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U.S. SECURITIES AND
EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-KSB
(Mark One)
[X] ANNUAL REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For Fiscal Year Ended: December 31, 1999
OR
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from ________________ to ________________
Commission file number 0-25007
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Contessa Corporation
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(Exact name of small business issuer as
specified in its charter)
Delaware 65-0655628
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(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
11 Chambers Street
Princeton, NJ 08542 08542
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(Address of principal executive offices) (Zip Code)
Issuer's telephone number (609)252 -0657
Securities registered under Section 12(b) of the Act: NONE
Securities registered under Section 12(g) of the Act: Common Stock, par value
$.0001 per share
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Check whether the issuer (1) filed all reports required to be filed by
Section 13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
Yes No X
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Check if disclosure of delinquent filers in response to Item 405 of
Regulation S-B is not contained in this form, and no disclosure will be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form 10-
KSB or any amendment to this form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $ -0-
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As of December 31, 1999, there were 2,806,506 shares of the Registrant's
common stock, par value $0.001, issued and outstanding. Of these 844,006 shares
are held by non-affiliates of the Registrant. The Registrant's common stock
has never traded on any public market and has never received any bids and
therefore the Registrant is unable to estimate the market value of securities
held by non-affiliates.
Transitional Small Business Disclosure Format (check one):
Yes No X
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DOCUMENTS INCORPORATED BY REFERENCE
If the following documents are incorporated by reference, briefly describe
them and identify the part of the Form 10-KSB (e.g., Part I, Part II, etc.)
into which the document is incorporated: (1) any annual report to security
holders; (2) any proxy or information statement; and (3) any prospectus filed
pursuant to Rule 424(b) or (c) of the Securities Act of 1933 ("Securities Act"):
None, however certain exhibits hereto are incorporated by reference to the Form
10-SB and Amendment No. 1 previously filed by the Registrant with the
Commission.
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TABLE OF CONTENTS
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Item Number and Caption Page
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PART I
1. Description of Business............................................................... 1-7
2. Description of Property............................................................... 8
3. Legal Proceedings..................................................................... 8
PART II
4. Submission of Matters to a Vote of Security Holders................................... 8
5. Market for Common Equity and Related Stockholder Matters; Change in Control........... 9
6. Management's Discussion and Analysis or Plan of Operations............................ 10
7. Financial Statements.................................................................. 12
8. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.. 12
PART III
9. Directors, Executive Officers, Promoters and Control Persons;
Compliance with Section 16(a) of the Exchange Act...................................... 13
10. Executive Compensation.............................................................. 14
11. Security Ownership of Certain Beneficial Owners and Management....................... 15
12. Certain Relationships and Related Transactions....................................... 15
13. Exhibits and Reports on Form 8-K..................................................... 15
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PART I DESCRIPTION OF BUSINESS
Item 1. Description of Business.
(a) Business Development.
Contessa Corporation (hereinafter referred to as the "Company" and/or the
"Issuer"), a Delaware corporation, was formed on March 7, 1996 under the name
United Health Management, Inc. to operate as a managed health care provider. On
September 16, 1997, the board of directors of the Company changed the business
of the Company to that of a holding company, and subsequently changed its name
to Contessa Corporation. In September of 1997, the Company acquired all of the
issued and outstanding shares of Gastronnomia Bocca Di Rossa, Inc. ("GBDR"), a
Florida corporation, in exchange for 562,500 shares of its common stock, $.0001
par value (the "Acquisition"). As a result, GBDR became the wholly-owned
subsidiary of the Company. Prior to the Acquisition, GBDR was a wholly owned
subsidiary of Giuditta Investments, Inc. an affiliate of Mr. Pietro Bortolatti,
and a corporation organized under the laws of Florida. As noted below,
subsequent to the period covered by this report, the Company signed an Agreement
and Plan of Merger to acquire Fullcom Inc., a New Jersey corporation ("Old
Fullcomm"), disposed of its interest in GBDR, and consummated the acquisition
of Old Fullcomm pursuant to a merger which became effective on March 1, 2000.
(b) Business of the Issuer.
The Company is a holding company, the principal assets of which were
formerly the capital stock of Gastronnomia Bocca Di Rosa, Inc. ("GBDR"), and
which are now the capital stock of Fullcomm. At the time of its acquisition,
GBDR was to be the basis for the Company's restaurant operations. Development of
the restaurant operations proceeded behind schedule and the Company incurred
greater costs than it had anticipated. As a result, the Company has abandoned
the restaurant development effort. The Company entered into a Stock Purchase
Agreement (the "Stock Purchase Agreement") under which Mr. Bortolatti would
receive back the shares of GBDR formerly held by his affiliate, Giuditta
Investments, Inc. and in exchange therefor, would surrender the shares of the
Company that he received in the Acquisition. The consummation of the Stock
Purchase Agreement was subject to several contingencies and conditions which now
have been satisfied. The sale of the GBDR shares was
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consummated on February 23, 2000 and as a result, GBDR is no longer a subsidiary
of the Company, and Mr. Bortolatti's shares have been reacquired by the Company.
