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U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-SB
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b)
OR 12 (g) OF THE SECURITIES EXCHANGE ACT OF 1934
SYMPOSIUM TELECOM CORPORATION
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(Name of Small Business Issuer in Its Charter)
DELAWARE 13-4042921
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
410 Park Avenue, 18th Floor, New York, New York 10022
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(Address of Principal Executive Offices) (ZipCode)
(212) 891-7922
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Telephone Number
Securities to be registered under Section 12(b) of the Exchange Act:
None
Securities to be registered under Section 12(g) of the Exchange Act:
common stock, $0.001 par value
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(Title of class)
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PART I
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Item 1. Description of Business........................................................................ 1
Item 2. Management's Discussion and Analysis or Plan of Operation...................................... 8
Item 3. Description of Property........................................................................ 12
Item 4. Security Ownership of Certain Beneficial Owners and Management................................. 13
Item 5. Directors, Executive Officers, Promoters and Control Persons................................... 14
Item 6. Executive Compensation......................................................................... 16
Item 7. Certain Relationships and Related Transactions.................................................. 17
Item 8. Description of Securities...................................................................... 17
PART II
Item 1. Market Price of and Dividends on the Registrants Common Equity and Other Shareholder
Matters........................................................................................ 18
Item 2. Legal Proceedings.............................................................................. 18
Item 3. Changes in and Disagreements with Accountants.................................................. 18
Item 4. Recent Sales of Unregistered Securities........................................................ 18
Item 5. Indemnification of Directors and Officers...................................................... 20
PART F/S
Financial Statements...................................................................................... 21
PART III
Item 1. Index to Exhibits.............................................................................. 22
Item 2. Description of Exhibits........................................................................ 22
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PART I
ITEM 1. DESCRIPTION OF BUSINESS.
Symposium Telecom Corporation is engaged principally in telemarketing
magazine and periodical subscription renewals to persons whose subscriptions
have recently expired. The Company commenced operations in the quarter ended
December 31, 1998.
The Company intends to expand business operations through developing or
acquiring niche market businesses in the telecommunications industry. In
December 1998, the Company entered into an agreement to acquire all the
outstanding shares of Hamilton Telecommunications Limited ("Hamilton"), which
is an international audiotext service operator. The international audiotext
business allows customers to access a variety of types of information by
making international direct dial telephone calls that are billed to their
regular monthly telephone bills. In addition, in December 1998, the Company
purchased an option to acquire all of the outstanding capital stock of
Automated Communications Limited ("ACL"), a start-up business which intends
to engage primarily in the provision of international audiotext services to
customers in the United States. See "Hamilton Telecommunications Limited" and
"Automated Communications Limited."
The Company's acquisition of Hamilton is subject to several conditions,
including raising financing of up to at least $5.75 million, and there is no
certainty that the Company will be able to complete the acquisition. In
addition, there is no certainty that the Company will desire or have the
financial resources to exercise the option to acquire ACL.
The Company was incorporated in Delaware in May 1997 as "Brack Industries,
Inc." and changed its name to "Symposium Telecom Corporation" in June 1998. The
Company has one subsidiary, Publishers Advantage Corporation, through which it
operates its magazine subscription renewal business. References in this
Registration Statement to the "Company" or Symposium" include Symposium Telecom
Corporation and Publishers Advantage Corporation.
PUBLISHERS ADVANTAGE
INDUSTRY. According to the Magazine Publishers Association, the
circulation revenues in 1997 in the United States for 562 magazines audited
by the Audit Bureau of Circulation were $9.3 billion, of which $6.3 billion
were from subscriptions. Many of these subscriptions are sold by agencies
unaffiliated with the publishers. Generally, there are no written agreements
between publishers and these unaffiliated agencies other than arrangements
regarding the division of revenues for subscription renewals. The Company
believes that the agencies typically receive more than 75% of the renewal
revenues. Publishers are willing to pay to agents a high percentage of
subscription renewal revenues because they benefit more from a larger
subscriber base, which will generate greater advertising revenues, than from
the subscription renewal revenues.
BUSINESS. Publishers Advantage telemarkets magazine and periodical
subscription renewals to persons whose subscriptions recently expired (known in
the industry as "expires"). Upon obtaining a subscription renewal, Publishers
Advantage remits a portion of the subscription renewal fee to the publisher and
retains the difference as compensation for obtaining the subscription renewal.
Publishers Advantage obtains lists of expires directly from the publishers.
The use of these lists is referred to as "warm calling" because the success rate
is generally greater than the success rate from
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"cold calling." To date, Publishers Advantage has lists of expires only from
Hachette Filipacchi Magazines ("Hachette") for the magazines "Woman's Day,"
"Boating," "Car and Driver," "Flying" and "Popular Photography." The Company
has recently been advised by the publisher of the magazine "U.S. News and
World Report" that it will begin supplying the Company with lists of expires
of that magazine beginning in March 1999. The Company has been able to obtain
these lists of expires primarily through management's contacts at the
publishers and the fact that magazine publishers are often willing to try new
subscription renewal agencies in an attempt to increase the rate of
conversion of expires into subscription renewals. The Company has no contract
with any publisher, including Hachette, obligating the publisher to supply
lists of expires to the Company.
Publishers Advantage has engaged Publishers National Associated Service
("PNAS") to perform on a "turnkey" basis the telemarketing for Publishers
Advantage. By using PNAS for these functions, the Company has been able to
avoid incurring the substantial expenditures and time delays normally
incurred by start-up telemarketing businesses.
PNAS performs these services at a telemarketing call center in Blasdell,
New York. Publishers Advantage's operations occupy approximately 1,200
square-feet of the call center. PNAS provides at its expense the facility,
all telephones, telephone lines, telemarketers, bookkeeping and other
administrative personnel and facilities management. Publishers Advantage
supplies the other computer software and equipment used by the telemarketers.
Publishers Advantage compensates PNAS by paying the agreed upon hourly fee
for each hour worked by each telemarketer.
Persons who sell magazine subscriptions for a publisher must forward the
subscriptions to the publisher through a clearinghouse approved by the
publisher and must pay the clearinghouse a fee to clear the order. Publishers
generally do not grant to a start-up company authority to act as its own
clearinghouse. However, since Publishers Advantage is soliciting the
subscription renewals on behalf of Hachette and Hachette supervises the
pricing of the subscription renewals and the script of the phone
solicitations, Hachette has granted Publishers Advantage authority to act as
its own clearinghouse. Publishers Advantage expects that it will be able to
obtain the same direct authority from any publisher it works with in the
future. Publishers Advantage currently clears its own orders and processes
them through PNAS.
COMPETITION. Most of Publishers Advantage's competitors are
well-established companies with greater financial, marketing, distribution,
personnel and other resources than Publishers Advantage. The industry leaders
in sales of magazine subscriptions are Publishers Clearinghouse and American
Family Publishers, both of which have sales in excess of $800 million, and
which to the knowledge of the Company do not market directly to expires.
There are many companies that compete with Publishers Advantage for lists of
expires from publishers, the largest of which is Dial America. Publishers
Advantage initially competes to obtain these lists primarily on the basis of
contacts between its management and the publishers. Once lists of expires are
obtained from a publisher, Publishers Advantage will compete to continue
receiving these lists from the publisher based on its ability to convert a
higher percentage of those expires to subscription renewals than its
competitors.
GOVERNMENT REGULATION. Publishers Advantage's telemarketing operations are
subject to various Federal and state regulations. The Federal Telephone Consumer
Protection Act of 1991 limits the hours during which telemarketers may call
consumers to between 8:00 a.m. and 9:00 p.m., and prohibits the use of automated
telephone dialing equipment to call certain telephone numbers. The Federal
Telemarketing and Consumer Fraud and Abuse Prevention Act of 1994, and the
Federal Trade Commission ("FTC") regulations promulgated thereunder, prohibit
deceptive, unfair or abusive practices in telemarketing sales.
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Both the FTC and state attorneys general have authority to prevent
telemarketing activities that constitute "unfair or deceptive acts or
practices." Additionally, some states have enacted laws and others are
considering enacting laws targeted directly at telemarketing practices, and
there can be no assurance that any such laws, if enacted, will not adversely
affect or limit Publishers Advantage's current or future operations.
Publishers Advantage's marketing activities and/or products may become
subject to the scrutiny of each of these regulatory agencies. Compliance with
regulations promulgated by these agencies is generally the responsibility of
the telemarketing company, and these companies could be subject to a variety
of enforcement or private actions for any failure to comply with such
regulations. The failure of Publishers Advantage to comply with any rules and
regulations enforced by a Federal or state consumer protection authority may
subject Publishers Advantage or its management to fines or various forms of
civil or criminal prosecution, any of which could materially adversely affect
Publishers Advantage's business, financial condition and results of
operations.
EMPLOYEES
At January 31, 1999, Symposium had one full-time employee (Ronald
Altbach). At that date the Company also had the full-time services of Rupert
Galliers-Pratt, its Chairman of the Board and Chief Executive Officer, through a
consulting arrangement with Executive Management Services. Because Symposium
conducts its telemarketing operations through a third-party telemarketing
company, Symposium does not need a large number of employees.
HAMILTON TELECOMMUNICATIONS LIMITED
The Company has entered into an agreement to purchase all of the
outstanding capital stock of Hamilton Telecommunications Limited, an Irish
corporation ("Hamilton"), which is based in Sark in the Channel Islands.
Hamilton is owned by Panton Management Limited ("Panton") and Northern
Management Limited ("Northern"), which are owned by Robert Green and Marilyn
Shein, respectively.
TERMS OF THE ACQUISITION. The purchase price for Hamilton is $5.75
million plus 1,642,857 shares of the common stock plus contingent consideration
equal to the lesser of: (1) five times the amount, if any, by which the relevant
profits (as defined) of Hamilton for its fiscal year ending June 30, 1999
exceeds $2.25 million (the relevant profits of Hamilton for the fiscal year
ended June 30, 1998), and (2) $6,000,000. The contingent consideration is
payable 50% in cash and 50% in shares of common stock valued at $3.50 per share
(accordingly, a maximum of 857,143 additional shares of common stock may be
issued). Completion of the acquisition is conditioned upon Symposium's common
stock being quoted on the OTC Bulletin Board Service and Symposium raising
sufficient funds to satisfy the initial cash consideration. The sellers may
terminate the agreement if the conditions to closing are not satisfied by June
14, 1999. Symposium is obligated under the agreement to use reasonable efforts
to list the common stock in the Nasdaq Stock Market by April 2000.
In connection with the acquisition, Symposium will enter into
consulting agreements with Panton (which will provide the services of Mr.
Green), Northern (which will provide the services of Ms. Shein), and
Mediterranean Telecommunications (which will provide the services of Fabrice
Thomas, who interfaces with Hamilton's terminating network operators). The
consulting agreements may be terminated without cause at any time after two
years (three years if the consultant exercises his or her right to extend the
agreement by one year). Symposium has agreed to appoint Mr. Green as a
director of Symposium upon commencement of the consulting agreement and,
subject to shareholder approval, to maintain Mr. Green as a director for as
long as he is a consultant under the agreement. In consideration of their
services, Symposium will pay on a monthly basis consulting fees of $250,000
per year to Mr. Green and
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Ms. Shein and $100,000 per year to Mr. Thomas. In addition, each of the
consultants will be entitled to an annual bonus of 12% of the relevant
profits of Hamilton (but not more than $100,000 for Mr. Thomas).
The Company does not have the funds to complete the acquisition of
Hamilton. The Company has no commitment from any person to provide these
funds. The Company is unable to predict the terms and conditions of any loans
it obtains or securities it issues to generate these funds. If a significant
part of such funds are obtained through sales of equity securities, it is
likely that the investors as a group would acquire a significant equity
interest in the Company. The Company has until June 14, 1999 to complete the
acquisition of Hamilton or the sellers may terminate the transaction.
NO ASSURANCE CAN BE GIVEN THAT THE COMPANY WILL BE ABLE TO RAISE THE
FUNDS NECESSARY TO COMPLETE THE ACQUISITION OF HAMILTON.
THE INTERNATIONAL AUDIOTEXT BUSINESS. The international audiotext
business involves the delivery of information pursuant to an international
direct dial telephone call placed by the customer and for which the customer
is billed on his or her regular telephone bill. The customer learns of the
availability of the information through advertising that describes the
service and provides the international telephone number. It is easy for a
customer to access the service because the customer does not need to fill out
an application or provide credit card information for payment. The types of
information delivered may include weather, horoscope readings, lottery
information and ticket purchases, dateline services, sporting event results,
quiz show contests and other competitions, travel information, gaming, adult
services and any other information deliverable by telephone for which there
is consumer demand.
The participants in an international audiotext business include:
ORIGINATING NETWORK OPERATOR: the licensed telephone company of the
customer who originates the telephone call.
TERMINATING NETWORK OPERATOR: the licensed telephone company that
has the international telephone number dialed by the customer (referred to in
the industry as the place where the call "terminates").
CARRIER: the international telephone company that "transits" the
telephone call from the originating country to the terminating network
operator (although it is not necessary that the call be "physically" sent to
the terminating network operator). The carrier may, but does not need to be,
either the originating network operator or the terminating network operator.
INFORMATION PROVIDER: the company that creates the information
which is delivered by telephone to the customer and which advertises the
availability of the information to consumers.
SERVICE OPERATOR: the company that creates the infrastructure which
allows the international audiotext business to operate.
The service operator is the primary motivating force behind any
international audiotext business. The service operator first contracts with a
telephone company in one country to act as terminating network operator and
obtains from that company a group of telephone numbers to be used
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for the business. The service operator then enlists information providers to
join the business and allots one or more of those telephone numbers to
participating providers.
The goal of the business is to generate telephone call minutes by
consumers, which generate revenues that are split among the participants in
the business. The originating network operator receives the payment from the
customer, and pays a portion of this payment to the appropriate terminating
network operator. Payments between the originating and terminating network
operators are governed by the international system for settlement of payment
for telephone calls between countries. Most international telephone companies
belong to the International Telecommunications Union ("ITU"). The settlement
rate (the amount paid to the terminating network operator) is determined by
agreement between those two companies, and is generally 50% of the customer's
payment less any transit fee payable to the carrier. The fee payable to the
terminating network operator is allocated among the terminating network
operator, the service operator and information providers based on the
contracts between the service operator and these participants.
The international audiotext industry originated in the late 1980s/early
1990s as an alternative to premium rate services for delivering information
to consumers by telephone. While premium rate services are similar in many
respects to international audiotext, they differ in that with premium rate
service one telephone number may be used only in one country while with
international audiotext one telephone number may be used all over the world
(or at least in the countries in which the telephone companies participate in
the particular audiotext platform). This is a great advantage for information
providers who solicit business from more than one country. For example, by
using international audiotext, an information provider desiring to advertise
certain information to customers in ten countries in Europe can advertise one
telephone number by satellite television, magazine or otherwise; if that
information provider used premium rate services, it would have to advertise a
different number for each country. In addition, customers of the information
provider using international audiotext may dial the same telephone number
wherever they are in the world (or at least in the countries in which the
telephone companies participate in the particular audiotext platform).
Symposium believes that the international audiotext business will
continue to grow for the following reasons:
- Increasing consumer demand for the types of information that can be
provided by telephone, due in part to the ease in which the consumer
can access the information.
- Increasing interest from telephone companies in sharing in the
revenues that can be generated by this business.
- The fact that historically the business has not depended on economic
conditions.
HAMILTON'S BUSINESS. Hamilton is an international audiotext service
operator established in 1996. It has contracts with two terminating network
operators, one in Sierra Leone in Africa and one in Panama in Central America,
and with information providers serving customers in 14 countries throughout the
world (but excluding the United States). In connection with its Sierra Leone
arrangement, Hamilton has entered into an agreement with Teleglobe
International, Inc. ("Teleglobe"), a subsidiary of Teleglobe Canada, Inc., the
international telephone company of Canada, to act as the carrier to transit
these audiotext calls. For its fiscal years ended June 30, 1997 and 1998,
Hamilton had revenues of $5.7 million and $9.8 million, respectively.
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TERMINATING NETWORK OPERATOR--SIERRA LEONE. Hamilton entered
into a contract with the national telecom company of Sierra Leone ("SierraTel")
in April 1996 pursuant to which SierraTel acts as a terminating network
operator. SierraTel is an attractive terminating network operator because it has
relatively high settlement rates with many international telephone companies.
The contract with SierraTel expires in March 2001. An important part of the
SierraTel contract is that SierraTel has assigned to Hamilton the right to
collect settlement revenues directly from the originating network operators,
thus eliminating any collection issues that could arise if Hamilton was required
to seek payment from SierraTel.
Hamilton's audiotext platform with SierraTel is presently available
only with originating network operators in the following countries (which are
listed in alphabetical order): Austria, Belgium, Denmark, Egypt, France, Greece,
Italy, Portugal, Qatar, Saudi Arabia, Sweden, Switzerland and the United Arab
Emirates.
In connection with its arrangement with SierraTel, Hamilton has entered
into an agreement with TeleGlobe to act as carrier. As part of the agreement,
Teleglobe markets the availability of this platform to information providers
that do business with Teleglobe, which has resulted in additional information
providers joining this platform. In addition, Teleglobe pays Hamilton monthly
regardless of its collections from originating network operators, which provides
Hamilton funds to pay information providers and SierraTel monthly. Lastly, by
using Teleglobe, calls are not physically delivered to Sierra Leone, but are
instead routed through Teleglobe in Canada, thus avoiding the quality and
capacity restraints of the African telephone network.
TERMINATING NETWORK OPERATOR -- PANAMA. In April 1998 Hamilton
entered into an agreement with Cable & Wireless to act as terminating network
operator and carrier for Hamilton. Because Cable & Wireless is the official
international telephone company of Panama, any telephone call made to Panama
from anywhere in the world is automatically transited through the international
network of Cable & Wireless. As a result, although its settlement rate is lower
than SierraTel, the Panama platform is available throughout the world as
compared to the limited number of countries in which the SierraTel platform is
available.
INFORMATION PROVIDERS. During the year ended June 30, 1998,
Hamilton generated revenues through information providers delivering
information in 14 countries. All but one of these information providers utilized
the SierraTel audiotext platform. These information providers receive between
50% and 70% of the net revenues of Hamilton from calls generated by them.
Prior to entering into a contract with an information provider,
Hamilton investigates the provider's record in the business and reviews the
proposed content to be offered. Hamilton will not accept an information provider
if it determines that the character and reputation of the provider make it not
advisable to do business with that provider or the content to be offered
contravenes applicable law.
The one information provider making use of Hamilton's audiotext
platform through Panama provided important technological assistance in the
start-up of the Panama platform. In return for this assistance, Hamilton has
agreed to a unique profit sharing arrangement pursuant to which it pays to this
information provider 92% of the payments received from Cable & Wireless. The
oral agreement can be terminated or renegotiated upon one month's notice by
either party.
MANAGEMENT OF HAMILTON. Hamilton was founded and is presently
managed by Marilyn Shein and Robert Green. Following the acquisition, Ms. Shein
and Mr. Green will enter into
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consulting agreements with the Company, and Mr. Green will be appointed as a
director of Symposium. Along with the services he provides to Hamilton, since
1993, Mr. Green has served as the managing director of Connect Communications
Group, a company that provides discounted international telephone calls to
corporate clients.
COMPETITION. The audiotext industry is currently made up of
approximately five or six major service operators. Some of these service
operators may have longer operating histories, longer relationships with
originating network and terminating network operators around the world and
greater financial and other resources than Hamilton. Among other things, the
service operators in the industry typically compete for exclusive agreements
with terminating network operators. A service operator's ability to compete
for the right to enter into an agreement with a terminating network operator
depends on the quality of the service operator's platform, the ability of the
service operator to attract a large volume of audiotext traffic to the
terminating country and the service operator's overall reputation in the
industry for quality of service. Service operators also compete over
contracts with information providers for information content that is
appealing to callers. Information providers look for service operators with a
reputation for certainty of payment and with a platform that has the ability
not only to service a large volume of calls but to do so with quality
equipment that is free of echoes, delays, static and other audio problems.
EMPLOYEES. Hamilton has no full time employees. Mr. Green, Ms.
Shein and Mr. Thomas provide services to Hamilton as consultants (through
oral consulting agreements between their companies and Hamilton).
GOVERNMENT REGULATION. The management of Hamilton is unaware
of any licensing requirements in Sierra Leone or Panama for service operators
or any regulations specifically governing service operators. However,
Hamilton's platforms operate through the local telephone networks of Sierra
Leone and Panama. These local networks are subject to stringent
telecommunications regulations of their respective countries. Also, the
information providers that Hamilton engages are subject to regulations that
govern the information content that is delivered to the customer. While
Hamilton is unaware of any regulations in the countries in which Hamilton
does business which precludes the international audiotext business in that
country, regulations could be adopted which could materially adversely affect
Hamilton's business, including regulation which limits rates charged to
consumers and/or the content provided to consumers.
AUTOMATED COMMUNICATIONS LIMITED
Symposium has entered into an option agreement to acquire all of the
outstanding capital stock of Automated Communications Limited, a Bahamas
corporation ("ACL"). ACL , which is owned beneficially by Mr. Green, Ms.
Shein and Mr. Thomas, is an international audiotext service operator that
commenced generating revenues in February 1999.
OPTION TERMS. Symposium has agreed to pay an option fee in shares of
common stock having a market value of $2 million if certain conditions are
satisfied, including the completion of the acquisition of Hamilton, the
inclusion of common stock on the OTC Bulletin Board Service, and the
certification by ACL auditors that within nine months of the date of the
agreement ACL had earned in any one month in excess of $100,000. The purchase
price for the ACL shares is an amount equal to the relevant profits of ACL
for the 12-month period ending 18 months following the date the common stock
of Symposium becomes quoted on the OTC Bulletin Board Service, multiplied by
six, less the option fee. The option
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price is payable 50% in cash and 50% shares of common stock (based on the
market value of the common stock). The option is exercisable during a
six-month period following period during which the relevant profits are
calculated. A trust of which Mr. Galliers-Pratt is the beneficiary and Mr.
Altbach are each entitled to 1/18th, and Mr. Bishop is entitled to 1/10th, of
the Option Price pursuant to separate agreements with the shareholders of ACL.
Under the option agreement, Symposium has agreed that without the
approval of Mr. Green or Ms. Shein (which approval may not be unreasonably
withheld) it will not issue any preferred stock (other than in connection
with any financing to complete the Hamilton acquisition) until the earlier to
occur of payment of the option price or the date the common stock of
Symposium is listed on the Nasdaq stock market.
If Symposium exercises its option to acquire ACL, under the
consulting agreements Symposium will pay additional consulting fees of
$250,000 per year to Mr. Green and Ms. Shein and $125,000 per year to Mr.
Thomas (and the fixed fees will double any year the relevant profits of ACL
exceed $15 million). In addition, the bonus under the consulting agreement
will be based on the relevant profits of Hamilton and ACL.
ACL'S BUSINESS. In May 1997 ACL entered into an agreement with
Telecom Malagasi of Madagascar to act as a terminating network operator in
Madagascar. ACL established the Madagascar platform primarily to attract
audiotext traffic from the United States. The settlement rate between the
United States and Madagascar is currently the highest accounting rate in the
world for calls to and from the United States. ACL had agreements with five
information providers for this platform at February 1, 1999, and is currently
soliciting additional information providers.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION.
RESULTS OF OPERATIONS
Symposium commenced generating revenues from telemarketing in
December 1998. During the year it generated revenues of $13,816 from magazine
subscription renewals and incurred cost of sales of $20,586, resulting in a
gross loss of $6,770. Cost of sales included primarily the hourly fee paid to
PNAS for telemarketers and clearing costs.
During 1998, the Company incurred operating expenses of $312,734,
including $145,838 of consulting expenses and $83,000 of compensation
expenses. Consulting expenses included $69,000 of expenses associated with
the grant of options to consultants and non-employee directors. The
compensation expense was based on the value of contributed services by two
officers, who were not in fact compensated for their services.
As a result, the Company recorded a net loss of $319,504 for 1998.
FINANCIAL CONDITION AND LIQUIDITY
The Company funded its start-up and initial operating costs through
the sales of common stock generating proceeds of $413,412 (net of organizing
costs of $24,926) in 1998. At December 31, 1998 the Company had cash on hand
of $292,194. The Company believes that this cash on hand, together with cash
flows from the subscription renewals, will be sufficient to fund its cash
requirements for its
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subscription renewal telemarketing business in 1999, assuming the Company
continues to utilize PNAS or another third-party telemarketing service for
its telemarketing operations. The Company would need additional financing if
it were to determine to start-up its own telemarketing operations.
The Company has entered into an agreement to acquire Hamilton. Under
the agreement, the Company will pay to Hamilton's shareholders cash in the
amount of $5.75 million at the closing and up to an additional $3.0 million
prior to the end of the year based on Hamilton's results of operations for
the year ended June 30, 1999. See "Business--Hamilton Telecommunications
Limited." The Company must raise the funds for at least the first of these
payments in order to complete the acquisition. The Company has no commitment
from any person to provide these funds, and no assurance can be given that
the Company will be able to raise the funds on terms acceptable to the
Company. The Company is unable to predict the terms and conditions of any
loans it obtains or securities it issues to obtain these funds. If a
significant part of these funds is raised through the sale of equity
securities, it is likely that the investors as a group would acquire a
significant equity interest in the Company. If the Company cannot raise these
funds by June 14, 1999, the sellers will have the right to terminate the
agreement without liability to the Company.
YEAR 2000 ISSUES
Many existing computer programs were designed and developed without
considering the upcoming change in the century, which could lead to the
failure of computer applications or create erroneous results by or at the
Year 2000. The Year 2000 issue is a broad business issue, whose impact
extends beyond traditional computer hardware and software to possible failure
of automated systems and instrumentation. Based on its current assessment,
the Company believes that the limited amount of software and automated
systems and instrumentation that it owns is Year 2000 compliant. However, the
Company relies on local telephone companies to be able to provide its
telemarketing services. While the Company believes that these telephone
companies have devoted substantial amounts of time and money to ensure that
their equipment is Year 2000 compliant, if they are unable to identify Year
2000 issues and are unable to resolve such issues in a timely manner, it
could result in a material financial risk to the Company. Also, there can be
no guarantee that other third parties of business importance to the Company,
such as PNAS, will successfully reprogram or replace, and test, all of their
own computer hardware, software and process control systems to ensure such
systems are Year 2000 compliant.
CERTAIN INVESTMENT CONSIDERATIONS
DEPENDENCE ON PNAS FOR TELEMARKETING SERVICES
Publishers Advantage depends on PNAS to perform the Company's
telemarketing operations. Publishers Advantage's engagement of PNAS will
terminate in December 1999 and there is no assurance that PNAS will renew the
arrangement. Although there are other companies that provide similar
services, there is no assurance that Publishers Advantage would be able to
engage an acceptable replacement by the time the arrangement with PNAS
terminates. If the Company's engagement of PNAS is terminated, the Company
would not generate any revenues during the period that it has no agreement
with a telemarketing service company to perform these services for the
Company and it does not have the capability of performing these services with
its own personnel.
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NEED TO OBTAIN LISTS OF EXPIRES
The success of the Company's telemarketing business is subject to a
number of risks and uncertainties, including the ability to obtain lists of
expires directly from publishers. To date, the Company has received lists of
expires from only one publisher (Hachette Filipacchi Magazines) for four
magazines ("Boating," "Car and Driver," "Flying" and "Popular Photography")
and the promise from one other publisher to provide lists of expires
commencing March 1999. The Company has been able to obtain these lists
primarily through its contacts with the management of these publishers and
the willingness of publishers to try new subscription renewal agencies in
order to improve their conversion rate of expires to subscription renewals.
The Company has no agreement with any publisher that requires the publisher
to supply these lists to the Company. The ability of the Company to obtain
these lists will depend in substantial part on its success rate in generating
renewals from expires. There can be no assurance that the Company will have
an acceptable success rate or will continue to receiving these lists from any
publisher.
LIMITED OPERATING HISTORY
The Company commenced telemarketing operations in the fourth quarter
of 1998. Therefore, the Company has a limited relevant operating history upon
which to evaluate the likelihood of its success. Factors such as the risks,
expenses and difficulties frequently encountered in the operation and
expansion of a relatively new business and the development and marketing of
new products must be considered in evaluating the likelihood of the Company's
success.
INFLUENCE BY MANAGEMENT
The Company's officers and directors beneficially own, in the
aggregate, approximately 22.9% of the outstanding common stock of the
Company. These persons will continue to exert influence over the outcome of
all matters submitted to a vote of the holders of common stock, including the
election of directors, amendments to the Company's Certificate of
Incorporation and approval of significant corporate transactions. This
consolidation of voting power could also have the effect of delaying,
deterring or preventing a change in control of the Company that might be
beneficial to other stockholders.
YEAR 2000 ISSUES
Many existing computer programs were designed and developed without
considering the upcoming change in the century, which could lead to the
failure of computer applications or create erroneous results by or at the
Year 2000. The Year 2000 issue is a broad business issue, whose impact
extends beyond traditional computer hardware and software to possible failure
of automated systems and instrumentation. Based on its current assessment,
the Company believes that the limited amount of software and automated
systems and instrumentation that it owns is Year 2000 compliant. However, the
Company relies on local telephone companies to be able to provide its
telemarketing services. While the Company believes that these telephone
companies have devoted substantial amounts of time and money to ensure that
their equipment is Year 2000 compliant, if they are unable to identify Year
2000 issues and are unable to resolve such issues in a timely manner, it
could result in a material financial risk to the Company. Also, there can be
no guarantee that other third parties of business importance to the Company,
such as PNAS, will successfully reprogram or replace, and test, all of their
own computer hardware, software and process control systems to ensure such
systems are Year 2000 compliant.
10
<PAGE>
ACQUISITIONS OF HAMILTON AND ACL
A significant part of the Company's growth strategy is to acquire
niche market businesses in the telecommunications industry. In furtherance of
this strategy, the Company has entered into the following agreements: (i) an
agreement to purchase all of the outstanding capital stock of Hamilton and
(ii) an option agreement to acquire all of the outstanding capital stock of
ACL. The Company's ability to complete these acquisitions is subject to
several conditions, including having the funds to pay the cash portion of the
purchase price ($5.75 million for Hamilton). The Company must raise these
funds to complete the Hamilton acquisition, and will probably be required to
raise at least a significant portion of the funds needed to complete the ACL
acquisition. To raise these funds, the Company anticipates issuing debt
and/or equity securities. The Company is unable to predict the terms and
conditions of such securities or the price for such securities. If a
significant part of such funds are obtained through sales of equity
securities, it is likely that the investors as a group would acquire a
significant equity interest in the Company. The Company has until June 14,
1999 to complete the acquisition of Hamilton or the sellers may terminate the
transaction. In addition, ACL is a start-up operation, and there is no
certainty the Company will determine it to be advantageous to exercise its
option. No assurance can be given that the Company will complete the
acquisition of either Hamilton or ACL.
SUBSTANTIAL GOODWILL FOR FINANCIAL REPORTING PURPOSES. The Company
expects to account for the acquisitions using the purchase method of
accounting. Accordingly, either acquisition will result in the Company
recording a significant amount of goodwill (substantially all the purchase
price) for financial reporting purposes. It is anticipated that the goodwill
recorded in connection with the Hamilton acquisition will exceed $10 million.
The goodwill will be amortized to reduce income over its expected life.
Because of the uncertainty of the purchase price for ACL, it is not possible
to estimate the amount of goodwill which would result from that acquisition.
RAPID GROWTH. The acquisitions of Hamilton and/or ACL would result
in rapid and substantial growth in revenues and geographic scope of
operations. This could place a significant strain on management and on the
Company's financial resources. The failure to recruit additional staff and
key personnel, to have sufficient financial resources, to maintain or upgrade
these financial reporting systems, or to respond effectively to difficulties
encountered during expansion could have a material adverse effect on the
Company's business, operating results and financial condition.
POTENTIAL DIFFICULTIES IN EXPANDING INTERNATIONAL AUDIOTEXT BUSINESS.
The ability of Hamilton to expand its international audiotext
business will depend on a number of factors. Hamilton would need to identify
originating network operators in countries which have settlement rates with
Hamilton's terminating network operators which are high enough to make the
business profitable. With respect to the SierraTel platform, Hamilton will be
required to negotiate an acceptable arrangement with an originating network
operator in each new country (and in most countries there is only one
potential originating network operator). This is a time consuming process, in
some cases extending over a year. In addition, the ability to negotiate an
acceptable arrangement at all is subject to many factors beyond the control
of Hamilton, including political factors in the country and pre-existing
arrangements the originating network operator may have. There can be no
assurance that Hamilton will succeed in engaging originating network
operators in new countries.
RELIANCE UPON KEY PERSONNEL. To date, the business of Hamilton has
depended on Robert Green and Marilyn Shein. They will enter into two-year
consulting contracts with Hamilton at the closing of the acquisition, and
there is no assurance they will remain longer with Hamilton. The long-term
success of the Company in the international audiotext business will depend in
part on the ability of the Company to successfully implement a succession
strategy to reduce dependence on these individuals.
11
<PAGE>
SUBSTANTIAL RELIANCE UPON ONE INFORMATION PROVIDER. One information
provider accounted for approximately 25% of Hamilton's total revenues in its
year ended June 30, 1998. Hamilton does not have a long-term agreement with
this provider. The termination of Hamilton's relationship with this
information provider would have a material adverse effect on Hamilton's
results of operations.
GOVERNMENT REGULATION. The international telephone industry is
subject to the stringent government regulation in each originating country
that phone calls are terminated from. While the Company is unaware of any
regulation in the countries in which Hamilton does business which precludes
the international audiotext business in that country, regulation could be
adopted which could materially adversely affect the Hamilton's business,
including regulation which limits rates charged to consumers and/or the
content provided to consumers.
YEAR 2000 ISSUES. Many existing computer programs were designed and
developed without considering the upcoming change in the century, which could
lead to the failure of computer applications or create erroneous results by
or at the Year 2000. The Year 2000 issue is a broad business issue, whose
impact extends beyond traditional computer hardware and software to possible
failure of automated systems and instrumentation. Based on Hamilton's current
assessment, the costs of addressing potential problems are not currently
expected to have a material adverse impact on its financial position, results
of operations or cash flows in future periods. However, Hamilton relies on
local and international telephone companies to be able to provide its
audiotext services. While Hamilton believes that these telephone companies
have devoted substantial amounts of time and money to ensure that their
equipment is Year 2000 compliant, if they are unable to identify Year 2000
issues and are unable to resolve such issues in a timely manner, it could
result in a material financial risk to Hamilton. Also, there can be no
guarantee that other third parties of business importance to the Hamilton
will successfully reprogram or replace, and test, all of their own computer
hardware, software and process control systems to ensure such systems are
Year 2000 compliant.
ITEM 3. DESCRIPTION OF PROPERTY.
Symposium does not currently own or lease any property. The
Company's principal offices are located at both the offices of Ronald
Altbach, Co-Chairman of the Board and Chief Operating Officer, at 410 Park
Avenue, 18th Floor, New York, New York 10022 and at the offices of Rupert
Galliers-Pratt, Co-Chairman of the Board and Chief Executive Officer, at 54
St. James' Street, London SWI, England.
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<PAGE>
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.
The following table sets forth as of January 31, 1999 certain
information relating to the ownership of the common stock by (i) each person
known by Symposium to be the beneficial owner of more than 5% of the
outstanding shares of the common stock, (ii) each of Symposium's directors,
(iii) each of Symposium's Named Executive Officers, and (iv) all of
Symposium's Named Executive Officers and directors as a group. Except as may
be indicated in the footnotes to the table and subject to applicable
community property laws, each of such persons has the sole voting and
investment power with respect to the shares owned.
<TABLE>
<CAPTION>
Name and Address of Beneficial Amount and Nature of Beneficial
Owner(1) Ownership(2) Percent of Class(2)
------------------------------ ------------------------------- -------------------
<S> <C> <C>
The Shropshire Trust Company, Ltd . . . . . 1,200,000(3) 16.1%
M.L.H. Quin & Co.
Bermuda Commercial Bank Bldg.
44 Church Street
Hamilton HM 12
Bermuda
Ronald Altbach . . . . . . . . . . . . . . . 1,000,000(4) 13.4
Tyman Holdings, Inc. . . . . . . . . . . . . 650,000(5) 8.7
Thomas McGlew. . . . . . . . . . . . . . . . 650,000(5) 8.7
Adam Bishop. . . . . . . . . . . . . . . . . 650,000(5) 8.7
Richard Cohen. . . . . . . . . . . . . . . . 50,000(6) *
Ken Levine . . . . . . . . . . . . . . . . . 8,572(7) *
Rupert Galliers-Pratt. . . . . . . . . . . . 0 *
All officers and directors as a group
(6 persons). . . . . . . . . . . . . . . . . 1,708,572(8) 22.9%
</TABLE>
- ----------------
* Less than 1%
(1) Unless otherwise indicated, the address of each beneficial owner is
in the care of Symposium, Telecom Corporation, 410 Park Avenue, 18th
Floor, New York, NY 10022.
(2) Unless otherwise indicated, Symposium believes that all persons
named in the table have sole voting and investment power with
respect to all shares of common stock beneficially owned by them. A
person is deemed to be the beneficial owner of securities that may
be acquired by such person within 60 days from the date of this
registration statement upon the exercise of options, warrants or
convertible securities. Each beneficial owner's percentage of
ownership is determined by assuming all options, warrants or
convertible securities that are held by such person (but not held by
any other person) and which are exercisable or convertible within 60
days of this registration statement have been exercised or
converted. Percent of Class (third column above) is based on
7,455,464 shares of common stock outstanding as of the date of this
registration statement.
(3) Shrophire Trust Company Ltd. beneficially owns 1,200,000 shares as
trustee for Shropshire Trust No. 1, Shropshire Trust No. 2,
Shropshire Trust No. 3 and Shropshire Trust No. 4, each of which
holds 300,000 shares of common stock.
(4) Includes 475,000 shares of common stock owned by his wife, Elka
Altbach. Does not include 150,000 shares of common stock issuable
upon exercise of stock options exercisable commencing upon December
3, 1999.
(5) These shares are held of record by Tyman Holdings, Inc. By virtue of
their positions with and control of Tyman Holdings, Inc., Thomas
McGlew and Adam Bishop are beneficial owners of these shares.
(6) Does not include 70,000 shares of common stock issuable upon the
exercise of stock options exercisable commencing upon October 9,
1999.
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<PAGE>
(7) Does not include 70,000 shares of common stock issuable upon the
exercise of stock options exercisable commencing upon December 3, 1999.
(8) Does not include 290,000 shares of common stock issuable upon
exercise of stock options that are exercisable at various times
commencing October 9, 1999
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS.
The following table sets forth certain information with respect to the
directors and executive officers of Symposium as of January 1, 1999.
<TABLE>
<CAPTION>
Name Age Position
- ---- --- --------
<S> <C> <C>
Rupert Galliers-Pratt . . . . . . 47 Chief Executive Officer and Co-Chairman of the Board
Ronald Altbach. . . . . . . . . . 52 Co-Chairman of the Board, Chief Operating Officer,
acting Chief Financial Officer, Secretary and Director
Thomas McGlew . . . . . . . . . . 45 Director
Adam Bishop . . . . . . . . . . . 40 Director
Richard Cohen . . . . . . . . . . 48 Director
Ken Levine. . . . . . . . . . . . 37 Director
</TABLE>
MR. GALLIERS-PRATT has served as a Co-Chairman of the Board of
Symposium since October 1998 and the Chief Executive Officer of Symposium
since December 1998. Previously, he served as Chairman and Chief Executive
Officer of Petersburg Long Distance, Inc. ("PLD") from 1992 to 1995. During
the period in which Mr. Galliers-Pratt served as Chairman and Chief Executive
Officer, PLD raised $200 million in equity and debt financings, obtained a
license to construct and operate a digital overlay telephone network in St.
Petersburg, Russia, and acquired a 50% interest in a company which had been
granted a license to install and operate a national cellular system in
Kazakhstan. As PLD's activities expanded, Mr. Galliers-Pratt recognized the
need for an alliance with a larger telecommunications company, which led to
an acquisition of about one-third of PLD by Cable & Wireless PLC in 1994.
Having successfully completed the establishment and funding of the first
phase of PLD's activities, Mr. Galliers-Pratt turned over the role of Chief
Executive Officer to a Cable & Wireless-appointed executive in 1994 and
relinquished the role of Chairman in 1995. Since 1995, Mr. Galliers-Pratt has
assisted with the formation and financing of a number of other companies. He
served on the Board of Oriel Group plc, a London insurance brokering company,
which he assisted with a number of financings until the successful sale of
that company in August 1998. He has also served as a director of LOOX Ltd. an
optical retailing company with operations in Austria and Poland. He has also
served as Chairman of Princess Resources, a natural resource exploration
company with operations in China and East Africa.
In January 1994 Lightship PLC, of which Mr. Galliers-Pratt was the
Chairman of the Board, and its subsidiaries entered voluntary liquidation
proceedings. Lightship PLC, based in London, England, was engaged in a
variety of consumer and small business financing businesses through wholly
owned subsidiaries; Mr. Galliers-Pratt was not involved in the management of
the operating subsidiaries. In 1996, LOOX Ltd. filed an admission prospectus
with the London Stock Exchange. The prospectus
14
<PAGE>
inadvertently failed to disclose his directorship in several companies,
including subsidiaries of Lightship PLC which, like Lightship, had filed for
voluntary receivership or bankruptcy proceedings (the receivership of
Lightship was disclosed). When Mr. Galliers-Pratt became aware of these
omissions, he immediately notified the London Stock Exchange and provided the
Exchange with the necessary corrections. Although the London Stock Exchange
censured Mr. Galliers-Pratt in connection with this event, in its public
announcement it stated that it accepted that the omissions were unintentional.
MR. ALTBACH has served as a Co-Chairman of the Board since October 1998
and the Chief Operating Officer, acting Chief Financial Officer and Secretary of
Symposium since December 1998. From 1996 through June 1998 he served as Vice
Chairman of Rosecliff, Inc., a New York based merchant banking operation. From
1995 through 1997, Mr. Altbach served as Chairman of Paul Sebastian, Inc., one
of Rosecliff's portfolio companies,. Mr. Altbach left Rosecliff to form
Symposium with Mr. Galliers-Pratt. From November 1988 through December 1994 and
from February 1998 through December 1998, Mr. Altbach was the President of
Olcott Corporation, a distributor of luxury products.
MR. MCGLEW has served as a director of Symposium since October 1998. He
is currently Chief Executive Officer of Telemonde, Ltd., a fiber cable provider
to telecom carriers. From June 1997 through September 1998, Mr. McGlew served as
Vice President of International Commercial Operations for WorldCom
International. He was responsible for an international revenue line covering
basic and enhanced services across voice, data and Internet products and was
specifically responsible for the global portfolio and commercial operations
worldwide outside North America. From September 1993 to June 1997, Mr. McGlew
was the Head of Marketing and the Director of Distribution for British Telecom.
MR. BISHOP has served as a director of Symposium since October 1998.
Mr. Bishop is currently Chief Executive Officer of European Gateway, a
subsidiary of North American Gateway Inc. of Canada. European Gateway is
principally a carriers' carrier, which sells international traffic routes to
the worlds' largest telecom operators. Previously, Mr. Bishop was a senior
executive with British Telecom in its International Carrier Sales division.
During his tenure at British Telecom, Mr. Bishop and Mr. McGlew together
implemented a wholesale carrier strategy which employed joint venture
carrier-partners to create new routes in developing countries.
MR. COHEN has served as a director of Symposium since October, 1998.
Mr. Cohen has been the president of Richard M. Cohen Consultants, which
provides financial consulting services primarily in the multimedia industry,
since January 1996. From March 1993 to December 1995, Mr. Cohen served as the
President of General Media, Inc. Mr. Cohen has been involved in advising and
managing a number of financings in both the public and private sectors. Mr.
Cohen currently serves on the Board of Directors of both National Auto Credit
and Carnegie Int'l.
MR. LEVINE has served as a director of Symposium since December
1998. Mr. Levine practiced law with the firm Simpson Thatcher and Bartlett in
New York from 1987 through 1992. Since 1992, Mr. Levine has been employed by
First Equity Capital Securities, Inc., an investment bank and NASDAQ
registered broker-dealer specializing in small cap companies, most recently
as Chief Executive Officer and Chairman.
Directors are elected at each annual meeting of stockholders and hold
office until the following annual meeting and their successors are duly elected
and qualified. Executive officers of Symposium serve at the discretion of the
Board of Directors.
15
<PAGE>
ITEM 6. EXECUTIVE COMPENSATION.
DIRECTOR COMPENSATION
With the exception of the grant options to purchase 70,000 shares of
common stock to each of Richard Cohen and Ken Levine, Symposium has not paid any
compensation to directors for their services as directors of Symposium.
EXECUTIVE COMPENSATION
The Company did not pay any cash compensation to any executive
officer for the year ended December 31, 1998. Commencing January 1, 1999, the
Board of Directors authorized annual salaries to the executive officers, as
follows: Mr. Galliers-Pratt -- $250,000 (payable as consulting fees to his
company Executive Management Services) and Mr. Altbach -- $225,000. Mr.
Altbach and Mr. Galliers-Pratt have agreed to defer any payment of the salary
until the earlier to occur of the closing of the acquisition of Hamilton or
December 31, 1999.
STOCK OPTION PLAN
The Company has a Stock Option Plan (the "1998 Plan") which provides
for the issuance of up to 1,000,000 shares of common stock pursuant to options
granted from time to time to directors, officers, employees and consultants.
Unless extended or terminated sooner by the Board of Directors, the 1998 Plan
will terminate on December 31, 2007.
The 1998 Plan may be administered by the Company's Board of Directors
or, at the discretion of the Board, a committee of two or more directors (the
"Administrator"). Subject to the provisions of the 1998 Plan, the Administrator
will have full and final authority to select persons to whom options will be
granted and to determine the terms and conditions of the options.
Options granted under the 1998 Plan may, at the discretion of the
Administrator, either be "incentive stock options" within the meaning of Section
422 of the Internal Revenue Code of 1986, as amended (the "Code"), or options
which do not qualify as "incentive stock options." The exercise price of an
incentive stock option may not be less than the fair market value of a share of
common stock on the date of grant. There is no limitation on the exercise price
of options that are not incentive stock options. No participant may receive
options representing more than 50% of the aggregate number of shares of common
stock that may be issued pursuant to all options under the 1998 Plan. An option
may provide for the issuance of common stock for any lawful consideration,
including services rendered or, to the extent permitted by applicable state law,
to be rendered. Currently, Delaware law does not permit the issuance of common
stock for services to be rendered.
OPTION GRANTS IN LAST FISCAL YEAR
(INDIVIDUAL GRANTS)
<TABLE>
<CAPTION>
NUMBER OF SECURITIES PERCENT OF TOTAL
UNDERLYING OPTIONS OPTIONS GRANTED TO EXERCISE EXPIRATION
NAME GRANTED EMPLOYEES IN FISCAL YEAR PRICE DATE
<S> <C> <C> <C> <C>
Ronald Altbach 150,000 100% $1.00 12/3/02
</TABLE>
- -----------------------
16
<PAGE>
Mr. Galliers-Pratt provides his services to the Company through a
consulting agreement Symposium has with Executive Management Services. On
December 3, 1998, the Company granted 200,000 options, exercisable in full on
December 3, 1999 at $1.00 per share, to Executive Management Services. This
option terminates on December 3, 2002.
AGGREGATED FISCAL YEAR END OPTION EXERCISES AND FISCAL YEAR END OPTION VALUES
<TABLE>
<CAPTION>
NUMBER OF SECURITIES
UNDERLYING
SHARES UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED
ACQUIRED ON VALUE DECEMBER 31, 1998 IN-THE-MONEY OPTIONS
EXERCISE REALIZED -------------------------------- -----------------------------
NAME (#)(1) ($)(1) EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- -------------- ---------- ------------ --------------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
Ronald Altbach 0 -- 0 150,000 0 0
</TABLE>
- ----------------
(1) No options were exercised in fiscal year 1998.
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Symposium has an option to purchase all of the outstanding stock of
ACL. See "Business -- Automatic Communications Limited." If the Company
exercises the option, Adam Bishop would be entitled to 1/10th of the exercise
price and a trust of which Rupert Galliers-Pratt is the beneficiary and
Ronald Altbach would each be entitled to 1/18th of the exercise price.
ITEM 8. DESCRIPTION OF SECURITIES.
COMMON STOCK
Symposium is authorized to issue 25,000,000 shares of common stock,
par value $0.001 per share, and 10,000,000 shares of preferred stock, par
value $0.001 per share. Holders of common stock are entitled to one vote for
each share held of record on all matters on which the holders of common stock
are entitled to vote, and holders of common stock may cumulate votes in the
election of directors. The holders of common stock are entitled to receive
ratable dividends when, as and if declared by the Board of Directors out of
funds legally available therefor. In the event of liquidation, dissolution or
winding up of Symposium, the holders of common stock are entitled, subject to
the rights of holders of preferred stock issued by Symposium, if any, to
share ratably in all assets remaining available for distribution to them
after payment of liabilities and after provision is made for each class of
stock, if any, having preference over the common stock. The holders of common
stock have no preemptive or conversion rights and they are not subject to
further calls or assessments by Symposium. There are no redemption or sinking
fund provisions applicable to the common stock. The outstanding shares of
common stock are, and the common stock issuable pursuant to this prospectus
will be, when issued, fully paid and nonassessable.
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<PAGE>
PREFERRED STOCK
Symposium is authorized to issue "blank check" preferred stock in
one or more series from time to time with such designations, rights and
preferences as may be determined from time to time by the Board of Directors.
Accordingly, the Board of Directors is empowered, without stockholder
approval, to issue preferred stock with dividend, liquidation, conversion,
voting or other rights which adversely affect the voting power or other
rights of the holders of Symposium's common stock. In the event of issuance,
the preferred stock could be utilized, under certain circumstances, as a way
of discouraging, delaying or preventing an acquisition or change in control
of Symposium.
PART II
ITEM 1. MARKET PRICE OF AND DIVIDENDS ON THE REGISTRANT'S COMMON
EQUITY AND OTHER SHAREHOLDER MATTERS.
There is currently no market for Symposium's common stock. Symposium
has never paid cash dividends on its common stock. Payment of future
dividends will be within the discretion of Symposium's Board of Directors and
will depend on, among other factors, retained earnings, capital requirements
and the operating and financial condition of Symposium.
ITEM 2. LEGAL PROCEEDINGS.
Symposium is not currently a party to any pending legal proceedings.
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS.
Weinberg & Company ("Weinberg") audited the balance sheet of Symposium
as of July 20, 1998 in a single purpose engagement. During the Symposium's two
most recent fiscal years: (i) the Company had no disagreements with Weinberg,
whether or not resolved, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which, if not
resolved to Weinberg's satisfaction, would have caused it to make reference to
the subject matter of the disagreement in connection with an accounting report;
and (ii) Weinberg did not advise the Company of any of the events that would
have required reporting in a Form 8-K under Item 304(a)(iv)(B).
The Company engaged Grant Thornton LLP as its principal independent
auditors for the year ended December 31, 1998. Prior to such engagement, the
Company did not consult with Grant Thornton LLP regarding the application of
accounting principles to a specific, completed or contemplated transaction, or
the type of audit opinion that might be rendered on the Symposium's financial
statements.
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES.
THE FOLLOWING DESCRIPTIONS REFLECT A 1-FOR-2 REVERSE STOCK SPLIT
EFFECTIVE AS OF OCTOBER 7, 1998.
1. In July 1998, Symposium issued to PageOne Business Productions, LLC
and AppleTree Investment Co., an aggregate of 9,200 shares of common stock in
consideration of organizational costs valued at $184. These shares were issued
without registration under the Securities Act in reliance upon
18
<PAGE>
the exemption from registration under Section 4(2) the Securities Act as a
transaction not involving a public offering.
2. From July 1998 through October 1998, Symposium issued an aggregate
of 328,264 shares of common stock to PageOne Business Productions, LLC,
AppleTree Investment Co., Ltd., Kevin Welch and Deremie Enterprises Limited for
$0.02 per share.
In October 1998, Symposium issued 6,658,800 shares of common stock for
$0.01 per share to 31 investors.
From October 1998 through January 1999, Symposium issued an
aggregate of 450,000 shares of common stock for $1.00 per share to Cresta
Limited, Growise Investment, Ltd., The Mandel Company, T. Hoare Nominees
Limited, Svea Balfour, Felcom Capital Corporation, William Dartmouth and John
Miller.
The foregoing issuances of common stock were exempt from registration
under of the Securities Act of 1933, as amended, pursuant to Section 3(b)
thereof and Rule 504 because, at the time of the issuances: (i) Symposium was
not subject to reporting requirements under Section 13 or 15(d) of the
Securities Exchange Act of 1934, as amended; (ii) Symposium was not an
investment company; (iii) Symposium was not a development stage company that
either had no specific plan or purpose or that indicated that its business plan
was to engage in a merger or acquisition with an unidentified company or
companies; and (iv) the aggregate price for all shares issued by the Company
since inception was less than $1 million.
3. In December 1998, Symposium issued warrants to each of Tom Mosey
and Growise Investment Ltd. warrants to purchase 10,000 shares of the common
stock of Symposium for $1.00 per share in consideration of consulting
services provided by these persons. The warrants were issued without
registration under the Securities Act in reliance upon the exemption from
registration under Section 4(2) of the Securities Act as a transaction not
involving a public offering, based on: (1) the fact that Mr. Mosey and
Growise Investment Ltd. were accredited investors and represented that they
were acquiring the warrants for investment purposes; and (2) the Company did
not engage in any general advertisement or general solicitation in connection
with the issuance of the warrants.
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<PAGE>
ITEM 5. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Symposium's Certificate of Incorporation and its Bylaws provide for the
indemnification by Symposium of each director, officer and employee of Symposium
to the fullest extent permitted by the Delaware General Corporation Law, as the
same exists or may hereafter be amended. Section 145 of the Delaware General
Corporation Law provides in relevant part that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the corporation) by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving at
the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees), judgments, fines and amounts paid
in settlement actually and reasonably incurred by such person in connection with
such action, suit or proceeding if such person acted in good faith and in a
manner such person reasonably believed to be in or not opposed to the best
interests of the corporation, and, with respect to any criminal action or
proceeding, had no reasonable cause to believe such person's conduct was
unlawful.
In addition, Section 145 provides that a corporation may indemnify any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person is or was a director, officer, employee or agent of the corporation, or
is or was serving at the request of the corporation as a director, officer,
employee or agent of another corporation, partnership, joint venture, trust or
other enterprise against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or settlement
of such action or suit if such person acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of the
corporation and except that no indemnification shall be made in respect of any
claim, issue or matter as to which such person shall have been adjudged to be
liable to the corporation unless and only to the extent that the Delaware Court
of Chancery or the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability but in
view of all the circumstances of the case, such person is fairly and reasonably
entitled to indemnity for such expenses which the Delaware Court of Chancery or
such other court shall deem proper. Delaware law further provides that nothing
in the above-described provisions shall be deemed exclusive of any other rights
to indemnification or advancement of expenses to which any person may be
entitled under any bylaw, agreement, vote of stockholders or disinterested
directors or otherwise.
Symposium's Certificate of Incorporation provides that a director of
Symposium shall not be liable to Symposium or its stockholders for monetary
damages for breach of fiduciary duty as a director. Section 102(o)(7) of the
Delaware General Corporation Law provides that a provision so limiting the
personal liability of a director shall not eliminate or limit the liability of a
director for, among other things: breach of the duty of loyalty; acts or
omissions not in good faith or which involve intentional misconduct or a knowing
violation of the law; unlawful payment of dividends and transactions from which
the director derived an improper personal benefit.
Symposium has entered into separate but identical indemnity agreements
(the "Indemnity Agreements") with each director of Symposium (the
"Indemnitees"). Pursuant to the terms and conditions of the Indemnity
Agreements, Symposium indemnified each Indemnitee against any amounts which he
or she becomes legally obligated to pay in connection with any claim against him
or her based upon any action or inaction which he or she may commit, omit or
suffer while acting in his or her capacity as a director of Symposium or its
subsidiaries, provided, however, that Indemnitee acted in good faith and in a
20
<PAGE>
manner Indemnitee reasonably believed to be in or not opposed to the best
interests of Symposium and, with respect to any criminal action, had no
reasonable cause to believe Indemnitee's conduct was unlawful.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers, and controlling persons of
Symposium pursuant to the above statutory provisions or otherwise, Symposium has
been advised that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is, therefore, unenforceable.
PART F/S
The following financial statements are filed with this Form 10-SB:
PRO FORMA COMBINED FINANCIAL STATEMENTS
SYMPOSIUM TELECOM CORPORATION
Introduction to Unaudited Pro Forma Combined Financial Statements
Unaudited Pro Forma Combined Balance Sheet as of December 31, 1998
Unaudited Pro Forma Combined Statement of Operations for the year
ended December 31, 1998
Notes to Unaudited Pro Forma Combined Financial Statements
HISTORICAL FINANCIAL STATEMENTS
SYMPOSIUM TELECOM CORPORATION
Report of Independent Certified Public Accountants
Financial Statements
Consolidated Balance Sheet as of December 31, 1998
Consolidated Statement of Operations for the year ended
December 31, 1998
Consolidated Statement of Stockholders' Equity for the year
ended December 31, 1998
Consolidated Statement of Cash Flows for the year ended
December 31, 1998
Notes to Consolidated Financial Statements
HAMILTON TELECOMMUNICATIONS CORPORATION
Report of Independent Auditors
Financial Statements
Profit and Loss Account for the year ended June 30, 1998
Balance Sheet as at June 30, 1998
Cash Flow Statement for the year ended June 30, 1998
Notes to the Financial Statements
21
<PAGE>
PART III
ITEM 1. INDEX TO EXHIBITS
The following exhibits are filed with this Registration Statement:
<TABLE>
<CAPTION>
Exhibit No. Exhibit Name
<S> <C>
3.1 Amended and Restated Certificate of Incorporation of the Registrant.
3.2 By-Laws of the Registrant.
10.1 Share Purchase and Sale Agreement, by and between Symposium Telecom
Corporation and Hamilton Telecommunications Limited, dated
December 14, 1998 as amended.
10.2 Option Agreement, by and between Symposium Telecom Corporation,
Robert Green, Marilyn Shein, Fabrice Thomas, Shropshire Five
Investment Limited and Automated Communications Limited, dated
December 14, 1998, as amended.
10.3 1998 Stock Option Plan.
10.4 Form of Indemnification Agreement.
16.1 Letter from Weinberg & Company, P.A., dated February 16, 1999,
regarding change in certifying accountant.
21.1 List of Subsidiaries of Registrant.
27.1 Financial Data Schedule.
</TABLE>
ITEM 2. DESCRIPTION OF EXHIBITS
See Item 1 above.
22
<PAGE>
SIGNATURES
In accordance with Section 12 of the Securities Exchange Act of
1934, the registrant caused this registration statement to be signed on its
behalf by the undersigned, thereunto duly authorized.
SYMPOSIUM TELECOM CORPORATION
(Registrant)
Date: February 23, 1999 By: /s/ Ronald Altbach
-------------------------- --------------------------
Ronald Altbach
CHIEF OPERATING OFFICER
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below constitutes and appoints Ronald Altbach, his attorney-in-fact and agent,
with full power of substitution, for him in any and all capacities, to sign
this Registration Statement on Form 10-SB, and to file the same, with
exhibits thereto and other documents in connection therewith, with the
Securities and Exchange Commission, hereby ratifying and confirming all that
said attorney-in-fact, or their substitutes, may do or cause to be done by
virtue hereof.
Pursuant to the requirements of the Securities Act of 1934, this report
has been signed below by the following persons on behalf of the registrant
and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
<S><C>
Signature Title Date
--------- ----- ----
Co-Chairman of the Board and Chief
/s/ Rupert Galliers-Pratt Executive Officer February 23, 1999
- --------------------------
Ruper Galliers-Pratt
Co-Chairman of the Board
Acting Chief Financial Officer and
/s/ Ronald Altbach Chief Operating Officer February 23, 1999
- --------------------------
Ronald Altbach
/s/ Kenneth Levine Director February 23, 1999
- --------------------------
Kenneth Levine
/s/ Richard Cohen Director February 23, 1999
- --------------------------
Richard Cohen
</TABLE>
23
<PAGE>
SYMPOSIUM TELECOM CORPORATION
INDEX TO FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
PAGE
PRO FORMA COMBINED FINANCIAL STATEMENTS
<S> <C>
SYMPOSIUM TELECOM CORPORATION
Introduction to Unaudited Pro Forma Combined Financial Statements F-2
Unaudited Pro Forma Combined Balance Sheet F-3
Unaudited Pro Forma Combined Statement of Operations F-4
Notes to Unaudited Pro Forma Combined Financial Statements F-5 -- F-8
HISTORICAL FINANCIAL STATEMENTS
SYMPOSIUM TELECOM CORPORATION (REGISTRANT)
Report of Independent Certified Public Accountants F-9
Financial Statements
Consolidated Balance Sheet F-10
Consolidated Statement of Operations F-11
Consolidated Statement of Changes in Stockholders' Equity F-12
Consolidated Statement of Cash Flows F-13
Notes to Consolidated Financial Statements F-14 -- F-21
HAMILTON TELECOMMUNICATIONS LIMITED
Report of Independent Auditors F-22
Financial Statements
Profit and Loss Account F-23
Balance Sheet F-24
Statement of Cash Flows F-25
Notes to the Financial Statements F-26 -- F-33
</TABLE>
F-1
<PAGE>
Symposium Telecom Corporation
INTRODUCTION TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
BASIS OF PRESENTATION
Symposium Telecom Corporation (the "Company" or "Symposium"), a Delaware
corporation, was founded in May 1997 under the name Brack Industries Inc. In
July 1998, the Company amended its certificate of incorporation and changed
its name to Symposium Telecom Corporation. The Company is engaged principally
in telemarketing magazine and periodical subscription renewals to persons
whose subscriptions have recently expired. Symposium has contracted to
acquire all of the outstanding shares of Hamilton Telecommunications Limited
("Hamilton"), a company incorporated in the Republic of Ireland (the
"Acquisition"). Hamilton supplies telecommunications services to
international audiotext information providers located throughout Europe and
the Middle East. (See Note 1 - Acquisition.)
The following unaudited pro forma combined financial statements give effect
to the Acquisition. The Acquisition is anticipated to occur in April 1999 and
will be accounted for using the purchase method of accounting whereby the
assets and liabilities of Hamilton are recorded at fair market value.
Symposium has been identified as the accounting acquirer for financial
statement presentation purposes.
The unaudited pro forma combined balance sheet gives effect to the
Acquisition as if it had occurred on December 31, 1998. Hamilton's balance
sheet is as of September 30, 1998. The unaudited pro forma combined statement
of operations gives effect to the Acquisition as if it had occurred on
January 1, 1998. The unaudited pro forma combined statement of operations
reflects the operating results of Symposium for the calendar year ended
December 31, 1998 and of Hamilton for the year ended September 30, 1998.
Hamilton's operating results for its fiscal year ended June 30, 1998 were
adjusted by adding the subsequent period, July 1, 1998 to September 30, 1998,
and subtracting the interim period, July 1, 1997 to September 30, 1997.
The pro forma financial statements include adjustments to reflect (i) the
effect of the Acquisition, (ii) the effect of contractual compensation of
Symposium's new corporate management, (iii) the reduction in compensation to
the management of Hamilton, (iv) amortization of goodwill over fifteen years,
(v) an adjustment to convert Hamilton's financial statements to U.S.
generally accepted accounting principles, and (vi) amounts payable to the
shareholders of Hamilton for the cash portion of the purchase price of the
Acquisition and related interest expense at a rate of 12% per annum.
The pro forma adjustments are based on estimates, available information and
certain assumptions and may be revised as additional information becomes
available. The pro forma financial data do not purport to represent what
Symposium's financial position or results of operations would actually have
been if such transactions, in fact, had occurred on those dates and are not
necessarily representative of Symposium's financial position or results of
operations for any future period. Since the companies were not under common
control, historical combined results may not be comparable to, or indicative
of, future performance. The unaudited pro forma combined financial statements
should be read in conjunction with the other financial statements and notes
thereto included elsewhere in this Registration Statement.
F-2
<PAGE>
Symposium Telecom Corporation
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
December 31, 1998
(amounts in thousands)
<TABLE>
<CAPTION>
Symposium Hamilton Pro
Telecom Telecommuni- forma Pro
Corporation cations adjust- forma
ASSETS (Registrant) Limited ment combined
------------ ------------ -------- --------
<S> <C> <C> <C> <C>
CURRENT ASSETS
Cash $ 292 $ 111 $ - $ 403
Accounts receivable, net 10 1,729 - 1,739
---- ----- ------- ------
Total current assets 302 1,840 - 2,142
PLANT AND EQUIPMENT, NET 22 84 - 106
GOODWILL - - 11,535 11,535
ORGANIZATION COSTS 26 - - 26
---- ----- ------- ------
$ 350 $1,924 $11,535 $13,809
==== ===== ====== ======
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Amounts payable to Hamilton shareholders $ - $ - $ 5,750 $ 5,750
Accounts payable and accrued expenses 72 1,858 60 1,990
Due to stockholders 3 - - 3
---- ----- ------ ------
Total current liabilities 75 1,858 5,810 7,743
LONG-TERM DEBT
Capital lease obligation, net of current portion - 41 - 41
---- ----- ------ ------
75 1,899 5,810 7,784
---- ----- ------ ------
STOCKHOLDERS' EQUITY
Common stock 7 - 2 9
Additional paid-in capital 587 - 5,748 6,335
Retained earnings (accumulated deficit) (319) 25 (25) (319)
---- ----- ------ ------
275 25 5,725 6,025
---- ----- ------ ------
$ 350 $1,924 $11,535 $13,809
==== ===== ====== ======
</TABLE>
The accompanying notes are an integral part of this unaudited statement.
F-3
<PAGE>
Symposium Telecom Corporation
UNAUDITED PRO FORMA COMBINED STATEMENT OF OPERATIONS
Year ended December 31, 1998
(amounts in thousands)
<TABLE>
<CAPTION>
Symposium Hamilton
Telecom Telecommuni- Total Pro forma Pro
Corporation cations combined adjust- forma
(Registrant) Limited historical ments combined
------------ ------------ ---------- ----------- --------
<S> <C> <C> <C> <C> <C>
Revenues $ 14 $8,436 $8,450 $ - $8,450
Cost of sales 21 5,798 5,819 - 5,819
---- ----- ----- ------ -----
Gross margin (7) 2,638 2,631 - 2,631
Operating expenses 312 2,616 2,928 (1,357) 1,571
Goodwill amortization - - - 769 769
---- ----- ----- ------ -----
Operating income (loss) (319) 22 (297) 588 291
Other income (expense)
Interest income - 11 11 - 11
Interest expense - (9) (9) (690) (699)
Other income (expense) - - - (60) (60)
---- ----- ----- ------ -----
Income (loss) before taxes (319) 24 (295) (162) (457)
Provision for income taxes - 25 25 - 25
---- ----- ----- ------ -----
NET LOSS $(319) $ (1) $ (320) $ (162) $ (482)
==== ===== ==== ====== =====
Net loss per share
Basic and diluted $(.18) $ (.05)
==== ====
Shares used in computing
net loss per share
Basic and diluted 1,729,428 9,013,321
========= =========
</TABLE>
The accompanying notes are an integral part of this unaudited statement.
F-4
<PAGE>
Symposium Telecom Corporation
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS
NOTE 1 - ACQUISITION
The following table sets forth the consideration to be paid (the "Purchase
Consideration") in cash and shares of common stock of Symposium to
Hamilton, and the allocation of the consideration to net assets acquired
and resulting goodwill at December 31, 1998. The number of shares to be
issued to Hamilton is based upon the assumed market value of $3.50 per
share.
<TABLE>
<CAPTION>
Net
assets
Shares of Value Total (liabilities)
common of considera- acquired,
Cash stock shares tion as adjusted Goodwill
---- --------- ------ ---------- ------------- --------
---------------------------------(in 000's)------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Hamilton Telecommunications
Limited $5,750 1,643 $5,750 $11,500 $(35) $11,535
===== ===== ===== ====== === ======
</TABLE>
The total Purchase Consideration does not reflect any contingent
consideration, which cannot exceed $6,000,000, as defined in the Purchase
Agreement.
Completion of the acquisition is conditioned upon Symposium's common stock
being quoted on the OTC Bulletin Board Service and Symposium raising
sufficient funds to satisfy the initial cash consideration. The Sellers may
terminate the agreement if the conditions to closing are not satisfied by
June 14, 1999. There is no certainty that Symposium will be able to
complete the Acquisition.
Based on management's preliminary analysis, it is anticipated that the
historical carrying value of Hamilton's assets and liabilities will
approximate fair value. The amount allocated to goodwill is approximately
$11,535,000 at December 31, 1998.
F-5
<PAGE>
Symposium Telecom Corporation
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS
The following table summarizes unaudited pro forma combined balance sheet
adjustments (amounts in thousands):
<TABLE>
<CAPTION>
Total
adjust-
ASSETS (a) (b) ments
------ ---- -------
<S> <C> <C> <C>
GOODWILL $11,535 $ - $11,535
------ ---- ------
$11,535 $ - $11,535
====== ==== ======
LIABILITIES AND
STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Amounts payable to Hamilton shareholders $ 5,750 $ - $ 5,750
Accounts payable and accrued expenses - 60 60
------- --- ------
Total current liabilities 5,750 60 5,810
STOCKHOLDERS' EQUITY
Common stock 2 - 2
Additional paid-in capital 5,748 - 5,748
Preferred stock - - -
Retained earnings (deficit) 35 (60) (25)
------- --- ------
5,785 (60) 5,725
------- --- ------
$11,535 $ - $11,535
====== ===== ======
</TABLE>
F-6
<PAGE>
Symposium Telecom Corporation
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 - UNAUDITED PRO FORMA COMBINED BALANCE SHEET ADJUSTMENTS (CONTINUED)
(a) Records the consideration paid by Symposium, including
cash consideration of $5.75 million and common stock with an
assumed fair market value of $5.75 million, and the resulting
goodwill. The pro forma assumes that the cash portion of the
purchase price is funded by issuance of debt.
(b) Records an adjustment to accrue a migration tax payable to present
Hamilton's financial statements in accordance with U.S. generally
accepted accounting principles.
NOTE 3 - UNAUDITED PRO FORMA COMBINED STATEMENTS
OF OPERATIONS ADJUSTMENTS
The following table summarizes unaudited pro forma combined statement of
operations adjustments (amounts in thousands):
<TABLE>
<CAPTION>
Year Ended December 31, 1998
----------------------------------------------------------------
Pro
forma
adjust-
(a) (b) (c) (d) (e) ments
-------- --- ------- ------- ----- ---------
<S> <C> <C> <C> <C> <C> <C>
Operating expenses $ - $ - $ 550 $(1,907) $ - $(1,357)
-
Goodwill amortization - 769 - - 769
---- ---- ---- ------ --- -------
Operating income - 769 (550) 1,907 - 588
Other income and (expenses)
Interest expense (690) - - - - (690)
Other income (expense) - - - - (60) (60)
---- -------- ---- ------ --- ------
Income before taxes (690) (769) (550) 1,907 (60) (162)
Provision for taxes - - - - - -
---- ---- ---- ------ --- --------
NET LOSS $(690) $(769) $(550) $ 1,907 $(60) $ (162)
==== ==== ==== ====== === ======
</TABLE>
(a) Records interest expense at a rate of 12% per annum on acquisition
indebtedness of $5.75 million for twelve months.
(b) Records amortization of goodwill based on a fifteen-year life.
F-7
<PAGE>
Symposium Telecom Corporation
NOTES TO UNAUDITED PRO FORMA
COMBINED FINANCIAL STATEMENTS (CONTINUED)
NOTE 3 - UNAUDITED PRO FORMA COMBINED STATEMENTS
OF OPERATIONS ADJUSTMENTS (CONTINUED)
(c) Records an increase in compensation to Symposium management under terms
approved by the Company's Board of Directors.
(d) Reflects the net reduction in compensation to the owners and officers
of Hamilton, based on terms agreed to with Symposium.
(e) Records an adjustment to accrue a migration tax payable in order to
present Hamilton's financial statements in accordance with U.S.
generally accepted accounting principles.
NOTE 4 - PRO FORMA NET LOSS PER SHARE
Basic and diluted pro forma net loss per share is computed by dividing net
loss by the 9,013,321 common shares outstanding upon the completion of the
Acquisition. Outstanding options and warrants have not been included in the
computation as the effect would be antidilutive.
F-8
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
SYMPOSIUM TELECOM CORPORATION AND SUBSIDIARY
We have audited the accompanying consolidated balance sheet of Symposium
Telecom Corporation and Subsidiary (the "Company"), as of December 31, 1998
and the related consolidated statements of operations and deficit,
stockholders' equity and cash flows for the year then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Symposium Telecom Corporation
and Subsidiary at December 31, 1998, and the results of their operations and
their cash flows for the year then ended, in conformity with generally accepted
accounting principles.
GRANT THORNTON LLP
New York, New York
February 11, 1999
F-9
<PAGE>
Symposium Telecom Corporation and Subsidiary
CONSOLIDATED BALANCE SHEET
December 31, 1998
ASSETS
<TABLE>
<CAPTION>
<S> <C>
CURRENT ASSETS
Cash $ 292,194
Accounts receivable (net of $2,994 allowance
for doubtful accounts) 10,197
---------
Total current assets 302,391
EQUIPMENT, NET 22,304
ORGANIZATION COSTS 25,110
---------
$ 349,805
---------
---------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 71,625
Due to stockholders 3,162
---------
Total current liabilities 74,787
STOCKHOLDERS' EQUITY
Preferred stock - par value, $.001 per share;
authorized, 10,000,000 shares; -0- shares
issued and outstanding -
Common stock - par value, $.001 per share;
authorized, 25,000,000 shares; 7,370,464
shares issued and outstanding 7,370
Additional paid-in capital 587,152
Deficit (319,504)
---------
275,018
---------
$ 349,805
---------
---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-10
<PAGE>
Symposium Telecom Corporation and Subsidiary
CONSOLIDATED STATEMENT OF OPERATIONS
Year ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Revenues $ 13,816
Cost of sales 20,586
----------
Gross loss (6,770)
----------
Operating expenses
Consulting expenses 145,838
Compensation 83,000
Transfer agency fee 11,543
Auto expense 543
Travel expense 7,645
Legal expense 42,014
Accounting expense 3,807
Telephone expense 3,001
Licenses and taxes 225
Depreciation expense 124
Office expense 12,799
Miscellaneous 2,195
----------
312,734
----------
NET LOSS $ (319,504)
----------
----------
Net loss per share of common stock
Basic and diluted $(.18)
----------
----------
Weighted average common stock outstanding
Basic and diluted 1,729,428
----------
----------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-11
<PAGE>
Symposium Telecom Corporation and Subsidiary
CONSOLIDATED STATEMENT OF STOCKHOLDERS' EQUITY
Year ended December 31, 1998
<TABLE>
<CAPTION>
Common Stock
------------------
Number Additional Total
of paid-in Accumulated stockholders'
shares Amount capital deficit equity
------ ------ ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
Balance at January 1, 1998 - $ - $ - $ - $ -
Shares issued for services 9,200 9 175 184
Shares issued for cash 7,361,264 7,361 430,977 - 438,338
Stock options and warrants issued for services 73,000 73,000
Contributed services - officers 83,000 83,000
Net loss (319,504) (319,504)
--------- ------ -------- --------- ---------
Balance at December 31, 1998 7,370,464 $7,370 $587,152 $(319,504) $ 275,018
--------- ------ -------- --------- ---------
--------- ------ -------- --------- ---------
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-12
<PAGE>
Symposium Telecom Corporation and Subsidiary
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, 1998
<TABLE>
<CAPTION>
<S> <C>
Cash flows from operating activities
Net loss $(319,504)
Adjustments to reconcile net loss to the net cash
used in operating activities
Depreciation 124
Stock options and warrant issued for services 73,000
Contributed services - officers 83,000
Net change in asset and liabilities
Accounts and other receivables (10,197)
Accounts payable and accrued expenses 71,625
Due to stockholders 3,162
---------
Net cash used in operating activities (98,790)
---------
Cash flows from investing activities
Purchase of equipment (22,428)
Organization costs (24,926)
---------
Net cash used in investing activities (47,354)
---------
Cash flows from financing activities
Issuance of common stock 438,338
---------
NET INCREASE IN CASH 292,194
Cash at beginning of year -
---------
Cash at end of year $ 292,194
---------
---------
Supplemental disclosure of cash flow information:
Noncash investing activities
9,200 shares of common stock issued for
organization costs $ 184
</TABLE>
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THIS STATEMENT.
F-13
<PAGE>
Symposium Telecom Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
NOTE A - DESCRIPTION OF BUSINESS AND SIGNIFICANT
ACCOUNTING POLICIES
FORMATION OF THE COMPANY
Symposium Telecom Corporation (the "Company") was incorporated in Delaware
on May 9, 1997 under the name of Brack Industries Inc. No activity in the
Company occurred until 1998, when initial capital contributions were made.
As a result, no financial statements have been presented for the period
prior to January 1, 1998. In June 1998, the Company amended its certificate
of incorporation and changed its name to Symposium Telecom Corporation. The
Company, through its wholly-owned subsidiary, Publisher Advantage
Corporation ("PAC"), is engaged principally in telemarketing in the United
States for magazine and periodical subscription renewals to persons whose
subscriptions have recently expired. PAC commenced operations in the
quarter ended December 31, 1998.
ACQUISITIONS
In December 1998, the Company contracted to acquire all of the outstanding
shares of Hamilton Telecommunications Limited ("Hamilton"), a corporation
organized under the laws of the Republic of Ireland that supplies
telecommunications services to international audiotext information
providers located throughout Europe and in the Middle East. The Acquisition
will be accounted for using the purchase method of accounting.
The purchase price for Hamilton is $5.75 million plus 1,642,857 shares of
the Common Stock plus contingent consideration equal to the lesser of: (1)
five times the amount, if any, by which the relevant profits (as defined)
of Hamilton for its fiscal year ending June 30, 1999 exceed $2.25 million
(the relevant profits of Hamilton for the fiscal year ended June 30, 1998),
and (2) $6,000,000. The contingent consideration is payable 50% in cash and
50% in shares of Common Stock valued at $3.50 per share (accordingly, a
maximum of 857,143 additional shares of Common Stock may be issued).
The Acquisition of Hamilton is contingent upon the Company's ability to
obtain financing of at least $5.75 million and its stock being quoted on
the OTC Bulletin Board Service. There is no certainty that the Company will
be able to complete the Acquisition. The stockholders of Hamilton can
cancel the agreement if the conditions to closing are not satisfied by
June 14, 1999.
F-14
<PAGE>
Symposium Telecom Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE A (CONTINUED)
In addition, in December 1998, the Company purchased an option (the "Option
Agreement") to acquire all of the outstanding capital stock of Automated
Communications Limited ("ACL"), a Bahamas corporation. ACL, which is owned
beneficially by the principal shareholders of Hamilton, is an international
audiotext service operator that had not generated revenues as of
December 31, 1998. The Company has agreed to pay an option fee in shares of
common stock having a market value of $2 million if certain conditions are
satisfied, including the completion of the acquisition of Hamilton and the
certification by ACL's auditors that within nine months of the date of the
agreement ACL had earned in any one month in excess of $100,000 over its
expenditures. The purchase price for the ACL shares is an amount equal to
the relevant profits of ACL for the 12-month period ending 18 months
following the date the common stock of Symposium becomes quoted on the OTC
Bulletin Board Service, multiplied by six, less the option fee. The option
price is payable 50% in cash and 50% in shares of common stock (based on
the market value of the common stock). The option is exercisable during a
six-month period following the period during which the relevant profits are
calculated. Under the terms of the agreement, certain executives of the
Company would be entitled to receive a portion of the proceeds as
compensation for services. Under the Option Agreement, Symposium has agreed
that without the approval of the shareholders of ACL it will not issue any
preferred stock (other than in connection with any financing to complete
the Hamilton acquisiton) until the earlier to occur of payment of the
option price or the date the common stock of Symposium is listed on the
Nasdaq stock market.
There is no certainty that the Company will be able to complete the
Acquisition.
A summary of significant accounting policies applied consistently in the
preparation of the accompanying financial statements follows:
BASIS OF PRESENTATION
The consolidated financial statements include the accounts of the Company
and its wholly-owned subsidiary, Publishers Advantage Corporation ("PAC").
All intercompany accounts and transactions have been eliminated in the
accompanying consolidated financial statements.
F-15
<PAGE>
Symposium Telecom Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE A (CONTINUED)
REVENUE RECOGNITION
PAC recognizes revenue as commissions are earned when subscription renewals
are received. PAC estimates a reserve for renewals that are ultimately not
collectible.
USE OF ESTIMATES
In preparing financial statements in conformity with generally accepted
accounting principles, management is required to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements, as well as the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from
those estimates.
EQUIPMENT
Equipment is recorded at cost, less accumulated depreciation. Depreciation
expense is computed using straight-line and accelerated methods over the
equipment's useful life.
NET LOSS PER SHARE
Net loss per common share is based on the weighted-average number of common
shares outstanding during the periods.
Basic earnings per share exclude dilution and are computed by dividing
income (loss) available to common shareholders by the weighted-average
common shares outstanding for the period. Diluted earnings per share
reflect the weighted-average common shares outstanding plus the potential
dilutive effect of securities or contracts which are convertible to common
shares, such as options, warrants, and convertible preferred stock.
Options and warrants to purchase 580,000 shares and 20,000 shares,
respectively, of common stock were outstanding at December 31, 1998, but
were not included in the computation of diluted earnings per share because
to do so would have been antidilutive.
F-16
<PAGE>
Symposium Telecom Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE A (CONTINUED)
IMPAIRMENT OF LONG-LIVED ASSETS
The Company reviews long-lived assets and certain identifiable intangibles
held and used for possible impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be
recoverable. The Company has determined that no provision is necessary for
the impairment of long-lived assets at December 31, 1998.
NOTE B - EQUIPMENT
Equipment at December 31, 1998 is summarized as follows:
<TABLE>
<CAPTION>
Useful
life
--------
<S> <C> <C>
Equipment $22,428 5 years
Less: accumulated depreciation (124)
--------
$22,304
--------
--------
</TABLE>
Depreciation expense amounted to $124 for the year ended December 31, 1998.
NOTE C - CONCENTRATIONS
The Company maintains its cash balances at two financial institutions.
Deposits are insured by the Federal Deposit Insurance Corporation on
aggregate balances up to $100,000 at each financial institution. Uninsured
balances aggregate to approximately $200,000 at December 31, 1998. The
Company has not experienced any losses in such accounts and believes it is
not exposed to any significant credit risk.
The success of the PAC's telemarketing business is subject to a number of
risks and uncertainties, including the ability to obtain lists of expiring
subscriptions directly from publishers. In 1998, PAC received all of its
lists of expiring subscriptions from one publisher.
F-17
<PAGE>
Symposium Telecom Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE D - STOCKHOLDERS' EQUITY
The Company is authorized to issue 25,000,000 shares of common stock, $.001
par value and 10,000,000 shares of preferred stock, $.001 par value. From
its date of incorporation to December 31, 1998, and after giving effect to
a 1-for-2 reverse split in October 1998, the Company has issued 7,361,264
shares for cash and 9,200 shares for organization costs, as follows:
<TABLE>
<CAPTION>
Number
Price per of Net
share shares proceeds
--------- ------- ----------
<S> <C> <C>
$ .01 6,658,800 $ 66,589
.02 346,664 6,933
1.00 365,000 365,000
---------- ---------
7,370,464 $438,522
---------- ---------
---------- ---------
</TABLE>
In December 1998, the Company granted warrants to two consultants to
purchase an aggregate of 20,000 shares of the Company's common stock at an
exercise price of $1.00 per share. The warrants expire December 3, 2001.
The Company recognized $4,000 of consulting expense related to these
warrants.
NOTE E - STOCK OPTIONS
In December 1998, the Board of Directors approved the adoption of a stock
option plan (the "Plan"). The Plan provides for the grant of options to
purchase up to 1,000,000 shares of the Company's common stock. These
options may be granted to selected eligible directors, officers, employees
and consultants of the Company. Options granted under the Plan may either
be "incentive stock options" within the meaning of Section 422 of the
Internal Revenue Code of 1986, as amended (the "Code"), or options which do
not qualify as "incentive stock options." The exercise price of an
incentive stock option may not be less than the fair market value of a
share of common stock on the date of grant. There is no limitation on the
exercise price of options that are not incentive stock options. No
participant may receive options representing more than 50% of the aggregate
number of shares of common stock that may be issued pursuant to all options
under the Plan.
F-18
<PAGE>
Symposium Telecom Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE E (CONTINUED)
Statement of Financial Accounting Standards No. 123 ("SFAS No. 123"),
"Accounting for Stock-Based Compensation establishes financial accounting
and reporting standards for stock-based employee compensation plans. The
financial accounting standards of SFAS No. 123 permit companies to either
continue accounting for stock-based compensation under previous rules or
adopt SFAS No. 123 and reflect the fair value of stock options and other
forms of stock-based compensation in the results of operations and
additional expense. The disclosure requirements of SFAS No. 123 require
companies which elect not to record the fair value in the statement of
operations to provide pro forma disclosures of net income and earnings per
share in the notes to the financial statements as if the fair value of
stock-based compensation had been recorded.
The Company follows Accounting Principles Board Opinion No. 25 and its
related interpretations in accounting for its stock-based compensation
plans. Accordingly, no compensation cost has been recognized in the
statement of operations for employee stock options, however, the Company
did recognize approximately $69,000 of consulting expense for options which
were granted in 1998 to directors and consultants.
The following table summarizes the stock option activity for the year ended
December 31, 1998:
<TABLE>
<CAPTION>
Weighted
average
exercise
price Shares
-------- -------
<S> <C> <C>
Balance at January 1, 1998 $ - -
Granted $.98 580,000
-------
Balance at December 31, 1998 580,000
-------
-------
</TABLE>
As of December 31, 1998, no options outstanding were exercisable. The
exercise price for all stock options awarded was determined by the Board of
Directors of the Company.
F-19
<PAGE>
Symposium Telecom Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE E (CONTINUED)
The following table summarizes option data as of December 31, 1998:
<TABLE>
<CAPTION>
Options outstanding
----------------------------------------------
Weighted-
average Weighted-
remaining average
Range of Number contractual exercise Number
exercise price outstanding life price exercisable
-------------- ----------- ----------- --------- -----------
<S> <C> <C> <C> <C>
$.01 70,000 4 years $ .01 -
$1.00 - $2.50 510,000 4 years $ 1.12 -
--------- ------ ---------
580,000 $ .98 -
--------- ------ ---------
--------- ------ ---------
</TABLE>
The Company utilized the Black-Scholes option-pricing model to quantify the
expense for options and warrants granted to nonemployees and the pro forma
effects on net loss and net loss per share of the fair value of the options
granted to employees during 1998. The following assumptions were made in
estimating fair value.