The GBDR disposition was reported in an 8-K filed on March 14, 2000.
GBDR was to be engaged in the operation of an Italian delicatessen/cafe,
to be called "Bocca Di Rosa Gastronnomia" ("Gastronnomia"). Gastronnomia was
intended to be an informal restaurant/ delicatessen/bakery/ featuring take-
out, catering, deliveries, as well as on site dining. The restaurant was to
offer both indoor and outdoor dining in a rustic setting, with an open,
elevated kitchen. The opening of Gastronnomia was originally scheduled for
November 30, 1998. Due to unforeseen delays and difficulties of various types,
Gastronnomia has never opened. According to Mr. Bortolatti, successfully
bringing the project to completion would require additional investment by the
Company of approximately $200,000. The Company determined that it is not in its
best interest to continue the development process and has therefore abandoned
its restaurant operations. Base lease payments of $63,204 plus additional
lease payments in respect of allocated real estate taxes and insurance remain
the obligation of GBDR, however, the Company has no interest in GBDR, and
consequently, has no obligation with respect to that lease.
Acquisition of Old Fullcomm - The Old Fullcomm Merger
On January 28, 2000, the Company entered into an Agreement and Plan of
Merger among Old Fullcomm, Fullcomm Acquisition Corp. ("Acquisition"), a wholly
owned subsidiary of Contessa, and the principal shareholders of Contessa and Old
Fullcomm. An Amended and Restated Agreement and Plan of Merger dated as of
January 28, 2000 was later entered into (such Amended and Restated Agreement and
Plan of Merger being the "Merger Agreement"). Under the terms of the Merger
Agreement, Old Fullcomm was to be merged with and into Acquisition which would
be the remaining Delaware corporation (the "Merger"). Acquisition will continue
as a wholly-owned subsidiary under the name of "Fullcomm, Inc." and the former
shareholders of Old Fullcomm, the New Jersey "disappearing" corporation
received shares in Contessa, the public, parent company. The respective
shareholders of Contessa and Old Fullcomm under the Merger Agreement received
the following merger consideration; the (i) 4,601,100 shares of Old Fullcomm
issued and outstanding prior to the Merger were cancelled, and a like number of
Contessa shares issued to the former Old Fullcom shareholders on a "one for one"
basis and (ii) a stock dividend of 695,944 shares was declared and issued with
respect to the 2,304,006 shares of Contessa common stock issued and outstanding
prior to the Merger, thereby resulting in 3,000,000 shares held by the prior
shareholders of Contessa. Taking only these two issuances
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into account, the former shareholders of Old Fullcomm held 4,601,100 shares
of 7,601,100, or 60.5% of the issued and outstanding shares and the former
shareholders of Contessa held 3,000,000 shares of the 7,601,100, or 39.5% of the
issued and outstanding shares. As noted herein, a number of shares were issued
or are issuable to non-shareholders pursuant to various agreements entered into
in conjunction with the Merger.
The transaction was reviewed and approved by Acquisition's Board of
Directors and submitted to Contessa Corporation, its sole stockholder, for its
approval which was given by stockholder consent under the Delaware General
Corporation Law. The Merger was also approved via by unanimous shareholder
consent under the provisions of the New Jersey Business Corporation Law. The
Merger was effectuated by the filing of Certificates of Merger with the Delaware
and New Jersey Secretaries of State, and was effective, on March 1, 2000. The
Merger Agreement has been filed as Exhibit 2 hereto.
As the Merger was given unanimous approval by all shareholders entitled to
vote on the Merger, there were no dissenting shareholders and therefore no
dissenting shareholder rights under the relevant corporation statutes of
Delaware or New Jersey. All shares issued to former shareholders of Old
Fullcomm were issued under the exemptions from registration afforded by Rule
506 of Regulation D, and/or the "private placement" exemption under Section
4(2) of the Securities Act of 1933, as amended (the "Securities Act"), and the
dividend shares issued to Contessa shareholders are exempt from registration by
reason of the statutory exemption found in Section 3(a)(9) of the Securities
Act.
The Business of Fullcomm
Products and Services and Market Potential
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Fullcomm is a development stage company that is engaged in the research,
production and development of proprietary hardware and software encryption
components for digital data transfer.
For those who wish to download content from websites or engage in two-way
communication via the Internet, privacy is a key issue. Fullcomm's technology
aims to meet these needs. The Fullcomm technology is threefold: client-side
security hardware, server-side security software, and authentication party
software. These three cooperate in a fashion that facilitates the secure
transmission of any and all digital data via the Internet or over VPN's (Virtual
Private Networks).
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By focusing on the described near-term applications, Fullcomm believes it can
enter the market with relatively modest development costs.
Digital rights management (DRM) platforms serve as a foundation for providers of
digital information, technology, and commerce services to participate in a
global e-commerce system. DRM technologies manage rights and interests in
digital information. Fullcomm provides consulting, applied research and product
development services related to commercial security and encryption solutions.
These solutions enable the secure exchange of information among a wide array of
information systems and provide a framework for a broad range of transactions.