<TABLE>
<S> <C>
Risk-free interest rate 6%
Expected option life 4 years
Expected volatility 1%
</TABLE>
Had compensation cost been determined under SFAS No. 123 for the year ended
December 31, 1998, net loss and net loss per share would have been
increased as follows:
<TABLE>
<S> <C>
Net loss
As reported $(319,504)
Pro forma for stock options and warrants (351,504)
Net loss per share
As reported $(.18)
Pro forma for stock options and warrants (.20)
</TABLE>
F-20
<PAGE>
Symposium Telecom Corporation and Subsidiary
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
December 31, 1998
NOTE F - COMMITMENTS AND CONTINGENCIES
CONSULTING AGREEMENTS - RELATED PARTIES
The Company has engaged the services of several consultants, who are
directors or shareholders, to promote public relations and to identify
business development leads and potential acquisition targets for the
Company. The Company has commitments for consulting costs of approximately
$100,000 over the next twelve months related to these agreements. Under one
of these agreements, the Company issued options to purchase 40,000 shares
of its common stock.
SERVICE AGREEMENT
PAC has engaged Publishers National Associated Service ("PNAS") to perform,
on a "turnkey" basis, telemarketing services for PAC. PNAS performs these
services at a telemarketing call center in Blasdell, New York. Publishers
Advantage's operations occupy space in the call center. PNAS provides, at
its expense, the facility, all telephones, telephone lines, telemarketers,
bookkeeping and other administrative personnel and facilities management.
PAC supplies the other computer software and equipment used by the
telemarketers. PAC compensates PNAS by paying the agreed-upon hourly fee
for each hour worked by each telemarketer.
PAC depends on PNAS to perform PAC's telemarketing operations. PAC's
engagement of PNAS will terminate in December 1999 and there is no
assurance that PNAS will renew the arrangement. Although there are many
other companies that provide similar services, there is no assurance that
PAC would be able to engage an acceptable replacement by the time the
arrangement with PNAS terminates. If PAC's engagement of PNAS is
terminated, PAC will not generate any revenues during the period in which
it has no agreement with a telemarketing service company to perform these
services for PAC and has no capability of performing these services with
its own personnel.
NOTE G - INCOME TAXES
Income taxes payable are provided for on taxable income at the statutory
rates applicable to such income. No current tax provision has been recorded
as a result of losses incurred by the Company.
No deferred taxes have been provided since the amounts of deferred tax
assets and liabilities are immaterial to the accompanying financial
statements.
F-21
<PAGE>
REPORT OF INDEPENDENT AUDITORS
To the Board of Directors and the Shareholders of Hamilton Telecommunications
Limited.
We have audited the accompanying balance sheet of Hamilton Telecommunications
Limited ("the Company") as of June 30, 1998 and the related statements of
profit and loss account and cash flows for the years ended June 30, 1998 and
1997 (together, "the financial statements") which, as described in the
financial statements, have been prepared on the basis of accounting
principles generally accepted in the United Kingdom. These financial
statements are the responsibility of the Directors of the Company. Our
responsibility is to express an opinion on these financial statements based
on our audit.
We conducted our audit in accordance with generally accepted auditing
standards in the United Kingdom, which are substantially the same as auditing
standards generally accepted in the United States. These 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 statements 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 Hamilton Telecommunications
Limited as of June 30, 1998, and the results of its operations and its cash
flows for the years ended June 30, 1998 and 1997, in conformity with
accounting principles generally accepted in the United Kingdom.
United Kingdom accounting principles vary in certain material respects from
accounting principles generally accepted in the United States. The
application of the latter would have affected the determination of
shareholders' equity and financial position as of June 30, 1998, and the
determination of net profit for the years ended June 30, 1998, and 1997 to
the extent summarized in Note 14 to the financial statements.
SINCLAIR CROYDON
Chartered Accountants and Registered Auditors
Squires House
81 - 87 High Street,
Billericay,
Essex, CM12 9AS
27th October 1998
F-22
<PAGE>
HAMILTON TELECOMMUNICATIONS LIMITED
PROFIT AND LOSS ACCOUNT
FOR THE YEAR ENDED 30TH JUNE 1998
<TABLE>
<CAPTION>
NOTES 1998 1997
------ ---- ----
$ $ $ $
<S> <C> <C> <C> <C> <C> <C> <C>
TURNOVER 1 9,828,941 5,702,179
Cost of sales 6,361,614 4,165,996
--------- ---------
GROSS PROFIT 3,467,327 1,536,183
Administrative expenses 3,291,288 1,471,536
--------- ---------
OPERATING PROFIT 2 176,039 64,647
Interest receivable 3 10,678 4,846
Interest payable 4 6,466 4,212 - 4,846
------- ------------ --------- ------------
PROFIT ON ORDINARY
ACTIVITIES BEFORE TAXATION 180,251 69,493
Tax on profit on ordinary activities 5 39,322 22,117
----------- -----------
PROFIT ON ORDINARY
ACTIVITIES AFTER TAXATION 140,929 47,376
RETAINED PROFIT BROUGHT
FORWARD 47,376
----------- -----------
RETAINED PROFIT CARRIED
FORWARD 188,305 47,376
========== ===========
</TABLE>
The company has no recognized gains or losses other than the profit or loss for
the above financial years.
The accompanying accounting policies and notes form an integral part of this
financial statement.
F-23
<PAGE>
HAMILTON TELECOMMUNICATIONS LIMITED
BALANCE SHEET
AS AT 3OTH JUNE 1998
<TABLE>
<CAPTION>
1998
----
NOTES $ $
-------
<S> <C> <C> <C>
FIXED ASSETS
Tangible assets 6 91,541
CURRENT ASSETS
Debtors 7 1,271,211
Cash at bank and in hand 145,810
----------
1,417,021
CREDITORS - amounts falling due
within one year 8 1,277,693
---------
NET CURRENT ASSETS 139,328
--------
230,869
CREDITORS - amounts due after one year 9 42,562
--------
188,307
-------
-------
CAPITAL AND RESERVES
Share Capital 11 2
Profit and Loss Account 188,305
-------
188,307
-------
-------
</TABLE>
The accompanying accounting policies and notes form an integral part of this
financial statement.
F-24
<PAGE>
HAMILTON TELECOMMUNICATIONS LIMITED
CASH FLOW STATEMENT
FOR THE YEAR ENDED 30TH JUNE 1998
<TABLE>
<CAPTION>
NOTES 1998 1997
------ ---- ----
$ $ $ $
<S> <C> <C> <C> <C> <C>
NET CASH INFLOW FROM OPERATING
ACTIVITIES
Operating profit 176,039 64,647
Depreciation 18,712 7,156
Decrease in debtors 1,397,479 (2,668,690)
Decrease in creditors (1,412,662) 2,648,247
---------- ----------
179,568 51,360
RETURNS ON INVESTMENT AND
SERVICING OF FINANCE
Interest received 10,678 4,846
Interest paid (6,466)
------- ------
Net cash inflow from returns on
investments and servicing of finance 4,212 4,846
TAXATION
Corporation tax paid (25,274)
INVESTING ACTIVITIES
Payments to acquire tangible fixed
assets (88,781) (28,629)
----------- -----------
NET CASH INFLOW BEFORE FINANCING 69,725 27,577
FINANCING ACTIVITIES
Capital element of Finance leases 48,508
----------- ------------
INCREASE IN CASH AND CASH
EQUIVALENTS 118,233 27,577
========== ===========
RECONCILIATION OF CHANGE IN CASH
AND CASH EQUIVALENTS
Cash at bank and in hand at the
beginning of the year 27,577
Cash at bank and in hand at the end of
the year 145,810 27,577
---------- -----------
118,233 27,577
========== ===========
</TABLE>
The accompanying accounting policies and notes form an integral part of this
financial statement.
F-25
<PAGE>
HAMILTON TELECOMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS AT 3OTH JUNE 1998
1. ACCOUNTING POLICIES
(a) CURRENCY
All figures are stated in U.S. dollars, which is the functional
currency of the Company.
(b) ACCOUNTING CONVENTIONS
The financial statements have been prepared under the historical cost
convention.
(c) ACCOUNTING STANDARDS
The financial statements have been prepared in accordance with
applicable accounting standards in the United Kingdom.
(d) TURNOVER AND DEBTORS
Turnover comprises payments received and due for services provided at
their estimated recoverable amounts. This is recorded as 90% of the
volume of measured telephone call traffic carried over brokered
telephone lines. The 90% payment makes allowance for a measurement
variance between the volume of call traffic as measured by the
telephone company in the country of origin of the call, and the call
carrier. The call carrier pays Hamilton Telecommunications Limited
before they receive final settlement from the country of origin. The
10% retention is expected to adequately cover any measurement
variances. The residual amounts will be accounted for upon receipt.
(e) FOREIGN EXCHANGE DIFFERENCES
Assets and liabilities in foreign currencies are translated into U.S.
dollars at rates of exchange ruling at the balance sheet date.
Transactions in foreign currencies are translated into U.S. dollars at
the average exchange rate for the year. Exchange differences are taken
into account in arriving at the operating profit.
(f) DEPRECIATION
Depreciation is provided on all tangible fixed assets at rates
calculated to write off the cost of the assets to their anticipated
residual values over their expected useful lives, as follows:
<TABLE>
Rate Method
<S> <C> <C>
Plant and equipment 25% straight line
Motor vehicles 25% straight line
</TABLE>
F-26
<PAGE>
HAMILTON TELECOMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS AT 3OTH JUNE 1998
1. ACCOUNTING POLICIES (CONTINUED)
(g) TAXATION
The accounts include a provision for U.K. corporation tax on the
profits of the business up until the date of the company's migration
from the U.K. This liability is yet to be agreed with the U.K. tax
authorities.
2. OPERATING PROFIT
Operating profit is stated after charging:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Auditors' remuneration $20,000 $18,858
Depreciation 18,712 7,156
Equipment rental 2,904 23,296
Foreign exchange difference 9,002 18,502
</TABLE>
3. INTEREST RECEIVABLE AND SIMILAR INCOME
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Bank interest $10,678 $4,846
====== =====
</TABLE>
4. INTEREST PAYABLE
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
On hire purchase contact $5,830
On bank current accounts 636
------
$6,466
------
------
</TABLE>
F-27
<PAGE>
HAMILTON TELECOMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS AT 3OTH JUNE 1998
5. TAXATION
The tax charge on the profit on ordinary activities for the year was as
follows:
<TABLE>
<CAPTION>
1998
----
<S> <C>
U.K. corporation tax @ 21% $39,322
=======
</TABLE>
6. TANGIBLE FIXED ASSETS
<TABLE>
<CAPTION>
Motor Plant and
Vehicles Equipment Total
-------- --------- ---------
<S> <C> <C> <C>
Cost
At 1st July 1997 $28,629 $ 28,629
Additions in the year $72,591 16,190 88,781
------ ------ --------
At 30th June 1998 $72,591 $44,819 $117,410
====== ====== =======
Depreciation
At 1st July 1997 $ 7,157 $ 7,157
Charge for the year $ 7,508 11,204 18,712
------- ------ --------
At 30th June 1998 $ 7,508 $18,361 $ 25,869
======= ====== ========
Net Book Value
At 30th June 1998 $65,083 $26,458 $ 91,541
====== ====== ========
At 30th June 1997 $21,472 $ 21,472
====== ========
</TABLE>
Included in the amounts for fixed assets above are the following amounts
relating to assets which are subject to hire purchase contracts:
<TABLE>
<CAPTION>
Motor
Vehicles
--------
<S> <C>
Net book value $65,083
Depreciation charge for the year $ 7,508
=======
</TABLE>
F-28
<PAGE>
HAMILTON TELECOMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS AT 3OTH JUNE 1998
7. DEBTORS
<TABLE>
<CAPTION>
1998
----
<S> <C>
Amounts falling due within one year
Trade debtors $1,271,211
----------
----------
</TABLE>
8. CREDITORS
<TABLE>
<CAPTION>
1998
----
<S> <C>
Amounts falling due within one year
Trade creditors $1,220,115
Hire purchase 5,946
Other creditors 186
Corporation Tax 36,165
Accruals 15,281
----------
$1,277,693
----------
----------
</TABLE>
9. CREDITORS
<TABLE>
<CAPTION>
1998
----
<S> <C>
Amounts falling due after more than one year
Hire purchase $42,562
-------
-------
</TABLE>
F-29
<PAGE>
HAMILTON TELECOMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS AT 3OTH JUNE 1998
10. HIRE PURCHASE OBLIGATIONS
The maturity of these amounts is as follows:
<TABLE>
<CAPTION>
1998
----
<S> <C>
Amounts payable
In the following year $ 5,946
In the second year 10,246
In the third year 32,316
-------
Net obligation $48,508
-------
-------
</TABLE>
11. SHARE CAPITAL
<TABLE>
<CAPTION>
1998
----
<S> <C>
Ordinary shares of IR L1 each
Authorized 100,000
-------
-------
Issued and fully paid 2
-------
-------
</TABLE>
12. EXCEPTIONAL ITEM
The commissions and revenues payable figure, which appears as a cost
within the profit and loss account, is shown net of a credit amount of
$674,611. This figure relates to the reversal of a provision for an amount
payable in respect of the year to 30th June 1997. During the course of the
year to 30th June 1998 it was proved that this amount was not due.
13. RELATED PARTY TRANSACTIONS
During the year consultancy fees of $2,801,905 were paid to Mr. R. Green
and Ms. M. Shein. These individuals were the key management of the
business and also the ultimate owners of the entire issued share
capital.
F-30
<PAGE>
HAMILTON TELECOMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS AT 3OTH JUNE 1998
14. RECONCILIATION TO US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP)
The accompanying financial statements have been prepared in accordance
with accounting principles generally accepted in the United Kingdom ("UK
GAAP"), which differ in certain material respects from generally accepted
accounting principles in the United States ("US GAAP"). Such differences
involve methods for measuring the amounts shown in the financial
statements, as well as additional disclosures required by US GAAP.
The following is a summary of the material adjustment to profit on
ordinary activities and shareholders' equity which would have been
required in applying the significant differences between UK and US GAAP.
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
(a) Reconciliation of profit and loss accounts:
Profit for financial year reported under UK GAAP $140,929 $47,376
Provision for migration tax (60,000)
-------- -------
Net income in accordance with US GAAP $ 80,929 $47,376
======== =======
Earnings per share - basic and dilutive $ 40,465 $23,688
======== =======
Weighted average shares outstanding - basic
and dilutive 2 2
= =
(b) Reconciliation of shareholders' equity
Shareholders' equity per UK GAAP $188,307 $47,378
Provision for migration tax (60,000)
-------- -------
Shareholders' equity in accordance with US GAAP $128,307 $47,378
======== =======
(c) Changes in shareholders' equity on a US GAAP basis
Shareholders' equity at beginning of year $ 47,378 $ 2
Net income 80,929 47,376
-------- ------
Shareholders' equity at end of year $128,307 $47,378
======== =======
</TABLE>
F-31
<PAGE>
HAMILTON TELECOMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS AT 3OTH JUNE 1998
14. RECONCILIATION TO US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED)
In preparing the summary of differences between UK and US GAAP, management
is required to make estimates and assumptions that affect the reported
amounts of assets and liabilities, the disclosure of contingent assets and
liabilities, and the estimates of revenue and expenses. Accounting
estimates have been employed in these financial statements to determine
reported amounts, including realizability, useful lives of tangible
assets, income taxes and other areas. Actual results could differ from
those estimates.
The following is a description of the US GAAP reconciling item:
In 1998, the Company migrated its domicile from the United Kingdom. In
doing so it ceased to be liable for income taxes in the United Kingdom.
However UK tax rules provide that an exportation tax be paid by such
exiting Companies on the value of certain tangible and intangible assets.
Under US Financial Accounting Standards Board (FASB) Statement of
Financial Accounting Standard No. 5, an accrual for this tax is provided
as its payment is both probable and an amount can be reasonably estimated.
Income tax expense differs from that calculated at the statutory UK rate
due to permanently nondeductible items, of which entertainment expense is
the primary item. As disclosed in the US GAAP reconciling item above, the
Company migrated its domicile in 1998 to a location which does not impose
an income tax.
CASH FLOW INFORMATION
Under UK GAAP, the Cash Flow Statement is presented in accordance with UK
Financial Reporting Standard No. 1, as revised ("FRS 1"). The Statement
prepared under FRS 1 presents substantially the same information as that
required under US GAAP as interpreted by Statement of Financial Accounting
Standard No. 95.
Under UK GAAP, cash flows are presented for operating activities; returns
on investments and servicing of finance; taxation; capital expenditure and
financial investment acquisitions and disposals and equity dividends paid.
US GAAP requires the classification of cash flows as resulting from
operating, investing and financing activities.
F-32
<PAGE>
HAMILTON TELECOMMUNICATIONS LIMITED
NOTES TO THE FINANCIAL STATEMENTS
AS AT 3OTH JUNE 1998
14. RECONCILIATION TO US GENERALLY ACCEPTED
ACCOUNTING PRINCIPLES (US GAAP) (CONTINUED)
Cash flows under UK GAAP in respect of interest received and taxation
would be included within the operating activities. Capital expenditure and
financial investment and cash flows from acquisitions and disposals would
be included within investing activities under US GAAP. Equity dividends
paid would be included within financing activities under US GAAP.
INCOME TAXES
The following is a reconciliation between the U.K. statutory income tax
rate and the amount recognized in the financial statements:
<TABLE>
<CAPTION>
Twelve months ended June 30,
--------------------------------
1998 1997
-------- --------
<S> <C> <C>
Computed income tax at statutory rate $ 37,853 $16,157
Nondeductible item - entertainment expense 23,697 5,960
Effect of migration to nontaxing status (22,228)
-------- --------
$ 39,322 $22,117
======== ========
</TABLE>
MAJOR CUSTOMER AND SUPPLIERS
The Company in its provision of telecom service for information/audiotext
providers ("Ips") contracts with an international call carrier. This
carrier remits to Hamilton based on minute volume generated through a
country of origin telecom provider. Consequently, substantially all of the
Company's revenue comes from a single international call carrier. There
are numerous carriers capable of providing this service to Hamilton, and
on October 1, 1997, Hamilton changed its primary carrier.
The Company derives revenue from the volume of telecom traffic generated
by Ips. In 1998, two Ips accounted for 41% and 30% of cost of sales,
and in 1997, 18% and 16% of cost of sales.
The Company provides its service by having a contract granting it rights
to use certain destination phone numbers in a country. Hamilton has a
contract with a destination country telecom company which expires in March
2001.
F-33
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AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
SYMPOSIUM TELECOM CORPORATION
(a Delaware corporation)
The undersigned, Michael Taus, does hereby certify:
1. He is the Secretary of Symposium Telecom Corporation, (the "CORPORATION") a
corporation organized and existing under and by virtue of the General
Corporation Law of the State of Delaware.
2. The Corporation was originally incorporated under the name Brack
Industries, Inc.
3. The Certificate of Incorporation of the Corporation was filed with the
Secretary of State on May 9, 1997.
4. The Certificate of Incorporation is hereby amended and restated to read in
its entirety as follows:
FIRST: The name of the Corporation is: Symposium Telecom Corporation
(hereinafter referred to as the "Corporation").
SECOND: The purpose of this Corporation is to engage in any lawful act or
activity for which corporations may be organized under the General
Corporation Law of the State of Delaware (the "GCL").
THIRD: 1. The authorized capital stock of the Corporation shall consist of
35,000,000 shares of which 25,000,000 shares shall be designated Common
Stock, par value $0.001 per share (the "Common Stock"), and 10,000,000
shares shall be designated Preferred Stock, par value $0.001 per share (the
"Preferred Stock").
2. Shares of Preferred Stock may be issued from time to time in
one or more classes or series, each of which class of series shall have
such distinctive designation or title as shall be fixed by the Board of
Directors of the Corporation (the "Board") prior to the issuance of any
shares thereof. Each such class or series of Preferred Stock shall have
such voting powers, full or limited, or no voting powers, and such
preferences and relative, participating, optional or other special rights
and such qualifications, limitations or restrictions thereof, as shall be
stated in such resolution or resolutions providing for the issue of such
class or series of Preferred Stock as may be adopted from time to time by
the Board prior to the issuance of any shares thereof pursuant to the
authority hereby expressly vested in it, all in accordance with the GCL.
FOURTH: Elections of directors need not be by written ballot unless a duly
adopted Bylaw of the Corporation shall so provide.
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FIFTH: 1. To the fullest extent permitted by the GCL as the same exists or
may hereafter be amended, a director of the Corporation shall not be liable
to the Corporation or its stockholders for monetary damage for breach of
fiduciary duty as a director. If the GCL is amended after the date of the
filing of this Certificate of Incorporation to authorize corporate action
further eliminating or limiting the personal liability of directors, then
the liability of a director of the Corporation shall be eliminated or
limited to the fullest extent permitted by the GCL, as so amended from time
to time. No amendment or repeal of this Article FIFTH shall adversely
affect any right or protection of a director of the Corporation provided
hereunder with respect to any act or omission occurring prior to such
amendment or repeal.
2. The Corporation shall indemnify to the fullest extent permitted
by the GCL as the same exists or may hereafter be amended, any person made,
or threatened to be made, a defendant or witness to any action, suit or
proceeding (whether civil or criminal or otherwise) by reason of the fact
that such person, or his or her testator or intestate, is or was a
director, officer, employee or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust,
employee benefit plan or enterprise. Nothing contained herein shall affect
any rights to indemnification to which any person may be entitled by law.
No amendment or repeal of this Article FIFTH shall adversely effect any
right to indemnification provided hereunder with respect to any act or
omission occurring prior to such amendment or repeal.
3. In furtherance and not in limitation of the powers conferred by
statute:
(a) the Corporation may purchase and maintain insurance on behalf
of any person who is or was a director or officer, employee or agent of
the Corporation, or is serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise against
any liability asserted against him or her and incurred by him or her in any
such capacity, or arising out of his or her status as such, whether or not
the Corporation would have the power to indemnify against such liability
under the provisions of law; and
(b) the Corporation may create a trust fund, grant a security
interest and/or use other means (including, without limitation, letters of
credit, surety bonds and/or other similar arrangements), as well as enter
into contracts providing indemnification to the full extent authorized or
permitted by law and including as part thereof provisions with respect to
any or all of the foregoing to ensure the payment of such amounts as may
become necessary to effect indemnification as provided therein, or
elsewhere.
SIXTH: In furtherance and not in limitation of the powers conferred by the
GCL, the Board is expressly authorized to make, alter and repeal the Bylaws
of the corporation, subject to the power of the stockholders of the
corporation to alter or repeal any by-law whether adopted by them or
otherwise.
SEVENTH: The name and address of the Corporations registered agent is:
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Corporate Creations Enterprises, Inc.
686 North Dupont Boulevard #302
Milford, DE 19963
Kent County
5. That the issued and outstanding shares of stock of the Corporation shall be
split in a ration of 1:2 and that pursuant to Section 244 of the GCL the
stated capital shall be reduced thereby:
(a) All of the Corporation's issued Common Stock, having a par value
of $0.01 per share, is hereby changed into new Common Stock, having a par
value of $0.001 per share, on the basis of one (1) new share of Common
Stock for each two (2) shares of Common Stock issued as of the date of
filing of the Amended and Restated Certificate of Incorporation with the
Secretary of State of the State of Delaware; provided, however, that no
fractional shares of Common Stock shall be issued pursuant to such change.
Each shareholder who would otherwise be entitled to a fractional share as a
result of such change shall have only a right to receive, in lieu thereof,
a cash payment equal to the fair market value of such fractional share;
(b) The Corporation's stated capital shall be reduced by an amount
equal to the aggregate par value of the shares of Common Stock issued prior
to the effectiveness of this Amended and Restated Certificate of
Incorporation which, as a result of the reverse split provided for herein,
are no longer issued shares of Common Stock.
6. That the foregoing Amended and Restated Certificate of Incorporation was
duly approved by a majority of the issued and outstanding shares of stock
of the Corporation by written consent the Stockholders of the Corporation
on October 5th, 1998, in accordance with the provisions of Section 228 of
the GCL.
7. That the foregoing Amended and Restated Certificate of Incorporation was
approved pursuant to the provisions of Sections 242 and 245 of the GCL.
IN WITNESS WHEREOF, the undersigned has executed this Certificate this 7th
day of October, 1998.
/s/ Michael Taus
-----------------------------------
Michael Taus
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BYLAWS OF SYMPOSIUM TELECOM CORPORATION
ARTICLE I
OFFICES
Section 1. The registered office of the corporation shall be in the City of
Milford, County of Kent, State of Delaware.
Section 2. The corporation may also have offices at such other places, both
within and without the State of Delaware, as the Board of Directors may from
time to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF STOCKHOLDERS
Section 1. All meetings of the stockholders for the election of directors
shall be held at such place, either within or without the State of Delaware, as
may be designated from time to time by the Board of Directors and stated in the
notice of the meeting. Meetings of stockholders for any other purpose may be
held at such time and place, within or without the State of Delaware, as shall
be stated in the notice of the meeting or in a duly executed waiver of notice
thereof.
Section 2. Annual meetings of stockholders, shall be held on the second
Tuesday of May if not a legal holiday, and if a legal holiday, then on the
next business day following, at 10:00 a.m., or at such other date and time as
shall be designated from time to time by the Board of Directors and stated in
the notice of the meeting, at which the stockholders shall elect one or more
directors and transact such other business as may properly be brought before
the meeting.
At an annual meeting of the stockholders, only such business shall be
conducted as shall have been properly brought before the meeting. To be properly
brought before an annual meeting, business must be: (a) specified in the notice
of meeting (or any supplement thereto) given by or at the direction of the Board
of Directors, (b) otherwise brought before the meeting by or at the direction of
the Board of Directors, or (c) otherwise properly brought before the meeting by
a stockholder. For business to be properly brought before an annual meeting by a
stockholder, the stockholder must have given timely notice thereof in writing to
the secretary of the corporation. To be timely, a stockholder's notice must be
received at the principal executive offices of the corporation not less than 120
days nor more than 150 days prior to the date of the notice to stockholders of
the previous year's annual meeting. A stockholder's notice to the secretary
shall set forth as to each matter the stockholder proposes to bring before the
annual meeting: (a) a brief description of the proposal or business desired to
be brought before the annual meeting and the reasons for presenting the proposal
or conducting such business at the annual meeting, (b) the name and address, as
they appear on the corporation's books, of the stockholder proposing such
business, (c) the class and number of shares of the corporation which are
beneficially owned by the stockholder, and (d) any material interest of the
stockholder in such proposal or business. Notwithstanding anything in these
Bylaws to the contrary,
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no business shall be conducted at any annual meeting except in accordance
with the procedures set forth in this Section 2. The chairman of the annual
meeting shall, if the facts warrant, determine and declare to the meeting
that business was not properly brought before the meeting in accordance with
the provisions of this Section 2, and if he should so determine and declare
to the meeting, any such business not properly brought before the meeting
shall not be transacted.
Section 3. Written notice of the annual meeting stating the place, date
and hour of the meeting shall be given to each stockholder entitled to vote
at such meeting not less than ten (10) nor more than sixty (60) days before
the date of the meeting.
Section 4. The officer who has charge of the stock ledger of the
corporation shall prepare and make, at least ten (10) days before every
meeting of stockholders, a complete list of the stockholders entitled to vote
at the meeting, arranged in alphabetical order, and showing the address of
each stockholder and the number of shares registered in the name of each
stockholder. Such list shall be open to the examination of any stockholder,
for any purpose germane to the meeting, during ordinary business hours, for a
period of at least ten (10) days prior to the meeting, either at a place
within the city where the meeting is to be held, which place shall be
specified in the notice of the meeting, or, if not so specified, at the place
where the meeting is to be held. The list shall also be produced and kept at
the time and place of the meeting during the whole time thereof, and may be
inspected by any stockholder who is present.
Section 5. Special meetings of the stockholders entitled to vote, for
any purpose or purposes, may be called only by the president or the Board of
Directors.
Section 6. Written notice of a special meeting of the stockholders
entitled to vote, stating the place, date and hour of the meeting and the
purpose or purposes for which the meeting is called, shall be given not less
than ten (10) nor more than sixty (60) days before the date of the meeting to
each stockholder entitled to vote at the meeting.
Section 7. Business transacted at a special meeting of the stockholders
entitled to vote shall be limited to the purposes stated in the notice.
Section 8. The holders of a majority of the issued and outstanding stock
which is entitled to vote, whether present in person or represented by proxy,
shall constitute a quorum at all meetings of the stockholders for the
transaction of business. If, however, such a quorum shall not be present or
represented at a meeting, except as otherwise provided in Article VI, Section 5,
the stockholders entitled to vote thereat, present in person or represented
by proxy, shall have the power to adjourn the meeting from time to time,
without notice other than announcement at the meeting, until a quorum shall
be present or represented. At such adjourned meeting at which a quorum shall
be present or represented, any business may be transacted which might have
been transacted at the meeting in accordance with the original notice
thereof. If the adjournment is for more than thirty (30) days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each stockholder of record
entitled to vote at the meeting in accordance with Section 3 and/or Section 6
of this Article II.
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Section 9. When a quorum is present at any meeting, the affirmative vote
of a majority of the votes cast shall decide any question brought before the
meeting, unless the question is one upon which, by the express provision of
statute, the Certificate of Incorporation of the corporation or these Bylaws,
a different vote is required in which case such express provision shall
govern and control the decision of such question.
Section 10. When determining the presence of a quorum at any meeting,
all shares held by (a) any stockholder, or represented by a holder of a proxy
therefor, who is present but voluntarily decides not to vote, or (b) a broker
or nominee who lacks authority to vote such shares, shall be deemed present.
However, such shares shall not be deemed cast on any matter unless properly
voted and, therefore, shall have no effect on the outcome of the matter in
question.
Section 11. Unless otherwise provided in the Certificate of Incorporation
of the corporation, each stockholder shall at every meeting of the stockholders
be entitled to cast one vote in person or by proxy for each share of the
capital stock having voting power held by such stockholder, but no proxy
shall be voted on after eleven (11) months from its date, unless the proxy
provides for a longer period.
Section 12. Any action required or permitted to be taken at any annual
or special meeting of stockholders of the corporation, may be taken without a
meeting, without prior notice and without a vote, if a consent in writing,
setting forth the action so taken, is signed by the holders of outstanding
stock having not less than the minimum number of votes that would be
necessary to authorize or take such action at a meeting at which all shares
entitled to be voted were present and voted, and is delivered to the
corporation to its registered office in this State, its principal place of
business, or to an officer or agent of the corporation having custody of the
book in which proceedings of meetings of stockholders are recorded. Delivery
made to a corporation's registered office shall be by hand or by certified or
registered mail, return receipt requested.
ARTICLE III
DIRECTORS
Section 1. (a) The number of directors constituting the entire Board
shall be not less than three (3) nor more than nine (9) as fixed from time to
time by vote of a majority of the entire Board, provided, however, that the
number of directors shall not be reduced so as to shorten the term of any
director then in office, and provided further, that the number of directors
constituting the entire Board shall be three (3) until otherwise fixed by a
majority of the entire Board.
(b) The Board of Directors shall be divided into three classes.
Directors shall be elected and/or appointed to one of the following classes:
CLASS EXPIRATION OF TERM
I Annual meeting date of the stockholders in 1997 and every 3 years
thereafter
II Annual meeting date of the stockholders in 1998 and every 3 years
thereafter
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III Annual meeting date of the stockholders in 1999 and every 3 years
thereafter
Directors shall be elected and/or appointed to classes so that the total
number of directors shall be divided as equally as possible between the three
classes of directors. Any vacancies in the Board of Directors for any reason,
and any created directorships resulting from any increase in the directors,
may be filled by the Board of Directors, acting by a majority of the
directors then in office, although less than a quorum, and any directors so
chosen shall hold office until the next election of the class for which such
directors shall have been chosen and until their successors shall be elected
and qualified. No decrease in the number of directors shall shorten the term
of any incumbent director. Notwithstanding the foregoing, and except as
otherwise required by law, whenever the holders of any one or more series of
Preferred Stock shall have the right, voting separately as a class, to elect
one or more directors of the Corporation, the terms of the director or
directors elected by such holders shall expire at the next succeeding annual
meeting of stockholders. Subject to the foregoing, at each annual meeting of
stockholders the successors to the class of directors whose term shall then
expire shall be elected to hold office for a term expiring at the third
succeeding annual meeting.
(c) Notwithstanding any other provisions of the Certificate of
Incorporation of the Corporation or these Bylaws (and notwithstanding the
fact that some lesser percentage may be specified or permitted by law, the
Certificate of Incorporation or the Bylaws of the Corporation), any director
or the entire Board of Directors of the Corporation may be removed at any
time, but only for cause and only by the affirmative vote of the holders of
eighty percent (80%) or more of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors cast
at a meeting of the stockholders called for that purpose. Notwithstanding the
foregoing, and except as otherwise required by law, whenever the holders of
any one or more series of Preferred Stock shall have the right, voting
separately as a class, to elect one or more directors of the Corporation, the
provisions of this subsection (c) shall not apply with respect to the
director or directors elected by such holders of Preferred Stock.
Section 2. The business of the corporation shall be managed by or under
the direction of its Board of Directors, which may exercise all such powers
of the corporation and do all such lawful acts and things as are not by
statute or by the Certificate of Incorporation of the Corporation or by these
Bylaws directed or required to be exercised or done by the stockholders.
MEETINGS OF THE BOARD OF DIRECTORS
Section 4. The Board of Directors of the corporation may hold meetings,
both regular and special, either within or without the State of Delaware.
Section 5. The annual meeting of the Board of Directors shall be held
immediately following the annual meeting of stockholders at the place at
which the meeting of the stockholders is held, and no notice of such meeting
shall be necessary to the newly elected directors in order legally to
constitute the meeting, provided a quorum of the Board of Directors is
present.
Section 6. Regular meetings of the Board of Directors may be held without
notice at such time and at such place as shall from time to time be determined
by the Board of Directors.
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Section 7. Special meetings of the Board of Directors may be called by the
president on three (3) days' notice to each director, either personally or by
mail or by facsimile; special meetings shall be called by the president or
secretary in like manner and on like notice on the written request of two or
more directors unless the Board of Directors consists of only one director.
Section 8. At all meetings of the Board of Directors, a majority of
directors shall constitute a quorum for the transaction of business and the vote
of a majority of the directors present at any meeting at which there is a quorum
shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute. If a quorum shall not be present at any
meeting of the Board of Directors, the directors present thereat may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, until a quorum is present.
Section 9. Any action required or permitted to be taken at any meeting
of the Board of Directors or of any committee thereof may be taken without a
meeting, without prior notice and without a meeting, if all members of the
Board of Directors or committee, as the case may be, consent thereto in
writing, and the writing or writings are filed with the minutes of
proceedings of the Board of Directors or committee.
Section 10. Members of the Board of Directors, or any committee
designated by the Board of Directors, may participate in a meeting of the
Board of Directors, or any committee, by means of conference telephone or
similar communications equipment by means of which all persons participating
in the meeting can hear each other, and such participation in a meeting shall
constitute presence in person at the meeting.
COMMITTEES OF DIRECTORS
Section 11. The Board of Directors may, by resolution passed by a
majority of the whole Board of Directors, designate one or more committees,
each committee to consist of one or more of the directors of the corporation.
The Board of Directors may designate one or more directors as alternate
members of any committee, who may replace any absent or disqualified member
at any meeting of the committee.
In the absence or disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he, she or they constitute a quorum, may unanimously
appoint another member of the Board of Directors to act at the meeting in the
place of any such absent or disqualified member.
Any such committee, to the extent provided in resolutions of the Board of
Directors, shall have and may exercise all the powers and authority of the Board
of Directors in the management of the business and affairs of the corporation,
and may authorize the seal of the corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority to amend
the Certificate of Incorporation of the Corporation (except that a committee
may, to the extent authorized in the resolution or resolutions providing for the
issuance of shares of stock adopted by the Board of Directors, as provided in
Section 151(a) of the General Corporation Law of Delaware, fix any of the
preferences or rights of such shares relating to dividends, redemption,
dissolution, any distribution of assets of the corporation, or the conversion
into, or the exchange of such shares for, shares of any
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other class or classes or any other series of the same or any other class or
classes of stock of the corporation), to adopt an agreement of merger or
consolidation, to recommend to the stockholders the sale, lease or exchange
of all or substantially all of the corporation's property and assets, to
recommend to the stockholders a dissolution of the corporation or a
revocation of a dissolution, or to amend the Bylaws of the corporation; and,
unless the resolution of the Board of Directors or the Certificate of
Incorporation of the Corporation expressly so provides, no such committee
shall have the power or authority to declare a dividend or to authorize the
issuance of stock or to adopt a certificate of ownership and merger. Such
committee or committees shall have such name or names as may be determined
from time to time by resolution adopted by the Board of Directors.
Section 12. Section 11. Each committee shall keep regular minutes of its
meetings and report the same to the Board of Directors.
COMPENSATION OF DIRECTORS
Section 13. Section 12. The Board of Directors shall have the authority
to fix the compensation of directors. The directors may be paid their
expenses, if any, of attendance at each meeting of the Board of Directors or
committee thereof and may be paid, either in cash or in securities of the
corporation, a fixed sum for attendance at each meeting of the Board of
Directors or committee thereof or a stated salary as director or committee
member. No such payment shall preclude any director from serving the
corporation in any other capacity and receiving compensation therefor.
ARTICLE IV
NOTICES
Section 1. Whenever notice is required or permitted to be given to any
director or stockholder, it shall not be construed to require personal
notice, but such notice may be given in writing, by mail, addressed to such
director or stockholder, at his or her address as it appears on the records
of the corporation, with first class postage thereon prepaid, and such notice
shall be deemed to be given at the time when the same shall be deposited in
the United States mail. Notice to directors may also be given personally, by
facsimile or by next business day courier delivery and shall be deemed to be
given when personally given or so sent.
Section 2. Whenever any notice is required to be given, a waiver thereof
in writing, signed by the person or persons entitled to said notice, whether
before or after the time stated therein, shall be deemed equivalent thereto.
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ARTICLE V
OFFICERS
Section 1. The officers of the corporation shall be chosen by the Board
of Directors at its first meeting after each annual meeting of stockholders
and shall be a chairman of the Board of Directors, president, one or more
vice-presidents (who may have further descriptive designations thereof, such
as executive vice-president, senior vice-president, vice-president, finance,
etc.), a secretary and a treasurer. The Board of Directors may also choose
additional vice-presidents, and one or more assistant secretaries and
assistant treasurers. Any number of offices may be held by the same person,
unless the Certificate of Incorporation or these Bylaws otherwise provide.
Section 2. The Board of Directors may appoint such other officers and
agents as it shall deem necessary, who shall hold their offices for such
terms and shall exercise such powers and perform such duties as shall be
determined from time to time by the Board of Directors.
Section 3. The salaries of all executive officers of the corporation
shall be fixed by the Board of Directors.
Section 4. The officers of the corporation shall hold office until their
successors are chosen and qualified. Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any vacancy occurring in any office of
the corporation may be filled by the Board of Directors.
THE CHAIRMAN OF THE BOARD OF DIRECTORS
Section 5. The chairman of the Board of Directors shall have general
supervision over the policies, affairs and finances of the corporation. He
shall keep the Board of Directors fully informed and shall freely consult
with the Board of Directors concerning the business of the corporation and
shall perform such other duties as are incident to his office and are
properly required of him by the Board of Directors. The chairman of the Board
of Directors shall preside at all meetings of the stockholders and the Board
of Directors. Except where by law the signature of the president is required
and except as otherwise provided by the Board of Directors, the chairman may
sign all certificates, contracts, documents and other instruments on behalf
of the corporation. Unless otherwise provided by resolution of the Board of
Directors, the chairman of the Board of Directors also shall be entitled to
vote all stock and other interests having voting rights which are owned by
the corporation; in the absence of a contrary resolution adopted by the Board
of Directors, the chairman of the Board of Directors shall vote such stock
and other interests in a manner which he deems appropriate.
THE VICE CHAIRMAN OF THE BOARD OF DIRECTORS
Section 6. The vice chairman of the Board of Directors shall be the chief
executive officer of the corporation and shall have general supervision over the
policies, affairs and finances of the corporation. Except where by law the
signature of the president is required and except as otherwise
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provided by the Board of Directors, the vice chairman may sign all
certificates, contracts, documents and other instruments on behalf of the
corporation.
THE PRESIDENT
Section 7. The president shall have general supervision over the
day-to-day operating affairs of the corporation. The president shall keep the
Board of Directors fully informed, shall freely consult with the Board of
Directors concerning the business of the corporation and shall perform such
other duties and have such other powers as the Board of Directors may from
time to time prescribe. In the absence of the chairman of the Board of
Directors or in the event of the chairman's inability or refusal to act, the
president shall perform all the duties of the chairman of the Board of
Directors, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the chairman. The president may sign all
certificates, deeds, mortgages, bonds, contracts, documents and other
instruments on behalf of the corporation, except where by law the signature
of another officer or agent of the corporation is required, and except as
otherwise provided by the Board of Directors.
THE VICE-PRESIDENTS
Section 8. In the absence of the president or in the event of the
president's inability or refusal to act, the vice-president (or in the event
there is more than one vice-president, the vice-presidents in the order
designated by the directors, or in the absence of any designation, then in
the order of their election) shall perform the duties of the president, and
when so acting, shall have all the powers of and be subject to all the
restrictions upon the president. The vice-presidents shall perform such other
duties and have such other powers as the Board of Directors may from time to
time prescribe.
THE SECRETARY AND ASSISTANT SECRETARY
Section 9. The secretary shall attend all meetings of the Board of
Directors and all meetings of the stockholders and record all the proceedings
of such meetings in a book to be kept for that purpose and shall perform like
duties for the standing committees when required. The secretary shall give,
or cause to be given, notice of all meetings of the stockholders and special
meetings of the Board of Directors, and shall perform such other duties as
may be prescribed by the Board of Directors or chairman of the Board of
Directors. The secretary shall have custody of the corporate seal of the
corporation and shall have authority to affix the same to any instrument
requiring it and, when so affixed, it may be attested by the secretary's
signature. The Board of Directors may give general authority to any other
officer to affix the seal of the corporation and to attest the affixing by
the secretary's signature.
Section 10. The assistant secretary, if any, or if there be more than
one, the assistant secretaries in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the secretary or in the event of his
inability or refusal to act, perform the duties and exercise the powers of
the secretary and shall perform such other duties and have such other powers
as the Board of Directors may from time to time prescribe.
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THE TREASURER AND ASSISTANT TREASURERS
Section 11. The treasurer shall be the chief financial officer of the
corporation and shall have the custody of the corporate funds and securities
and shall keep or cause to be kept full and accurate accounts of receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys and other valuable effects in the name and to the credit of the
corporation in such depositories as may be designated by the Board of
Directors.
Section 12. The treasurer shall disburse the funds of the corporation as
may be ordered by the Board of Directors, taking proper vouchers for such
disbursements, and upon request shall render to the chairman of the Board of
Directors and the Board of Directors, an account of all transactions as
treasurer and of the financial condition of the corporation.
Section 13. If required by the Board of Directors, the treasurer shall
give the corporation and maintain in effect a bond in such sum and with such
surety or sureties as shall be satisfactory to the Board of Directors for the
faithful performance of the duties of the office of treasurer and for the
restoration to the corporation, in case of his death, resignation, retirement
or removal from office, of all books, papers, vouchers, money and other
property of whatever kind in the possession or under the control of the
treasurer belonging to the corporation.
Section 14. The assistant treasurer, if any, or if there shall be more
than one, the assistant treasurers in the order determined by the Board of
Directors (or if there be no such determination, then in the order of their
election) shall, in the absence of the treasurer or in the event of the
inability or refusal to act of the treasurer, perform the duties and exercise
the powers of the treasurer and shall perform such other duties and have such
other powers as the Board of Directors may from time to time prescribe.
ARTICLE VI
CERTIFICATES FOR SHARES
Section 1. The shares of the corporation shall be represented by one or
more certificates. Certificates shall be signed, in the name of the
corporation, by the chairman of the Board of Directors, the president or a
vice-president and the treasurer or an assistant treasurer or the secretary
or an assistant secretary of the corporation.
Upon the face or back of each stock certificate issued to represent any
partly paid shares shall be set forth the total amount of the consideration
to be paid therefor and the amount paid thereon.
If the corporation is authorized to issue more than one class of stock or
more than one series of any class, the powers, designations, preferences and
relative, participating, optional or other special rights of each class of stock
or series thereof and the qualifications, limitations or restrictions of such
preferences and/or rights shall be set forth in full or summarized or referenced
on the face or back of the certificate which the corporation shall issue to
represent such class or series of stock, provided that, if summarized or
referenced, there shall also be set forth on the face or back of the certificate
which
9
<PAGE>
the corporation shall issue to represent such class or series of stock, a
statement that the corporation will furnish without charge to each
stockholder thereof who so requests a copy of the powers, designations,
preferences and relative, participating, optional or other special rights of
the class of stock or series and the qualifications, limitations or
restrictions of such preferences and/or rights.
Section 2. Any of or all the signatures on a certificate may be
facsimile. If any officer, transfer agent or registrar who has signed or
whose facsimile signature has been placed upon a certificate shall have
ceased to be such officer, transfer agent or registrar before such
certificate is issued, it may be issued by the corporation with the same
effect as if he or she were such officer, transfer agent or registrar at the
date of issue.
LOST CERTIFICATES
Section 3. The Board of Directors may direct a new certificate or
certificates to be issued in place of any certificate or certificates
theretofore issued by the corporation alleged to have been lost, stolen or
destroyed, upon the making of an affidavit of that fact by the person
claiming the certificate of stock to be lost, stolen or destroyed. When
authorizing such issue of a new certificate or certificates, the Board of
Directors may, in its discretion and as a condition precedent to the issuance
thereof, require the owner of such lost, stolen or destroyed certificate or
certificates, or his or her legal representative, to advertise the same in
such manner as it shall require and/or to give the corporation a bond in such
sum as it may direct as indemnity against any claim that may be made against
the corporation with respect to the certificate alleged to have been lost,
stolen or destroyed.
TRANSFER OF STOCK
Section 4. Upon surrender to the corporation or the transfer agent of
the corporation of a certificate for shares duly endorsed or accompanied by
proper evidence of succession, assignation or authority to transfer, it shall
be the duty of the corporation to issue a new certificate to the person
entitled thereto, cancel the old certificate and record the transaction upon
its books, subject, however to restrictions imposed either by applicable
federal or state securities laws or by agreements by or among the
stockholders.
FIXING RECORD DATE
Section 5. In order that the corporation may determine the stockholders
entitled to notice of or to vote at any meeting of stockholders, or to
express consent to corporate action in writing without a meeting, or entitled
to receive payment of any dividend or other distribution or allotment of any
rights, or entitled to exercise any rights in respect of any change,
conversion or exchange of stock or for the purpose of any other lawful
action, the Board of Directors may fix, in advance, a record date, which
shall not be more than sixty (60) nor less than ten (10) days before the date
of such meeting, nor more than sixty (60) days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting;
provided, however, that the Board of Directors may fix a new record date for
the adjourned meeting.
REGISTERED STOCKHOLDERS
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<PAGE>
Section 6. The corporation shall be entitled to recognize the exclusive
right of a person registered on its books as the owner of shares to receive
dividends, to vote as such owner, and to hold liable for calls and
assessments, and shall not be bound to recognize any equitable or other claim
to or interest in such shares on the part of any other person, whether or not
the corporation shall have express or other notice thereof.
ARTICLE VII
GENERAL PROVISIONS
DIVIDENDS
Section 1. Dividends upon the capital stock of the corporation may be
declared by the Board of Directors at any regular or special meeting,
pursuant to law. Dividends may be paid in cash, in property, or in shares of
the capital stock of the corporation.
Section 2. Before payment of any dividend, there may be set aside out of
any funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve to meet contingencies, or for equalizing dividends, or for repairing
or maintaining any property of the corporation, or for such other purpose as
the directors shall think conducive to the interest of the corporation, and
the directors may modify or abolish any such reserve in the manner in which
it was created.
CHECKS
Section 3. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers or such other person or persons
as the Board of Directors may from time to time designate.
FISCAL YEAR
Section 4. The fiscal year of the corporation shall be fixed by
resolution of the Board of Directors.
SEAL
Section 5. The corporate seal shall have inscribed thereon the name of
the corporation and the words "Corporate Seal, Delaware". The seal may be
used by causing it or a facsimile thereof to be impressed or affixed or
reproduced or otherwise.
ARTICLE VIII
INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
11
<PAGE>
Section 1. (a) The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative, or investigative (other than an action by or in the right of
the corporation) by reason of the fact that such person is or was a director
or officer of the corporation, or is or was serving at the request of the
corporation as a director or officer of another corporation, partnership,
joint venture, trust, or other enterprise, against expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, actually
and reasonably incurred by such person in connection with such action, suit,
or proceeding if such person acted in good faith and in a manner such person
reasonably believed to be in or not opposed to the best interests of the
corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe such conduct was unlawful. The termination of any
action, suit, or proceeding by judgment, order, settlement, conviction, or
upon a plea of nolo contendere or its equivalent shall not, of itself, create
a presumption that the person did not act in good faith and in a manner which
such person reasonably believed to be in or not opposed to the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had reasonable cause to believe that such conduct was unlawful.
(b) The corporation shall indemnify any person who was or is a
party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director or officer of the corporation, or is or was serving at the request
of the corporation, as a director or officer of another corporation,
partnership, joint venture, trust or other enterprise against expenses
(including attorneys' fees) actually and reasonably incurred by such person
in connection with the defense or settlement of such action or suit if such
person acted in good faith and in a manner such person reasonably believed to
be in or not opposed to the best interests of the corporation and except that
no indemnification shall be made in respect of any claim, issue or matter as
to which such person shall have been adjudged to be liable to the corporation
unless and only to the extent that the court in which such action or suit was
brought shall determine upon application that, despite the adjudication of
liability but in view of all the circumstances of the case, such person is
fairly and reasonably entitled to indemnity for such expenses which the court
shall deem proper.
(c) To the extent that a director or officer of the corporation has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in subparagraphs (a) and (b), or in defense of any
claim, issue or matter therein, such person shall be indemnified against
expenses (including attorneys' fees) actually and reasonably incurred in
connection therewith.
(d) Any indemnification under subparagraphs (a) and (b) (unless
ordered by a court) shall be made by the corporation only as authorized in
the specific case upon a determination that indemnification of the director
or officer is proper in the circumstances because such person has met the
applicable standard of conduct set forth in subparagraphs (a) and (b). Such
determination shall be made (i) by the Board of Directors by a majority vote
of a quorum consisting of directors who were not parties to such action, suit
or proceeding, or (ii) if such a quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent
legal counsel in a written opinion, or (iii) by the stockholders.
(e) Expenses (including attorneys' fees) incurred by an officer or
director in defending a civil, criminal, administrative or investigative
action, suit, or proceeding may be paid by the
12
<PAGE>
corporation in advance of the final disposition of such action, suit, or
proceeding upon receipt of an undertaking by or on behalf of the director or
officer to repay such amount if it shall ultimately be determined that such
person is not entitled to be indemnified by the corporation as authorized
herein.
(f) The indemnification and advancement of expenses provided by, or
granted pursuant to, other subsections of this section shall not be deemed
exclusive of any other rights to which officers or directors seeking
indemnification or advancement of expenses may be entitled under any by-law,
agreement, vote of stockholders or disinterested directors or otherwise, both
as to action in his or her official capacity and as to action in another
capacity while holding such office.
(g) The corporation also shall have the authority to indemnify
employees and agents of the corporation, but only to the extent provided by a
majority vote of disinterested directors on a case-by-case basis, after full
disclosure to the directors of all relevant facts and circumstances.
(h) The corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee
or agent of the corporation, or is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against any liability
asserted against such person and incurred by such person in any such
capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify such person against such
liability under the provisions of this section.
(i) For the purposes of this section, references to "the
corporation" include all constituent corporations (including any constituent
of a constituent) absorbed in a consolidation or merger which, if its
separate existence had continued, would have had the power and authority to
indemnify its directors, officers, employees or agents, as well as the
resulting or surviving corporation, so that any person who is or was a
director, officer, employee or agent of such constituent corporation, or is
or was serving at the request of such constituent corporation as a director,
officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, shall stand in the same position under
the provisions of this section with respect to the resulting or surviving
corporation as such person would have with respect to such constituent
corporation if its separate existence had continued.
(j) For purposes of this section, references to "other enterprises"
shall include employee benefit plans; references to "fines" shall include any
excise taxes assessed on a person with respect to any employee benefit plan;
and references to "serving at the request of the corporation" shall include
any service as a director or officer of the corporation which imposes duties
on, or involves services by, such director or officer with respect to an
employee benefit plan, its participants, or beneficiaries; and a person who
acted in good faith and in a manner such person reasonably believed to be in
the interest of the participants and beneficiaries of an employee benefit
plan shall be deemed to have acted in a manner "not opposed to the best
interests of the corporation" as referred to in this section.
(k) The indemnification and advancement of expenses provided by, or
granted pursuant to, this section shall, unless otherwise provided when
authorized or ratified, continue as to a person who has ceased to be a
director, officer, employee or agent, including, but not limited to, a
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<PAGE>
person who ceases to be a director, officer, employee or agent due to the
resignation of such person prior to the initiation of any action, suit or
proceeding referred to in subparagraphs (a) and (b), and shall inure to the
benefit of the heirs, executors and administrators of such a person.
Section 2. The corporation shall, to the fullest extent permitted by
Section 145 of the General Corporation Law of the State of Delaware, as the
same may be amended and supplemented from time to time, indemnify all
officers and directors whom it shall have the power to indemnify under said
section from and against any and all of the expenses, liabilities or other
matters referred to in or covered by said section, or any successor section
thereto.
ARTICLE IX
AMENDMENTS
Section 1. These Bylaws may be altered, amended or repealed or new
Bylaws may be adopted by the stockholders or by the Board of Directors (when
such power is conferred upon the Board of Directors by the Certificate of
Incorporation), at any regular meeting of the stockholders or of the Board of
Directors or at any special meeting of the stockholders or of the Board of
Directors if notice of such alteration, amendment, repeal or adoption of new
Bylaws be contained in the notice of such special meeting. If the power to
adopt, amend or repeal Bylaws is conferred upon the Board of Directors by the
Certificate of Incorporation it shall not divest or limit the power of the
stockholders to adopt, amend or repeal Bylaws.
14
<PAGE>
CERTIFICATION OF BY-LAWS
I hereby certify that the attached is a true copy of the By-Laws and all
amendments of:
Symposium Telecom Corporation as in effect on the 9th day of July, 1998.
By: /s/ Michael Taus
------------------------
Michael Taus, Secretary
15
<PAGE>
DATED 14 DECEMBER 1998
SHARE SALE AND PURCHASE AGREEMENT
relating to the entire issued share capital
of Hamilton Telecommunications Limited
PANTON MANAGEMENT LIMITED and
NORTHERN MANAGEMENT LIMITED (1)
MARILYN SHEIN (2)
ROBERT GREEN (3)
SYMPOSIUM TELECOM CORPORATION (4)
<PAGE>
TABLE OF CONTENTS
<TABLE>
<S> <C>
PARTIES 3
INTRODUCTION 3
OPERATIVE PROVISIONS 4
1 INTERPRETATION 4
2 SALE AND PURCHASE OF THE SHARES 10
3 CONSIDERATION 10
4 COMPLETION 15
5 POSITION PENDING COMPLETION 19
6 WARRANTY 22
7 RESTRICTIONS 24
8 USE OF NAME 26
9 GENERAL PROVISIONS 26
ATTESTATIONS 46
</TABLE>
<PAGE>
DATED
14 DECEMBER 1998
PARTIES
(1) The companies whose names and addresses appear in column 1 of Schedule 1
("the Vendors"); and
(2) Marilyn Shein of Apartment 107, Parc Saint Roman, 6 Avenue Saint, Roman,
Monaco, 98000
(3) Robert Green of Apartment 211, Parc Saint Roman, 6 Avenue Saint, Roman,
Monaco 98000; and
(4) Symposium Telecom Corporation of 410 Park Avenue, 18th Floor, New York, New
York 10022 ("the Purchaser").
INTRODUCTION
(A) The Company was incorporated in Ireland under the name of Verity
International Limited on 10th December 1995 and is registered under number
239381 as a company limited by shares. It has at the date of this
Agreement an authorised share capital of L100,000 divided into 100,000
ordinary shares of L1 each of which only the Shares have been issued and
are fully paid or credited as fully paid and the Vendors are the legal and
beneficial owners of the Shares in the proportions shown in column 2 of
Schedule 1 and as such have the right, power and authority to sell and
transfer the Shares free from any claims, charges, liens, encumbrances or
equities.
(B) The business of the Company is that of providing international audiotext
services and a billing mechanism for international audiotext services.
(C) The Vendors are willing to sell and the Purchaser is willing to purchase
the Shares on the terms and subject to the conditions of this Agreement.
(D) The Vendors have delivered or arranged for the delivery to the Purchaser of
a true and up-to-date copy of the Memorandum and Articles of Association of
the Company and of the Accounts.
<PAGE>
OPERATIVE PROVISIONS
1 INTERPRETATION
1.1 In this Agreement (including the Introduction and Schedules), except where
a different interpretation is necessary in the context, the following
expressions shall have the following meanings:
the Accounts the balance sheet of the Company as at
the Accounts Date and the profit and
loss account of the Company for the year
ended on the Accounts Date together with
the directors' reports and other
documents required by law to be annexed
thereto
the Accounts Date 30 June 1998
ACT Advance Corporation Tax
Admission the date a broker/dealer initiates
quotations for Purchaser Common Stock in
the OTC Bulletin Board Service or a
comparable medium
Associated Company Any company which at the relevant time
is:-
(a) a holding company of the Company or
of the Purchaser; or
(b) a subsidiary or subsidiary
undertaking of the Company or of
the Purchaser; or
(c) a subsidiary or subsidiary
undertaking (other than the Company
itself) of any such holding
company.
Automatic Communications Limited a company no. 76494B registered in the
Bahamas
<PAGE>
Business Day any day on which the Stock Exchange is
open for business
Board the board of directors for the time
being of the Purchaser and of the
Company as specifically referred to
the BT Amount as referred to in clause 3.8
the Company Hamilton Telecommunications Limited of
which short particulars are set out in
Schedule 2
the Company's Auditors Sinclair Croydon of Squires House, 81-87
High Street, Billericay, Essex CM12 9AS
Completion completion of the acquisition of the
Shares in accordance with the terms of
clause 4
Conditions the condition precedents to Completion
set out in clause 3.7
Consideration the maximum sum of US$17,500,000, being
the aggregate of the Initial
Consideration and the Deferred
Consideration
Consideration Shares shares of Purchaser Common Stock to be
allotted to the Vendors pursuant to
clause 3
the Consultancy Agreements the consultancy agreements in the form
derived from the agreed proforma
consultancy agreement attached as
Annexure E to be entered into on
Completion between the Purchaser and
each of the Vendors and Fabrice Thomas
the Deed of Covenant the deed of covenant in the form
attached as Annexure D
Deferred Consideration the aggregate sum determined pursuant to
clause 3 and Schedule 4
<PAGE>
the Directors the persons specified as directors of
the Company in Schedule 2 (the
expression "Director" meaning any of
them)
the Disclosure Letter a letter bearing the same date as this
Agreement from the Vendors or the
Vendors' Solicitors to the Purchaser
together with the documents annexed to
such letter
Final Audited Accounts the financial statements of the Company
at and for the year ended 30 June 1999
prepared in accordance with the terms of
Schedule 4
ICTA the Income and Corporation Taxes Act
1988
IHTA the Inheritance Tax Act 1984
Initial Consideration the aggregate sum of US$11,500,000
referred to in clause 3
the Initial Issue Price as defined in clause 3.2(b)
Intellectual Property copyrights, trade and service marks,
trade names, rights in logos and get-up,
inventions, confidential information,
trade secrets and know-how, registered
designs, design rights, letters patent,
utility models, semi-conductor
topographies, all rights of whatsoever
nature in computer software and data,
all rights in plant varieties, all
rights of privacy and all intangible
rights and privileges of a nature
similar to any of the foregoing, in
every case in any part of the world and
whether or not registered; and including
all granted registrations and all
applications for registration in respect
of any of the same
<PAGE>
Marilyn Shein Marilyn Shein of Apartment 107, Parc
Saint Roman, 6 Avenue Saint Roman,
Monaco 98000
NASDAQ National Association of Securities
Dealers Automated Quotation System
OTC Bulletin Board Service a service operated by the National
Association of Securities Dealers
providing an electronic quotation medium
to reflect market making interest in
eligible securities
the Permitted Business the business of providing international
audiotext services and a billing
mechanism for international audiotext
and internet services as carried on or
to be carried on by Automatic
Communications Limited
the Purchaser's Auditors a firm of auditors to be determined by
the board of directors of the Purchaser
Purchaser Common Stock common stock with a par value of
US$0.001 per share of the Purchaser
the Purchaser's Solicitors S J Berwin & Co of 222 Grays Inn Road,
London WC1X 8HB
Regulation S Regulation S under the Securities
Exchange Act of 1933, as amended
Relevant Receipts as referred to in clause 3.8
Relief the same meaning as in the Deed of
Covenant
Relevant Profits such profits of the Company as are
determined in accordance with the
provisions of clause 3.5 and Schedule 4
<PAGE>
Restricted Activities the business carried on by the Company
as at today's date as described in
paragraph (B) of the Introduction
Robert Green Robert Green of Apartment 211 Parc Saint
Roman, 6 Avenue Saint Roman, Monaco
98000
Securities Act the United States Securities Act of 1933
(as amended)
the Shares the 2 issued ordinary shares of L1 each
in the capital of the Company
Stock Exchange London Stock Exchange Limited
Taxation, Taxing Authority the same respective meanings as in the
Deed of Covenant
Taxation Liability the same meaning as in the Deed of
Covenant
TCGA the Taxation of Chargeable Gains Act
1992
VAT Value Added Tax
VATA the Value Added Tax Act 1994
the Vendor's Auditors Messrs Sinclair Croydon
the Vendors' Solicitors Jay, Benning & Peltz of 1 Cumberland
Place, London W1H 7AL
the Warranty the warranty, representation and
undertaking given in clause 3
Warranty Claim a claim made by the Purchaser on the
breach by the Vendors of any of the
Warranty Statements
the Warranty Statements the statements set out in Schedule 3
US$ or US Dollars the legal currency of the United States
of America
<PAGE>
1.2 All references to statutory provisions or enactments shall include
references to any amendment, modification or re-enactment of any such
provision or enactment (whether before or after the date of this
Agreement) to any previous enactment which has been replaced or
amended and to any regulation or order made under such provision or
enactment.
1.3 The term "holding company" shall have the meaning attributed to it in
section 736 and 736A of the Companies Act 1985 (as amended) and a
company or other entity shall be a "subsidiary" for the purposes of
this Agreement if it falls within any of the meanings attributed to a
"subsidiary" in such sections or the meaning attributed to the term
"subsidiary undertaking" in section 258 of such Act, and the terms
"subsidiaries" and "holding companies" are to be construed
accordingly.
1.4 References to those of the parties who are individuals include
references to their respective legal personal representative(s).
1.5 References to documents "in the agreed form" are to documents in terms
agreed between the parties and signed (for the purpose of
identification only) by the Vendors' Solicitors and the Purchaser's
Solicitors.
1.6 References in this Agreement and the Schedules to the parties, the
Introduction, Schedules and clauses are references respectively to the
parties, the Introduction and Schedules to and clauses of this
Agreement.
1.7 Save where the context specifically requires otherwise, words
importing one gender shall be treated as importing any gender, words
importing individuals shall be treated as importing corporations and
vice versa, words importing the singular shall be treated as importing
the plural and vice versa, and words importing the whole shall be
treated as including a reference to any part thereof.
1.8 Clause and paragraph headings are inserted for ease of reference only
and shall not affect construction.
1.9 Section 839 ICTA is to apply to determine whether a person is
connected with another for the purposes of this Agreement.
<PAGE>
2 SALE AND PURCHASE OF THE SHARES
2.1 The Vendors with full title guarantee shall sell with effect from
Completion the number of the Shares set out opposite their names in
column 2 of Schedule 1 and the Purchaser relying on the
representations, warranties and undertakings herein contained shall
purchase subject to clause 2.2 all of the Shares with any dividends,
distributions and rights declared, paid, created or arising and free
from all claims, charges, liens, encumbrances, options, rights of
pre-emption or equities.
2.2 The Purchaser shall not be obliged to complete the purchase of any of
the Shares unless the purchase of all the Shares is completed
simultaneously in accordance with this Agreement.
3 CONSIDERATION
3.1 In consideration of the sale of the Shares in accordance with the
terms of this Agreement, the Purchaser shall pay to the Vendors in the
proportions set out in columns 3 and 4 of Schedule 1 the aggregate of
the Initial Consideration and, to the extent payable in accordance
with the terms of this Agreement, the Deferred Consideration subject
to the provisions of Clause 3.6 below, without set-off or other
deduction of any kind whatsoever..
3.2 The Initial Consideration in the aggregate sum of US$11,500,000 shall
(subject to the provisions of this clause 3) be paid and satisfied by:
(a) the payment of US$5,750,000 ("the Initial Cash Consideration");
and
(b) by the issue and allotment, free of any lien, option, charge or
other encumbrance whatsoever and credited as fully paid to the
Vendors in the proportions set out opposite their respective
names in column 3 of Schedule 1, of such number of shares of
Purchaser Common Stock as shall have an aggregate value of
US$5.75 million calculated by reference to the market price at
which dealings in Purchaser Common Stock commenced on the OTC
Bulletin Board Service ("the Initial Issue Price") such price to
be certified in writing to the Vendors by the principal
broker/dealer of the Purchaser Common Stock ("the Initial
Consideration Shares").
<PAGE>
3.3 The Consideration Shares will rank pari passu in all respects with the
other outstanding Purchaser Common Stock in issue as at the date of
Admission and any Purchaser Common Stock to be issued in the future.
3.4.1 Each of the Vendors agrees not to offer, sell, transfer, assign,
pledge, hypothecate or otherwise dispose of (collectively, "Transfer")
any of the Consideration Shares except pursuant to an effective
registration statement under the Securities Act, the provisions of
Regulation S or pursuant to an exemption from registration under the
Securities Act. As a further condition to any such Transfer, except
in the event that such Transfer is made pursuant to an effective
registration statement under the Securities Act, if in the reasonable
opinion of the Company's advisers any Transfer of the Shares to the
contemplated transferee thereof would not be exempt from the
registration and prospectus delivery requirements of the Securities
Act, the Company may require the contemplated transferee to furnish
the Company with an investment letter setting forth such information
and agreements as may be reasonably requested by the Company to ensure
compliance by such transferee with the Securities Act.
3.4.2 Each certificate evidencing the Consideration Shares will bear the
following legend:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER
THE UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE
REGISTRATION AND OTHERWISE IN ACCORDANCE WITH THE TERMS OF AN
AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL ALLOTTEE OR
PURCHASER OF THE SECURITIES, A COPY OF WHICH IS ON FILE AT THE
PRINCIPAL EXECUTIVE OFFICE OF THE ISSUER".
The Purchaser shall have no obligation to register any purported
Transfer of any of the Consideration Shares in violation of this
Agreement on its stock transfer records, and any such Transfer shall
be null, void and of no force and effect.
<PAGE>
3.4.3. Each Vendor agrees not to engage in any hedging transactions with
regard to the Consideration Shares except in compliance with the
Securities Act.
3.4.4 The Purchaser agrees not to issue or sell any shares of capital stock
without imposing on the purchaser/allottee restrictions substantially
similar to those imposed under clauses 3.4.1 and 3.4.2 of this
Agreement until the satisfaction of the Deferred Consideration.
3.5.1 The Deferred Consideration shall:
(i) be a sum calculated by deducting from the Relevant Profits for
the accounting period of the Company ended on 30 June 1999 the
Relevant Profits for the accounting period of the Company ended
on 30 June 1998 and multiplying the result by five but in the
event that the result shall produce a minus figure then the
Deferred Consideration shall be deemed to be nil;
(ii) be subject to a maximum aggregate amount so that when it is added
to the Initial Consideration the aggregate equals US$17,500,000
3.5.2 The Deferred Consideration shall be satisfied by:
(a) the payment within 60 days of the determination and agreement of
the Final Audited Accounts of a sum in US Dollars equal to 50 per
cent. of the Deferred Consideration due ("the Deferred Cash
Consideration"); and
(b) the issue and allotment to the Vendors on or within 60 days after
the determination and agreement of the Final Audited Accounts of
such numbers of shares of Purchaser Common Stock, free of any
lien, option, charge or other encumbrance whatsoever and credited
as fully paid as shall be ascertained by dividing 50 per cent. of
the Deferred Consideration by the Initial Issue Price such shares
to rank pari passu with the outstanding Purchaser Common Stock
("the Deferred Consideration Shares").
3.6 If prior to payment of the Deferred Consideration or any part thereof
the Purchaser shall become entitled to assert any claim against any of
the Vendors pursuant to the terms of this Agreement or the Deed of
Covenant, the Purchaser shall be entitled to pay from the amount of
the Deferred
<PAGE>
Consideration otherwise payable to the Vendors into a joint client
deposit account at The Royal Bank of Scotland plc Western Branch,
Conduit Street, W1 (and opened in their names) and not release to the
Vendors such amount as represents the value of such of its outstanding
claims against the Vendors (pending determination of such claims).
Upon any determination in the Purchaser's favour there shall be paid
to the Purchaser the amount as so determined which shall be deemed to
have been set off against the Deferred Consideration and the
Purchasers' Solicitors and Vendors' Solicitors by notice in writing
shall (following receipt of suitable evidence of any such
determination) transfer to the Purchaser from the joint client
deposit account a sum equal to such amounts determined to be due to it
and the balance (if any) of any Deferred Consideration determined not
to be due to the Purchaser, and not subject to any other such claim,
shall be paid to the Vendors and the interest earned on the said
account shall be apportioned between the Vendors and the Purchaser in
the same proportions as the amounts of principal paid to them
respectively from the joint client deposit account.
3.7.1 This Agreement is conditional upon:
3.7.1.1 a broker/dealer initiating quotations for Purchaser Common
Stock in the OTC Bulletin Board Service, (if no such
quotation has been initiated prior to the signing of this
Agreement); and
3.7.1.2 the Purchaser raising sufficient funds to satisfy the amount
of the Initial Cash Consideration.
3.7.2 In the event that the Conditions set out in 3.7.1.1 and 3.7.2.1 shall
not have been satisfied within a period of 6 months from the date of
this Agreement, then the Vendors and the Purchaser shall have the
right to serve 7 days Notice in writing upon the other party and in
the event that the Conditions shall still not have been satisfied by
the expiration of such period of 7 days, this Agreement shall be of no
further effect but without prejudice to the rights of either party
against the other in respect of any antecedent breach of this
agreement.
3.7.3 The Purchaser shall use reasonable endeavours to procure the
initiation of the quotations referred to in 3.7.1.1 and the raising of
the funds referred to in 3.7.1.2.
<PAGE>
3.8 (i) In the event that any amounts of money or other valuable
consideration are received by the Company being monies or any
other valuable consideration due to the Company in relation to
trading up to close of business on the date of Completion
("Relevant Receipts"), the Purchaser shall pay or transfer to
the Vendors in the proportions set out in column 4 of Schedule 1
by way of further consideration sums equivalent to such amounts
or other valuable consideration as are so received from time to
time (a) by the Company or by any third party on its behalf or
(b) by any third party (not on its behalf) in the event that
payment or transfer of such other valuable consideration shall
be made to such a third party due to any act or default on the
part of the Company. The Purchaser shall within 7 days of the
end of each calendar month following Completion send to each of
the Vendors by Recorded Delivery Post or equivalent a
declaration as to the relevant amounts or other valuable
consideration received by the Company during that month. Such
declarations shall be posted to each of the Vendors within 14
days of the end of the relevant calendar month accompanied by a
remittance for the amount or other valuable consideration shown
in such declaration.
(ii) The Purchaser shall make available on prior written notice to
the Vendor and/or the Vendors' Accountants and/or Solicitors for
inspection and if necessary copying all the Company's books of
account and papers and other information (including such
information as is in machine readable form).
(iii) For the avoidance of doubt, the proceeds of the amount owing by
Bezeq International and/or by British Telecom Plc ("the BT
Amount") shall be deemed to be one of the Relevant Receipts
payable to the Vendors in accordance with clause 3.8.(i) above.
3.8.1 The Vendors understand that an investment in the Consideration Shares
involves a high degree of risk; the Vendors have such knowledge and
experience in financial and business matters that they are capable of
evaluating the merits and risks of the investment in the Consideration
Shares and in protecting their interests in connection with the
transaction.
3.8.2 The Vendors understand that the Consideration Shares have not been
registered under the Securities Act. The Vendors are familiar with
the provisions of the Securities Act and Regulation S
<PAGE>
thereunder and understand that the restrictions on transfer of the
Consideration Shares prevent the Vendors, and any transferee of the
Vendors, from publicly selling the Shares in the United States for
one year from receipt.
3.8.3 The Vendors are acquiring the Consideration Shares for their own
account, and not as a nominee or agent for others, and not with a view
to resale or distribution of any part thereof in violation of the
Securities Act.
3.8.4 The Purchaser has made available to the Vendors and their advisers and
counsel the opportunity to ask questions of, and to receive answers
from, the Purchaser and its officers and directors concerning the
Purchaser and its business and the Purchaser has given access to
information, documents, financial statements, records and books (i)
relating to the Purchaser and its business and an investment in the
Purchaser, and (ii) necessary to verify the accuracy of any
information furnished to the Vendors.
3.8.5 The Purchaser shall use all reasonable endeavours to obtain a full
listing of the Consideration Shares on NASDAQ, within 16 months of the
date of this Agreement.
4 COMPLETION
4.1 Completion shall take place at the offices of the Vendor's Solicitors
(or any other location agreed upon by the Vendors and the Purchaser)
within 14 Business Days of the satisfaction of the Conditions
following which the Purchaser shall immediately serve notice in
writing on the Vendors that Completion can occur.
4.2 At Completion the Vendors shall deliver to the Purchaser:
(a) transfers in respect of the Shares duly executed by the
registered holders thereof in favour of the Purchaser or as it
may direct;
(b) certificates for the Shares (or an indemnity in the form
attached as Annexure C) duly signed if such certificates are
missing) and any other documents which may be required to give
good title to the Shares and to enable the Purchaser to procure
registration of the same in its name or as it may direct;
<PAGE>
(c) the Deed of Covenant, and the deed containing the restrictions
contained in clauses 7.2, 7.3 and 7.4 of this Agreement duly
executed by the Vendors;
(d) an irrevocable power of attorney in the form attached at
Annexure A executed by the Vendors to enable the Purchaser
(during the period prior to the registration of the transfer of
the Shares) to exercise all voting and other rights attaching to
the Shares;
(e) any necessary waivers and consents in the agreed form signed by
all members of the Company to enable the Purchaser or its
nominee to be registered as the holder of the Shares (each of
the Vendors hereby irrevocably waiving all and any rights of
pre-emption to which it may be entitled under any articles of
association, agreement, law or otherwise in respect of the
transfer of the Shares delivered under this Agreement) and a
release of liabilities executed by each of the Vendors, Robert
Green and Marilyn Shein in the form attached as Annexure B;
(f) the counterparts of the Consultancy Agreements duly executed by
each party to them (other than the Purchaser);
(g) a certified copy of any power of attorney under which any
document required to be delivered under this clause 4.2 has been
executed;
(h) a form of revocation (in a form reasonably satisfactory to the
Purchaser) in respect of a general power of attorney dated 9
November 1998 given by the Company in favour of Robert Green;
(i) certified copies of board resolutions of the Company and the
Vendors (as applicable) in the agreed form:
(i) approving in anticipation of Completion of (subject only
to proper stamping) the transfers of the Shares
delivered under this Agreement;
(ii) approving in anticipation of Completion of the placing
on the register of members of the Company of the names
of the transferees for registration in
<PAGE>
accordance with the share transfer forms referred to
above and authorising the issue of appropriate share
certificates; and
(iii) approving the execution of the Deed of Covenant and the
Consultancy Agreements.
4.3.1 When the Vendors have complied with the terms of clause 4.2 the
Purchaser shall procure the delivery:
(a) to the Vendors' Solicitors US Dollar Clients account at The Royal
Bank of Scotland International Limited, Jersey or to such other
bank account as they may designate for the account of the Vendors
of a telegraphic transfer in favour of the Vendors' Solicitors
for the amount of the Initial Cash Consideration; the Vendors'
Solicitors are authorised by the Vendors to receive payment of
the Consideration on the Vendors' behalf and the receipt of the
Vendors' Solicitors shall be a sufficient discharge for the
Purchaser;
(b) to the Vendors of certificates for the Initial Consideration
Shares registered in the name of the Vendors and any other
documents which may be required to give good title to the Initial
Consideration Shares;
(c) to the Vendors of the counterparts of the Deed of Covenant and
the deed required pursuant to Clause 7 duly executed by the
Purchaser; and
(d) to the Vendors of the Consultancy Agreements duly executed by the
Purchaser.
Provided That in the event that the Vendors' Solicitors give
notice in writing prior to Completion to the Purchasers'
Solicitors, the following provisions shall have effect:-
(i) On Completion all documents shall be held in escrow and
shall constitute escrows pending receipt of payment pursuant
to sub-clause (ii) of this proviso and;
(ii) the Purchasers or their Solicitors shall immediately
following completion of all other matters to be done on
Completion in accordance with this clause 4 send
<PAGE>
the Initial Cash Consideration by Swift to Barclays
Bank Plc, Monaco Branch as to 50 per cent. for the account
of Panton Management Limited and the balance for the account
of Northern Management Limited. On receipt by such bank of
the Initial Cash Consideration the condition of the escrows
shall be deemed to have been satisfied (and the relevant
documents shall no longer be deemed to be the subject of any
escrow and shall thereupon have full effect).
4.3.2 On Completion the Vendors shall procure that the Company delivers to
the Vendors irrevocable authorities addressed to Messrs Yussifoff
Cohen & Co of 6 Wissotzky Street, Tel Aviv, Israel, (Israeli
Advocates) and also to Bezeq International and to British Telecom Plc
to pay to the US Dollar Clients account of the Vendors' Solicitors at
The Royal Bank of Scotland Plc (as referred to in clause 4.3.1(a) or
to such other Bank account as the Vendors' Solicitors may from time to
time designate) in respect of the BT Amount.
4.4.1 The parties agree that at any time on or after the date of Completion,
any party, being ready and willing to fulfil its own outstanding
obligations pursuant to this Agreement, may (without prejudice to any
other right or remedy available to it) give to the other parties
notice in writing requiring completion of this Agreement in conformity
with this clause.
4.4.2 Upon the service of such notice as stated in Clause 4.4.1, it shall
become and be a term of this Agreement in respect of which time shall
be of the essence thereof, that the parties to whom the notice is
given shall complete this Agreement within fourteen Business Days
after service of the notice (exclusive of the date of service) but
this condition shall operate without prejudice to any right of each
party to rescind this Agreement in the meantime.
4.5 If for any reason the provisions of clause 4.2 are not fully complied
with, the Purchaser (following the delivery of the notice referred to
in clause 4.4.1 by the Purchaser) shall be entitled (in addition and
without prejudice to any other right or remedy available to it) to
elect:
(a) to rescind this Agreement in which case the Purchaser shall
not be obliged to purchase any of the Shares or pay any of
the Consideration; or
(b) to fix a new date for Completion: or
<PAGE>
(c) to proceed to Completion so far as practicable, the Vendors
then being obliged to use their best endeavours to perform
or procure the performance of any of the outstanding
provisions of clause 4.2.
5 POSITION PENDING COMPLETION
5.1 The Vendors hereby covenant with and undertake to the Purchaser that
they will use their reasonable endeavours to procure that neither one
of them nor the Company shall at any time prior to Completion without
the prior written consent of the Purchaser (not to be unreasonably
withheld or delayed) do allow or procure any act or omission which
would (or would be likely to) cause, constitute or result in a breach
of the Warranty if the same were to be expressly repeated at
Completion or which would make any of Warranty Statements untrue,
incorrect, inaccurate or misleading if they were expressly repeated at
Completion.
5.2 Without prejudice to clause 5.1, the Vendors hereby covenant with and
undertake to the Purchaser that the Company shall not at any time
prior to Completion without the prior written consent of the Purchaser
(not to be unreasonably withheld or delayed):
(a) permit or cause to be proposed any alteration to its share
capital (including any increase thereof) or the rights attaching
to its shares;
(b) create, allot, issue, redeem, consolidate, convert or sub-divide
any share or loan capital or grant or agree to grant any options
for the issue of any share or loan capital;
(c) subscribe or otherwise acquire, or dispose of any shares in the
capital of any company;
(d) acquire or dispose of the whole or part of it's undertaking;
(e) cease to carry on its business or so far as practicable be wound
up or enter into receivership, administrative receivership or any
other form of judicial management or administration of its assets
or;
(f) so far as possible permit or suffer any of its insurances to
lapse or do anything which would make any policy of insurance of
it null or voidable;
<PAGE>
(g) apply or permit its directors to apply to petition to the Court
for an administration order or similar order to be made in
respect of it;
(h) make any change to its auditors, its bankers or the terms of the
mandate given to such bankers in relation to its account(s), or
its accounting reference date;
(i) enter into or vary any transaction or arrangement with, or for
the benefit of any of its directors or shareholders or any other
person who is a "connected person" (within the meaning of Section
286 of the Taxation Of Chargeable Gains Act 1992 with any of its
directors or shareholders;
(j) enter into or give or permit or suffer to subsist any guarantee
of or indemnity or contract of suretyship for or otherwise commit
itself in respect of the due payment of money or the performance
of any contract, engagement or obligation of any other person or
body;
(k) propose or pay any dividend or propose or make any other
distribution (other than any payments to the Vendors by way of
consultancy payments);
(l) enter into any partnership or joint venture;
(m) dispose of any asset of a capital nature with a book or market
value in excess of US$20,000;
(n) engage any employee on terms that either his contract cannot be
terminated by six months' notice or less or his emoluments and/or
commissions or bonuses are or are likely to be at the rate of
US$50,000 per annum or more or increase the emoluments and/or
commissions or bonuses or any employee to more than US$50,000 per
annum or vary the terms of employment of any employee earning (or
so that after such variation he will, or is likely to earn) more
than US$50,000 per annum;
(o) vary the terms of employment and service of any officer or an
employee or increase the salary by more than ten per cent. or
vary other benefits of any such officer or employee, or appoint
or unless reasonably necessary dismiss any officer or such
employee;
<PAGE>
(p) mortgage or charge or permit the creation of or suffer to subsist
any mortgage or charge over the whole or any part of its assets
or redeem any of the foregoing;
(q) make any loan or give any credit (other than normal trade credit)
or acquire any loan capital of any corporate body (wherever
incorporated);
(r) surrender or agree to any material change in the terms of any
substantial supply or distribution agreement to which it is from
time to time a party;
(s) enter into any unusual or onerous contract or any other material
or major or long term contract;
(t) make any change in its business or do any act or thing outside
the ordinary course of the business carried on by it;
(u) conduct any material litigation (save in respect of any breach of
any contract or for the collection of debts arising in the
ordinary course of business) or settle or compromise any claim or
dispute; or
(v) enter into any contract or non-binding commitment to do any of
the acts or matters referred to in this clause 5.2.
5.3 The Vendors hereby covenant with and undertake to the Purchaser that
the Vendors shall not at any time prior to Completion:
(a) dispose or attempt to dispose of any interest in the Shares or
grant any option over, or mortgage, charge or otherwise encumber
or dispose of any of the Shares;
(b) enter into discussions with any persons as regards any possible
sale of the business or a material part of the business of the
Company.
5.4 The Vendors hereby covenant with and undertake to the Purchaser that
the Vendors will procure that between the date of this Agreement and
Completion:
<PAGE>
(a) the Company will continue to pay it's creditors in the ordinary
course of business or within the usual terms of payment of such
creditors; or
(b) the Vendors will use all reasonable endeavours to maintain the
trade and trade connection of the business of the Company and
will not by any action, omission, neglect or default knowingly
damage or risk damage to the same.
5.5 Pending Completion the Vendors shall procure that the Purchaser and
its agents and representatives are given full access to the Vendors'
properties and to the books and to the records of the Company and of
its subsidiaries and the Vendors shall upon request furnish such
information regarding the businesses and affairs of the Company as the
Purchaser may reasonably require.
6 WARRANTY
6.1 The Vendors hereby:
(a) acknowledge that the Purchaser has been induced to enter into
this Agreement and to purchase the Shares on the basis of the
Warranty and the agreements in the agreed form; and
(b) jointly and severally warrant, represent and undertake to the
Purchaser that each and every Warranty Statement is true, correct
and accurate in all material respects and not misleading at the
date of this Agreement and undertake to the Purchaser that each
and every Warranty Statement will continue to be accurate and not
misleading throughout the period from the date of this Agreement
up to and including Completion, subject only to:
(i) the matters stated in the Disclosure Letter save that the
Disclosure Letter shall not reduce in any way the Vendors'
liability pursuant to the Deed of Covenant in respect of any
Taxation Liability arising out of or associated with the
migration of the Company from the UK; and
(ii) any exceptions for which express provision is made pursuant
to this Agreement specifically limiting the operation of any
disclosure.
<PAGE>
6.2 The Warranty is a separate and independent warranty, representation
and undertaking in relation to each of the Warranty Statements and no
Warranty Statement shall be limited by reference to any other Warranty
Statement.
6.3 The rights and remedies of the Purchaser in respect of any breach of
the Warranty shall not be affected by Completion but shall take effect
subject only to the matters specifically disclosed by the Vendors or
the Vendors' Solicitors in writing or in the Disclosure Letter.
6.4 The Vendors shall not do nor permit to occur any act or omission at or
before Completion which would constitute a breach of the Warranty so
far as within their powers to prevent the same.
6.5 If prior to the Completion any of the material Warranty Statements is
found to be untrue, incorrect, inaccurate or misleading in any
material respect the Purchaser shall be entitled to rescind this
Agreement by notice to the Vendors' Solicitors. The right to rescind
under this clause shall be in addition and without prejudice to any
rights and remedies which would have been available to the Purchaser
had this Agreement not been rescinded and failure to rescind shall not
constitute a waiver of any other rights the Purchaser may have under
this Agreement or the Deed of Covenant.