Fullcomm intends to earn revenue from licensed technology products, transaction
fees and information services delivered over the Internet, private Intranets or
other networks.
Fullcomm's technology is strategically positioned to reap the benefits of the
exponential growth of online transactions. The size of the markets for the
following applications are expected to range from $2.5 billion to more than $20
billion in the next few years. These markets include:
- E-commerce - greater security for online financial transactions and
business information;
- Audio - distribution of music over the Internet;
- Video - distribution of movies and television programming for sale or
rental online;
- Internet Publishing - distribution of books, newspapers, and periodicals
online;
- Software Distribution - enhanced security for the sale or rental of
software online;
- Voice over Internet Protocol Telephony - enhanced security for voice
communication over the Internet; and
- Wireless Data - secure transmission of information for the rapidly
expanding wireless data market.
Fullcomm's product research and development efforts consists of essentially five
key steps:
- design;
- prototyping;
- testing;
- certification; and
- manufacturing
Fullcomm currently has completed the design and is developing the working
prototype. The design includes two key elements: server side security
software and user side security hardware.
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Financing of Product Development
Fullcomm has undertaken a private placement offering of not less than $1
Million of equity securities at an offering price of $2.50 per share. R.K Grace
and Company, a registered broker/dealer has agreed to act as placement agent for
the equity securities under a Memorandum of Understanding re: Placement Agent.
As of March 29, $1.1 Million of subscriptions have been received and thus the
minimal levels needed to break escrow under the terms of the offering will have
been met. Net of placement agency commissions and other expenses of offering,
Fullcomm will have available to it net offering proceeds of at least $850,000.
Fullcomm intends to continue with the private placement and under the stated
terms of the offering will be able to raise up to $3 Million in gross offering
proceeds.
Strategic Marketing Alliances
The ultimate commercial success of any new technology depends not only upon
that technology's technical capabilities but on a successful marketing and
product implementation campaign which will provide the necessary level of market
penetration and product acceptance. Contessa and Fullcomm have entered into
Consulting Agreements with C. Bradley Tashenberg and Gregory Creekmoore who are
principals in Bradmark Technologies Inc., a firm with an existing institutional
client base of approximately 10,000 customers. Bradmark, located in Houston,
TX, was cited as a "Software 500" Company by Software Magazine in its 1999
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industry review. Under the terms of their agreements, Messrs. Tashenberg and
Creekmoore have agreed to make themselves available from time to time over the
next two years for consultation, marketing, and technical advice. Under the
terms of their Consulting Agreements, Messrs. Tashenberg and Creekmoore
receive no direct cash payments but instead have been awarded equity stakes in
Contessa of 175,000 shares apiece, which shares may not be sold until the
passage of at least 3 years. Fullcomm has also entered into a binding agreement
to establish a master distributorship relationship with Creative Web Solutions,
Inc., a subsidiary of Bradmark. Creative Web Solutions will aim to provide
particular marketing focus to the "business to business " applications sector.
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ITEM 2. DESCRIPTION OF PROPERTY
Executive Offices
The Company's executive offices are currently located at 211 Chambers
Street, Princeton, New Jersey 08542. The Company occupies approximately 1000
square feet of space at a monthly rent of $2,400. The current lease term ends on
April 30, 2000. The Company believes it could secure comparable space in the
event it needs to move.
The Former Restaurant Development Premises
The Company's formerly wholly owned subsidiary, GBDR had entered into a ten
year lease dated July 1, 1997 with Carolyn Meredith for 1,832 square feet of
retail space at 2808 Bird Avenue (the "Premises A") and 916 square feet of
retail space at 2806 Bird Avenue (the "Premises B"), both in Coconut Grove,
Florida (collectively the "Premises").
The annual rent for Premises A for the first three years is $42,136,
payable in equal monthly installments of $3,511.33. Beginning on May 1, 1998,
the annual rent for Premises B for the first three (3) years is $21,068, payable
in equal monthly installments of $1,755.66. The lease also required the lessee
to pay additional rent, which amount represents the lessee's proportionate share
of real estate taxes and insurance. The amount of additional rent owed by the
lessee for the first year of the lease was $10,764, payable in equal monthly
installments of $897.00. The lessee's share of the aggregate additional rent is
31.5% of the total yearly costs for real estate taxes and insurance. The
Company paid a security deposit of $10,533.99. As noted previously, the Company
has disposed of GBDR. As a result, the lease obligations remain the obligation
of GBDR and the Company has no further obligations with respect to the lease.
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ITEM 3. LEGAL PROCEEDINGS
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NONE.
PART II
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ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
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No matter was submitted to a vote of security holders during the fourth
quarter of 1999, either through the solicitation of proxies or otherwise.
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ITEM 5. MARKET FOR COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS; CHANGE IN CONTROL
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(a) The Issuer's Common Stock is listed on the National Association of
Securities Dealers, Inc. Electronic Bulletin Board under the trading symbol of
"CONT". The Common Stock became listed on October 8, 1998, and to date there
has been no established bid price for the Common Stock. Prior to that time,
there has been no trading in the Issuer's Common Stock. Accordingly, there has
been no high and low bid prices for the Issuer's Common Stock for each quarter
within the last three fiscal years. The issuer intends to change its name to
more accurately reflect its new acquisition of Fullcomm and anticipates doing so
in connection with its 2000 Annual Meeting and Proxy process.
(b) As of December 31, 1999, the approximate number of holders of record of
the Issuer's Common Stock according to its transfer agent is 34. The Issuer has
not contacted stock brokerage firms showing on the Issuer's stock transfer
records to determine the number of actual holders holding in "street name." As
of the date of this filing, the Issuer has approximately 53 record holders.
(c) The Issuer has not paid any cash dividends on its Common Stock, nor
does it intend to do so in the foreseeable future. Under the General
Corporation Law of the State of Delaware, the Issuer may only pay dividends out
of capital and surplus, or out of certain delineated retained earnings, all as
defined in the General Corporation Law. There can be no assurance that the
Issuer will have such funds legally available for the payment of dividends in
the event that the Issuer should decide to do so.
(d) Change in Voting Control
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As a result of Contessa's acquisition of Old Fullcomm in the manner
previously described, Contessa has issued a substantial number of shares to the
former shareholders of Old Fullcomm, the former New Jersey corporation and to
various other parties who have contractual or other relationships arising in
connection with the Merger. As of December 31, 1999, the former holders of
Contessa held 2,806,506 shares of common stock which represented 100% of the
issued and outstanding capital stock of Contessa. Of these, 562,500 shares
were cancelled as result of the GBDR disposition resulting in 2,304,006 shares
issued and outstanding pre-Merger. As described in the Merger Agreement, a
share dividend of 595,994 shares were issued post-Merger resulting in 3,000,000
shares and former shareholders of Old Fullcomm Inc., the predecessor corporation
received 4,601,100 shares or approximately 60.5% of the common stock, all of
which had equivalent voting rights. As a result of the Merger, the former
shareholders of Fullcomm received a controlling share
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of Contessa's common stock. In return for relinquishing control of Contessa, its
former shareholders now own a portion of a corporation whose wholly-owned
subsidiary succeeded, by virtue of the Merger, to Old Fullcomm's right, title
and interests including the intellectual property associated with development of
its hardware and software encryption technology. As described below, certain of
the shareholders of Contessa and certain of the shareholders of Old Fullcomm
have entered into a Shareholders Agreement which has the effects described
below. The Shareholders Agreement is appended as an exhibit to this 10-KSB
Report.
(e) The Shareholders Agreement and Possible Anti-Takeover Effect
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Under the terms of a certain Shareholders Agreement entered into in
conjunction with the Merger, Messrs. Elliott, Escaravage and Lee (collectively,
the "Fullcomm Shareholder Agreement Signatories") who collectively owned
4,500,000 of the 4,601,100 Old Fullcomm common shares, or 97.8% of the pre-
Merger Old Fullcomm shares, and certain holders of 1,350,000 shares, or 47.10%
of the pre-Merger Contessa shares (the "Contessa Shareholder Agreement
Signatories") agreed to vote their respective shares so that the Contessa
Shareholder Agreement Signatories would be guaranteed, at all times on or after
the 2000 Annual Meeting of Shareholders, of having at least one (1) designee
sitting on Contessa's Board of Directors. Under the same Shareholders
Agreement, the Contessa Shareholder Agreement Signatories agreed to vote their
respective shares so that the Contessa Shareholder Agreement Signatories would
be guaranteed, at all times, of having three (3)designees sitting on Contessa's
Board of Directors. The terms of this Agreement remain effective for ten (10)
years. The Contessa Shareholder Agreement Signatories and the Old Fullcomm
Shareholder Agreement Signatories have mutually indemnified each other from any
damages, costs, or expenses associated with the violation of the rights granted
under the Shareholders Agreement. The Shareholders Agreement could have the
effect of inhibiting or prohibiting any potential takeover of the Company since
any transferee of the shares held by the Contessa Shareholder Signatories or
the Fullcomm Shareholder Signatories will be bound to observe the voting
agreement for mutual representation of director designees discussed above.
(d) Restrictions upon resale. Under the terms of the Shareholder
------------------------
Agreement, all signatories have agreed that they will not sell their shares
before 2003, three years after the date of signing of that Agreement.
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ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OF OPERATIONS
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The Company is considered a development stage company with no operations
or income since inception. The costs and expenses associated with the
preparation and filing of this report and other operations of the Company have
been paid for by shareholders of the Company. Unlike many development stage
companies, and as a result of the recent private placement offering which has
raised in excess of $850,000 net offering proceeds, the Company enjoys capital
resources sufficient to meet its anticipated capital outlays for the next 12
months.