6.6 The Vendors shall immediately give written notice to the Purchaser of
the occurrence of any event which results or may result in any of the
Warranty Statements being untrue, incorrect, inaccurate or misleading
giving sufficient details of the event.
6.7 Any information supplied by the Company, its officers or employees to
the Vendors, their agents, representatives or advisers in connection
with, or to form the basis of, the Warranty or a Warranty Statement or
any matter covered in the Disclosure Letter, or for any other reason,
shall be deemed not to include or have included a representation,
warranty or guarantee of its accuracy to the Vendors and shall not
constitute a defence to the Vendors to any claim made by the
Purchaser. The Vendors waive any and all claims against the Company,
its officers or employees in respect of any information so supplied.
6.8 References to the awareness or knowledge of the Vendors in a Warranty
Statement in Schedule 3 shall only limit that Warranty Statement by
the Vendors awareness or knowledge if each of the
<PAGE>
Vendors has made all due and careful enquiries to ascertain if the
relevant information is true, accurate, correct and not misleading.
6.9 Each of the paragraphs in Schedule 3 shall be interpreted as being
deemed to include all references to the foreign equivalent of terms
used, statutes and regulations referred to and concepts applied where
the Company is incorporated in, does business in or is affected by the
laws or regulations of a country outside England and Wales.
6.10 The Vendors hereby jointly and severally undertake to indemnify the
Purchaser from and against all debts and liabilities (including legal
costs and expenses) in connection with any claim made against the
Company by Kol Haolam or any person connected with Kol Haolam.
6.11 For the avoidance of doubt, the parties agree that all existing
arrangements to pay consultancy fees and related payments to Robert
Green or Marilyn Shein (or the Vendors) will cease from the date of
the appointment of the Vendors under the Consultancy Agreements.
6.12 Any Warranty Claim or claim under the Deed of Covenant may be
satisfied by the Vendors as to 50 per cent. in cash and the balance of
the Warranty Claim satisfied by transferring to the Purchaser or as it
may direct, Purchaser Common Stock valued at the price at which shares
in Purchaser Common Stock were allotted to the Vendors or in the event
of there having been allotments at two different striking prices, then
at the average of such striking prices.
6.13 The provisions of Schedule 6 shall have effect.
7 RESTRICTIONS
7.1 The Vendors, Marilyn Shein and Robert Green will on Completion deliver
to the Purchaser a deed of covenant (in a form to be agreed between
the parties) containing the restrictions contained within the
following Clauses 7.2, 7.3 and 7.4.
7.2.1 To ensure that the Purchaser receives the full benefit of the goodwill
of the business of the Company, each of the Vendors, Marilyn Shein and
Robert Green hereby represent and undertake that they will not either
alone or for, together with or as agent, officer or employee of any
other person, firm or company or through the medium of any company
directly or indirectly:
<PAGE>
(a) for a period of 3 years from Completion:
(i) solicit, interfere with or attempt to entice away from the
Company any person who is at the date hereof or was within
the previous 12 months an employee or agent of any of the
Company, or who is reasonably considered by the Company to
be or have been a regular client or customer of or supplier
to the Company on the date of this Agreement or during the
12 months immediately preceding the date of this Agreement;
or
(ii) interfere or attempt to interfere with the supply or
continued supply of goods or services to or by the Company;
or
(b) for a period of 18 months from Completion carry on or be engaged,
concerned, interested or hold shares or other securities in any
company or businesses which compete with the Restricted
Activities at the date of this Agreement.
7.2.2 Provided that nothing in this clause 7.2 shall prevent the Vendors,
Marilyn Shein or Robert Green being interested in the Permitted
Business.
7.3 Each of the restrictions contained in each paragraph of clause 7.2.1
it is a separate and distinct restriction and is to be construed
separately from the other restrictions. Each of the Vendors
acknowledges that the restrictions are reasonable when taken together
as well as individually, that the duration, extent and application of
each restriction are no greater than is necessary for the protection
of the goodwill of the businesses of the Company and that the
consideration paid by the Purchaser for the Shares takes into account
and provides adequate compensation for the restraints and restrictions
imposed. Should any restriction be found to be void or unenforceable
without the deletion of some part of it or the reduction in area or
duration specified, that restriction shall apply with such
modification as may be necessary to make it valid.
7.4 The parties agree that the benefit of the covenants and undertakings
given in this clause shall be assignable in whole or in part by the
Purchaser to and become enforceable by the Company or the person which
from time to time is the holder of the Shares or to which any part of
the business(es) of the Company has been transferred.
<PAGE>
7.5 It is declared for the avoidance of doubt that any projections which
may have been prepared by the Vendors' auditors were prepared in good
faith but that no responsibility for any of the same is accepted by or
placed upon such auditors or upon any other party to this Agreement
since the same were intended for illustration purposes only.
8 USE OF NAME
The Purchaser shall as between the Purchaser and the Vendors, be
entitled from Completion to the exclusive use of the names "Hamilton
Telecommunications" and "Verity International" as part of the
Company's names and in the Company's business dealings and the Vendors
undertake not without the prior written consent of the Purchaser, to
use as a corporate or trading name any name which is or might be
confused with "Hamilton 'Telecommunications" or "Verity
International".
9 GENERAL PROVISIONS
9.1 The Purchaser undertakes not to issue preferred stock without the
approval of Robert Green or Marilyn Shein except in connection with
obtaining any financing required to complete this Agreement provided
that the Purchaser's obligations pursuant to this clause shall
terminate upon the earliest to occur of:
(a) the satisfaction of the Deferred Consideration; and
(b) the date the capital stock of the Purchaser becomes listed on NASDAQ.
9.2 Each of the Vendors shall be jointly and severally liable in the event
of any breach of the warranties, representations, indemnities,
covenants, agreements and obligations of the Vendors under this
Agreement provided that the Purchaser may release or compromise the
liability of one of the Vendors hereunder or grant to one of the
Vendors time or other indulgence without affecting the liability of
the other Vendor hereunder.
9.3 Until such time as all of the consideration has been paid to the
Vendors and for so long as either of the Consultancy Agreements in
favour of Panton Management Limited and Northern Management Limited
shall subsist, the Purchaser shall procure that no one shall be
appointed a Director of the Company (or of ACL following completion of
the purchase of all the issued shares in ACL in the
<PAGE>
event that such completion takes place) without the written consent
of Panton Management Limited, Northern Management Limited, Robert
Green and Marilyn Shein.
9.4.1 Without prejudice to any right or remedy available to the Purchaser
pursuant to clause 6 or otherwise, the Vendors shall be liable on an
indemnity basis for all costs, claims and expenses reasonably incurred
by the Purchaser in connection with any claim arising out of any
warranty, representation, undertaking or indemnity contained in this
Agreement (or any breach thereof) or any of the agreements in the
agreed form provided that the relevant claim is successful or settled
in favour of the Purchaser.
9.4.2 Without prejudice to any right or remedy available to the Vendors
pursuant to this Agreement, the Purchaser shall be liable on an
indemnity basis for all costs, claims and expenses reasonably incurred
by the Vendors in connection with any claim arising out of any
warranty, representation, undertaking or indemnity contained in this
Agreement (or any breach thereof) or any of the agreements in the
agreed form provided that the relevant claim is successfully resisted
by the Vendors.
9.5 The waiver by either party of any right or breach, default or omission
by another party of any of the terms of this Agreement or any of the
agreements in the agreed form shall not take effect unless in writing
and shall not constitute a continuing waiver of the right waived or
apply to, or operate as a waiver of, any other breach, default or
omission and any forbearance in enforcing any right shall not
constitute a waiver.
9.6 Neither the Purchaser nor the Vendors may assign whether in whole or
in part the benefit of this Agreement.
9.7 No party shall divulge to any third party (other than their respective
professional advisers or insurers) the fact that this Agreement or any
of the documents in the agreed form has been entered into or any
information regarding its terms or any matters contemplated by this
transaction or make any announcement relating to it without the prior
agreement (not to be unreasonably withheld or delayed) of the other
parties unless any such relevant information or announcement is
required by the Inland Revenue and/or a court of competent
jurisdiction or by any other relevant regulatory
<PAGE>
body in which event the other parties shall (if practicable) be given
prior written notice of any such intended announcement. Any
announcement shall in any event be made or issued only in a form
approved by the Purchaser and with the consent of the Vendors (not to
be unreasonably withheld or delayed).
9.8.1 The Vendors shall ensure that the Purchaser, its agents, advisers
(including legal advisers or insurers) and representatives are given
promptly on request full access to all accounting, taxation and other
records of the Companies and any other facilities and information
regarding the business, assets, liabilities, contracts and
arrangements of the Companies which it may request and which are
within the possession or the control of the Vendors and the Vendors
hereby undertake to retain all such information in their possession
and control for a period of six years following the date hereof.
9.8.2 The Purchaser shall ensure that the Vendors, their agents, advisers
(including legal advisers and insurers) and representatives are given
promptly on request full access to all accounting, taxation, and other
records of the Company and Automatic Communications Limited and any
other facilities and information regarding the business, assets and
liabilities, contracts and arrangements of the Company and Automatic
Communications Limited which they may request and which are within the
possession or control of the Purchaser, for so long as any of the
Consultancy Agreements remain in effect or the Deferred Consideration
remains payable pursuant to this Agreement.
9.9 Subject as mentioned in clause 9.4 each party shall pay its own legal,
accountancy and other costs, charges and expenses incurred in
connection with this Agreement.
9.10 It is hereby agreed that the negotiations concerning the migration of
the Company from the UK (including any appeals) and the finalisation
of the tax computations for the accounting periods ending 30 June 1997
and with the migration, shall continue to be dealt with by Messrs
Sinclair Croydon or Messrs Simmons Gainsford, unless the parties
otherwise agree.
9.11.1 This Agreement and the documents referred to in this Agreement
constitute the whole agreement between the parties in relation to the
subject matter covered. No oral explanation or oral information given
by any party shall alter the interpretation of this Agreement. It is
agreed that:
<PAGE>
(a) no party has entered into this Agreement in reliance upon any
representation, warranty or undertaking which is not set out or
referred to in this Agreement save for information relating to
the Purchaser supplied to the Vendors' Solicitors by Troop,
Steuber, Pasich, Reddick & Tobey of 2029 Century Park East, Los
Angeles CA90067-3010, USA and save for the information supplied
in writing by the Vendors or the Vendors' Solicitors or Vendors'
Accountants to the Purchaser or any professional advisers of the
Purchaser;
(b) in the absence of fraud, no party will have any remedy in respect
of any untrue statement, made to it or its representatives or
agents, upon which it or they relied and such party's only remedy
will be for breach of contract; and
(c) this clause shall not exclude any liability for fraudulent
misrepresentation.
9.11.2 No acquisitions of any other company or business or undertaking shall
be made by the Purchaser, unless the same shall have been approved
unanimously by all the members of the Board of the Purchaser and (for
so long as the Consultancy Agreements remain in effect) Robert Green
or Marilyn Shein nor shall the Company make any acquisition of any
asset or series of assets the value of which exceeds US$50,000 without
such approval.
9.12 The parties hereby undertake with each other to do or procure to be
done all such further acts and things and execute or procure to be
executed all such further deeds and documents as may be necessary or
desirable fully and effectively to give full effect to the terms of
this Agreement and the agreements entered into in the agreed form and,
following Completion, pending such vesting, the Vendors shall hold
such Shares and benefits in trust for the Purchaser and shall receive
all monies in connection therewith as trustee of the Purchaser and
shall account to the Purchaser forthwith on receipt.
9.13 Any notice:
9.13.1 (a) must be in writing and must be given:
(i) to a company which is a party at its registered office or to
such other address as may have been notified to the other
party; and
<PAGE>
(ii) to any individual who is a party at the address of that
individual given at the beginning of this Agreement; and
(b) will be effectively served:
(i) on the day of receipt where any hand-delivered letter,
telefax message is received on a Business Day before or
during normal working hours; or
(ii) on the following Business Day, where any hand-delivered
letter or, telefax message is received either on a
Business Day after normal working hours or on any other
day; or
(iii) on the second Business Day following the day of posting
from within the United Kingdom of any letter sent by post
office inland first class mail postage prepaid.
9.13.2 Each of the Vendors hereby appoint Jay, Benning and Peltz of 1
Cumberland Place, London W1H 7AL (marked for the attention of Barry
Jay or Jonathan Fisher) as their authorised agent for the purpose of
accepting service of process and notices for all purposes in
connection with this Agreement.
9.13.3 The Purchaser hereby appoints S J Berwin & Co of 222 Grays Inn Road,
London WC1X 8HB, (marked for the attention of Robert Burrow or Simon
McLeod) as it's authorised agent for the purpose of accepting service
of process and notices for all purposes in connection with this
Agreement.
9.14 This Agreement and all documents supplemental thereto are governed by
and are to be construed in accordance with English law.
9.15 The parties accept the non-exclusive jurisdiction of the appropriate
court of law in England in relation to all matters, claims and
disputes arising out of or in connection with this Agreement, any of
the documents in the agreed form or any document supplemental thereto.
<PAGE>
9.16 Any provisions of this Agreement shall, so far as they are capable of
being performed or observed, continue in full force and effect
notwithstanding Completion except in respect of those matters already
performed.
9.17 This Agreement may be executed in several counterparts (whether
original or facsimile counterparts) and upon the execution of all such
counterparts by one or more parties, each counterpart shall be deemed
to be an original hereof.
<PAGE>
SCHEDULE 1
The Vendors
<TABLE>
<CAPTION>
Column 1 Column 2 Column 3 Column 4
-------- -------- -------- --------
Proportion of
Initial
Consideration
(including Proportion of
Consideration Deferred
Name and Address Shareholdings Shares) Consideration
---------------- ------------- ------- -------------
<S> <C> <C> <C>
Panton Management Limited 2 ordinary shares jointly 50 per cent. 50 per cent.
(no. 39307B held by the Vendors
Providence House
East Hill Street
PO Box N-3944
Nassau
Bahamas
50 per cent. 50 per cent.
Northern Management Limited
(no. 71490B)
Providence House
East Hill Street
PO Box N-3944
Nassau
Bahamas
</TABLE>
<PAGE>
SCHEDULE 2
Particulars of the Company
<TABLE>
<S> <C>
Number: 239381
Status: Private company limited by shares
Registered Office: 27/29 Lower Pembroke Street, Dublin 2, Republic of Ireland
Authorised share capital: L100,000 divided into 100,000 ordinary shares of L1 each
Issued share capital: L2 divided into 2 ordinary shares of L1 each
Shareholders and shareholdings: Two ordinary shares of L1 each held jointly by the Vendors
Directors: Robert Green and Marilyn Shein
Secretary: Marilyn Shein
Charges: None.
</TABLE>
<PAGE>
SCHEDULE 3
Warranty Statements
1 All information contained or referred to in the Disclosure Letter and all
other information given by any of the Vendors of any of the directors,
officials or professional advisers of the Company to any of the directors,
officials or professional advisers of the Purchaser is accurate in all
material respects.
2 All requirements applicable to the continuance in existence, management,
property or operations of the Company have been complied with, the
Company's books of accounts and other records are complete and accurate and
the Company has not committed any illegal or unlawful act and is not liable
for any breach of covenant, consent, licence, permission, contract or
statutory duty (all requisite or necessary consents, licences and
permissions having been obtained).
3 The Accounts and the accounting records of the Company having been prepared
in accordance with the applicable requirements and in accordance with
generally accepted accountancy principles and are true, complete and
accurate in all material respects, and show a true and fair view of the
state of affairs and assets and liabilities of the Company as at the
Accounts Date and the profits or losses of the Company for the period
concerned.
4 The Accounts make full provision for and disclose and take into account as
at the Accounts Date, all assets, liabilities (actual, contingent or
disputed), all capital commitments (actual or contingent) and all bad and
doubtful debts.
5 Since the Accounts Date no dividend or other distribution (save for
payments made by way of consultancy fees to the Vendors) has been declared
or paid on, and no capital distribution made or agreed to be made in
respect of, any share capital of the Company and all amounts received by
the Company have been paid into its account and appear in the Company's
books of account.
6 Since the Accounts Date the Company has carried on in the ordinary and
usual course the business carried on by it at that date.
7 Since the Accounts Date there has been no material adverse change in the
Company's financial position or prospects, the value of the Company's net
assets as at the date of this Agreement only is not less than the value of
its net assets at the Accounts Date and no material liabilities (actual,
<PAGE>
contingent or disputed) have arisen, provided that for the avoidance of
doubt there will/may be no cash in hand at the bank on Completion.
8 Subject to the provisions of clause 3.8 of this Agreement all the book and
other debts of the Company outstanding at Completion are the absolute
property of the Company and will (save insofar as a specific provision has
been made in the Accounts therefor and save for the BT Amount) be good and
collectable in the ordinary course of business
9 All information contained or referred to in the Disclosure Letter and all
information supplied by the Vendors' Solicitors to the Purchaser's
Solicitors (including without limitation the information referred to in
paragraphs (A), (B) and (D) of the Introduction and Schedules 1 and 2), is
true, complete, accurate and not misleading in any material respects.
10 The Vendors are together the beneficial owners of the Shares (which
represent the entire issued share capital of the Company, there being no
other share or loan capital in the Company or any share or loan capital
under option to purchase or subscribe) and will at Completion have the
right and power to sell and transfer unencumbered, the entire legal and
beneficial ownership of the Shares with full title guarantee free of all
options, liens, charges or other encumbrances and together with all
dividends, distributions, (save for payments made by way of consultancy
fees to the Vendors rights declared, paid, credited or arising to the
Purchaser in accordance with the provisions of this Agreement.
11 As at the date of this Agreement none of the Vendors is aware of any
material fact or matter not disclosed in writing to the Purchaser, the
disclosure of which might reasonably affect the willingness of a reasonable
Purchaser to acquire the Shares on the terms of this Agreement.
12 The Company is not a party to any material or onerous contract and has not
guaranteed any other person's liabilities or is a party to any contract
with a Vendor or director, employee, consultant of a Vendor or any persons
connected with any of them not disclosed in the Disclosure Letter.
13 All the assets of the Company are prudently insured and all insurance
policies of the Company are in full force and effect and all premiums have
been paid and there are no insurance claims or possible insurance claims by
the Company in existence.
14 The Company is the owner of and has good and marketable title to all the
assets used in its business and has all assets necessary to carry on its
business and the Company will not prior to
<PAGE>
Completion without the prior written consent of the Purchaser (not to be
unreasonably withheld or delayed) acquire any assets on lease purchase or
by leasing agreement.
15 The Company does not have outstanding any commitment for capital
expenditure or any agreement or arrangement not on an arm's length basis.
There is not outstanding any mortgage or charge on the whole or any part of
the undertaking, property or assets of the Company.
16 Neither the Company nor any of the Vendors has any reason to believe that
the sale of the Shares will result in either loss of business with any of
the Company's present suppliers or customers or a breach of any contract,
covenant or licence or an employee handing in notice.
17 Otherwise than as disclosed in writing to the Purchaser's Solicitors or in
the Disclosure Letter the Company does not own, licence or use any
intellectual property or require to own, licence or use any intellectual
property in order to operate its business and the Company is not in breach
of any other person's intellectual property rights and the Company will not
prior to Completion without the prior written consent of the Purchaser (not
to be unreasonably withheld or delayed) acquire or take any licence in
respect of any intellectual property.
18 Full provision or reserve has been made in the Accounts for all Taxation
liable to be assessed on the Company or for which it is or may become
accountable in respect of the period ended on the Accounts Date.
19 The Company has within the required period duly and properly made, given or
delivered all information, returns, notices, accounts and computations
which ought to have been made for the purposes of Taxation and all such
information, returns, notices, accounts and computations supplied to any
Taxing Authority for any purpose have been made on a consistent basis.
20 Save as disclosed in the Disclosure Letter, there is no dispute or question
with any Taxing Authority and the Company has not been the subject of any
review, audit or investigation by any Taxing Authority and there is no fact
or circumstance known to the Vendors, Robert Green or Marilyn Shein which
might give rise to any such dispute, audit, review or question.
21 No clearances and consents are or have been required to be obtained from
any Taxing Authority .
22 The Company has duly and punctually paid all Taxation for which it is
liable to the appropriate Taxing Authority and whether or not such
liability to Taxation is or could be the subject of an appeal.
<PAGE>
23 The Company is under no liability to pay any penalty, interest, supplement,
fine, default surcharge or other payment in connection with any Taxation.
24 The Company has deducted or withheld all Taxation required to be deducted
or withheld from any payments made by the Company and the Company has duly
and punctually complied with any obligation to account for any such
Taxation deducted or withheld to the appropriate Taxing Authority.
25 There have been disclosed to the Purchaser in the Disclosure Letter, copies
of all notifications (if any) from the Inland Revenue that any payment may
be made gross or at a reduced rate of withholding which otherwise should
have been made net of Taxation.
26 The Company is not the owner of:
(a) any shares to which Sections 249-251 ICTA could apply; or
(b) any qualifying corporate bonds within Sections 116 and 117 TCGA or any
qualifying convertible securities within Schedule 10 to the Finance
Act 1990.
27 The Company has not issued and is not the owner of:
(a) any securities in relation to which payments might fall within Section
209(2)(d) and/or (e) ICTA;
(b) any deep discount securities within the meaning of Schedule 4 ICTA; or
(c) any deep gain securities within the meaning of Schedule 11 to the
Finance Act 1989.
28 The Company has not been concerned or agreed to be concerned in any
transaction involving an exempt distribution within Sections 213-18 ICTA.
29 Within the four years prior to Completion there will have been no major
change in the nature or conduct of any trade or business of the Company
within the meaning of Section 245 or 768 ICTA whether or not arising as a
result of the transfer of assets directly or indirectly by the Company to
the Vendor or to any other company under the control of the Vendor or to a
connected person of any of them, and no arrangements exist whereby, after
Completion, any such major change shall occur.
30 At no time prior to Completion will the activities in a trade carried on by
the Company or the scale of activities in a trade or business carried on by
the Company become negligible or small and no
<PAGE>
arrangements exist whereby, after the date of Completion, any such
activities shall cease or the scale of any such activities shall become
small or negligible.
31 The Company is not and has never at any time been registered for the
purposes of VATA.
32 As at the date of this Agreement, other than as disclosed in the Accounts
the Company is not involved in any litigation, prosecution, arbitration or
any other proceedings for the enforcement of rights or settlement of
disputes and no act, omission or event has occurred which has given rise to
a threat of such proceedings or which is likely to result in the Company
being involved in any such proceedings.
33 The Company has no liability whatsoever (whether legally binding or not) to
make any payment to or for the benefit of any employee, officer,
consultant, independent contractor or agent in respect of past service,
pension or the termination of the employment or engagement of that or any
other person (including, without limitation, payments for wrongful or
unfair dismissal, loss of office or redundancy) and the Company has no
superannuation fund, retirement benefit or other pension schemes or
arrangements.
34 Full details of all employment, engagement, remuneration and notice terms
of all employees, directors, consultants, independent contractors or agents
of the Company are set out in the Disclosure Letter and all remuneration
due to them up to Completion has been paid and all of their employment,
engagement and office terms can be terminated by the Company on less than
three months' notice.
35 There is no outstanding commitment (whether legally binding or not) to
increase the remuneration of any officer, employee, consultant, independent
contractor or agent of the Company beyond any remuneration presently
payable.
36 As at the date of this Agreement, the Company has no bank overdraft
facilities nor any borrowings.
37 Other than as disclosed to the Purchaser in writing or in the Disclosure
Letter there are no existing contracts (including, without limitation,
customer and supply contracts) to which the Company is a party and in which
any of the Vendors' Group or any director or shareholder of the Company or
any person connected with any of them is interested (and for the purposes
of this paragraph a person shall be deemed to be interested in a contract
in accordance with the provisions of Section 317 of the Companies Act
1985).
<PAGE>
38 The Company:
(a) is not party to any contract other than those described in Schedule 5
hereto or disclosed in the Disclosure Letter;
(b) is not a party to any contract, arrangement or commitment (whether in
respect of capital expenditure or otherwise) which was entered into
otherwise than on terms determined on an arms' length basis, or
outside the ordinary course of business;
(c) has not delegated any powers under a power of attorney (other than as
an incidental part of a larger transaction) which remains in effect
and has appointed any agent under an authority which has not been
revoked and other than any ostensible or implied authorities to
directors or employees and consultants to enter into routine contracts
in the normal course of their duties;
(d) has not, by reason of its default, become bound, and no person has
become entitled (or with the giving of notice and/or the issue of a
certificate will become entitled) to require it, to repay prior to its
stipulated due date any loan capital or other debenture, redeemable
preference share capital or borrowed money and no notice has been
received since the Accounts Date of such liability having arisen for
any other reason;
(e) has not entered into and is not bound by any guarantee or indemnity
under which any liability or contingent liability is outstanding;
(f) has not at any time acquired, assigned or otherwise disposed of any
leasehold property in such a way that it retains any residual
liability;
(g) save as disclosed in the Disclosure Letter is not and has never been
party to any joint venture, consortium, partnership or profit sharing
arrangement or agreement; and
(i) to the best of the Vendors' knowledge is not in default under any
written agreement or covenant to which it is a party, nor under any
other written obligation binding on it being a default which would
have a materially adverse affect.
<PAGE>
39 The Company does not own or have any interest in any land or building other
than as disclosed in the Disclosure Letter and the Company has not entered
into any legally binding agreement for the purchase of any such interest.
40 Neither of the Vendors is a U.S. Person as defined in Regulation S of the
United States Securities and Exchange Commission (the "SEC") under the
Securities Act, a copy of which definition has been provided to the
Vendors.
<PAGE>
SCHEDULE 4
RELEVANT PROFITS
1 The Relevant Profits will be determined by reference to the net profits
of the Company as shown by the financial statements of the Company as
at 30th June 1998 ("the 1998 Accounts") and those to be prepared and
audited as at 30th June 1999 ("the Final Audited Accounts"). The Final
Audited Accounts shall be prepared and audited by the Company's
Auditors applying accounting policies and principles on a basis
consistent with generally accepted accounting policies and practises
applied on a basis consistent with those used in preparing the 1998
Accounts and in particular full provision will be made for all actual,
and contingent liabilities of the Company.
In order to arrive at the Relevant Profits there shall be deducted in
each case the amount of Taxation payable by the Company as shown in the
relevant accounts or as otherwise determined and the relevant net
profits shall be subject to the following adjustments (if not already
taken into account in the profit and loss accounts):
A Adding back:
(i) Taxation shown by the audited Profit and Loss Account of the
Company or as otherwise determined;
(ii) Any payments:
(a) not made at arms length;
(b) made to any other company within the Group of which the
Company forms part, including in particular the
Purchaser including any management fees or other charges
paid to any other such company;
(c) made in connection with anything not in the Company's
normal course of business;
(iii) All payments made to any of the following:-
(a) Panton Management Limited;
<PAGE>
(b) Northern Management Limited;
(c) Robert Green; and
(d) Marilyn Shein;
and any expenses payable to them, whether under any Consultancy
Agreement or otherwise howsoever;
(iv) any depreciation charged in respect of any items which
would normally fall to be depreciated;
(v) any rents, licence fees or outgoings in respect of any
premises occupied or shared by the Company.
B So as to negate any profits or losses on the revaluation of any
assets or any adjustment arising on the translation into US
Dollars of assets and liabilities denominated in currencies other
than US Dollars;
C Adding back any extraordinary items as described in Financial
Reporting Standard 3 (FRS3) not deriving from the ordinary
activities of the Company and any Associated Company of the
Company; and
D So as to exclude profits or losses of a capital nature.
2 The Purchaser and the Vendors agree to procure that the Company's auditors
are instructed to prepare the Final Audited Accounts.
3.1 The Purchaser shall instruct the Purchaser's Auditors to review the Final
Audited Accounts within 7 business days of the Company's Auditors issuing
the Final Audited Accounts with a view to confirming to the Vendors and the
Purchaser within 28 days of the date on which the Final Audited Accounts
are approved by the Board of Directors of the Purchaser either that they
approve the Final Audited Accounts or that they propose that adjustments
should be made to the Final Audited Accounts. If the Purchaser's Auditors
do not approve the Final Audited Accounts in their entirety, the
Purchaser's Auditors shall be instructed to discuss the adjustments
suggested by the
<PAGE>
Purchaser's Auditors with a view to reaching agreement with the Company's
Auditors on the final form of the Final Audited Accounts within 14 days of
the end of the above 28 day period. If they fail to reach agreement, the
matter shall be referred to a firm of accountants of international repute
chosen by the Vendors and the Purchaser, provided if they fail to agree on
their choice within seven days of the end of such 14 day period, such firm
shall be chosen by the President of the Institute of Chartered Accountants
(the "Independent Firm") on the application of either party. The
Independent Firm shall determine what adjustments (if any) may be required
to the Final Audited Accounts in order for them to comply with this
Schedule 4. The Company's Auditors shall, if requested give the
Purchaser's Auditors and the Independent Firm access to their working
papers.
3.2 In the event that the Purchaser does not instruct the Purchaser's Auditors
within the period referred to in paragraph 3.1 of this Schedule 4, or in
the event that the Purchaser's Auditors fail to notify the Company's
Auditors that they do not approve the Final Audited Accounts in their
entirety within a further period of fourteen days then the Final Audited
Accounts shall be deemed to have been agreed inter alia for the purposes of
paragraph 3.1 of this Schedule 4.
4 For the purposes of the matters described in this Schedule, the Independent
Firm shall be deemed to act as expert and not as an arbitrator. In the
absence of manifest error, the determination of the Independent Firm shall
be conclusive and binding and the Purchaser and each of the Vendors agrees
to be bound by such determination.
<PAGE>
SCHEDULE 5
CONTRACTS
1 Service agreement dated 1996 entered into between the Company and Sierre
Leone Telecommunications Company Limited
2 Service agreement dated 15 January 1998 between the Company and Cable &
Wireless Panama SA.
3 Audiotext termination agreement between Teleglobe International Inc. and
the Company dated 3 September 1997.
4 Service agreement dated 11 November 1998 between Automatic Communications
Limited and the Company.
5 Master Contract Hire Agreement dated 22 July 1998 between (1) Network
Vehicles Limited and (2) Verity International Limited.
6 Hire Agreement dated 22 July 1998 re: Volkswagen Polo between same
parties.
7 Lease Purchase Agreement dated July 1998 re: Range Rover registration
number N708 JLT between the same parties.
<PAGE>
SCHEDULE 6
VENDORS' PROTECTION PROVISIONS
1 The liability of the Vendors in relation to the Warranty Statements shall
cease on the expiration of the accounting reference period of the Company
ended on 30 June 2000 (or if the accounting reference period of the Company
is altered, then 30 June 2000) save as regards any alleged specific breach
of which notice in writing (containing details of the event or circumstance
giving rise to the breach, the basis upon which the Purchaser is making a
claim against the Vendors and the total amount of liability which results)
has been given to the Vendors prior to that anniversary.
2 The Vendors shall not be liable for any Warranty Claim unless their
aggregate liability (or what would be their liability apart from this
paragraph) exceeds US$50,000 in which case the Vendors shall be liable for
both the initial US$50,000 and the excess.
3 The total liability of the Vendors under the Warranties and the Deed of
Indemnity shall not in any event exceed the value of the Consideration
received by the Vendors.
4 In the event of any Warranty Claim being established, the Vendors shall be
entitled to set off against the amount of any depletion in or reduction in
the value of the assets of the Group Companies giving rise to the Warranty
Claim the amount by which (after adjustment where appropriate for Taxation
in respect of revenue items) the position of the Group Companies (taken as
a whole) in respect of any other matter is established to be better than as
so warranted (after adjustments where appropriate for Taxation).
5 The Vendors shall not be liable for any Warranty Claim to the extent that
the subject matter of the Warranty Claim is taken into account in
determining an adjustment to the Consideration.
6 If the Purchaser and the Company, or either of them, are entitled to make a
claim in respect of any act, event or default both under the Warranty
Statements and under the Deed of Covenant, the claim shall be made first
under the Warranty Statements and any amount payable to the Purchaser or
any Group Company under the Deed of Covenant shall be reduced to the extent
of the claim.
<PAGE>
ATTESTATIONS
FOR AND ON BEHALF OF
SYMPOSIUM
TELECOM CORPORATION
RUPERT GALLIERS-PRATT
.......................................
FOR AND BEHALF OF
PANTON
MANAGEMENT LIMITED
ROBERT GREEN
.......................................
<PAGE>
FOR AND ON BEHALF OF
NORTHERN
MANAGEMENT LIMITED
MARILYN SHEIN
.......................................
Signed by
MARILYN SHEIN
MARILYN SHEIN
.......................................
Signed by
ROBERT GREEN
ROBERT GREEN
.................................................
<PAGE>
ANNEXURE A
POWER OF ATTORNEY
We PANTON MANAGEMENT LIMITED of Providence House, East Hill Street, PO Box
N-3944, Nassau, Bahamas and NORTHERN MANAGEMENT LIMITED of Providence
House, East Hill Street, PO Box N-3944, Nassau, Bahamas being members of
Hamilton Telecommunications Limited (no. 239381) ("the Company") hereby
irrevocably and unconditionally jointly appoint Symposium Telecom
Corporation of 410 Park Avenue, 18th Floor, New York, New York 10022 ("the
Purchaser") to be our true and lawful attorney (with full power to appoint
substitutes) pending registration of the Purchaser as the legal owner of
the shares in the capital of the Company held by us jointly ("the Shares")
and in our name or otherwise and on our behalf and as our act and deed to
do exercise and perform any of the acts and things to be done and performed
or that may be done and performed by us and to execute any documents
necessary to be or, if the Purchaser deems desirable, that may be completed
or executed by us as our attorney shall think to do and perform and execute
in connection with the legal or beneficial ownership of all or any of the
Shares as if it were the legal and beneficial owner of the Shares and in
particular but without limitation:
(a) to do and perform any of the acts and things and to approve and
execute any document or documents necessary to be completed or
executed by us for transferring our legal or beneficial interest in
all or any of the Shares into the name of the Purchaser or its
nominee(s) or other person(s) nominated by the Purchaser or any
person(s) purchasing all or any of the Shares from the Purchaser; and
(b) to receive or accept service of or agree to waive all or any notices
or to agree to accept short notice for and to attend and vote and
demand and vote on a poll or otherwise at all or any meetings or class
meetings of the holders of shares or securities in the Company;
in all cases as amply and effectually as we could do if this Power of
Attorney had not been made and no sale of any legal or beneficial ownership
of the Shares had taken place by us.
We hereby undertake, pending registration of the transfer of the Shares, to
ratify whatever our attorney shall lawfully do or cause to be done
hereunder.
This Power of Attorney is irrevocable and is given to secure the
proprietary interest of the Purchaser in the Shares.
Dated
Executed as a deed by )
PANTON MANAGEMENT LIMITED )
by the signature of: )
Director
Director/Secretary
Executed as a deed by )
NORTHERN MANAGEMENT LIMITED )
by the signature of: )
<PAGE>
Director
Director/Secretary
<PAGE>
ANNEXURE B
RELEASE OF LIABILITIES
To: The Directors of Hamilton Telecommunications Limited ("the Company")
We hereby irrevocably and unconditionally release the Company and all of
its subsidiaries, subsidiary undertakings and associated companies and all
of their respective officers and employees from all and any claims or
liabilities, whether present or future, actual, contingent or otherwise,
which the Company, such other companies and any of such officers or
employees may have to me/us on any account whatsoever at the date hereof
and I/we hereby waive all and any rights or claims which I/we may have in
respect of any such liabilities. I/We also hereby confirm that there is
nothing owing between me/us and the Company, such other companies or any
such officers or employees.
Dated
Executed as a deed by )
[ ] )
in the presence of: )
<PAGE>
ANNEXURE C
LOST SHARE CERTIFICATE INDEMNITY
To: Hamilton Telecommunications Limited ("the Company")
The original certificates of title issued to us relating to 2 shares of L1
each fully paid of the Company have been lost or destroyed.
Neither the securities nor the certificates of title thereto have been
transferred, charged, lent, deposited or dealt with in any manner affecting
the absolute title thereto and we are the persons entitled to be on the
register in respect of such securities.
We request you to register a transfer of such shares to Symposium Telecom
Corporation without production of the said original certificates and in
consideration of you doing so undertake to jointly and severally indemnify
the Company against all actions, losses, costs, charges, expenses, claims and
demands which may be sustained or incurred by or brought or made against you
or any of you in consequence of you complying with this request and of the
Company permitting at any time hereafter a transfer of the said securities,
or any part thereof, without the production of the said original certificates.
We undertake to deliver to the Company for cancellation the lost certificates
should the same ever be recovered.
Dated 1998
Executed as a Deed by )
PANTON MANAGEMENT LIMITED )
in the presence of: )
Director )
)
Director/Secretary )
Executed as a Deed by )
NORTHERN MANAGEMENT )
LIMITED )
in the presence of: )
Director )
)
Director/Secretary )
<PAGE>
ANNEXURE D
THE DEED OF COVENANT
DATED
DEED OF COVENANT
<PAGE>
DATE
PARTIES
(1) The companies whose names and addresses appear in the Schedule to this
Deed ("the Vendors").
(2) Symposium Telecom Corporation of 410 Park Avenue, 18th floor, New York,
New York 10022 ("the Purchaser").
(3) Hamilton International Limited (a company incorporated in the Republic of
Ireland with registered number 239381) whose registered office is at
27/29 Lower Pembroke Street, Dublin 2, Republic of Ireland ("the
Company").
INTRODUCTION
(A) This Deed is supplemental to an agreement of even date herewith ("the
Agreement") made between the Vendors and the Purchaser, whereby (inter
alia) the Purchaser agreed to purchase the shares in the Company from the
Vendors.
(B) Pursuant to the Agreement, the Vendors are required on Completion to
deliver to the Purchaser a duly executed deed of covenant in the form of
this Deed.
INTERPRETATION
(1) In this Deed, unless the context otherwise requires, words and
expressions not expressly defined in paragraph (2) below shall have the
respective meanings given to them in the Agreement, and the rules of
interpretation contained in clause 1 of the Agreement shall apply to this
Deed as if the same had been set out herein with references to the
Agreement being references to this Deed.
(2) The following expressions shall have the following meanings:
Demand any notice, demand, assessment, letter or other
document issued, or action taken, by or on behalf
of any Taxing Authority (including the imposition
of any withholding) from which it appears that a
Taxation Liability is or may be imposed which may
give rise to a claim under this Deed;
the Parties the parties to this Deed, the expression "Party"
meaning any of the Parties;
Taxation all forms of taxation, duties, rates, levies,
contributions, withholdings, deductions, liabilities
to account, charges and
<PAGE>
imposts whether imposed in the United Kingdom or
elsewhere in the world, including but not limited to:
(a) in the United Kingdom, income tax to which
the "pay as you earn" system applies, ACT, any
liability arising under Sections 419 or 601
ICTA, national insurance contributions, VAT and
input tax within the meaning of Section 24 VATA;
and
(b) all penalties, charges, costs and interest
relating thereto or otherwise imposed by any
Taxing Authority;
Taxing Authority the Inland Revenue, H M Customs & Excise and any other
governmental, state, federal, provincial, local
governmental or municipal authority, body or
official whether of the United Kingdom or elsewhere
in the world;
Transaction any transaction, act, circumstance, omission,
agreement, arrangement or event whatsoever
(including, but not limited to, entering into the
Agreement, Completion, any change in the residence
of any person or the death, winding up or
dissolution of any person);
unavailability in relation to a Relief, means the loss, reduction,
nullification, non-existence, modification,
claw-back, counteraction, denial, disallowance,
cancellation of or failure to obtain that Relief
and "unavailable" shall be construed accordingly.
(3) In this Deed, references to a "Taxation Liability" mean not only any
payment or a liability to make any payment (or increased payment) of or
in respect of Taxation (whether or not such payment is primarily payable
by the Purchaser or the Company and whether or not the Purchaser or the
Company has or may have any right of reimbursement from any other person)
but also include:
(a) the enforcement or exercise of any mortgage, charge or power of sale
over any of the shares in or assets of the Company in connection with
the payment of any amount of Taxation.
(4) The Taxation Liability referred to in paragraph (3)(a) above shall be
treated as being equal to the amount of Taxation which is or is liable
to be paid out of the proceeds of enforcement or exercise of the
mortgage, charge or power of sale together with the
<PAGE>
amount of any costs or expenses incurred in connection with such
enforcement or exercise which are liable to be paid out of those
proceeds.
(5) In this Deed:
(a) any reference to any form of Taxation or Relief in the United Kingdom
shall include a reference to the equivalent or substantially
equivalent form of Taxation or Relief in any other relevant taxing
jurisdiction;
(b) any reference to the occurrence of a Transaction on or before a
particular date (including without limitation, Completion) shall
include Transactions which are for the purposes of any Taxation
deemed to have been or treated or regarded as having occurred or
existed at or before that date; and
(c) any reference to income, profits or gains arising, earned, accrued
or received on or before a particular date (including without
limitation, Completion) or in respect of a particular period shall
include income, profits or gains which are for the purposes of any
Taxation deemed to have been or treated or regarded as arising,
earned, accrued or received on or before that date or in respect
of that period.
OPERATIVE PROVISIONS
1 COVENANT TO PAY
1.1 Subject as provided in this Deed, the Vendors agree to pay to the
Purchaser, or at the option of the Purchaser to the Company from time to
time an amount equal to:
(a) any Taxation Liability of the Company:
(i) which would not have arisen but for any Transaction or
Transactions occurring on or before the date of Completion;
or
(ii) arising in respect of or by reference to or in consequence
of any income, profits or gains arising, earned, accrued or
received on or before Completion;
(b) any Taxation Liability which is also a Taxation Liability of another
person and which is payable by the Company by virtue of
(c) the other person failing to discharge such a liability to Taxation;
any Taxation Liability of the Company arising under
Sections 154(2)(b) or 179 TCGA which would not have arisen but for a
Transaction or Transactions occurring on or before the date of
Completion;
<PAGE>
(d) any Taxation Liability as specified in paragraph (3)(a) of the
Interpretation Section of this Deed falling on or to be met or paid
by the Purchaser or the Company and arising as specified in
paragraph (a) above;
(e) any Taxation Liability of the Company arising as a result of or in
respect of it ceasing to be resident for the purposes of tax in the
United Kingdom;
(f) any contractual liability of the Company entered into prior to
Completion to make a payment by way of reimbursement, recharge,
indemnity, covenant, guarantee or damages in respect of or arising
from another person's liability to Taxation; and
(g) all costs and expenses reasonably and properly incurred and payable
by the Purchaser or the Company in relation to any demand claim or
proceeding in respect of any Taxation Liability which is likely to
give rise to a claim under this Deed (taking into account clause
1.4).
1.2 Any amount paid to the Purchaser pursuant to this Deed shall be deemed
to constitute a reduction in the Consideration.
1.3 The Vendors shall be under no liability under this clause 1 and the
other provisions of this Deed in respect of any Taxation liability to
the extent that provision for such Taxation liability has been made in
the Accounts or such Taxation Liability was discharged prior to
Completion.