The statements contained in this Report on Form 10-KSB that are not historical
facts are forward-looking statements (as such term is defined in the Private
Securities Litigation Reform Act of 1995) that involve risks and
uncertainties. Such forward-looking statements may be identified by, among other
things, the use of forward-looking terminology such as "believes," "expects,"
"may," "will," "should" or "anticipates" or the negative thereof or other
variations thereon or comparable terminology, or by discussions of strategy that
involve risks and uncertainties. From time to time, the Company or its
representatives have made or may make forward-looking statements, orally or in
writing. Such forward-looking statements may be included in various filings made
by the Company with the Securities and Exchange Commission (the "SEC"), or press
releases or oral statements made by or with the approval of an authorized
executive officer of the Company. These forward-looking statements, such as
statements regarding anticipated future revenues, capital expenditures, and
other statements regarding matters that are not historical facts, involve
predictions. The Company's actual results, performance or achievements
could differ materially from the results expressed in, or implied by, these
forward-looking statements. Potential risks and uncertainties that could
affect the Company's future operating results include, but are not limited to:
(i) economic conditions, including economic conditions related to entry
into any new business venture; (ii) the availability of equipment from the
Company's vendors at current prices and levels; (iii) the intense
competition in the markets for the Company's new products and services; (iv)
the Company's ability to integrate acquired companies and businesses in a cost-
effective manner; (v) the Company's ability to effectively implement its
branding strategy; and (vi) the Company's ability to develop, market, provide,
and achieve market acceptance of new service offerings to future clients.
Management's Discussion and Analysis of Financial Condition and Results of
Operations for the
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Period from inception (March 7, 1996) to December 31, 1999.
Development Stage Activities
The Company has been a development stage enterprise since its inception
March 7, 1996 to December 31, 1999. During this period, management had devoted
the majority of its efforts to construction of the restaurant, pursuing and
finding a management team to continue the process of completing its marketing
goals, and obtaining sufficient working capital through officer loans, and
through the completion of the sale of a private placement. These activities
were funded by the Company's management aggregating $176,656 through December
31, 1999 and investments from stockholders aggregating $318,902 through December
31, 1999. The Company has expended funds to purchase restaurant equipment
aggregating $132,148, paid out $133,975 in restaurant pre-opening expenses, paid
security deposits of $10,533 and paid $355,217 in general and administrative
expenses for the period from inception, March 7, 1996, through December 31,
1999. The Company has not yet generated sufficient revenues during its limited
operating history to fund its ongoing operating expenses, repay outstanding
indebtedness or to fund its product development expenses.
Results of operations
Results of Operations for the period from the Company's inception March 7, 1996
through December 31, 1999.
For the period from the Company's inception March 7, 1996 through December
31, 1999, a period of approximately 45 months, the Company has not generated
any net sales, any gross profits, or any net profits.
The Company's overhead costs aggregated approximately $355,217 for the
period from inception March 7, 1996 through December 31, 1999. Of these initial
start up costs, $155,362 is attributed to consulting contracts for an unrelated
business operated prior to the Company's entrance into the restaurant business,
$133,975 in restaurant pre-opening expenses, and an aggregate of $54,228 in rent
and real estate taxes and an additional $11,690 related to administrative costs
of organizing the building of the new restaurant.
.
Liquidity and Capital Resources
The Company increased liquidity by $1 from a cash balance at the Company's
inception of $-0-. The Company has been funded through the process of selling
shares of common stock through
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various private placements aggregating $301,037 for the period, March 7, 1996 to
December 31, 1999 including $18,902 during 1998, and received loans from
officers amounting to $176,656 through December 31, 1998, and a loan of $10,000
from an unrelated entity.
The Company expended an aggregate of $132,148 for equipment and
furnishings, $10,533 in security deposits, and paid an aggregate of $133,927 in
pre-opening expenses which has been charged to operations.
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $355,217 for the period from inception March 7, 1996 to December 31, 1999.
These factors indicate that the Company's continuation as a going concern is
dependent upon its ability to obtain adequate financing. The Company will
require substantial additional funds to finance its business activities on an
ongoing basis and will have a continuing long-term need to obtain additional
financing. The Company plans to engage in such ongoing financing efforts on a
continuing basis. The Company's capital needs, plans and monies raised to date
with respect to Fullcomm are discussed under "Financing of Product Development"
under Item 1 "The Business of Fullcomm".
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The Company anticipates that with the balance of funds raised to date,
together with the existing cash resources which Contessa provided in the Merger,
that it will be able to meet operational expenses for the next twelve months.
The Company anticipates that it may need additional capital beyond this one
year forecast and it will seek such financing either through a public offering,
a private placement, or by allying itself with a strategic partner who is able
to provide development capital. There is no assurance given the Company's
present state of product development that such financing will be available or
forthcoming, or if it is available, that it will be available on terms which
are commercially reasonable or advantageous.
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ITEM 7. FINANCIAL STATEMENTS
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The consolidated financial statements of the Company, of Old Fullcomm, the
former New Jersey corporation, and pro forma financials giving effect to the
Merger are included beginning immediately following the signature page to this
report. See Item 13 for a list of the financial statements, pro forma financial
statements, and financial statement schedules included.
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ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
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None.