1.4 The Covenant in clause 1 shall not apply to any Taxation Liability
to the extent that
1.4.1 the provision or reserve made in the Accounts is
insufficient by reason of any increase in the rates of
taxation announced after the date of this Agreement, or
1.4.2 it would not have arisen but for a voluntary act or
transaction carried out by the Company after the date of
this Deed, otherwise than in the ordinary course of business
or at the request or with the consent of the Vendors, and
which the Purchaser knew or ought reasonably to have known
would give rise to such increased liability; or
1.4.3 it arises out of a Transaction undertaken after the Accounts
Date but before Completion by the Company in the ordinary
course of its business and for which the Company is
primarily liable; for the purpose of this Clause 1.4.3, a
Transaction undertaken outside the ordinary course of
business of the Company shall include, but not be limited
to, the following:
(i) anything which involves, or leads directly or
indirectly to the receipt by the Company of a Demand
in respect of any Taxation Liability of, or properly
attributable to, another person (other than the
Company);
<PAGE>
(ii) anything which relates to or involves a Transaction
which is not entered into at arm's length (including,
but not limited to, the acquisition or disposal of an
asset or the supply of services or the lending of
money or the hiring or licensing of tangible or
intangible property);
(iii) anything which relates to or involves a distribution
for Taxation purposes, the creation, cancellation or
reorganisation of share or loan capital, the
creation, cancellation or repayment of any
intra-group debt or any company becoming or ceasing
or being treated as ceasing to be a member of a group
of companies or as becoming or ceasing to be
associated or connected with any other company for
any Taxation purposes; or
(iv) any failure to deduct and/or account for Taxation; or
(v) any Transaction which gives rise to a Taxation
Liability in respect of deemed (as opposed to actual)
income, profits or gains; or
(vi) any Transaction which gives rise to a Taxation
Liability under Sections 124 to 129 (inclusive) of
the Finance Act 1995 (change of residence and
non-residents) or Sections 203F, 203FA or 203FB of
ICTA (PAYE); or
(vii) any fine, penalty, surcharge, interest or other
imposition arising as a result of a failure by the
Company duly to deduct, charge, recover and/or
account for Taxation.
1.4.4 the Company has recovered (less any costs of recovery and any tax on
the recovery) an amount in respect of such Taxation from a person or
persons other than the Vendors or the Purchaser.
1.5 The Purchaser shall not be entitled to recover any sum pursuant to
this Deed if and to the extent that the same subject matter has
given rise to a claim for breach of any of the Warranty Statements
and that claim has been satisfied and vice versa.
2 GROSSING-UP OF PAYMENTS
2.1 All sums payable by the Vendors to any person pursuant to this Deed shall
be paid free of any rights of counterclaim or set off and without any
deductions or withholdings whatsoever, save only as may be required by
any applicable law.
2.2 If any deductions or withholdings are required by law to be made from any
of the sums payable pursuant to this Deed (other than interest payable
pursuant to clause 3.2 thereof), the Vendors shall be obliged to pay to
the relevant person such sum as will, after the deduction or withholding
has been made, leave that person with the same amount as it would have
been entitled to receive
<PAGE>
in the absence of any such requirement to make a deduction or
withholding provided that if the relevant person obtains a credit for
the deduction or witholding in calculating its Taxation liability it
shall promptly account to the Vendors for such proportion of any credit
obtained as shall leave the relevant person in no better or worse
position than if no such deduction or withholding had been required.
2.3 If Taxation is payable on any sum paid by the Vendors to any person
pursuant to this Deed or the Agreement, (other than interest payable
pursuant to clause 3.2 thereof) the sum otherwise so payable shall be
grossed up by such amount as will ensure that, after payment of any
Taxation charged on or in respect of such payment, there shall be left a
sum equal to that which would otherwise be payable pursuant to this Deed
or the Agreement.
3 DATE FOR PAYMENT
3.1 Without prejudice to clauses 1.3 and 1.4 of this Deed, Where the Vendors
become liable to make any payment pursuant to this Deed, the due date for
the making of that payment shall be:
(a) where that payment relates to a liability on the part of the
Purchaser or the Company to pay an amount of or in respect of
Taxation, the fifth Business Day prior to the date on which that
amount must be paid to the Taxing Authority concerned in order to
avoid incurring a liability to interest or a charge or penalty in
respect of such Taxation; and
(b) in any case under 1.1(f) or (g), the date falling five Business Days
after the date when the Vendors have been notified by the Purchaser
or the Company that the Vendors have a liability for a determinable
amount pursuant to this Deed.
3.2 If any payment required to be made by the Vendors pursuant to this Deed
is not made by the due date then the amount payable shall carry interest
from the due date until the date when payment is actually made at the
rate of 2% above the base rate from time to time of Barclays Bank PLC.
4 PURCHASER'S UNDERTAKING
4.1 The Purchaser agrees to pay to the Vendors an amount equal to any
liability of the Vendors for corporation tax arising pursuant to Section
767A ICTA as a result of the Company failing to pay any corporation tax
assessed on it.
4.2 The Purchaser shall not be liable under clause 4.1 for any corporation
tax:
(a) to the extent that the Purchaser would (but for such corporation tax
having been satisfied by the Vendors or such other person falling
within Section 767A(2) ICTA by virtue of a relationship which he has
with the Vendors) have had a claim under clause 1; or
<PAGE>
(b) to the extent that it has been recovered (otherwise than from the
Vendors or Robert Green or Marilyn Shein) under Section 767B(2) ICTA
(and the Vendors shall procure that no such recovery is sought to
the extent that payment is made hereunder).
4.3 Clause 3 shall apply to the covenant contained in this clause 4 as it
applies to the covenant contained in clause 1, replacing references to
the Vendors with references to the Purchaser (and vice versa) and making
any other necessary modifications.
5 RIGHT TO REIMBURSEMENTS
5.1 If the Purchaser or the Company is or becomes entitled to recover
(whether by operation of law contract or otherwise including by way of
indemnity) from some other person (not being the Company or any member of
the Purchaser's Group or any employee of any of them) any amount in
respect of a Taxation Liability which has resulted in a payment by the
Vendors to the Purchaser under this Deed, then the Purchaser shall
promptly notify the Vendors of the said entitlement and, if so required
by the Vendors and at the cost of the Vendors the Purchaser and the
Company shall take all reasonable steps as the Vendors may reasonably
require to enforce that recovery (keeping the Vendors fully informed of
progress) and shall apply the same in accordance with Clause 5.2.
5.2 If the Purchaser or the Company receives a recovery as mentioned in
Clause 5.1 then the Purchaser shall promptly pay to the Vendors an amount
equal to so much of the benefit received or sum recovered (less any tax
payable by the recipient in respect thereof and less any costs and
expenses incurred by the Purchaser or the Company) as does not exceed the
amount which the Vendors have previously paid under this Deed in respect
of the relevant Taxation Liability (together with so much of any interest
or repayment supplement paid to the recipient of the recovery or
corresponding benefit in respect thereof as corresponds to the
proportions of the recovery or benefit accounted for under this Clause
5.2, less any tax thereon).
6 RELIEFS AND CORRESPONDING SAVINGS
6.1 Where:
(a) an amount of tax paid by the Company has resulted in a Relief which
would not otherwise have arisen (and which has not been taken into
account in computing any liability of the Covenantor under the
Warranty Statements or has not been taken into account in computing
any over-provision pursuant to Clause 6.1(b)) (a "Relevant Relief")
and the Vendors have made a payment to the Purchaser in respect of
such amount of Taxation under this deed; or
(b) any provision for tax in the Accounts has proved to be an
over-provision (except to the extent that such over-provision
results from the utilisation of a Relief arising in relation to any
period after Completion or by reason of a Relief already taken into
account in
<PAGE>
computing any payment under the warranties or this Deed or for the
purposes of Clause 6.1(a) above) ("Over-provision");
an amount equal to the amount by which the Company's liability to Tax is
reduced as a result of utilisation of a Relevant Relief or Over-provision
(as determined and certified by the auditors for the time being of the
Company at the expense of the Vendors) shall be dealt with in accordance
with clause 6.2 below.
6.2 Where pursuant to clause 6.1 any amount ("the Relevant Amount") is to be
dealt with in accordance with this sub-clause:-
(a) the relevant amount shall first be set off against any payment then
due from the Vendors under this Deed or any provision of the
Agreement relating to Taxation;
(b) to the extent there is an excess after set off in accordance with
clause 6.2(a) a refund shall be made to the Vendors of any previous
payment or payments made by it under this Deed in respect of such
Tax Liability and not previously refunded under this sub-clause up
to the amount of such excess; or
(c) to the extent of any remaining excess, the same shall be set against
further payment under this Deed or any provision of the Agreement
relating to Taxation until exhausted.
6.3 For the purposes of clause 6.1(a) no Relevant Relief shall be treated
as having arisen until it has been realised by the Company either by
way of repayment or by reduction in tax which would otherwise have been
due and payable and in particular nothing in this clause shall require
the Purchaser to procure that the Company utilises a Relevant Relief
prior to any relief which became available to the Company after
Completion.
7 CONTESTING OF ANY DEMAND
7.1 If any Demand is received by or comes to the notice of the Purchaser or
the Company, the Purchaser shall as soon as reasonably practicable give
or procure to be given to the Vendors written notice of that Demand.
Such notice shall be accompanied by a copy of the Demand (if made in
writing).
7.2 If so requested in writing by the Vendors and subject to the Purchaser
and the Company being indemnified and secured in such manner as the
Purchaser may reasonably require against all losses, Taxation, additional
Taxation, costs, damages and expenses which may be incurred, the
Purchaser and the Company shall take such action (at the cost of the
Vendors) as the Vendors may reasonably request in writing to avoid,
dispute, resist, appeal, compromise or defend the Demand PROVIDED THAT
neither the Purchaser nor the Company shall be required to make a formal
appeal to any court, appellate body or judicial authority unless the
Vendors at their own expense and after disclosure of all relevant
information and documents obtain and deliver to the
<PAGE>
Purchaser an opinion from Counsel who has specialised in Taxation
matters for a minimum of five years advising that in his opinion an
appeal against the Demand would on the balance of probabilities be
likely to succeed.
7.3 The Vendors hereby acknowledge that neither the Purchaser nor the Company
shall be obliged to comply with any of the provisions of clause 7.2 if in
the opinion of the auditors of the Company at the time of such
determinationany such compliance would adversely affect the future
liability of the Company to Taxation without the approval of the
Purchaser or the Company such approval not to be unreasonably withheld or
delayed.
7.4 The Purchaser or the Company shall, without reference to the Vendors, be
entitled to admit, compromise, settle, discharge or otherwise deal with a
Demand on such terms as it thinks fit and without prejudice to any right
or remedy under this Deed if:
(a) the Vendors have not made the request referred to in clause 7.2 by
the earlier of the following dates:
(i) the date occurring 21 days after the date on which notice of
that Demand was given pursuant to clause 7.1; and
(ii) the date occurring two clear Business Days prior to the last
date on which an appeal may be made against the Taxation
Liability to which the Demand relates; or
(b) the Purchaser or the Company shall not at any time be indemnified
and secured as provided in clause 7.2; or
(c) Counsel shall advise (on the balance of probabilities pursuant to
clause 7.2) that an appeal against the relevant Demand is not likely
to succeed; or
(d) the Vendors shall have made the request referred to in clause 7.2,
but shall subsequently fail to make a further request or requests
within 21 days of the Purchaser requesting the same in writing from
the Vendors; or
(e) it appears to the Purchaser or the Company that while the Company
was under the control of the Vendors there was any act or failure to
act by the Company or the Vendors which might constitute fraud in
relation to any Taxation Liability.
7.5 For the purposes of this clause 7, the Vendors shall appoint from amongst
their number a representative who may make or authorise the making of
requests as to any action to be taken ("the Vendors' Representative") and
the Vendors may by not less than seven days' written notice to the
Purchaser signed by all the Vendors withdraw the authority of one
representative and appoint another in his place. The Purchaser and the
Company shall be entitled to have regard
<PAGE>
only to the requests made or authorised by the said Vendors'
Representative from time to time and shall not be responsible for the
consequences of or incur any liability to any of the Vendors by acting
in accordance with such instructions.
8 GENERAL
8.1 The liability of the Vendors under this Deed shall be joint and several.
8.2 Any liability to the Purchaser under this Deed may be released,
compounded or compromised in whole or in part and time or indulgence may
be given by the Purchaser in its absolute discretion as regards the
Vendors or any of them under such liability without in any way
prejudicing or affecting its rights against the Vendors or any of them in
respect of any other liability under this Deed or against any other
Vendor under the same or a like liability.
8.3 The rights under this Deed of the Vendors, Purchaser and the Company
shall be without prejudice to their respective rights and remedies under,
pursuant to or resulting from the Agreement and shall continue to be of
full force and effect notwithstanding Completion.
8.4 The provisions of clauses 9.12 (Notices and Acceptance of Process), 9.13
(Governing Law), 9.14 (Jurisdiction) and 9.16 (Execution in Counterparts)
of the Agreement shall apply to this Deed as if the same had been set out
herein with references to the Agreement being references to this Deed.
<PAGE>
SCHEDULE
(the Vendors)
1. Panton Management Limited (no. 39307B) whose registered office is at
Providence House, East Hill Street, PO Box N-3944, Nassau, Bahamas.
2. Northern Management Limited (no. 71490B) whose registered office is
at Providence House, East Hill Street, PO Box N-3944, Nassau,
Bahamas.
<PAGE>
EXECUTED and DELIVERED )
as a DEED by SYMPOSIUM )
TELECOM CORPORATION )
- ---------------------------
Director
- ---------------------------
Director/Secretary
EXECUTED and DELIVERED )
as a DEED by PANTON )
MANAGEMENT LIMITED )
- ---------------------------
Director
- ---------------------------
Director/Secretary
EXECUTED and DELIVERED )
as a DEED by NORTHERN )
MANAGEMENT LIMITED )
- ---------------------------
Director
- ---------------------------
Director/Secretary
<PAGE>
ANNREXURE E
CONSULTANCY AGREEMENT
DATED
CONSULTANCY AGREEMENT
SYMPOSIUM TELECOM CORPORATION (1)
[-] (2)
MR/MRS [-] (3)
<PAGE>
DATE
[ ]
PARTIES
(1) SYMPOSIUM TELECOM CORPORATION of 410 Park Avenue, 18th Floor, New York,
New York 1022 ("the Company");
(2) [ ] of [-] ("the Consultant"); and
(3) [ ] of [-] ("Mr/Mrs ").
DEFINITIONS
(A) In this Agreement, unless the context otherwise requires, the following
words and expressions bear the meanings shown:
"ACL" Automatic Communications Limited (a company
incorporated in the Bahamas)
"the Appointment" the appointment of the Consultant on the terms
of this Agreement
"the Board" the board of directors for the time being of the
Company (excluding Mr /[ ])
"the Business" the business of providing international and
audiotext services, and a billing mechanism
for international audiotext services carried
on by Hamilton and in the case of ACL the
same and also internet services
<PAGE>
"the Commencement Date" the date of Completion of the acquisition
of the entire issued share capital of
Hamilton by the Company
"Confidential Information" all information which may be imparted in
confidence or be of a confidential nature
relating to the Business or prospective
business, current or projected plans or
internal affairs of the Company or any
Group Company and, in particular, but not
limited to all Know-how, Marketing
Information, trade secrets, unpublished
information relating to the Company's or
any Group Company's intellectual property
and any other commercial, financial or
technical information relating to the
business or prospective business of the
Company or any Group Company or to any
customer or potential customer or supplier
or potential supplier, licensee, officer or
employee of the Company or any Group
Company or to any member or person
interested in the share capital of the
Company or any Group Company
"Documents" documents, disks, memory, notebooks, tapes
or any other medium, whether or not
eye-readable, on which information (whether
confidential or otherwise) may from time to
time be referred to, written or recorded
"the Group" the Company, any company which is for the
time being the ultimate holding company of
the
67
<PAGE>
Company, all subsidiaries for the time
being of the Company or of such holding
company and any company at least 65 per
cent. of the equity share capital of which
is owned directly or indirectly by the
Company or by such holding company
"Hamilton" Hamilton Telecommunications Limited a company
incorporated in the Irish Republic
"holding company and the same meanings as are respectively
subsidiary" attributed to such expressions by Section
736 of the Companies Act 1985
"the Initial Period" the initial period of the Appointment as
described in clause 1.1
"Know-how" information (including without limitation
that comprised in formulae, specifications,
designs, drawings, component lists,
databases, software (or pre-cursor
documents), databases, manuals,
instructions and catalogues) held in
whatever form relating to the creation,
production or supply of any products or
services by the Company or any Group
Company, or by or to any of the suppliers,
customers, partners or joint venturers of
such company
"Marketing Information" information relating to the current or
prospective marketing or sales of any
products or services of the Company or any
Group Company, including lists of customers'
and suppliers' names,
68
<PAGE>
addresses and contacts, sales targets and
statistics, market share and pricing
statistics, marketing surveys, research and
reports and advertising and promotional
material
"Net Profit" the net profit of the Company in each
financial year as determined pursuant to the
Schedule
"Permitted Business" the business of providing international
audiotext services and internet services and
a billing mechanism for international
audiotext services as carried on/or to be
carried on by Automatic Communications
Limited
"Relevant Profits" as set out in the Schedule
(B) References to any enactment shall be construed as references thereto as
from time to time amended or re-enacted and to any previous enactment
consolidated therein and to any regulation or order made thereunder.
(C) References to clauses and the parties are respectively to clauses of and
the parties to this Agreement.
OPERATIVE PROVISIONS
1 APPOINTMENT
1.1 Subject to the terms and conditions hereof the Company hereby
agrees to appoint the Consultant and the Consultant hereby agrees
to make available to the Company the services of Mr/Mrs [ ] as
a consultant of the Company for a fixed period of two years from
the Commencement Date ("the Initial Period") and thereafter
unless or until terminated by either the Company or the
Consultant giving to the other not less than four months' notice
in writing to expire at or at any time after the end of the
Initial Period (unless in the meantime notice has been given
pursuant to clause 1.2).
69
<PAGE>
1.2 If on the second anniversary of the Commencement Date the
Appointment is continuing, the Consultant may extend the Initial
Period by one year from the date on which it would otherwise have
expired by giving notice in writing to the Company at any time
during the three months immediately preceding that anniversary in
which case the provisions of this clause 1.2 shall no longer
apply.
1.3 The Company (and any relevant Group Company) shall not be obliged
to provide work to the Consultant at any time after notice of
termination of the Appointment shall have been given by either
party under any of the provisions of this Agreement and the
Company may, in its discretion, take any one or more of the
following steps in respect of all or part of an unexpired period
of notice:
(a) require the Consultant to comply with such reasonable
conditions as it may specify in relation to attending at,
or remaining away from, the place(s) of business of the
Company and the Group Companies;
(b) assign the Consultant to other duties; or
(c) withdraw any powers vested in, or duties assigned to, the
Consultant.
1.4 [R Green only]. The Company agrees to appoint and, subject to
the approval of the shareholders of the Company and provided that
the Company is not required to make any disclosures in relation
to Mr Green under Section 401(d) of Regulation S-B, to maintain,
Mr Green as a director of the Company and agrees that subject to
the resolution of the shareholders of the Company at the annual
general meetings of the Company he shall be entitled to remain
such a director so long as his services continue to be provided
hereunder.
1.5 [R Green, M Shein] The Company agrees that if not already
appointed as such [R Green and M Shein] shall be appointed and
will be entitled to remain a director of Hamilton for so long as
the services of [R Green and M Shein] are provided under the
terms of this Agreement [F Thomas also] and in the event of the
Company acquiring ACL, as a director of ACL. The Company shall
procure at all times and maintain Directors or Officers Indemnity
Insurance for his/her benefit.
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1.6 [R Green only] The Company and [R Green] agree to enter into an
Indemnification Agreement, substantially in the same form as that
attached to this Agreement as Annexure A.
1.7 [M Shein and F Thomas alternative] the Company and [M Shein and F
Thomas] agree to enter into an Indemnification Agreement on terms
to be agreed (or if they cannot be agreed then as determined by
an independent solicitor appointed by the parties by agreement or
in the absence of agreement by the President of the Law Society
of England and Wales (on the application of any party)) as soon
as is reasonably possible following the date of the Appointment
(if not entered into on the execution of this Agreement).
2 DUTIES
2.1 During the continuance of the Appointment the Consultant shall
and shall procure that Mr/Mrs [ ] shall:
(a) provide such services and exercise such powers in relation
to the Business as the Company may reasonably request from
time to time including (without prejudice to the generality
of the foregoing);
(i) advising the Company on all matters relating to the
promotion, development and conduct of the Business;
(ii) being responsible to the Board and performing such
duties and exercising such powers as may from time
to time be assigned to or vested in it or Mr/Mrs
[ ] by the Board;
(iii) making itself and [himself/herself] available, at
reasonable times and upon reasonable notice, to the
Company for the purpose of consultation and advice,
attending such meetings with representatives of the
Company as the Board may reasonably specify and, in
that connection, making such visits as the Board
may reasonably request from time to time;
(iv) [Robert Green and M Shein only] acting as joint
managing director of Hamilton and (if acquired by
the Company) ACL.
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(b) throughout the Appointment procure that Mr/Mrs [ ]
devote as much time as [he/she] reasonably considers necessary
for his/her part of the management of Hamilton (and ACL in the
event of the Company acquiring all the issued shares in ACL)
unless prevented by ill health or other circumstances beyond its
or his/her control.
3 FEES AND EXPENSES
3.1 The Company shall pay to the Consultant for the proper
performance of its and Mr/Mrs [ ]'s duties under this
Agreement:
(a) a fixed fee at the rate of [US$250,000/F Thomas -
US$100,000] per annum (or such higher rate as the Company
may from time to time notify in writing to the Consultant)
("the Hamilton Fixed Fee");
[Green/Shein]
Provided that in the event that the Company acquires all or any
of the issued share capital of ACL, the Company shall pay to the
Consultant an additional fixed fee of [R Green and M Shein -
US$250,000 and F F Thomas - US$125,000 per annum] ("the ACL Fixed
Fee") unless the Relevant Profits of ACL exceed US$15,000,000 in
any relevant year in which case, the ACL Fixed Fee shall be
multiplied by two. Provided that
(aa) until the Relevant Profits of ACL for the relevant year
shall have been ascertained in the manner described in Part
BB of the Schedule the ACL Fixed Fee shall be paid at the
rate of [$250,000] [$125,000] per annum;
(bb) within seven working days of the signing off of the
relevant ACL Accounts in the event that Relevant Profits of
ACL exceed $15,000,000 the Company shall pay to the
Consultant the further sum of [$250,000] [$125,000] but in
the event that payment shall not have been made by such
date then the Company shall, in addition, pay to the
Consultant interest at the rate of 5% per annum over
Barclays Bank Plc's Base Rate for the time being (as well
after as before any judgement) for the period commencing on
the due date and ending on the day on which payment is made
in cleared funds.
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(cc) in the event that the result is a minus figure, it shall be
deemed to be zero and shall accordingly not reduce the
fixed fee; and
(dd) in the event that the adjustment to the fixed fee requires
to be carried out at any time other than the end of any
accounting period, then the adjustment shall be made for
the relevant number of months commencing with the beginning
of the first month of the relevant period and ending on the
last day of such period.
and
(b) a bonus of an amount equal to 12 percent of Relevant
Profits in respect of each financial year of Hamilton and
ACL (in the event that the Company acquires ACL) subject to
deduction from the Relevant Profits:
(i) in respect of Hamilton of L4,228,000 for the
accounting period ended 30 June 1999 and L6,000,000
in respect of the accounting period ended 30 June
2000 and for all subsequent accounting periods such
an amount as shall be agreed from time to time
between the Board and the Consultant as the
projected profits of Hamilton; and
(ii) (in the event that the Company acquires ACL) of
ACL, less such amounts as shall be agreed between
the Board and the Consultant from time to time as
the projected profits of ACL for all relevant
accounting periods.
Relevant Profits shall be determined in accordance with and
subject to the terms of the Schedule and payable (if at
all) within 14 days of its determination. [Provided that
the bonus shall not in any financial year exceed US$100,000
- FABRICE THOMAS].
3.2 The fixed fees of the Consultant will:
(a) accrue from day to day subject to the proviso to clause
3.1(b) and be payable by equal monthly instalments in
arrears by not later than the last working day of each
month;
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(b) notwithstanding anything to the contrary contained in the
Certificate of Incorporation or Bye Laws of the Company or
of any other Group Company, be inclusive of any other fees
or remuneration of any description (but for the avoidance
of doubt not any dividends) which the Consultant or Mr/Mrs
[ ] may be entitled to receive from the Company or
any Group Company or any other company or association in
which he/she holds office as a nominee or representative of
the Company or any Group Company (and the Consultant or
Mr/Mrs [ ] shall, at the discretion of the Board,
either waive his right to any such remuneration or account
to the Company for the same forthwith upon receipt) of the
fee;
(c) be paid by credit transfer to the account nominated by the
Consultant from time to time; and
(d) be capable of set off by the Company from time to time
against any liability of the Consultant to the Company.
3.3 The Consultant hereby authorises the Company to deduct from any
remuneration accrued and due to it under the terms of this
Agreement (whether or not actually paid during the Appointment)
or from any pay in lieu of notice any overpayment of fee or
expenses or payment made to the Consultant by mistake or through
any misrepresentation.
3.4 The Consultant shall be reimbursed by the Company for all
expenses reasonably and properly incurred by Mr/Mrs [ ] and
the Consultant in the performance of their duties hereunder
subject to the provision of satisfactory vouchers and receipts or
other evidence of actual payment of such expenses (air travel to
be at least Business Class or equivalent).
3.5 [M Shein only]Until termination of the Appointment and subject to
Mrs Shein holding and continuing to hold a full driving licence
the Company shall at its own expense provide or procure that the
Consultant is provided with the use for Mrs Shein of a motor car
of an appropriate standard, quality and make for the purpose of
enabling Mrs Shein to discharge the Consultant's duties hereunder
being at least of a cost approximately equivalent to a Range
Rover.
[3.5 for R Green (alternative form)
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[The Company shall throughout the continuation of this Agreement
pay to Panton Management Limited the sum equivalent to the cost
of the lease purchase agreement relating to a Range Rover
presently used by Mrs M Shein and in addition all running costs
of a car of similar standard including in particular insurance
premiums, maintenance, repairs, fuel and oil.]
4 UNDERTAKINGS
4.1 The Consultant hereby undertakes with the Company to indemnify
the Company and keep the Company at all times fully and
effectively indemnified from and against all and any taxation
(including in particular but without limitation all and any PAYE
or National Insurance Contributions) assessed on the Company by
reason of the Appointment.
4.2 The Consultant hereby warrants and undertakes to the Company that
it is free to enter into this Agreement and to perform all its
obligations and procure the performance of all the obligations of
Mr/Mrs [ ] hereunder.
5 CONFIDENTIALITY AND RESTRICTIONS
5.1 Neither during the continuance of the Appointment, other than in
the proper course of its duties and for the benefit of the
Company, nor after the termination date of the appointment for
any reason whatsoever, shall the Consultant nor Mr/Mrs [ ]:
(a) use, disclose or communicate to any person any Confidential
Information which he/she shall have come to know or have
received or obtained at any time (before or after the date
of this Agreement) by reason of or in connection with its
and his/her service with the Company; or
(b) copy or reproduce in any form or by or on any media or
device save as reasonably necessary or allow others access
to or to copy or reproduce Documents containing or
referring to Confidential Information.
5.2 The Consultant acknowledges that all Documents containing or
referring to Confidential Information at any time in his control
or possession are and shall at all times remain the absolute
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property of the Company and the Consultant undertakes, both
during the Appointment and after the termination of the
Appointment:-.
(a) to exercise due care and diligence to avoid any
unauthorised publication, disclosure or use of Confidential
Information and any Documents containing or referring to
it;
(b) at the direction of the Board, on or following the
termination of this Agreement to deliver up any
Confidential Information (including all copies of all
Documents whether or not lawfully made or obtained) or to
delete Confidential Information from any re-usable medium;
and
(c) to do such things and sign such documents at the expense of
the Company as shall be reasonably necessary to give effect
to this Clause and/or to provide evidence that it has been
complied with.
5.3 The restrictions in Clause 5.1:
(a) will not restrict the Consultant from disclosing (but only
to the proper recipient) any Confidential Information which
the Consultant is required to disclose by law or any order
of the court or any relevant regulatory body, provided that
the Consultant shall in so far as practicable give prior
written notice to the Company of the requirement and of the
information to be disclosed and insofar as it is
practicable allow the Company an opportunity to comment on
the requirement before making the disclosure; and
(b) will not apply to Confidential Information which is or
which comes into the public domain otherwise than as a
result of an unauthorised disclosure by the Consultant.
5.4 The Consultant agrees that the restrictions set out in this
Clause 5 are without prejudice to any other duties of
confidentiality owed to the Company whether express or implied
and are to survive the termination of the Appointment.
5.5 Save as permitted under Clause 5.6, the Consultant and Mr/Mrs
[ ] shall not during the Appointment carry on or be
concerned, engaged or interested directly or indirectly (whether
as
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principal, shareholder, partner, employee, officer, agent or
otherwise) in any trade or business which in any way competes
with that of the Company.
5.6 The Consultant and Mr/Mrs [ ] may have an interest in the
Permitted Business.
5.7 The Consultant and Mr/Mrs [ ] shall not during the Appointment
or for a period of 3 years following termination of the
Appointment either on his own behalf or on behalf of any person,
firm or company solicit or endeavour to entice away from the
Company an actual employee, or discourage from being employed by
the Company any person who, to the knowledge of the Consultant,
is an employee or a prospective employee of the Company; or
5.8 The Consultant and Mr/Mrs [ ] shall not, save in respect of
an interest permitted by clause 5.6 or with the prior written
consent of the Board (which shall not be unreasonably withheld),
for a period of 12 months from the termination of the Appointment
("the Period") within the United States of America or anywhere
else the Company does business to a material extent ("Restricted
Area") carry on or be concerned or engaged or interested directly
or indirectly (whether as principal, shareholder, partner,
employee, officer, agent or otherwise) in any part of any trade
or business which competes with any part of any trade or business
carried on by the Company.
5.9 The Consultant and Mr/Mrs [ ] shall not for a period of 12
months from the date of termination of the Appointment either on
its or his/her own behalf or on behalf of any person, firm or
company in relation to the business activities of the Company in
which the Consultant has been engaged or involved, directly or
indirectly:
(a) solicit, approach or offer services to or entice away from
the Company any person, firm or company who was a client or
customer of the Company during the period of this Agreement
and with whom the Consultant has been actively engaged or
involved by virtue of his duties with such customer
hereunder ("the Period"); or
(b) deal with or accept custom from any person, firm or company
who was a client or customer of the Company with whom the
Consultant has been actively engaged or involved by virtue
of his duties hereunder during the Period; or
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(c) solicit or approach or offer services to or entice away
from the Company any person, firm or company who was a
supplier, agent or distributor of the Company during the
Period with whom the Consultant has been actively engaged
or involved by virtue of his duties hereunder during the
Period; or
(d) deal with or interfere with any person, firm or company who
was a supplier, agent or distributor of the Company during
the Period and in each case with whom the Consultant has
been actively engaged or involved by virtue of his duties
hereunder during the Period;
PROVIDED THAT nothing contained in these paragraphs (a) to (d)
shall prohibit the Consultant from carrying out any activities
which are not in competition with any part of the Business.
5.10 The Consultant shall not, at any time after the Termination of
the Appointment, either on its own behalf or on behalf of any
other person, firm or company directly or indirectly interfere or
seek to interfere with the continuance, or any of the terms, of
the supply of services to the Company.
5.11 The restrictions contained in clauses 5.1 - 5.10 are separate and
distinct and are to be construed separately from every other
restriction contained in this sub-clause. The above restrictions
are considered reasonable by the parties but in the event that
any such restrictions shall be found to be void but would be
valid if some part thereof were deleted or the scope or period
reduced such restrictions shall apply with such modification as
may be necessary to make it valid and effective.
6 TERMINATION OF THE APPOINTMENT
6.1 If Mr/Mrs [ ] shall at any time become ill or be unable
properly to perform his/her duties hereunder by reason of ill
health, accident or other incapacity (thereby preventing the
Consultant from discharging in full its duties hereunder) either
for a period of or for periods aggregating not less than 180 days
in any period of twelve consecutive calendar months, the Company
may by one month's notice in writing to the Consultant forthwith
terminate the Appointment, but no such notice shall be given by
the Company to the Consultant by reference to any period or
periods of incapacity after the expiration of one calendar month
from the end of the period or the last of the periods of
incapacity taken into account for the purpose of such notice.
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6.2.1 If the Consultant or Mr/Mrs [ ] shall (as the case may
be):
(a) materially fail or neglect to discharge its duties
hereunder or otherwise to observe or perform the provisions
of this Agreement in any material respect (otherwise than
by reason of ill health, accident or other incapacity) and
which failure or neglect is not remedied within a period of
28 days from the receipt of written notice from the Company
to this effect; or
(b) be adjudicated bankrupt; or
(c) be placed in voluntary liquidation otherwise than for the
purpose of reconstruction or amalgamation or if any order
is made for its compulsory liquidation; or
(d) shall have an administrator or receiver or other
encumbrancer appointed over the whole or any part of its
assets or undertaking or otherwise become subject to the
insolvency laws of any jurisdiction in which it carries on
business so that the services to be performed hereunder
cannot be performed to a reasonable standard; or
(d) be guilty of serious misconduct; or
(e) commit any act of fraud or dishonesty (whether or not
connected with the appointment); or
(f) act in any way which may bring the Company or any member of
the Group into disrepute; or
(g) become of unsound mind (as defined in section 112 or
section 145 of the Mental Health Act 1983); or
(h) be convicted of a criminal offence (other than an offence
under the Road Traffic Acts for which a penalty of
imprisonment is not imposed); or
(i) in the event that Mr/Mrs [ ] becomes deceased.
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the Company may (without prejudice to any other rights or
remedies of the Company in respect thereof) by notice in writing
to the Consultant forthwith terminate the Appointment.
6.3 On termination of the Appointment under clause 6.1 or 6.2 the
Consultant shall be paid any accrued fixed fees to the date of
termination.
6.4 Upon the expiry or termination of the Appointment (howsoever
caused) each of the Consultant and Mr/Mrs [ ] shall
deliver up to the Company any motor car provided hereunder and
all correspondence, notes, customer lists, plans, drawings,
documents, papers, records (including machine-readable records),
credit cards, Confidential Information, Documents or property
belonging to the Company or any other member of the Group which
may have been made by it or him/her or have come into its or
his/her possession and shall not retain any copies, notes,
extracts or records (including machine-readable records) of any
such items.
7 ROLE OF MR/MRS [ ]
The Consultant hereby covenants with the Company to the best of
its ability to procure the performance and observance by Mr/Mrs
[ ] of all his obligations hereunder and to procure that
Mr/Mrs [ ] carries out on behalf of the Consultant all
duties of the Consultant hereunder and hereby acknowledges that
any breach by Mr/Mrs [ ] shall constitute a separate
breach by the Consultant of its obligations hereunder.
8 GENERAL
8.1 This Agreement is personal to the Consultant and Mr/Mrs
[ ], neither of whom shall be entitled to assign any of their
respective rights hereunder or sub-contract or otherwise delegate
any of their respective obligations hereunder to any third party.
8.1 Until such time as all of the consideration has been paid to
Panton Management Limited and Northern Management Limited ("the
Vendors") pursuant to a share sale and purchase agreement of even
date entered into between the Vendors (1), Marilyn Shein (2),
Robert Green (3) and the Company (4) and for so long as either of
the Consultancy Agreements in favour of Panton Management Limited
and Northern Management Limited shall subsist, the Purchaser
shall procure
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that no one shall be appointed a Director of Hamilton (or of ACL
following completion of the purchase of all the issued share
capital of ACL by the Company, in the event that such completion
takes place) without the written consent of Panton Management
Limited, Northern Management Limited, Robert Green and Marilyn Shein.
8.2 This Agreement represents the entire understanding between the
parties in relation to the subject matter and shall take effect
on and from the Commencement Date, as from which date all other
agreements or arrangements between the Company and the Consultant
and/or Mr/Mrs [ ] relating to the services of the
Consultant and/or Mr/Mrs [ ] shall be deemed to have been
cancelled.
8.3 The Consultant and Mr/Mrs [ ] undertake not to disclose or
communicate any terms of the Appointment to any other employee of
any Group Company save insofar as may be necessary (or to any
third party save for the purpose of obtaining professional
advice.
8.4 The expiry or termination of the Appointment (howsoever caused)
shall not prejudice any claim which any party may have against
another in respect of any antecedent breach of any provision
hereof nor shall it prejudice the continuance in force of any
provision hereof which is expressly or by implication intended to
come into or continue in force on or after such expiry or
termination.
8.5 The terms of this Agreement shall not be varied or amended except
in writing signed by the parties.
8.6 Nothing in this Agreement shall constitute or create or be deemed
to constitute or create a partnership or the relationship of
principal and agent or employer and employee between the parties
and neither the Consultant nor Mr/Mrs [ ] shall bind or
otherwise commit the Company to any third party without the prior
consent of the Board.
8.7.1 Any notice or communication under or in connection with this
Agreement shall be in writing and shall be delivered personally
or by post fax or cable to the respective addresses of the
parties given in this Agreement or to such other address as the
intended recipient may have notified to the other party in
writing. Proof of posting or despatch shall be deemed to be
proof of receipt:
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(a) in the case of a letter posted to a destination within the
country of posting, three business days after posting;
(b) in the case of a letter posted to a destination outside the
country of posting, ten business days (being business days
in both relevant countries) after posting; and
(c) in the case of a fax or cable, on the date of despatch if
sent during business hours on a business day in the country
of the intended recipient and otherwise on the next
business day in the country of the intended recipient.
8.7.1 Each of the Consultant and Mr/Mrs [ ] hereby appoint Jay
Benning & Peltz of 1 Cumberland Place, London W1H 7AL (marked
for the attention of Barry Jay or Jonathan Fisher) as their
authorised agents for the purpose of accepting service of process
and notices for all purposes in connection with this Agreement).
8.7.2 The Company hereby appoints S J Berwin & Co of 222 Grays Inn
Road, London WC1X 8HB (marked for the attention of Robert Burrow
or Simon McLeod) as its authorised agent for the purpose of
accepting service of process and notices for all purposes in
connection with this Agreement.
8.8 The clause headings in this Agreement are for ease of reference
only and in no way affect the construction hereof.
8.9 This Agreement shall be governed by and construed in accordance
with the laws of England.
8.10 The parties accept the non-exclusive jurisdiction of the
appropriate court of law in England in relation to all matters,
claims and disputes arising out of or in connection with this
Agreement, any of the documents in the agreed form or any
document supplemental thereto.
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SCHEDULE
THE BONUS PAYABLE TO THE CONSULTANT - CLAUSE 3.1(b)
AA HAMILTON:
1 The Company shall within 14 days after the audited accounts of
Hamilton have been approved by the Board of Directors of Hamilton
deliver to the Consultant a statement showing the amount of the
Relevant Profits for the financial year to which such accounts
relate and the amount (if any) of the bonus payable to the
Consultant which (less any sum or sums paid to the Consultant on
account thereof under paragraph (3) of Part AA of this Schedule)
shall become due and payable 14 days thereafter.
The Relevant Profits will be determined by reference to the Net
Profit of Hamilton as shown by such audited accounts.
In order to arrive at the Relevant Profits the relevant Net
Profit shall be subject to the following adjustments (if not
already taken into account in the Profit and Loss Accounts):
A By adding back
(i) taxation shown by the audited Profit and Loss
Account of Hamilton or otherwise payable;
(ii) any payments:
(a) not made at arms length;
(b) made to any other company within the Group of
which Hamilton forms part, including in
particular the Purchaser including any
management fees or other charges paid to any
other such company;
(c) made in connection with anything not in
Hamilton's normal course of business;
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(iii) all payments made to any of the following:-
(a) Panton Management Limited;
(b) Northern Management Limited;
(c) Robert Green; and
(d) Marilyn Shein;
and any expenses payable to them, under Consultancy
Agreements including bonuses payable thereunder;
(iv) any depreciation charged in respect of any items
which would normally fall to be depreciated;
(v) any rents, licence fees or outgoings in respect of
any premises occupied or shared by Hamilton.
B by deducting a reasonable contribution (to be agreed
between the parties) to the general administrative costs of
Symposium insofar as the same are attributable to Hamilton;
C so as to negate any profits or losses on the revaluation of
any assets or any adjustment arising on the translation
into US Dollars of assets and liabilities denominated in
currencies other than US Dollars;
D adding back any extraordinary items as described in
Financial Reporting Standard 3 (FRS3) not deriving from the
ordinary activities of Hamilton;
E so as to exclude profits or losses of a capital nature.
2 In respect of any financial year during which the Appointment is
terminated the Company shall produce a statement showing the
amount of the Relevant Profits for such year in accordance with
paragraph 1 of Part AA of this Schedule and the Consultant shall
be entitled to the whole of the
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bonus attributable to that financial year notwithstanding that
the Appointment shall have been terminated during that financial
year (unless this Agreement shall be terminated pursuant to any of
the provisions of clause 6.2.1 in which case the Consultant shall
only be entitled to that proportion of the bonus attributable to the
period prior to the termination of the Appointment) (less any sum or
sums paid to the Consultant on account thereof under paragraph 3 of
Part AA of this Schedule).
3 The Board shall during the course of any financial year of
Hamilton make payments to the Consultant on account of the bonus
payable to it at the rate to be agreed between the Consultant and
the Board. If the amount of the bonus payable is less than the
amount(s) received by the Consultant on account thereof during
the financial year in question it shall refund the shortfall to
the Company 14 days after the delivery to it of the statement
referred to in paragraphs 1 or 2 of Part AA of this Schedule (as
the case may be) and the Company shall be entitled to deduct the
amount of the refund from any fixed salary or fee otherwise
payable to the Consultant.
4 In the event of a dispute as to the amount of the Relevant
Profits for any financial year or as to any amount payable or
deductible in relation to the bonus, the matter in dispute shall
be referred to the decision of the auditors for the time being of
Hamilton ("the Auditors"). The certificate of the Auditors as to
such amounts shall be final and binding on the Company and on the
Consultant (or his personal representatives as the case may be)
and in giving the same the Auditors shall be deemed to be acting
as experts and not as arbitrators.
BB ACL:
1 The Company shall within 14 days after the audited accounts of
ACL have been approved by the Board of Directors of ACL deliver
to the Consultant a statement showing the amount of the Relevant
Profits for the financial year to which such accounts relate and
the amount (if any) of the bonus payable to the Consultant which
(less any sum or sums paid to the Consultant on account thereof
under paragraph (3) of Part BB of this Schedule) shall become due
and payable 14 days thereafter.
The Relevant Profits will be determined by reference to the Net
Profit of ACL as shown by such audited accounts.
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In order to arrive at the Relevant Profits the relevant Net
Profit shall be subject to the following adjustments (if not
already taken into account in the Profit and Loss Accounts):
A By adding back
(i) taxation shown by the audited Profit and Loss
Account of ACL or otherwise payable;
(ii) any payments:
(a) not made at arms length;
(b) made to any other company within the Group of
which ACL forms part, including in particular
the Purchaser including any management fees
or other charges paid to any other such
company;
(c) made in connection with anything not in ACL's
normal course of business;
(iii) all payments made to any of the following:-
(a) Panton Management Limited;
(b) Northern Management Limited;
(c) Mediterranean Telecommunications Limited;
(d) Moss Barton Limited;
(e) Robert Green;
(f) Marilyn Shein;
(g) Fabrice Thomas; and
(h) Adam Bishop
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and any expenses payable to them, under Consultancy
Agreements including bonuses payable thereunder;
(iv) any depreciation charged in respect of any items
which would normally fall to be depreciated;
(v) any rents, licence fees or outgoings in respect of
any premises occupied or shared by Hamilton.