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PART III
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ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL
PERSONS AND SIGNIFICANT EMPLOYEES; COMPLIANCE WITH SECTION 16(a)
OF THE EXCHANGE ACT
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Executive Officers, Directors, and Significant Employees
(a) The Directors and Executive Officers of the Company are listed below.
Directors of the Company serve for a term of one year or until their successors
are elected. Officers are appointed by, and serve at the pleasure of, the
Board.
Thomas E. Knudson, 42, President, Treasurer and Director
Mr. Knudson has served as a director of the Company since inception
and has served as President of the Company since July 1996. Prior to that
time, Mr. Knudson was a principal of several entrepreneurial ventures including
serving as Secretary of Leadville Development Corp., a commercial real estate
developer (1990 until June 1996), President and owner of Cocobianco, a clothing
importer and retailer (1986 to 1996) and Principal of Fast Incorporated, a BMW
dealership, all located in and around Sun Valley, Idaho. Mr. Knudson served as
Vice President of Sales of Tamboril Cigar Company ("Tamboril") from June 1996 to
August 4, 1998, and served as a Director of Tamboril from October 1996 to
August 4, 1998.
Anthony Markofsky, 30, Secretary and Director
Mr. Markofsky has served as Secretary and a Director of the Company since
inception. During the period April 1997 to January, 1999, Mr. Markofsky served
as President and Chief Executive Officer of Tamboril. Mr. Markofsky served as
a Director of Tamboril from October 1996 to January 1999. Prior to these
positions with Tamboril, Mr. Markofsky served as Vice President and Sales
Administration Manager of Tamboril from March 1996 to April 1997. From April
1995 to January 1996, Mr. Markofsky served as a consultant to Intercare Inc., a
medical management company. From April 1991 to April 1995, he held various
positions with CareFlorida Inc., a health maintenance organization. Mr.
Markofsky's father is Ian Markofsky, President and sole shareholder of Viking
Investment Group II., Inc., an affiliate of the Company by virtue of its
shareholdings in the Company.
Adam S. Gottbetter, 30, Assistant Secretary
Adam S. Gottbetter has served as the Assistant Secretary of the Company
since inception. Mr. Gottbetter received his J.D. from the Benjamin N. Cardozo
School of Law and his B.S. in Finance from the School of Business and Economics
at Lehigh University. Since 1992, Mr. Gottbetter has developed, negotiated,
structured and closed equity and debt investments with both public and private
companies on behalf of both issuers and investors. From 1992 to 1993 he was an
associate with the law firm of Paul B. Gottbetter, Esq. in New York. In 1993,
Mr. Gottbetter co-founded the
15
<PAGE>
law firm of Kaplan & Gottbetter, predecessor to Kaplan Gottbetter & Levenson,
LLP, which was formed in 1996. As an attorney, Mr. Gottbetter specializes in
corporate finance and securities matters for public companies and private
companies which may be candidates for the public market. Mr. Gottbetter is a
member of the Finance Committee for Compost America Holding Company, Inc., a
publicly-traded waste management company. He is admitted to the practice of law
in the States of New York and Connecticut.
David S. Rector, 51, Director
Mr. Rector has served as a Director of Contessa Corporation since June
1998. Mr. Rector was a director of Tamboril Cigar Company ("Tamboril") from
August, 1996 to January 1999. From August 1996 to March 1997, Mr. Rector was
also Executive Vice President and General Manager of Tamboril, where he was
instrumental in organizing Tamboril's operations and administration. Mr. Rector
was appointed Secretary of Tamboril in June of 1997. Over the past two decades,
Mr. Rector has served as a business consultant to, and held senior positions in,
a variety of ventures. From July of 1995 until July 1996, Mr. Rector was
principal of David Stephen Group, a business consulting firm. Mr. Rector was
Chief Operating Officer of Headstrong Group, a manufacturer and distributor of
recreational safety helmets, from July to November 1995. From January to June
of 1995 Mr. Rector was General Manager of Bemiss-Jason, a distributor of paper
products. From June 1992 to April 1994 he was President of Supercart
International, a distributor of shopping carts. From April 1986 to June 1992 he
was principal of Blue Moon, a distributor of garment buttons. From 1980 to
1985, Mr. Rector served as President of Sunset Designs, a designer of leisure
time craft. From 1972 to 1980, Mr. Rector held various managerial sales and
marketing positions with Crown Zellerbach Corporation, a multi-billion dollar
manufacturer of paper and forest products.
(b) Although not an employee of the Company, Pietro Bortolatti's
participation in GBDR was significant to the Company's development efforts for
its Coconut Grove restaurant project. Pietro Bortolatti has served as the
President of GBDR since its inception. Mr. Bortolatti has over 30 years
experience in the retail food industry. Mr. Bortolatti currently manages two
other restaurants in Miami under the Bocca Di Rosa name, one of which is located
across the street from GBDR's location. As noted before, the Company has
disposed of its GBDR subsidiary and Mr. Bortolatti has no ongoing relationship
with the Company.
(c) Anthony Markofsky, Vice President and a Director of the Issuer, is the
son of Ian Markofsky, the President and the sole shareholder of Viking
Investment Group II, Inc., which is a principal shareholder of the Issuer. Ian
Markofsky was instrumental in the founding of the Issuer and plays a significant
role in promoting the Issuer to the investment community.
Significant Employees
Richard T. Case, 50, CEO and Director of Fullcomm
Mr. Case has over 28 years of executive line managment experience with
Fortune 500 companies and as a consultant. He has served as a consultant since
1981 to numberous industries in raising capital, turnarounds, strategic
planning, acquisitions and mergers, operational analysis, product development,
strategic marketing, international market development, organizational behavior
and company culture change. Prior to that he was an executive with three
Fortune 500 companies, Baxter Labohratories, Corning Glass Works and American
Hospital Supply Corporation.
Mr. Case received his MBA degree from the University of Southern California
where he graduated first in his
16
<PAGE>
class and his BS degree in management and finance from Bradley University. He is
a published author, has hosted a weekly business radio program, has received
The Wall Street Journal Achievement Award, and is listed in Who's Who in
- -----------------------
American Business.
Board Meetings and Committees
The Directors and Officers will not receive remuneration from the Company
until a subsequent offering has been successfully completed, or cash flow from
operating permits, all in the discretion of the Board of Directors. Directors
may be paid their expenses, if any, of attendance at such meeting of the Board
of Directors, and may be paid a fixed sum for attendance at each meeting of the
Board of Directors or a stated salary as Director. No such payment shall
preclude any Director from serving the Corporation in any other capacity and
receiving compensation therefrom. No compensation has been paid to the
Directors. The Board of Directors may designate from among its members an
executive committee and one or more other committees. No such committees have
been appointed.
Compliance with Section 16(a) of the Exchange Act
Based solely upon a review of forms 3, 4, and 5 and amendments thereto,
furnished to the Company during or respecting its last fiscal year, the
directors, officers, and beneficial owners of more than 10% of any class of
equity securities of the Company or any other person known to be subject to
Section 16 of the Exchange Act of 1934, as amended, failed to file on a timely
basis reports required by Section 16(a) of the Exchange Act for the last fiscal
year. As noted previously, the Company's stock has never traded nor been quoted
and none of the aforementioned individuals has sold any of the stock which they
hold.
- --------------------------------------------------------------------------------
ITEM 10. EXECUTIVE COMPENSATION
- --------------------------------------------------------------------------------
There was no compensation paid to either officers or directors during 1999.
- --------------------------------------------------------------------------------
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
- --------------------------------------------------------------------------------
(a) Security Ownership of Certain Beneficial Owners.
<TABLE>
<CAPTION>
Name and Amount and
Title of Address of Nature of Beneficial Percent Percent
Class Beneficial Owner Ownership of Class* of Class**
- ------------------------------ --------------------------- --------------------- ---------- -----------
<S> <C> <C> <C> <C>
Common Stock Anthony Markofsky 300,000 10.46% 3.46%
c/o Contessa Corporation Direct
Common Stock Viking Investment Group II, 525,000 18.31% 6.00%
Inc.; 630 Third Avenue
New York, NY 10017 Direct(3)
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
Name and Amount and
Title of Address of Nature of Beneficial % %
Class Beneficial Owner Ownership of Class(1) of Class(2)
- ------------------------------ --------------------------- --------------------- ---------- -----------
<S> <C> <C> <C> <C>
Common Stock Parenteau Corporation 525,000 18.31% 6.00%
4446 St. Laurent Blvd.
Suite 801 Direct
Quebec, Canada W2W 125
Common Stock Giuditta Investment, Inc. 562,500 None 19.62%
2833 Bird Avenue
Coconut Grove, FL 33133 Direct
Common Stock Brendan Elliott 1,800,000 None 20.59%
Direct
Common Stock Phillippe Escaravage 1,575,000 None 18.02%
Direct
Common Stock Wayne Lee 1,125,000 12.87% None
Direct
</TABLE>
- ------------------
(1) Based on 2,866,506 shares issued and outstanding at 12/31/99.
(2) Based on 8,741,100 shares issued and outstanding immediately after the
Merger, shares issued in connection with the Merger, and the minimum number of
shares issuable under the private placement offering.
(3) Ian Markofsky is the President and sole shareholder of Viking Investment
Group II, Inc. and the father of Anthony Markofsky.
The Company has not contacted stock brokerage firms holding shares of the
Company's Common Stock in "street name" to determine whether there are
additional substantial shareholders of the Company.
(b) Security Ownership of Management.