B by deducting a reasonable contribution (to be agreed between
the parties) to the general administrative costs of
Symposium insofar as the same are attributable to ACL;
C so as to negate any profits or losses on the revaluation of
any assets or any adjustment arising on the translation into
US Dollars of assets and liabilities denominated in
currencies other than US Dollars;
D adding back any extraordinary items as described in
Financial Reporting Standard 3 (FRS3) not deriving from the
ordinary activities of ACL;
E so as to exclude profits or losses of a capital nature.
2 In respect of any financial year during which the Appointment is
terminated the Company shall produce a statement showing the
amount of the Relevant Profits for such year in accordance with
paragraph 1 of Part BB of this Schedule and the Consultant shall
be entitled to the whole of the bonus attributable to that
financial year notwithstanding that the Appointment shall have
been terminated during that financial year (unless this Agreement
is terminated pursuant to any of the provisions of clause 6.2.1
in which case the Consultant shall only be entitled to that
proportion of the bonus attributable to the period prior to the
termination of the Appointment) (less any sum or sums paid to the
Consultant on account thereof under paragraph 3 of Part BB of
this Schedule).
3 The Board shall during the course of any financial year of
Hamilton make payments to the Consultant on account of the bonus
payable to it at the rate to be agreed between the Consultant and
the Board. If the amount of the bonus payable is less than the
amount(s) received by the Consultant on account thereof during
the financial year in question it shall refund the shortfall to
the
87
<PAGE>
Company 14 days after the delivery to it of the statement referred
to in paragraphs 1 or 2 of Part BB of this Schedule (as the case may
be) and the Company shall be entitled to deduct the amount of the
refund from any fixed salary or fee otherwise payable to the
Consultant.
4 In the event of a dispute as to the amount of the Relevant
Profits for any financial year or as to any amount payable or
deductible in relation to the bonus, the matter in dispute shall
be referred to the decision of the auditors for the time being of
ACL ("the Auditors"). The certificate of the Auditors as to such
amounts shall be final and binding on the Company and on the
Consultant (or his personal representatives as the case may be)
and in giving the same the Auditors shall be deemed to be acting
as experts and not as arbitrators.
88
<PAGE>
ATTESTATIONS
EXECUTED as a DEED by )
SYMPOSIUM TELECOM )
CORPORATION by: )
Director
Director/Secretary
EXECUTED as a DEED by )
[-] )
by: )
Director
Director/Secretary
EXECUTED as a DEED and )
delivered by [-] )
in the presence of: )
Name of Witness:
Address:
Occupation:
89
<PAGE>
ANNEXURE A
Indemnification Agreement
90
<PAGE>
DATED: FEBRUARY 22, 1999
(1) PANTON MANAGEMENT LIMITED
AND
NORTHERN MANAGEMENT LIMITED
AND
(2) MARILYN SHEIN
AND
(3) ROBERT GREEN
AND
(4) SYMPOSIUM TELECOM CORPORATION
==============================
DEED OF VARIATION
==============================
JAY BENNING & PELTZ
ONE GREAT CUMBERLAND PLACE
LONDON W1H 7AL
Ref: BJ.SG.26045
Tel: 0171-636 9043
<PAGE>
THIS DEED is made the 22nd day of February 1999 BETWEEN (1) PANTON MANAGEMENT
LIMITED (No: 89307B), Providence House, East Hill Street, P O Box N-3944,
Nassau, Bahamas and NORTHERN MANAGEMENT LIMITED (No: 71490B) of Providence House
aforesaid ("the Vendors") (2) MARILYN SHEIN of Apartment 107, Parc Saint Roman,
6 Avenue Saint Roman, Monaco, 98000 (3) ROBERT GREEN of Apartment 211, Parc
Saint Roman, aforesaid and (4) SYMPOSIUM TELECOM CORPORATION of 410 Park Avenue,
18th Floor, New York, New York, 10022, USA ("the Purchaser").
RECITALS
A. This Deed is supplemental to an Agreement dated 14th December 1998 and made
between the parties hereto and in the same order in relation to the sale
and purchase of the entire issued share capital of Hamilton
Telecommunications Limited ("the Agreement").
B. The parties desire to vary the Agreement as set out in this Deed.
1. OPERATIVE PROVISIONS
1.1 INTERPRETATION - In this Agreement (including the Recitals and any
Schedules) except where a different interpretation is necessary in the
context, words and expressions not expressly defined shall have the
respective meanings given to them in the Agreement and the Rules of
Interpretation contained in clause 1 of the Agreement shall apply to this
Deed as if the same had been set out herein with references to the
Agreement being references to this Deed.
1.2 "THE PARTIES" - means the Parties to this Agreement.
2. VARIATIONS
The Agreement shall be varied as follows:-
2.1 Schedule 1 - there shall be deleted "two Ordinary Shares jointly held by
the Vendors", and there shall be substituted against the name of each of
the Vendors "one Ordinary Share".
2
<PAGE>
2.2 Schedule 2 - there shall be deemed to be deleted from Shareholders and
Shareholdings "each held jointly by the Vendors"
Directors - There shall be deemed to be deleted Robert Green and Marilyn
Shein and substituted James William Grassick of "La Collenette", Sark,
via Guernsey, British Channel Islands, and Simon Peter Elmont of The
Stables, La Fregondee, Sark, aforesaid.
Secretary - There shall be deemed to be deleted the name of Marilyn Shein
and substituted SCF Secretaries Limited Liability Company 1912 Capitol
Avenue, Cheyenne, Wyoming 82001, USA. and clause 9.3 of the Agreement
shall be deemed to be amended accordingly.
2.3 Interpretation - the definition of "the Initial Issue Price" shall be
deemed to be deleted.
2.4 Clause 3.2(b) shall be deemed to be deleted and there shall be substituted
for the same the following:
"by the issue and allotment free of any lien, option, charge or other
encumbrance whatsoever and credited as fully paid to the Vendors in the
proportions set opposite their respective names in column 3 of Schedule
1 1,642,857 shares of Purchaser Common Stock ("the Initial Consideration
Shares")
2.5 Clause 3.5.1(ii) shall be deemed to be deleted and there shall be
substituted for the same the following :
"be subject to a maximum aggregate amount of US$3,000,000 in cash and
857,143 shares of Purchaser Common Stock".
2.6 Clause 3.5.2(b) shall be amended by deleting in line 5 "the Initial Issue
Price" and substituting for the same "US$3.50".
2.7 There shall be deemed to be deleted from the Agreement clause 4.2(h).
2.8 There shall be deemed to be added a new clause 9.12 (and clauses 9.12 to
9.17 inclusive shall be deemed to be renumbered) :-
"in the event that either of the Consultancy Agreements to be made between
in the one case:- (1) the Purchaser (2) Northern Management Limited and
(3) Marilyn Shein and in the other case between (1) the Purchaser
(2) Panton Management Limited and (3) Robert Green either terminating by
effluxion of
3
<PAGE>
time or being properly terminated, then the parties shall take all such
steps as shall be in their respective power to revoke any Power of Attorney
in respect of any General Power of Attorney then in force given by the
Company in favour of in the first case, Marilyn Shein and in the second
case Robert Green".
3.1 The parties hereby undertake with each other to do or procure to be done,
all such further acts and things and execute or procure to be executed all
such further deeds and documents as may be necessary or desirable fully and
effectively to give full effect to the terms of this Agreement.
3.2 The terms of the Agreement shall continue to have full force and effect as
varied or amended by this Agreement and the parties hereby undertake to do
all such acts or things and execute or procure to be executed all such
further deeds and documents as may be necessary or desirable fully and
effectively to give fully effect to the terms of the Agreement as so varied
or amended.
4 This Agreement is governed by and is to be construed in accordance with
English Law.
IN WITNESS whereof this document has been executed as a Deed the day and year
first before written
EXECUTED as a Deed by PANTON )
MANAGEMENT LIMITED )
by: )
/s/ Robert Green
- ----------------
Director
4
<PAGE>
EXECUTED as a Deed by NORTHERN )
MANAGEMENT LIMITED )
by: )
/s/ Marilyn Shein
- -----------------
Director
EXECUTED as a Deed by )
MARILYN SHEIN )
in the presence of : )
Witness Signature ..../s/.......................................................
Name ..............................................................
Address ..............................................................
..............................................................
Occupation ..............................................................
EXECUTED as a Deed by )
ROBERT GREEN )
in the presence of : )
Witness Signature .../s/........................................................
Name ..............................................................
Address ..............................................................
..............................................................
Occupation ..............................................................
5
<PAGE>
EXECUTED as a Deed by SYMPOSIUM )
TELECOM CORPORATION )
by: )
/s/ Rupert Galliers-Pratt
- -------------------------
Director
/s/ Ronald Altbach
- ------------------
Director/Secretary
6
<PAGE>
DATED 14 DECEMBER 1998
OPTION AGREEMENT
SYMPOSIUM TELECOM CORPORATION (1)
ROBERT GREEN (2)
MARILYN SHEIN
FABRICE THOMAS
AUTOMATIC COMMUNICATIONS LIMITED (3)
<PAGE>
OPTION AGREEMENT
DATE
14 DECEMBER 1998
PARTIES
(1) SYMPOSIUM TELECOM CORPORATION LIMITED of 410 Park Avenue, 18th Floor,
New York, New York 10022 ("the Grantee");
(2) ROBERT GREEN of Apartment 211, Parc Saint Roman, 6 Avenue Saint Roman,
Monaco 98000;
MARILYN SHEIN of Apartment 107, Parc Saint Roman, 6 Avenue Saint
Roman, Monaco 98000; and
FABRICE THOMAS of Apartment 107, Parc Saint Roman, 6 Avenue Saint
Roman, Monaco 98000 (collectively "the Grantors")
(3) AUTOMATIC COMMUNICATIONS LIMITED (no 76494B) of Suites 61-62 Grosvenor
Close, Shirley Street, PO Box N-7521, Nassau New Providence, Bahamas
("the Company")
INTRODUCTION
(A) The Company was incorporated in the Bahamas on 22 May 1998 and is
registered under number 76494B as a private limited company and has an
authorised share capital of US$5,000 divided into 5,000 shares of US$1
each of which 5,000 of such shares have been issued fully paid or
credited as fully paid.
(B) The Grantee is a corporation organised under the laws of Delaware, USA
and has a share capital of 25,000,000 shares of common stock, with a
par value of $0.001 per share and 10,000,000 shares of preferred
stock, with a par value of $0.001 per share.
(C) The parties have agreed that the Grantors shall grant to the Grantee
an option to purchase 5,000 shares of US$1 each in the Company
beneficially owned by the Grantors upon the terms and subject to the
conditions contained in this Agreement.
<PAGE>
OPERATIVE PROVISIONS
1 DEFINITIONS
1.1 In this Agreement unless the context otherwise requires the following
expressions shall bear the meanings shown:
Accounts Date the date of the last day of the eighteenth
month following the Trading Date
Admission the date a broker/dealer initiates quotations
for Purchaser Common Stock in the OTC
Bulletin Board Service or a comparable
medium.
Audited Accounts the accounts determined pursuant to Schedule
2 for the period commencing on the first day
of the seventh month (being the first day of
a calendar month) following the Trading Date
and ending on the Accounts Date
Business Day a day on which banks in the City of London
generally are open for business
Common Stock common stock with a par value of US$0.001 per
share of the Grantee
Completion the performance by the parties hereto of
their respective obligations under clause 3
the Conditions as set out in clause 3.2
Consideration Shares shares of common stock of the Grantee to be
allotted to the Grantors pursuant to clauses
3 and 4
the Disclosure Letter the letter from the Grantors to the Grantee
to be dated as at Completion
-3-
<PAGE>
Grantee's Auditors a firm of auditors to be determined by the
board of directors of the Grantee
Grantors' Auditors Sinclair Croydon of Squires House, 81-87 High
Street, Billericay, Essex CM12 9AS
Grantors' Solicitors Jay, Benning & Peltz
the Grantee's Solicitors S J Berwin & Co of 222 Grays Inn Road London
WC1X 8HB
Jay Benning & Peltz Jay Benning & Peltz of One Great Cumberland
Place, London W1H 7AL
NASD National Association of Securities Dealers
NASDAQ National Association of Securities Dealers
Automated Quotation System
the Option the right granted to the Grantee pursuant to
clause 2 to purchase the Option Shares at the
Option Price
the Option Fee the aggregate sum of US$2 million to be
satisfied in accordance with the terms of
clause 3
the Option Period the period commencing on the Business Day
following the signing off of the Audited
Accounts and ending 6 months thereafter
provided that if any matter is referred to an
independent solicitor or an independent
chartered accountant pursuant to clause 4.10
then the Option Period shall be extended by a
period equal to the length of the period
required for the matter so referred to be
finally determined in accordance with clause
4.10
the Option Price the aggregate sum determined pursuant to
clause 4
-4-
<PAGE>
the Option Shares the 5,000 Shares in the capital of the
Company now owned by the Grantors in the
proportions set out in Schedule 1,
representing the entire issued share capital
of the Company and any other shares, stock or
securities referred to in clause 6
OTC Bulletin Board Service a service operated by the NASD providing an
electronic quotation medium to reflect market
making interest in eligible securities
Recipients those persons whose names appear in Part 1 of
Schedule 1 who will receive the Option Fee
and Option Price in the proportions set out
in the Schedule 1
Regulation S Regulation S under the Securities Exchange
Act of 1933, as amended
Relevant Profits as referred to in Clause 4.2.1
Relevant Receipts as referred to in Clause 4.9
Reorganisation in relation to the Company includes every
issue by way of capitalisation of profits or
reserves and every issue by way of rights and
every consolidation or sub-division or
reduction of capital or capital dividend or
other reconstruction or adjustment relating
to the equity share capital (or any shares or
securities derived therefrom) and any
amalgamation or reconstruction affecting the
equity share capital (or any shares stocks or
securities derived therefrom)
Securities Act the United States Securities Act of 1933 (as
amended)
-5-
<PAGE>
Share Sale and Purchase an agreement of even date herewith relating
Agreement to the purchase by the Grantee of the entire
issued share capital of Hamilton
International Limited
Trading Date the date upon which the Company begins
trading or if such date is not the first day
of a calendar month then the first day of the
calendar month following the date on which
the Company commenced trading
Warranty the warranty, representation and undertaking
given in clause 8.3
Warranty Claim a claim made by the Grantee on the breach by
the Grantors of any of the Warranty
Statements
Warranty Statements the warranty statements to be given by the
Grantors pursuant to clause 4.10
1.2 Reference to clauses and the parties are respectively to clauses of
and the parties to this Agreement.
2 OPTION
In consideration of the agreement to pay the Option Fee to the
Recipients in the proportions set out in Schedule 1 the Grantors grant
to the Grantee the right exercisable during the Option Period to
purchase all but not some of the Option Shares in consideration of the
Option Price subject to the satisfaction of the Conditions.
3 OPTION FEE
3.1 The Option Fee shall (subject to clause 3.2) be satisfied by the issue
and allotment, free of any lien, option, charge or other encumbrance
whatsoever and credited as fully paid, of the Consideration Shares to
the Recipients in the proportions set out opposite their respective
names in Part 1 of Schedule 1, at par.
3.2 Subject to and conditional upon:
-6-
<PAGE>
(a) the completion of the Share Sale and Purchase Agreement ("the
Hamilton Completion"); and
(b) the inclusion of a quotation for Common Stock on the OTC
Bulletin Board Service (which the Grantee shall use all
reasonable endeavours to procure as quickly as possible); and
(c) the Grantors' Auditors certifying to the Grantee that within
nine months of the date of this Agreement the Company has
earned in any one month in excess of US$100,000 over its
expenditure to be calculated in accordance with generally
accepted accounting principles applied in the United Kingdom.
the Grantee shall within 10 Business Days of the satisfaction of the
Conditions satisfy the Option Fee by the allotment and issue, credited
as fully paid, to the Recipients of such number of shares of Common
Stock as shall have an aggregate value of US$2 million as derived from
the average closing bid prices of shares of Common Stock on each of
the 20 trading days immediately prior to the issue of such stock. For
the avoidance of doubt if the conditions in (a) and (b) shall not have
been satisfied within six months and the condition (c) has not been
satisfied within 9 months of the date of this Agreement any of the
parties may by their solicitors giving notice to the remaining parties
rescind this Agreement whereupon this Agreement be shall of no further
effect but without prejudice to any parties' rights in respect of any
antecedent breach of any provision thereof.
3.3 The Consideration Shares will rank pari passu in all respects with the
other outstanding shares of Common Stock.
3.4 The Grantee will use all reasonable endeavours to become listed on the
NASDAQ stock market within 16 months of the signing of this Agreement.
4 OPTION PRICE
4.1 The Option Price shall be paid and satisfied to the Recipients in the
proportions set out in Part 1 of Schedule 1 subject to clause 4.10,
without set-off or deduction of any kind whatsoever.
-7-
<PAGE>
4.2.1 The Option Price shall be the Relevant Profits of the Company as at
the Accounts Date as determined in accordance with Schedule 2
multiplied by six less the Option Fee expressed in US Dollars.
4.2.2 The Grantors shall use all reasonable endeavours to procure the
preparation and signing off of the Audited Accounts as soon as
possible after the Accounts Date.
4.3 The Option Price shall be paid and satisfied by:
(a) the payment to the Recipients in the proportions set out in
Schedule 1 on Completion: (a) US$2 million; and (b) a sum in
US Dollars equal to 50 per cent. of the balance of the Option
Price (after deducting the said sum of US$2 million) ("the
Balance"); and
(b) the issue and allotment on Completion to the Recipients in the
proportions set out in Schedule 1 of Consideration Shares,
free of any lien, option, charge or other encumbrance
whatsoever and credited as fully paid, of such number of
shares of Common Stock as have an aggregate market price as
nearly as possible equal to but not exceeding 50 per cent. of
the amount of the Balance, such shares to rank pari passu with
the existing Common Stock then in issue.
4.4.1 For the purpose of clause 4.3, the market price of Common Stock shall
be the average of the closing bid prices of the Common Stock on each
of the 20 trading days prior to the date of signing off of the Audited
Accounts pursuant to the provisions of Schedule 2.
4.4.2 The market price of the Common Stock on any date shall be determined
as follows:
(i) if the Common Stock shall be listed on a national securities
exchange or on NASDAQ, the bid price shall be the closing bid
price of the Common Stock as reported in the WALL STREET
JOURNAL (or comparable publication if the WALL STREET JOURNAL
shall not then be published);
(ii) if the Common Stock shall not be listed on a national
securities exchange or NASDAQ, and quotations for Common Stock
shall be reported on the OTC Bulletin Board Service, the
average of the closing bid quotations for the Common
-8-
<PAGE>
Stock on such date by the principal broker/dealer (as
determined in good faith by the Board of Directors of the
Grantee) providing quotations for Common Stock on such date.
4.4.3 If the Common Stock shall not on Completion be listed on a national
securities exchange or NASDAQ, and quotations for the Common Stock
shall not be included in the OTC Bulletin Board Service the whole of
the Option Price shall be satisfied in cash.
4.5.1 Each of the Recipients agrees not to offer, sell, transfer, assign,
pledge, hypothecate or otherwise dispose of (collectively, "Transfer")
any of the Consideration Shares except pursuant to an effective
registration statement under the Securities Act, the provisions of
Regulation S or pursuant to an exemption from registration under the
Securities Act. As a further condition to any such Transfer, except
in the event that such Transfer is made pursuant to an effective
registration statement under the Securities Act, if in the reasonable
opinion of counsel to the Company any Transfer of the Shares by the
contemplated transferee thereof would not be exempt from the
registration and prospectus delivery requirements of the Securities
Act, the Company may require the contemplated transferee to furnish
the Company with an investment letter setting forth such information
and agreements as may be reasonably requested by the Company to ensure
compliance by such transferee with the Securities Act.
Each certificate evidencing the Consideration Shares will bear the
following legend:
"THE SECURITIES EVIDENCED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
UNITED STATES SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT BE
OFFERED, SOLD, TRANSFERRED, PLEDGED, ASSIGNED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
AND OTHERWISE IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT BETWEEN
THE ISSUER AND THE ORIGINAL ALLOTTEE OR PURCHASER OF THE
-9-
<PAGE>
SECURITIES, A COPY OF WHICH IS ON FILE AT THE PRINCIPAL EXECUTIVE
OFFICE OF THE ISSUER".
The Company shall have no obligation to register any purported
Transfer of any of the Consideration Shares in violation of this
Agreement on its stock transfer records, and any such Transfer shall
be null, void and of no force and effect.
Each of the Recipients agrees not to engage in any hedging
transactions with regard to the Consideration Shares except in
compliance with the Securities Act.
4.5.2 Each of the Recipients undertakes to the Grantee, in relation to such
number of the Consideration Shares issued and allotted to it pursuant
to the terms hereof that, in the period of 12 months following the
allotment of such shares that it shall not, without the written
consent of the Grantee (such consent not to be unreasonably withheld
or delayed) sell or otherwise dispose of or encumber or charge or
create any interest or trust or agree to sell or otherwise dispose of
or encumber or charge or create any interest or trust, in any of the
Consideration Shares and for the purpose of this clause 4.5 any of the
Recipients shall be deemed to dispose of a share if it ceases, in any
circumstances whatsoever, to be the absolute legal or beneficial owner
of it.
4.6 The Option shall subject to the satisfaction of the Conditions, be
exercisable during the Option Period in respect of all (but not part)
of the Option Shares by 10 Business Days notice in writing served on
each of the Grantors but not without the prior written consent of
Grantors (not to be unreasonably withheld) in the event that the whole
of the consideration payable to the Vendors under the Share Sale and
Purchase Agreement shall not have been paid prior to the date on which
the Grantee wishes to exercise the Option (except to the extent that
any part of the Deferred Consideration (as defined in the Share Sale
and Purchase Agreement) shall have been paid into the joint client
deposit account as contemplated by Clause 3.6 of the Share Sale and
Purchase Agreement).
4.7 The Option Shares shall be sold free from all liens, charges and
encumbrances and with all rights attached thereto at the date of such
exercise.
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<PAGE>
4.8 In the event that any amounts of money or other valuable consideration
are received by the Company being monies or any other valuable
consideration due to the Company in relation to trading up to close of
business on the date of Completion ("Relevant Receipts") the Grantee
shall pay or transfer to the Grantors in the proportions set out in
column 3 of Part 2 of Schedule 1 by way of further consideration sums
equivalent to such amounts or other valuable consideration as are so
received from time to time (a) by the Company or by any third party on
its behalf or (b) by any third party (not on its behalf) in the event
that payment or transfer of such other valuable consideration shall be
made to such a third party due to any act or default on the part of
the Company. The Grantee shall within 7 days of the end of each
calendar month following Completion send to each of the Grantors by
Recorded Delivery Post or equivalent a declaration as to the relevant
amounts or other valuable consideration received by the Company during
that month. Such declarations shall be posted to each of the Grantors
within 14 days of the end of the relevant calendar month accompanied
by a remittance for the amount or other valuable consideration shown
in such declaration.
4.9 The Grantee agrees not to issue or sell any shares of capital stock
without imposing on the purchaser/allottee restrictions substantially
similar to those imposed under clauses 4.5.1 and 4.5.2 of this
Agreement until the satisfaction of the Option Price.
4.10.1 The Grantee and the Grantors shall within 90 Business Days of the
signing off of the Audited Accounts endeavour in good faith to agree
Warranty Statements (and suitable provisions limiting the Grantors'
liability pursuant to the said Warranty Statements) which shall upon
agreement be deemed to be incorporated in this Agreement to which
Clause 8.3 shall relate. Such Warranty Statements shall be such of
the Warranty Statements contained in the Share Sale and Purchase
Agreement (together with similar provisions limiting the Grantors'
liability pursuant to the said Warranty Statements) as shall be
appropriate to the Company as at the date of the signing off of the
Audited Accounts provided that in the event that the Grantors and the
Grantee shall be unable to agree such Warranty Statements (or the
aforementioned provisions limiting the Grantors' liability) then the
matter shall be referred to an independent solicitor with suitable
-11-
<PAGE>
experience of such matters for adjudication as to what would be normal
commercial practice in the circumstances of this transaction, whose
identity shall be agreed by the Grantors and the Grantee or in the
event that they are unable to agree upon such appointment within five
Business Days following it having become apparent that there is a
dispute, by the President for the time being of the Law Society of
England and Wales on the application of the Grantors or the Grantee.
Such solicitor shall be deemed to act as an expert and not as an
arbitrator and his decision shall be final and binding on the Grantors
and the Grantee (in the absence of clear or manifest error) and the
question of who shall be responsible for his fees and in what
proportion shall be in his award.
4.10.2 (i) In the event that the Grantors' Auditors shall in the course
of the preparation of the Audited Accounts identify a
contingent liability ("the Liability") the Grantee shall be
entitled to pay from the amount of the Option Price otherwise
payable to the Recipients on Completion, into a joint clients'
deposit account at a clearing bank to be established by Jay,
Benning & Peltz and the Grantee's Solicitors in their joint
names, such amount as in the opinion of Grantors' Auditors
represents the value of the Liability provided that such
expression of opinion shall not bind any party.
(ii) The Grantors and the Grantee shall endeavour in good faith to
agree such reduction in the Option Price as may be appropriate
in respect of the Liability but if they are unable to agree
the same within 20 Business Days of the exercise of the Option
by the Grantee the matter shall be referred to an independent
chartered accountant to be appointed by the Grantors and the
Grantee jointly but if they shall be unable to agree on such
appointment then by the President for the time being or the
appropriate officer of the Institute of Chartered Accountants
in England and Wales on the application of any party. Such
Chartered Accountant shall be deemed to be acting as an expert
and not as an arbitrator and his decision shall be final and
binding on the Grantee and the Grantors (in the absence of
clear or manifest error) and the question of which party shall
be responsible for his fees and in what proportion shall be in
his award.
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<PAGE>
(iii) Upon any determination pursuant to clause 4.10.2(ii) above in
the Grantee's favour there shall be paid to the Grantee the
amount so determined which shall have been deemed to have been
set off against the Option Price and Jay, Benning and Peltz
and the Grantee's Solicitors shall by notice in writing
(following receipt of suitable evidence of any such
determination) transfer to the Grantee from the joint deposit
client account a sum equal to such amount determined to be due
to it (if any) and the balance (if any) (or the whole if it is
determined pursuant to clause 4.10.2(ii) that the Purchaser is
not entitled to any of the sum held) determined not to be due
to the Grantee shall be paid to the Recipients and the
interest earned on the said account shall be apportioned
between the Recipients and the Grantee in the same proportions
as the amounts of principal paid to them respectively from the
joint client deposit account.
5 EXERCISE OF THE OPTION
5.1 Completion of the transfer of the Option Shares shall take place at
the offices of the Grantors' Solicitors (or at such other place as the
parties shall mutually agree) on the expiration of the notice referred
to in clause 4.6, (subject to clause 4.10 in which case Completion
shall take place within 10 Business Days of any agreement or
determination in accordance with Clause 4.10.2(ii)) when:
(a) the Grantee shall pay or procure the payment to the Grantors'
Solicitors (or as the Grantors may direct) of the Option Price
and insofar as Common Stock is to be issued, hand to them the
appropriate stock certificates provided that in the event that
the Grantors' Solicitors give notice in writing prior to
Completion to the Grantees' Solicitors, the following
provisions shall have effect:-
(i) On Completion all documents shall be held in escrow and
shall constitute escrows pending receipt of payment
pursuant to sub-clause (ii) of this proviso and;
(ii) the Grantee or its Solicitors shall immediately following
completion of all other matters to be done on Completion in
accordance with this clause 5.1 send by
-13-
<PAGE>
Swift to Barclays Bank Plc, Monaco Branch of that part of the
Option Price as is payable under Clause 5.1(a) as to one third
thereof for the account of each of Robert Green and Marilyn
Shein and as to one sixth thereof for the account of Fabrice
Thomas. On receipt by such bank of such monies the condition
of the escrows shall be deemed to have been satisfied (and the
relevant documents shall no longer be deemed to be the subject
of any escrow and shall thereupon have full effect); and
(b) the Grantors shall deliver to the Grantee:
(i) duly executed stock transfer forms in respect of the
Option Shares together with the relative share
certificates (or, if applicable, duly executed
indemnities in respect of missing certificates);
(ii) a waiver of any applicable rights of pre-emption, duly
signed by all the other members of the Company; and
(iii) such other deeds and documents (if any) as may be
necessary to transfer to the Grantee or as it may
direct the unencumbered beneficial ownership of the
Option Shares.
5.2.1 The parties agree that at any time on or after the date of Completion,
each party, being ready and willing to fulfil its own outstanding
obligations pursuant to this Agreement, may (without prejudice to any
other right or remedy available to it) give to the other parties
notice in writing requiring completion of this Agreement in conformity
with this clause.
5.2.2 Upon the service of such notice as stated in Clause 5.2.1, it shall
become and be a term of this Agreement in respect of which time shall
be of the essence thereof, that the parties to whom the notice is
given shall complete this Agreement within ten Business Days after
service of the notice (exclusive of the day of service), but this
condition shall operate without prejudice to any right of any party to
rescind this Agreement in the meantime.
5.3 If the Grantors make default in transferring the Option Shares as
aforesaid the Directors of the Company shall be entitled to receive
and give a good discharge for the Option Price
-14-
<PAGE>
and Option Fee on behalf of the Grantors (but shall not be bound to
earn any interest thereon) and the Grantors hereby irrevocably appoint
such one of the Directors of the Company as the Grantee shall
nominate in writing as the Grantors' attorney to execute on its behalf
the transfer or transfers of the Option Shares in favour of the
Grantee (or as the Grantee may direct) and such other documents as may
be necessary to transfer title to the Option Shares to the Grantee
(or as the Grantee may direct) and hereby authorises the Directors of
the Company to approve the registration of such transfer or transfers
or the documents.
5.4 The Grantors shall (so far as they are able) procure that upon
presentation of the stamped transfer of the Option Shares to the
Company, together with the relative share certificates it shall be
approved and the transferee will be registered as the holder of the
Option Shares.
5.5 On Completion, there shall be repaid to the Grantors a sum equal to
all amounts owing to them by the Company in respect of outstanding
loans
6 REORGANISATION
The Grantors shall procure that no Reorganisation shall take place
from the date hereof until the expiration of the Option Period.
7 PROHIBITION ON DISPOSAL
Notwithstanding the provisions of clause 4 while the Option entitling
the Grantee to purchase the Option Shares remains exercisable the
Grantors shall not, without the prior written consent of the Grantee,
sell, transfer or otherwise dispose of (including without prejudice
to the generality of the foregoing accept an offer made to all
holders for the class or classes of securities to which the Option
Shares belong) any of the Option Shares or any interest therein.
8 GRANTORS' WARRANTIES
8.1 Each of the Grantors severally warrant to the Grantee that:
-15-
<PAGE>
(a) they are and will remain until the exercise of the Option or
expiry of the Option Period (whichever is the later) the
beneficial owner of the Option Shares, subject only to the
Option, and have and will have full power and authority to
grant an option in respect of the same upon the terms and
conditions of this agreement;
(b) they will not during the Option Period transfer, dispose of,
charge, pledge or encumber in any way their interest in any of
the Option Shares or enter into negotiations with any third
party with a view to doing any of such things; provided that
notwithstanding anything else contained in this Agreement each
of the Grantors may transfer his or her Option Shares to a
single purpose vehicle company or companies which has/have not
previously traded (or one or more of the Grantors may do so),
and shall thereupon give notice to the Grantee's Solicitors to
that effect. In that event, the Grantors shall procure that
such company or companies shall and the Company and the
Grantee shall enter into a novation deed to give effect to
this Agreement on the basis that such company or companies
shall be substituted for such of the Grantors who shall have
transferred his or her Option Shares to the relevant company
or companies
(c) there is not and will not on Completion be any option or right
outstanding in favour of any third party in respect of the
Option Shares;
8.2 Each of the Grantors severally warrant to the Grantee that:
(a) all written replies to the enquiries made by the Grantee or
its professional advisers in relation to the Company and its
affairs subject to any details supplied by the Grantors or
Recipients under clause 8.2(b), are accurate in all material
respects and do not omit anything which would be likely to
make any such reply misleading;
(b) the Grantors shall forthwith give details in writing to the
Grantee or the Grantee's Solicitors of any matter or thing
which becomes known to the Grantors prior to Completion
directly or indirectly relating to any of the written replies
to enquiries referred to in clause 8(c); and
-16-
<PAGE>
(c) that the Company will begin and continue trading as soon as
possible following the date of this Agreement (if it has not
already done so).
8.3.1 The Grantors jointly and severally warrant, represent and undertake to
the Grantee that every Warranty Statement which is to be given shall
be accurate in all material respects in respect of ACL at Completion,
subject only to the matters stated in the Disclosure Letter.
8.3.2 The Warranty is a separate and independent warranty, representation
and understanding in relation to each of the Warranty Statements and
no Warranty shall be limited by reference to any other Warranty
Statement.
8.3.3 The rights and remedies of the Grantee in respect of any breach of the
Warranty shall not be affected by Completion but shall take effect
subject only to matters specifically disclosed by the Grantors or the
Grantors' Solicitors in writing or in the Disclosure Letter.
8.3.4 References to awareness or knowledge of the Grantors in a Warranty
Statement shall only limit that Warranty Statement by the Grantors'
awareness or knowledge if each of the Grantors has made all due and
careful enquiries to ascertain if the relevant information is true,
accurate, correct and not misleading.
8.3.5 Any Warranty Claim or claim under this Agreement may be satisfied by
the Grantors as to 50 per cent. in cash and the balance of the
Warranty Claim satisfied by transferring to the Purchaser or as it may
direct, Purchaser Common Stock valued at the price at which shares in
Purchaser Common Stock were allotted to the Vendors or in the event of
there having been allotments at two different striking prices, then at
the average of such striking prices.
9 MATTERS REQUIRING APPROVAL OF THE GRANTEE
9.1 During the Option Period the Grantors and the Company shall procure
that no action shall be taken by the Company without the prior written
permission (not to be unreasonably withheld or delayed) of the Grantee
in respect of the implementation of any of the matters listed below by
or on behalf of the Company:
-17-
<PAGE>
(a) any material change in the nature of business of the Company
or the establishment or acquisition of any new business;
(b) the initiation of any litigation or arbitration (other than
any action alleging the non-performance by any third party of
such third party's contractual obligations or for the
collection of debts arising in the ordinary course of
business);
(c) the issue or allotment of any share or other capital or the
granting or entering into any agreement to grant any option
over the uncalled capital of the Company or any
Reorganisation;
(d) the borrowing or raising of money (other than from the
Grantors or any of them) whether or not on the security of any
property or assets of the Company or the creation of any
mortgage, charge or pledge upon or in respect of the business
or the assets of the Company or any part thereof.
9.2.1 The Grantors hereby undertake to the Grantee throughout that they
shall forthwith notify the Grantee if any matters listed in clause 9.1
is being considered or is proposed to be implemented by or on behalf
of the Company and in addition shall forthwith notify the Grantee on
the purchase, sale, taking or letting on lease or tenancy or other
acquisition of any real or leasehold property by the Company or the
appointment of any employee.
9.2.2 The Grantors shall forthwith forward a copy of all half yearly and
annual reports of accounts of the Company to the Grantee within 7
Business Days of the issue of such reports and accounts.
10 GENERAL
10.1 It is declared for the avoidance of doubt that any projections which
may have been prepared by the Grantors' auditors were prepared in good
faith but that no responsibility for any of the same is accepted by or
placed upon such auditors or upon any other party to this Agreement
since the same were intended for illustration purposes only.
10.2 Until such time as all of the consideration has been paid to the
Vendors and for so long as either of the Consultancy Agreements in
favour of Panton Management Limited and
-18-
<PAGE>
Northern Management Limited shall subsist, the Purchaser shall
procure that no one shall be appointed a Director of the Company
without the written consent of Robert Green and Marilyn Shein.
10.3 No amendment, change or addition hereto shall be effective or binding
on either party unless reduced to writing and executed by both
parties.
10.4 The Grantee undertakes not to issue preferred stock without the
approval of Robert Green or Marilyn Shein (such approval not to be
unreasonably withheld) except in connection with obtaining any
financing required to complete the Share Sale and Purchase Agreement
or this Agreement provided that the Grantee's obligations pursuant to
this clause shall terminate upon the earliest to occur or:
(a) the satisfaction of the Option Price; and
(b) the date the capital stock of the Grantee becomes listed on
NASDAQ.
10.5 This Agreement or any rights hereunder shall not be assigned whether
in whole or in part.
10.6 The headings to clauses of this Agreement are for ease of reference
only and do not form part of this Agreement and are not in any way to
affect its construction.
10.7.1 Any notice to be given under this Agreement:
(a) must be in writing;
(b) may be given to the Grantors and Recipients at the addresses
stated at the beginning of this Agreement (or such other
address as it may notify to the Grantee for such purpose);
(c) may be given to the Grantee at its registered office (or such
other address as it or its assignee may notify to the Grantors
for such purpose); and
(d) will be effectively served:
(i) on the day of receipt, where any hand delivered letter,
telex or telefax message is received on any Business
Day (being any day between
-19-
<PAGE>
Monday and Friday other than United Kingdom public or
bank holidays) before or during normal working hours;
(ii) on the following Business Day, where any hand delivered
letter, telex or telefax message is received either on
any Business Day after normal working hours or on any
day which is not a Business Day; or
(iii) on the second Business Day following the day of
posting, upon despatch from within the United Kingdom
of any posted letter by post office inland first class
mail postage prepaid and in proving such service it
shall only be necessary to prove that the same was
stamped, addressed and posted as aforesaid.
10.7.2 Each of the Company, Grantors and Recipients hereby appoint Jay
Benning & Peltz of 1 Cumberland Place, London W1H 7AL (marked for the
attention of Barry Jay or Jonathan Fisher) as their authorised agents
for the purpose of accepting service of process and notices for all
purposes in connection with this Agreement).
10.7.3 The Grantee hereby appoints S J Berwin & Co of 222 Grays Inn Road,
London WC1X 8HB (marked for the attention of Robert Burrow or Simon
McLeod) as its authorised agent for the purpose of accepting service
of process and notice (for all purposes or in connection with this
Agreement).
10.8 This Agreement is governed by and is to be construed in accordance
with English Law.
-20-
<PAGE>
SCHEDULE 1
PART 1
RECIPIENTS
<TABLE>
<CAPTION>
RECIPIENTS OPTION FEE OPTION PRICE
<S> <C> <C>
Robert Green 36 per cent. One third
Marilyn Shein 36 per cent. One third
Fabrice Thomas 18 per cent. One sixth
Shropshire Five Investment Limited Nil One eighteenth
Ronald Altbach Nil One eighteenth
Rigley Holdings BVI Nil One eighteenth
Church Bay Trust Company Limited 3.5 per cent Nil
Gulf Securities Corporation 6.5 per cent Nil
</TABLE>
PART 2
GRANTORS
<TABLE>
<CAPTION>
GRANTORS SHAREHOLDINGS PROPORTION OF RELEVANT RECEIPTS
<S> <C> <C>
Robert Green 2,000 Shares Two fifths
Marilyn Shein 2,000 Shares Two fifths
Fabrice Thomas 1,000 Shares One fifth
</TABLE>
-21-
<PAGE>
SCHEDULE 2
AUDITED ACCOUNTS
1 The Net Profit will be determined by reference to the financial
statements of the Company to be audited as at the Accounts Date in
accordance with the provisions of this Schedule 2 ("the Audited
Accounts"). Such accounts shall be prepared and audited by the
Grantors' Auditors applying accounting policies and principles on a
basis which is consistent with the generally accepted accounting
policies and practices applied in the United Kingdom. The Net Profit
shall be the aggregate after-tax profit as shown in the accounts so
prepared.
2 The Relevant Profits will be determined by reference to the Net Profit
of the Company as shown by the Audited Accounts.
In order to arrive at the Relevant Profits the relevant Net Profit
shall be subject to the following adjustments (if not already taken
into account in the Profit and Loss Accounts):
A By adding back
(i) Taxation shown by the audited Profit and Loss Account of the
Company or as otherwise payable by the Company;
(ii) any payments:
(a) not made at arms length;
(b) made to any other company within the Group of which
the Company forms part, including in particular the
Grantee including any management fees or other
charges paid to any other such company;
(c) made in connection with anything not in the Company's
normal course of business;
(iii) all payments made to any of the following:
(a) Panton Management Limited;
(b) Northern Management Limited;
(c) Mediterranean Telecommunications Limited;
(d) Moss Barton Limited;
(e) Robert Green;
(f) Marilyn Shein;
(g) Fabrice Thomas; and
(h) Adam Bishop
and any expenses payable to them, whether under any
Consultancy Agreement or otherwise howsoever;
(iv) any depreciation charged in respect of any items which would
normally fall to be depreciated;
(v) any rents, licence fees or outgoings in respect of any
premises occupied or shared by the Company.
-22-
<PAGE>
B So as to negate any profits or losses on the revaluation of
any assets or any adjustment arising on the translation into
US Dollars of assets and liabilities denominated in currencies
other than US Dollars;
C Adding back any extraordinary items described in Financial
Reporting Standard 3(FRS3) not deriving from the ordinary
activities of the Company and any Associated Company of the
Company; and
D So as to exclude profits or losses of a capital nature.
-23-
<PAGE>
ATTESTATIONS
Executed as a Deed by )
SYMPOSIUM TELECOM CORPORATION )
by: )
Director: Rupert Galliers - Pratt
Director: Ronald Altbach
Executed as a Deed by )
ROBERT GREEN in ) ROBERT GREEN
the presence of: )
Name of Witness: Cherie Narbey
Occupation: Hotel Front Office Teamleader
Address: 2/14 Miro Road, Green Lane, Auckland, New Zealand
Executed as a Deed by )
MARILYN SHEIN in ) MARILYN SHEIN
the presence of: )
Name of Witness: Ann McCormack
Occupation: Senior Private Broker
Address: Eden Star, 98000 Monaco
Executed as a Deed by )
FABRICE THOMAS in ) FABRICE THOMAS
the presence of: )
Name of Witness: Ann McCormack
Occupation: Senior Private Broker
Address: Eden Star 9800 Monaco
-24-
<PAGE>
Executed as a Deed by )
AUTOMATIC COMMUNICATIONS )
LIMITED by: )
Director: Robert Green
Director: Marilyn Shein
-25-
<PAGE>
THIS NOVATION AGREEMENT is made the 22nd day of February 1999 BETWEEN (1)
SYMPOSIUM TELECOM CORPORATION of 410 Park Avenue, 18th Floor, New York, New
York, 10022, USA ("the Grantee"), (2) ROBERT GREEN of Apartment 211, Parc Saint
Roman, 6 Avenue Saint Roman, Monaco, 98000 ; MARILYN SHEIN of Apartment 107,
Parc Saint Roman, 6 Avenue Saint Roman, Monaco, 98000; FABRICE THOMAS of
Apartment 107, Parc Saint Roman, 6 Avenue Saint Roman, Monaco, 98000
(collectively "the Grantors") (3) AUTOMATIC COMMUNICATIONS LIMITED (No. 7649B)
of Suites 61-62 Grosvenor Close, Shirley Street, P O Box N-7521, Nassau, New
Providence, Bahamas ("the Company") and (4) A.C.L. HOLDINGS LIMITED (No. 84,257
B) whose registered office is at First Floor, Kings Court, P O Box N3944, Bay
Street, Nassau, New Providence, Bahamas ("Holdings").
RECITALS:
(1) This Novation Agreement is supplemental to an Option Agreement dated 14th
December 1998, and made between the parties of the First, Second and Third
parts ("the Agreement").
(2) Pursuant to the proviso to clause 8.1(b) of the Agreement and as
contemplated by that clause, each of the Grantors wishes to transfer
his/her Option Shares to Holdings and have given notice to the Grantee's
Solicitors to that effect, and accordingly this Novation Agreement is
entered into upon the terms and conditions hereinafter contained.
NOW IT IS AGREED as follows:-
1. INTERPRETATION
1.1 In this Agreement, unless the context otherwise requires, words and
expressions not expressly defined herein shall have the respective meanings
given to them in the Agreement, and the rules of interpretation contained
in clause 1 of the Agreement shall apply to this Agreement as if the same
had
1
<PAGE>
been set out herein with references to the Agreement being references
to this Agreement.
1.2 References to clauses and the parties are respectively to clauses of
and the parties to this Agreement.
2. This Agreement shall take effect in the event that the Grantors transfer
the Option Shares to Holdings (forthwith upon the last of such transfers
being effected) ("the Effective Date").
3. HOLDING'S UNDERTAKING
Holdings undertakes to perform the Agreement and to be bound by the terms
of the Agreement in every way and unconditionally assume the rights and
obligations of each of the Grantors under the Agreement in all respects as
if Holdings were a party to the Agreement in lieu of the Grantors.
4. RELEASE OF GRANTORS
With effect from the Effective Date the Grantee releases and discharges the
Grantors from all claims and demands whatever in respect of the Agreement,
and accepts the liability of Holdings under the Agreement in lieu of the
liability of the Grantors.
5. RELEASE BY GRANTORS
With effect from the Effective Date, the Grantors release and discharge the
Grantee from all claims and demands whatever in respect of the Agreement,
insofar as the same could be made by the Grantors Provided That with effect
from such date the Grantee shall be liable to Holdings under the Agreement
in lieu of being liable to the Grantors and agrees to continue to be bound
by the terms of the Agreement, as though the Agreement had been made
between (1) the Grantee, (2) Holdings and (3) the Company.
2
<PAGE>
6. WARRANTY
The Grantors hereby jointly and severally represent and warrant to the
Grantee that Holdings was incorporated on 14th December 1998 and has not
since that date traded (save to the extent if any that any of the Option
Shares shall have been transferred to Holdings and to the extent that any
payment may have been made or shares issued in consideration of the
transfer of the Option Shares).
6.1 The parties hereby undertake with each other to do or procure to be done,
all such further acts and things and execute or procure to be executed all
such further deeds and documents as may be necessary or desirable fully and
effectively to give full effect to the terms of this Agreement.
6.2 The terms of the Agreement shall continue to have full force and effect as
varied or amended by this Agreement and the parties hereby undertake to do
all such acts or things and execute or procure to be executed all such
further deeds and documents as may be necessary or desirable fully and
effectively to give fully effect to the terms of the Agreement as so varied
or amended.
7. This Agreement is governed by and is to be construed in accordance with
English Law.
8. Holdings hereby appoints Jay Benning & Peltz of One Great Cumberland Place,
London, WIH 7AL (marked for the attention of Barry Jay or Jonathan Fisher)
as their authorised Agent for the purpose of accepting service of process
and notices for all purposes in connection with this Agreement and the
Agreement.
3
<PAGE>
IN WITNESS whereof this document has been executed as a Deed the day and year
first before written
EXECUTED as a Deed by SYMPOSIUM )
TELECOM CORPORATION )
by: )
/s/ RUPERT GALLIERS-PRATT
Director
/s/ RONALD ALTBACH
Director
EXECUTED as a Deed by )
ROBERT GREEN ) /s/ Robert Green
in the presence of : )
Witness Signature /s/
Name -------------------------------------------------------------
Address
-------------------------------------------------------------
-------------------------------------------------------------
Occupation
-------------------------------------------------------------
EXECUTED as a Deed by )
MARILYN SHEIN ) /s/ Marilyn Shein
in the presence of : )
Witness Signature /s/
-------------------------------------------------------------
Name
-------------------------------------------------------------
Address
-------------------------------------------------------------
-------------------------------------------------------------
Occupation
-------------------------------------------------------------
4
<PAGE>
EXECUTED as a Deed by )
FABRICE THOMAS ) /s/ Fabrice Thomas
in the presence of : )
Witness Signature /s/
-------------------------------------------------------------
Name
-------------------------------------------------------------
Address
-------------------------------------------------------------
-------------------------------------------------------------
Occupation
-------------------------------------------------------------
EXECUTED as a Deed by AUTOMATIC )
COMMUNICATIONS LTD )
by: )
/s/ ROBERT GREEN
Director
/s/ MARILYN SHEIN
Director
EXECUTED as a Deed by A.C.L HOLDINGS LTD )
by: )
/s/
- ---------------------------------------
Director
5
<PAGE>
SYMPOSIUM TELECOM CORPORATION
1998 STOCK OPTION PLAN
1. THE PLAN.
The purpose of this 1998 Stock Option Plan (the "PLAN") is to provide
incentives and rewards to selected eligible directors, officers, employees and
consultants of Symposium Telecom Corporation (the "COMPANY") and its
subsidiaries in order to assist the Company and its subsidiaries in attracting,
retaining and motivating those persons by providing for or increasing the
proprietary interests of those persons in the Company, and by associating their
interests in the Company with those of the Company's shareholders.
2. ADMINISTRATION OF THE PLAN.
(a) ADMINISTRATOR. The Plan shall be administered by the Board of
Directors of the Company (the "BOARD"), or a committee of the Board (the
"COMMITTEE") which shall consist of two or more of its members who shall serve
at the pleasure of the Board. The administrator of the Plan shall be referred
to as the "ADMINISTRATOR." During such time that administration is delegated to
the Committee, the Committee shall have, in connection with the administration
of the Plan, the powers theretofore possessed by the Board subject, however, to
such resolutions, not inconsistent with the provisions of the Plan, as may be
adopted from time to time by the Board.
(b) POWERS AND AUTHORITY. The Administrator shall have all the powers
vested in it by the terms of the Plan, including exclusive authority (i) to
select from among eligible directors, officers, employees and consultants, those
persons to be granted "OPTIONS" (as defined below) under the Plan; (ii) to
determine the type, size and terms of individual Options (which need not be
identical) to be made to each person selected, including whether an Option will
be an Incentive Stock Option or a Nonqualified Option (both as defined below);
(iii) to determine the time when Options will be granted and to establish
objectives and conditions (including, without limitation, vesting and
performance conditions), if any, for earning Options; (iv) to amend the terms or
conditions of any outstanding Options, subject to applicable legal restrictions
and to the consent of the other party to such Options; (v) to determine the
duration and purpose of leaves of absences which may be granted to holders of
Options without constituting termination of their employment for purposes of
their Options; (vi) to authorize any person to execute, on behalf of the
Company, any instrument required to carry out the purposes of the Plan; and
(vii) to make any and all other determinations which it determines to be
necessary or advisable in the administration of the Plan. The Administrator
shall have full power and authority to administer and interpret the Plan and to
adopt, amend and revoke such rules, regulations, agreements, guidelines and
instruments for the administration of the Plan and for the conduct of its
business as the Administrator deems necessary or advisable. The Administrator's
interpretation of the Plan, and all actions taken and determinations made by the
Administrator pursuant to the powers vested in it hereunder, shall be conclusive
and binding on all parties concerned, including the Company, its shareholders,
any optionee and any other employee of the Company or any of its subsidiaries.
<PAGE>
3. PERSONS ELIGIBLE UNDER THE PLAN.
(a) INCENTIVE STOCK OPTIONS. Any person who is an employee of the Company
or any of its subsidiaries shall be eligible to be considered for the grant of
Options under the Plan which qualify as "incentive stock options" ("INCENTIVE
STOCK OPTIONS") within the meaning of Section 422 of the Internal Revenue Code
of 1986, as amended (the "CODE").
(b) NONQUALIFIED STOCK OPTIONS. Any person who is a director, officer,
employee or consultant of the Company or any of its subsidiaries shall be
eligible to be considered for the grant of Options under the Plan which do not
qualify as Incentive Stock Options ("NONQUALIFIED OPTIONS").
4. OPTIONS.
Subject to the provisions of the Plan, the Administrator, in its sole and
absolute discretion, shall determine all of the types, terms and conditions of
each Option granted pursuant to the Plan. The provisions of separate Options
need not be identical, but each Incentive Stock Option shall be in compliance
with the substance of each of the following provisions:
(a) TERM. The exercise period may not be more than 10 years from the
date the Incentive Stock Option is granted. In the case of an Incentive Stock
Option granted to a person who owns stock possessing more than 10% of the total
combined voting power of all classes of stock of the Company, the exercise
period may not be more than 5 years from the date such Incentive Stock Option is
granted.
(b) PRICE. The exercise price of an Incentive Stock Option may not be
less than 100% of the Fair Market Value of the Common Stock at the time the
Incentive Stock Option is granted (110% of the Fair Market Value in the case of
any person who owns stock possessing more than 10% of the total combined voting
power of all classes of stock of the Company). In the absence of an established
market for the Common Stock, the Fair Market Value of the Common Stock shall be
determined in good faith by the Administrator;
(c) TRANSFERABILITY. An Incentive Stock Option shall not be transferable
except by will or by the laws of descent and distribution, and shall be
exercisable during the lifetime of the person to whom the Incentive Stock Option
is granted only by such person.
(d) EMPLOYMENT STATUS. In the event that the optionee's employment with
the Company terminates, the optionee must exercise the Incentive Stock Option,
to the extent it was exercisable at termination, within three months of such
termination.
(e) AGGREGATE FAIR MARKET VALUE OF INCENTIVE STOCK OPTIONS. To the extent
that the aggregate Fair Market Value (determined at the time of grant) of Common
Stock with respect to which Incentive Stock Options are exercisable for the
first time by any Optionee during any calendar year under all plans of the
Company and its affiliates exceeds one hundred thousand
2
<PAGE>
dollars ($100,000), the Options or portions thereof which exceed such limit
(according to the order in which they were granted) shall be treated as
Nonqualified Options
5. SHARES OF COMMON STOCK SUBJECT TO THE PLAN.
(a) MAXIMUM SHARES AVAILABLE. The aggregate number of shares of Common
Stock that may be issued or issuable pursuant to the Plan shall not exceed an
aggregate of 1,000,000 shares of Common Stock, subject to adjustment as provided
in Section 6 of the Plan. Any shares of Common Stock subject to an Option which
for any reason expires or is terminated unexercised as to such shares shall
again be available for issuance under the Plan. The aggregate number of shares
of Common Stock that may be issued at any time pursuant to Options granted under
the Plan shall be reduced by the number of shares of Common Stock which were
otherwise issuable pursuant to Options granted under this Plan but which were
withheld by the Company as payment of the purchase price of the Common Stock
issued pursuant to such Options or as payment of the recipient's tax withholding
obligation with respect to such issuance.
(b) PAYMENT OF SHARES. The exercise price of Common Stock acquired
pursuant to the exercise of an Option shall be paid, to the extent permitted by
applicable statutes and regulations, either (1) in cash at the time the Option
is exercised, or (2) at the discretion of the Board, either at the time of the
grant or exercise of the Option, (A) by delivery to the Company of other shares
of Common Stock, the value of which shall be the Fair Market Value of such
Common Stock, (B) according to a deferred payment or other arrangement (which
may include, without limiting the generality of the foregoing, the use of other
shares of Common Stock) with the person to whom the Option is granted, (C) by
reducing the number of shares of Common Stock otherwise issuable pursuant to the
Option or (D) in any other form of legal consideration that may be acceptable to
the Board.
In the case of any deferred payment arrangement, interest shall be payable
at least annually and shall be payable at the minimum rate of interest necessary
to avoid the imputation of interest, under the applicable provisions of the Code
and Treasury Regulations.
6. RECAPITALIZATIONS.
Unless otherwise provided in the option agreement:
(a) If outstanding shares of the Common Stock of the Company shall be
subdivided into a greater number of shares, or a dividend in Common Stock shall
be paid in respect of the Common Stock, the exercise price of any outstanding
Option in effect immediately prior to such subdivision or immediately after the
record date of such dividend, be proportionately reduced, and conversely, if
outstanding shares of the Common Stock of the Company shall be combined into a
smaller number of shares, the exercise price of any outstanding Option in effect
immediately prior to such combination shall, simultaneously with the
effectiveness of such combination, be proportionately increased.
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(b) When any adjustment is required to be made in the exercise price, the
number of shares purchasable upon the exercise of any outstanding Option shall
be adjusted to that number of shares determined by dividing (1) an amount equal
to the number of shares purchasable upon the exercise of the Option immediately
prior to such adjustment, multiplied by the exercise price in effect immediately
prior to such adjustment, by (2) the exercise price in effect immediately after
such adjustment.
(c) In case of any capital reorganization, any reclassification of the
Common Stock of the Company (other than recapitalization described in Paragraph
6(a) of this Plan), or the consolidation or merger of the Company with another
person where the Company is the "surviving corporation," as defined in Paragraph
6(h) below (collectively referred to hereinafter as "REORGANIZATIONS"), the
holder of any outstanding Option shall thereafter be entitled to purchase on
exercise of the Option the kind and number of shares of stock or other
securities or property of the Company receivable upon such Reorganization by a
holder of the number of shares of the Common Stock of the Company which such
Option entitles the holder to purchase from the Company immediately prior to
such Reorganization: and in any such case appropriate adjustments shall be made
in the application of the provisions set forth in the option agreements and in
this Plan with respect to the rights and interests thereafter of the optionee,
to the end that the provisions set forth in the option agreements and in this
Plan (including the specified changes and other adjustments to the exercise
price) shall thereafter be applicable in relation to any shares or other
property thereafter purchasable upon exercise of such Option.
(d) Each outstanding Option shall terminate upon a dissolution or
liquidation of the Company or a merger or consolidation in which the Company is
not the surviving corporation provided that (1) each optionee to whom no Option
has been tendered by the surviving corporation pursuant to the terms of item (2)
immediately below shall have the right exercisable during a ten-day period
ending on the fifth day prior to such dissolution or liquidation, or merger or
consolidation in which the Company is not the surviving corporation, to exercise
his or her Option in whole or in part, without regard to any installment
provisions under his or her Option agreement; and (2) in its sole and absolute
discretion, the surviving corporation may, but shall not be so obligated, tender
to any optionee an option or options to purchase shares of the surviving
corporation, and such new option or options shall contain such terms and
provisions as shall substantially preserve the rights and benefits of any Option
then outstanding under this Plan.
(e) To the extent that the foregoing adjustments relate to stock or
securities of the Company, such adjustments shall be made by the Board or
Administrator, whose determination in that respect shall be final, binding and
conclusive.
(f) Except as expressly provided in this Section 6, no optionee shall have
any rights by reason of any subdivision or consolidation of shares of stock of
any class or the payment of any stock dividend or any other increase or decrease
in the number of shares of stock of any class, and the dissolution, liquidation,
merger, consolidation or split-up or sale of assets or stock to another
corporation, or any issue by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, shall not affect, and
no adjustment by reason thereof shall be made with respect to, the number of or
exercise price for the shares subject to such optionee's Option.
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(g) The grant of an Option pursuant to the Plan shall not affect in any
way the right or power of the Company to make adjustments, reclassifications,
reorganizations or changes of its capital or business structure or to merge or
to consolidate or to dissolve or liquidate, or to sell or transfer all or any
part of its business or assets.
(h) The determination as to which party to a Reorganization is the
"SURVIVING CORPORATION" shall be made on the basis of the relative equity
interest of the shareholders in the corporation existing after the
Reorganization, as follows: if following any reorganization the holders of
outstanding voting securities of the Company immediately prior to the
reorganization own equity securities possessing more than 50% of the voting
power of the corporation existing following the reorganization, then for
purposes of the Option, the Company shall be the surviving corporation. In all
other cases, the Company shall not be the surviving corporation. In making the
determination of ownership by the shareholders of a corporation immediately
after the reorganization of equity securities pursuant to this Section 6(h),
equity securities which the shareholders owned immediately before the
reorganization, as shareholders of another party to the transaction shall be
disregarded. Further, for purposes of this Section 6(h) only, outstanding
voting securities of a corporation shall be calculated by assuming the
conversion of all equity securities convertible (immediately or at some future
time) into shares entitled to vote.
7. MISCELLANEOUS PROVISIONS.
(a) DEFINITIONS.
(1) "SUBSIDIARY" means any future corporation which would be a
"SUBSIDIARY CORPORATION," as that term is defined in Section 424(f) of the Code,
of the Company.
(2) "OR" means "and/or."
(3) "FAIR MARKET VALUE" means, as of any date, the value of the Common
Stock as determined as follows:
(i) If the Common Stock is listed on any established stock
exchange or a national market system, including without limitation the Nasdaq
National Market, the Fair Market Value of a share of Common Stock shall be the
closing sales price for such stock (or the closing bid, if no sales were
reported) as quoted on such system or exchange (or the exchange with the
greatest volume of trading in the Common Stock) on the last market trading day
prior to the day of determination, as reported in the WALL STREET JOURNAL or
such other source as the deems reliable;
(ii) If the Common Stock is quoted on the Nasdaq System (but
not on the Nasdaq National Market) or is regularly quoted by a recognized
securities dealer but selling prices are not reported, the Fair Market Value of
a share of Common Stock shall be the mean between the bid and asked prices for
the Common Stock on the last market trading day prior to the day of
determination, as reported in the Wall Street Journal or such other source as
the deems reliable;
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(iii) In the absence of an established market for the Common
Stock, the Fair Market Value shall be determined in good faith by the
Administrator.
(b) CONDITIONS ON ISSUANCE. Securities shall not be issued pursuant to
Options unless the grant and issuance thereof shall comply with all relevant
provisions of law and the requirements of any securities exchange or quotation
system upon which any securities of the Company are listed, and shall be further
subject to approval of counsel for the Company with respect to such compliance.
Inability of the Company to obtain authority from any regulatory body having
jurisdiction, which authority is determined by Company counsel to be necessary
to the lawful issuance and sale of any security or Options, shall relieve the
Company of any liability in respect of the nonissuance or sale of such
securities as to which requisite authority shall not have been obtained.
(c) RIGHTS AS A SHAREHOLDER. An optionee shall have no rights as a holder
of Common Stock with respect to Options hereunder, unless and until certificates
for shares of such stock are issued to the optionee.
(d) AGREEMENTS. All Options granted under the Plan shall be evidenced by
written agreements in such form and containing such terms and conditions (not
inconsistent with the Plan) as the Administrator shall from time to time adopt.
(e) WITHHOLDING TAXES. The Company shall have the right to require upon
exercise of an Option the payment (through withholding from the optionee's
salary or otherwise) of any federal, state, local or foreign taxes required by
law to be withheld. The obligation of the Company to issue Common Stock shall
be subject to the restrictions imposed by any and all governmental authorities.
(f) NO RIGHTS TO OPTION. No person shall have any right to be granted an
Option under the Plan. Neither the Plan nor any action taken hereunder shall
be construed as giving any person any right to be retained in the employ of the
Company or any of its subsidiaries or shall interfere with or restrict in any
way the rights of the Company or any of its subsidiaries, which are hereby
reserved, to discharge an employee at any time for any reason whatsoever, with
or without good cause.
(g) ACCELERATION. The shall have the power to accelerate the time at
which an Option may first be exercised or the time during which an Option or any
part thereof will vest, notwithstanding the provisions in the Option stating the
time at which it may first be exercised or the time during which it will vest.
(h) TRANSFERABILITY. Except as otherwise provided by the Administrator,
options granted under the Plan are not transferable other than as designated by
the Optionee by will or by the laws of descent and distribution.
8. AMENDMENTS AND TERMINATION.
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(a) AMENDMENTS. The Board may at any time and from time to time amend the
Plan in whole or in part, but no such action shall adversely affect any rights
or obligations with respect to any outstanding Options. However, with the
consent of the optionee affected, the may amend outstanding agreements
evidencing Options under the Plan in a manner not inconsistent with the terms of
the Plan.
(b) TERMINATION. The Plan shall terminate on the earlier to occur of the
date the Board terminates the Plan and December 31, 2007. The termination of the
Plan shall not terminate any outstanding Options.
9. EFFECTIVE DATE.
The Plan is effective on December 3, 1998.
10. GOVERNING LAW.
The Plan and any agreements entered into thereunder shall be construed and
governed by the laws of the State of New York applicable to contracts made
within, and to be performed wholly within, such state, without regard to the
application of conflict of laws rules thereof.
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INDEMNIFICATION AGREEMENT
This Indemnification Agreement ("AGREEMENT") is made as of this _____ day
of _____, 199_, by and between Symposium Telecom Corporation, a Delaware
corporation (the "COMPANY"), and __________________ ("INDEMNITEE").
RECITALS
A. The Company and Indemnitee recognize the increasing difficulty in
obtaining liability insurance for directors, officers, employees and agents, the
significant increases in the cost of such insurance and the general reductions
in the coverage of such insurance.
B. The Company and Indemnitee further recognize the substantial increase
in corporate litigation in general, subjecting directors, officers, employees,
and agents to expensive litigation risk at the same time that the availability
and coverage of liability insurance has been severely limited.
C. Indemnitee does not regard the current protection available as
adequate under the present circumstances, and Indemnitee and other directors,
officers, employers and agents of the Company may not be willing to continue to
serve as directors, officers, employees and agents without additional
protection.
D. The Company desires to attract and retain the services of highly
qualified individuals, such as Indemnitee, to serve as directors, officers,
employees and agents of the Company and to indemnify its directors, officers,
employees and agents so as to provide them with the maximum protection permitted
by law.
AGREEMENT
The Company and Indemnitee hereby agree as follows:
1. AGREEMENT TO SERVE. Indemnitee agrees to serve and/or continue to
serve the Company, at the Company's will (or under separate written agreement
approved by the Board of Directors of the Company, if such agreement exists), in
the capacity Indemnitee currently serves the Company, as long as Indemnitee is
duly appointed or elected and qualified in accordance with the applicable
provisions of the Bylaws of the Company or any subsidiary of the Company or
(subject to any employment agreement between Indemnitee and the Company) until
such time as Indemnitee tenders a written resignation or is removed in
accordance with the Bylaws; PROVIDED,
<PAGE>
HOWEVER, that nothing contained in this Agreement is intended to or shall
create any right (express or implied) to continued employment by Indemnitee.
2. INDEMNIFICATION.
(a) THIRD PARTY PROCEEDINGS. The Company shall indemnify Indemnitee
if Indemnitee is or was a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative (other than an action by or in the
right of the Company) by reason of the fact that Indemnitee is or was a
director, officer, employee or agent of the Company, or any subsidiary of the
Company, by reason of any action or inaction on the part of Indemnitee while a
director, officer, employee or agent, or by reason of the fact that Indemnitee
is or was serving at the request of the Company as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including, without limitation, attorneys' fees,
disbursements and retainers, accounting and witness fees, travel and deposition
costs, and expenses of investigations), judgments, fines and amounts paid in
settlement (if such settlement is approved in advance by the Company) actually
and reasonably incurred by Indemnitee in connection with such action, suit or
proceeding if Indemnitee acted in good faith and in a manner Indemnitee
reasonably believed to be in or not opposed to the best interests of the
Company, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe Indemnitee's conduct was unlawful. The termination
of any action, suit or proceeding by judgment, order, settlement, conviction, or
upon a plea of NOLO CONTENDERE or its equivalent, shall not, of itself, create a
presumption that Indemnitee did not act in good faith and in a manner which
Indemnitee reasonably believed to be in or not opposed to the best interests of
the Company, and, with respect to any criminal action or proceeding, had
reasonable cause to believe that Indemnitee's conduct was unlawful.
(b) PROCEEDINGS BY OR IN THE RIGHT OF THE COMPANY. The Company shall
indemnify Indemnitee if Indemnitee was or is a party or is threatened to be made
a party to any threatened, pending or completed action or suit by or in the
right of the Company or any subsidiary of the Company to procure a judgment in
its favor by reason of the fact that Indemnitee is or was a director, officer,
employee or agent of the Company, or any subsidiary of the Company, by reason of
any action or inaction on the part of Indemnitee while a director, officer,
employee or agent, or by reason of the fact that Indemnitee is or was serving at
the request of the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
expenses (including, without limitation, attorneys' fees, disbursements and
retainers, accounting and witness fees, travel and deposition costs, and
expenses of investigations) and, to the fullest extent permitted by law, amounts
paid in settlement, in each case to the extent actually and reasonably incurred
by Indemnitee in connection with the defense or settlement of such action or
suit (i) if Indemnitee acted in good faith and in a manner Indemnitee reasonably
believed to be in or not opposed to the best interests of the Company and its
stockholders, except that no indemnification shall be made in respect of any
claim, issue or
<PAGE>
matter as to which Indemnitee shall have been adjudged to be liable to the
Company in the performance of Indemnitee's duty to the Company and its
stockholders unless and only to the extent that the court in which such
action or suit is or was pending shall determine upon application that, in
view of all the circumstances of the case, Indemnitee is fairly and
reasonably entitled to indemnity for expenses and then only to the extent
that the court shall determine; (ii) if Indemnitee is a director, to the
extent that the action or contemplated action seeks monetary damages for
breach of Indemnitee's duties to the Company and its stockholders in
circumstances under which Indemnitee's personal liability therefor has been
eliminated as a result of the provisions of Section 102(b)(7) of the Delaware
General Corporation Law; or (iii) if Indemnitee is an agent other than a
director, to the extent that, were Indemnitee a director, Indemnitee would
have the right to be indemnified under Section 2(b)(ii), above; and in the
case of Section 2(b)(ii) and 2(b)(iii) above, indemnification shall include,
to the extent not prohibited by law, indemnification against all judgments,
fines and amounts paid in settlement actually and reasonably incurred by
Indemnitee in connection with such action, suit or proceeding.
(c) MANDATORY PAYMENT OF EXPENSES. To the extent that Indemnitee has
been successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in Sections 2(a) or (b) or in defense of any claim, issue
or matter therein, Indemnitee shall be indemnified against expenses (including,
without limitation, attorneys' fees, disbursements and retainers, accounting and
witness fees, travel and deposition costs, and expenses of investigations)
actually and reasonably incurred by Indemnitee in connection therewith.
(d) INDEMNIFICATION FOR SERVING AS A WITNESS. Notwithstanding any
other provision of this Agreement, to the extent that Indemnitee is, by reason
of Indemnitee's status as a director, officer, employee or agent of the Company,
a witness in any action, suit or proceeding, whether civil, criminal,
administrative or investigative, Indemnitee shall be indemnified against
expenses actually and reasonably incurred by Indemnitee in connection therewith.
3. EXPENSES; INDEMNIFICATION PROCEDURE.
(a) ADVANCEMENT OF EXPENSES. The Company shall advance all
reasonable expenses incurred by Indemnitee in connection with the investigation,
defense, settlement or appeal of any civil, criminal, administrative or
investigative action, suit or proceeding referenced in Section 2(a) or (b)
hereof (but not amounts actually paid in settlement of any such action, suit or
proceeding). Indemnitee hereby undertakes to repay such amounts advanced only
if, and to the extent that, it shall ultimately be determined that Indemnitee is
not entitled to be indemnified by the Company as authorized hereby.
(b) NOTICE/COOPERATION BY INDEMNITEE. Indemnitee shall, as a
condition precedent to his right to be indemnified under this Agreement, give
the Company notice, in accordance with Section 14 hereof, of any claim made
against Indemnitee for which indemnification will or could be sought under this
Agreement. Notice to the Company shall be directed to
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<PAGE>
the Chief Executive Officer of the Company. In addition, Indemnitee shall
give the Company such information and cooperation as it may reasonably
require and as shall be within Indemnitee's power.
(c) PROCEDURE. Any indemnification and advances provided for in
Section 2 and this Section 3 shall be made no later than 30 days after receipt
of the written request of Indemnitee. If a claim under this Agreement, under
any statute, or under any provision of the Company's Certificate of
Incorporation or Bylaws providing for indemnification, is not paid in full by
the Company within 30 days after a written request for payment thereof has first
been received by the Company, Indemnitee may, but need not, at any time
thereafter bring an action against the Company to recover the unpaid amount of
the claim and, subject to Section 13 of this Agreement, Indemnitee shall also be
entitled to be paid for the expenses (including attorneys' fees) of bringing
such action. It shall be a defense to any such action (other than an action
brought to enforce a claim for expenses incurred in connection with any action,
suit or proceeding in advance of its final disposition) that Indemnitee has not
met the standards of conduct which make it permissible under applicable law for
the Company to indemnify Indemnitee. Indemnitee shall be entitled to receive
interim payments of expenses pursuant to Section 3(a) unless and until such
defense may be finally adjudicated by court order or judgment from which no
further right of appeal exists. It is the intention of the parties that if the
Company contests Indemnitee's right to indemnification, the question of
Indemnitee's right to indemnification shall be for the court to decide, and
neither the failure of the Company (including its Board of Directors, any
committee or subgroup of the Board of Directors, independent legal counsel, or
its stockholders) to have made a determination that indemnification of
Indemnitee is proper in the circumstances because Indemnitee has met the
applicable standard of conduct required by applicable law, nor an actual
determination by the Company (including its Board of Directors, any committee or
subgroup of the Board of Directors, independent legal counsel, or its
stockholders) that Indemnitee has not met such applicable standard of conduct,
shall create a presumption that Indemnitee has or has not met the applicable
standard of conduct.
(d) NOTICE TO INSURERS. If, at the time of the receipt of a notice
of a claim pursuant to Section 3(b) hereof, the Company has director and officer
liability insurance in effect, the Company shall give prompt notice of the
commencement of such proceeding to the insurers in accordance with the
procedures set forth in the respective policies. The Company shall thereafter
take all necessary or desirable action to cause such insurers to pay, on behalf
of the Indemnitee, all amounts payable as a result of such proceeding in
accordance with the terms of such policies.
(e) SELECTION OF COUNSEL. In the event the Company shall be
obligated under Section 3(a) hereof to pay the expenses of any proceedings
against Indemnitee, the Company, if appropriate, shall be entitled to assume the
defense of such proceeding, with counsel approved by Indemnitee, upon the
delivery to Indemnitee of written notice of its election so to do. After
delivery of such notice, approval of such counsel by Indemnitee and the
retention of such counsel
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by the Company, the Company will not be liable to Indemnitee under this
Agreement for any fees of counsel subsequently incurred by Indemnitee with
respect to the same proceeding, provided that (i) Indemnitee shall have the
right to employ separate counsel in any such proceeding at Indemnitee's
expense; and (ii) if (A) the employment of counsel by Indemnitee has been
previously authorized by the Company, (B) Indemnitee shall have reasonably
concluded that there may be a conflict of interest between the Company and
Indemnitee in the conduct of any such defense, or (C) the Company shall not,
in fact, have employed counsel to assume the defense of such proceeding, then
the fees and expenses of Indemnitee's counsel shall be at the expense of the
Company.
4. ADDITIONAL INDEMNIFICATION RIGHTS; NONEXCLUSIVITY.
(a) SCOPE. Notwithstanding any other provision of this Agreement,
the Company hereby agrees to indemnify the Indemnitee to the fullest extent
permitted by law, notwithstanding that such indemnification is not specifically
authorized by the other provisions of this Agreement, the Company's Certificate
of Incorporation, the Company's Bylaws or by statute. In the event of any
change in any applicable law, statute or rule which narrows the right of a
Delaware corporation to indemnify a member of its board of directors or its
officers, employees or agents, such change, to the extent not otherwise required
by such law, statute or rule to be applied to this Agreement, shall have no
effect on this Agreement or the parties' rights and obligations hereunder.
(b) NONEXCLUSIVITY. The indemnification provided by this Agreement
shall not be deemed exclusive of any rights to which Indemnitee may be entitled
under the Company's Certificate of Incorporation, its Bylaws, any agreement, any
vote of stockholders or disinterested Directors, the Delaware General
Corporation Law or otherwise, both as to action in Indemnitee's official
capacity and as to action in another capacity while holding such office. The
indemnification provided under this Agreement shall continue as to Indemnitee
for any action taken or not taken while serving in an indemnified capacity even
though he may have ceased to serve in such capacity at the time of any action,
suit or other covered proceeding.
5. PARTIAL INDEMNIFICATION. If Indemnitee is entitled under any
provision of this Agreement to indemnification by the Company for some or a
portion of the expenses, judgments, fines or penalties actually or reasonably
incurred by him in the investigation, defense, appeal or settlement of any civil
or criminal action, suit or proceeding, but not, however, for the total amount
thereof, the Company shall nevertheless indemnify Indemnitee for the portion of
such expenses, judgments, fines or penalties to which Indemnitee is entitled.
6. MUTUAL ACKNOWLEDGEMENT. Both the Company and Indemnitee acknowledge
that in certain instances, Federal law or applicable public policy may prohibit
the Company from indemnifying its directors, officers, employees and/or agents
under this Agreement or otherwise. Indemnitee understands and acknowledges that
the Company has undertaken or may be required
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<PAGE>
in the future to undertake with the Securities and Exchange Commission to
submit the question of indemnification to a court in certain circumstances
for a determination of the Company's right under public policy to indemnify
Indemnitee.
7. LIABILITY INSURANCE. If the Company does not maintain a policy or
policies of officers and directors liability insurance with a reputable
insurance company(ies), upon written request of Indemnities, the Company shall,
from time to time, make the good faith determination whether or not it is
practicable for the Company to obtain and maintain such a policy or policies of
insurance. Officers and directors liability insurance would cover, among other
things, coverage for losses from wrongful acts and/or to ensure the Company's
performance of its obligations under this Agreement. The Company shall not be
obligated to make such determination more than once in any 12-month period based
on written requests from Indemnities and any other persons with similar rights.
Among other considerations, the Company will weigh the costs of obtaining such
insurance coverage against the protection afforded by such coverage. In all
such policies of liability insurance, Indemnitee shall be named as an insured in
such a manner as to provide Indemnitee the same rights and benefits as are
accorded to the most favorably insured of the Company's directors, if Indemnitee
is a director; or of the Company's officers, if Indemnitee is not a director of
the Company but is an officer; or of the Company's employees, if Indemnitee is
not a director or officer but is an employee; or of the Company's agents, if
Indemnitee is not a director, officer or employee but is an agent.
Notwithstanding the foregoing, the Company shall have no obligation to obtain or
maintain such insurance if the Company determines in good faith that such
insurance is not reasonably available, if the premium costs for such insurance
are disproportionate to the amount of coverage provided, if the coverage
provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or if Indemnitee is covered by similar insurance
maintained by a subsidiary or parent of the Company.
8. SEVERABILITY. Nothing in this Agreement is intended to require or
shall be construed as requiring the Company to do or fail to do any act in
violation of applicable law. The Company's inability, pursuant to court order,
to perform its obligations under this Agreement shall not constitute a breach of
this Agreement. The provisions of this Agreement shall be severable as provided
in this Section 8. If this Agreement or any portion hereof shall be invalidated
on any ground by any court of competent jurisdiction, then the Company shall
nevertheless indemnify Indemnitee to the full extent permitted by any applicable
portion of this Agreement that shall not have been invalidated, and the balance
of this Agreement not so invalidated shall be enforceable in accordance with its
terms.
9. EXCEPTIONS. Any other provision herein to the contrary
notwithstanding, the Company shall not be obligated pursuant to the terms of
this Agreement:
(a) CLAIMS INITIATED BY INDEMNITEE. To indemnify or advance expenses
to Indemnitee with respect to proceedings or claims initiated or brought
voluntarily by Indemnitee and not by way defense, except with respect to
proceedings brought to establish or enforce a right
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to indemnification under this Agreement or any other statute or otherwise as
required under Section 145 of the Delaware General Corporation Law, but such
indemnification or advancement of expenses may be provided by the Company in
specific cases if the Board of Directors has approved the initiation or
bringing of such suit;
(b) LACK OF GOOD FAITH. To indemnify Indemnitee for any expenses
incurred by the Indemnitee with respect to any proceeding instituted by
Indemnitee to enforce or interpret this Agreement, if a court of competent
jurisdiction determines that each of the material assertions made by the
Indemnitee in such proceeding was not made in good faith or was frivolous;
(c) INSURED CLAIMS. To indemnify Indemnitee for expenses or
liabilities of any type whatsoever (including, but not limited to, judgments,
fines, ERISA excise taxes or penalties, and amounts paid in settlement) which
have been paid directly to Indemnitee by an insurance carrier under a policy of
officers' and directors' liability insurance or other policy of insurance
maintained by the Company;
(d) CLAIMS UNDER SECTION 16(b). To indemnify Indemnitee for expenses
and the payment of profits arising from the purchase and sale by Indemnitee of
securities in violation of Section 16(b) of the Securities Exchange Act of 1934,
as amended, or any similar successor statute;
(e) UNLAWFUL CLAIMS. To indemnify Indemnitee in any manner which is
contrary to public policy or which a court of competent jurisdiction has finally
determined to be unlawful;
(f) FAILURE TO SETTLE PROCEEDING. To indemnify Indemnitee for
liabilities in excess of the total amount at which settlement reasonably could
have been made, or for any cost and/or expenses incurred by Indemnitee following
the time such settlement reasonably could have been effected, if Indemnitee
shall have unreasonably delayed, refused or failed to enter into a settlement of
any action, suit or proceeding (or investigation or appeal thereof) recommended
in good faith, in writing, by the Company; or
(g) BREACH OF EMPLOYMENT AGREEMENT. To indemnify Indemnitee for any
breach by Indemnitee of any employment agreement between Indemnitee and the
Company or any of its subsidiaries.
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10. CONSTRUCTION OF CERTAIN PHRASES.
For purposes of this Agreement, references to the "COMPANY" shall
include, in addition to the resulting corporation, any constituent corporation
(including any constituent of a constituent) absorbed in a consolidation or
merger which, if its separate existence had continued, would have had power and
authority to indemnify its directors, officers, employees and/or agents, so that
if Indemnitee is or was a director, officer, employee or agent of such
constituent corporation, or is or was serving at the request of such constituent
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, Indemnitee shall stand in
the same position under the provisions of this Agreement with respect to the
resulting or surviving corporation as Indemnitee would have with respect to such
constituent corporation if its separate existence had continued.
For purposes of this Agreement, references to "OTHER ENTERPRISES"
shall include employee benefit plans; references to "FINES" shall include any
excise taxes assessed on Indemnitee with respect to an employee benefit plan;
and references to "SERVING AT THE REQUEST OF THE COMPANY" shall include any
service as a director, officer, employee or agent of the Company or any
subsidiary of the Company which imposes duties on, or involves services by, such
director, officer, employee or agent with respect to an employee benefit plan,
its participants, or beneficiaries; and if Indemnitee acted in good faith and in
a manner Indemnitee reasonably believed to be in the interest of the
participants and beneficiaries of an employee benefit plan, Indemnitee shall be
deemed to have acted in a manner "NOT OPPOSED TO THE BEST INTEREST OF THE
COMPANY" as referred to in this Agreement.
11. COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which shall constitute an original.
12. SUCCESSORS AND ASSIGNS. This Agreement shall be binding upon the
Company and its successors and assigns, and shall inure to the benefit of
Indemnitee and Indemnitee's estate, heirs, legal representatives and assigns.
13. ATTORNEYS' FEES. In the event that any action is instituted by
Indemnitee under this Agreement to enforce or interpret any of the terms hereof,
Indemnitee shall be entitled to be paid all court costs and expenses, including
reasonable attorneys' fees, incurred by Indemnitee with respect to such action,
unless as a part of such action, the court of competent jurisdiction determines
that each of the material assertions made by Indemnitee as a basis for such
action were not made in good faith or were frivolous. In the event of an action
instituted by or in the name of the Company under this Agreement to enforce or
interpret any of the terms of this Agreement, Indemnitee shall be entitled to be
paid all court costs and expenses, including attorneys' fees, incurred by
Indemnitee in defense of such action (including with respect to Indemnitee's
counterclaims and cross-claims made in such action), unless as a part of such
action the court
8
<PAGE>
determines that each of Indemnitee's material defenses to such action were
made in bad faith or were frivolous.
14. NOTICE. All notices, requests, demands and other communications under
this Agreement shall be in writing and shall be deemed duly given (i) if
delivered by hand and receipted for by the party addressee, on the date of such
receipt, or (ii) if mailed by domestic certified or registered mail with postage
prepaid, on the third business day after the date postmarked. Addresses for
notice to either party are as shown on the signature page of this Agreement, or
as subsequently modified by written notice.
15. CONSENT TO JURISDICTION. The Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of California
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that any action instituted under this
Agreement shall be brought only in the state courts of the State of California,
or in Federal courts located in such State.
16. CHOICE OF LAW. This Agreement shall be governed by and its provisions
construed in accordance with the laws of the State of Delaware.
17. CALIFORNIA LAW. To the extent that the Company is subject to the
provisions of Section 317 of the California General Corporation Law pursuant to
Section 2115 of the California General Corporation Law, nothing in this
Agreement shall be deemed to require the Company to take any action which would
cause it to be in violation of Section 317 of the California General Corporation
Law.
9
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
SYMPOSIUM TELECOM CORPORATION,
a Delaware corporation, as the Company
By:
-------------------------------------
Name:
--------------------------------
Title:
-------------------------------
Notice Address:
-------------------------------------
-------------------------------------
-------------------------------------
AGREED TO AND ACCEPTED:
INDEMNITEE:
- --------------------------
- --------------------------
Notice Address:
- --------------------------
- --------------------------
- --------------------------
10
<PAGE>
EXHIBIT 15.1
[LETTERHEAD]
February 16, 1999
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549
RE: SYMPOSIUM TELECOM CORPORATION
-----------------------------
We were previously the principal accountant for Symposium Telecom Corporation
and under the date of August 4, 1998, we reported on the balance sheet of
Symposium Telecom Corporation as of July 20, 1998. On February 8, 1999 our
appointment as principal accountant was terminated. We have read Symposium
Telecom Corporation's statements included under Part II Item 3 of its Form
10-SB dated February 16, 1999 and we agree with such statements.
Very truly yours,
/s/ Weinberg & Company, P.A.
----------------------------
WEINBERG & COMPANY, P.A.
Certified Public Accountants
<PAGE>
EXHIBIT 15.2
SUBSIDIARIES OF REGISTRANT
1. Publishers Advantage Corporation, a Delaware corporation
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM AUDITED
FINANCIAL STATEMENTS OF SYMPOSIUM TELECOM CORPORATION AND SUBSIDIARY FOR THE
YEAR ENDED DECEMBER 31, 1998 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 292,000
<SECURITIES> 0
<RECEIVABLES> 13,191
<ALLOWANCES> (2,994)
<INVENTORY> 0
<CURRENT-ASSETS> 302,000
<PP&E> 22,428
<DEPRECIATION> (124)
<TOTAL-ASSETS> 349,805
<CURRENT-LIABILITIES> 74,787
<BONDS> 0
0
0
<COMMON> 7,370
<OTHER-SE> 267,648
<TOTAL-LIABILITY-AND-EQUITY> 349,805
<SALES> 13,816
<TOTAL-REVENUES> 13,816
<CGS> 20,586
<TOTAL-COSTS> 319,504
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (319,504)
<INCOME-TAX> 0
<INCOME-CONTINUING> (319,504)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (319,504)
<EPS-PRIMARY> (.18)
<EPS-DILUTED> (.18)
</TABLE>