The number of shares of Common Stock of the Issuer owned by the Directors
and Executive Officers of the Issuer is as follows:
<TABLE>
<CAPTION>
Name and Amount and
Title of Address of Nature of % %
Class Beneficial Owner Beneficial Ownership of Class(1) of Class(2)
- -------------------------------------------------------- --------------------------- -------------------- ---------- -----------
<S> <C> <C> <C> <C>
Common Stock Thomas Knudson 0 shares None None
c/o Contessa Corporation
Common Stock David Rector 0 shares None Director
c/o Contessa Corporation
Common Stock Anthony Markofsky 300,000 shares 10.46% 3.43%
Secretary & Director
c/o Contessa Corporation
Common Stock Adam S. Gottbetter (4) 50,000 shares 1.74% 0.57%
Assistant Secretary
Kaplan Gottbetter & Levenson, LLP Indirect
630 Third Avenue, 5th Floor
New York, NY 10017
Common Stock, par All Officers and Directors 350,000 shares 12.20% 4.00%
value $.0001 per share (4 persons)
</TABLE>
- --------------------
(1) Based on 2,866,506 shares issued and outstanding at 12/31/99.
(2) Based on 8,741,100 shares issued and outstanding immediately after the
Merger, shares issued in connection with the Merger, and the minimum number of
shares issuable under the private placement offering .
(3) Mr. Ian Markofsky holds his shares through an affiliated corporation, Viking
Investment Group II, Inc.
(4) Mr. Gottbetter is a partner in the law firm of Kaplan Gottbetter & Levenson,
LLP, which owns 50,000 shares of common stock of the Company.
18
<PAGE>
- --------------------------------------------------------------------------------
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
- --------------------------------------------------------------------------------
In March 1996, the Company issued an aggregate of 2,100,000 shares to its
founders, Messrs. Rudy Roig, Anthony Markofsky, Viking Investment Group II,
Inc., and Parenteau Corporation in connection with the organization and early
development stage of the Company, as follows: Rudy Roig was issued 750,000
shares, Anthony Markofsky was issued 300,000 shares, Viking Investment Group II,
Inc. was issued 525,000 shares and Parenteau Corporation was issued 525,000
shares. In consideration for said shares, the founders paid an aggregate of
$3,710, consisting of $500 in organization expenses and $3,000 in office
equipment. In September 1996, the Company issued to Kaplan & Gottbetter,
predecessor of Kaplan Gottbetter & Levenson, LLP, 50,000 shares of its common
stock in consideration for legal services valued at $10,000 or $.20 per share.
In July 1996, Rudy Roig was removed as an officer and director of the
Company for breach of his fiduciary duties to the Company. In connection
therewith, pursuant to an escrow agreement dated July 9, 1996 between the
Company and Mr. Roig, Mr. Roig's shareholdings in the Company were returned to
the Company for cancellation in September 1996.
On September 26, 1997, the Company acquired all of the issued and
outstanding capital stock of GBDR consisting of 500
19
<PAGE>
shares, in exchange for 562,500 shares of the common stock, $.0001 par value of
the Company (the "Acquisition"). As a result of the Acquisition, GBDR, became
the wholly-owned subsidiary of the Company. Prior to the Acquisition, GBDR was a
wholly owned subsidiary of Giuditta Investments, Inc., a corporation organized
under the laws of Florida. Pursuant to a Stock Sales Agreement, and effective as
of February 23, 2000, Mr. Bortolatti reacquired the shares of GBDR and Contessa
cancelled the 562,500 shares it had previously issued to him.
- --------------------------------------------------------------------------------
ITEM 13. EXHIBITS, AND REPORTS ON FORM 8-K
- --------------------------------------------------------------------------------
(a) The following documents are filed as part of this report.
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
1. Contessa Corporation Proforma Consolidated Financial Statements (unaudited)
(giving effect to the Merger)
Scope of Proforma financials F-1
Proforma Consolidated Balance Sheet as at March 1, 2000 F-2
Proforma Consolidated Statement of Operations F-3
Proforma Consolidated Statement of Cash Flows F-4
Proforma Consolidated Statement of Stockholders Equity F-5
Notes to Proforma Consolidated Financial Statements F-6 to F-13
2. Fullcomm, Inc. Financial Statements
Report of Thomas P. Monahan, Independent Certified Public Accountant F-14
Balance Sheet as of December 31, 1999 F-15
Statement of Operations for the period from inception,
May 13, 1999 to December 31, 1999 F-16
Statement of Cash Flows for the period from inception,
May 13, 1999 to December 31, 1999 F-17
Statement of Stockholders Equity F-18
Notes to Financial Statements F-19 to F-24
3. Contessa Corporation Consolidated Financial Statements (pre-merger)
Report of Thomas P. Monahan, Independent Certified Public Accountant F-25
Balance Sheet as of December 31, 1999 F-26
Consolidated Statements of Operations for the years ended
December 31, 1999 and 1998 F-27
Consolidated Statement of Cash Flows for the years ended
December 31, 1999 and 1998 F-28
Consolidated Statements of Stockholders Equity for the years ended
December 31, 1999 and 1998 F-29
Notes to Consolidated Financial Statements F-30 to F-38
4. Financial Statement Schedule Exhibit 27
</TABLE>
20
<PAGE>
4. Exhibits
(a) The following exhibits are included as part of this report:
<TABLE>
<CAPTION>
SEC
Exhibit Reference
Number Number Title of Document Location
------- -------- ----------------- --------
<S> <C> <C> <C>
2 2 Amended and Restated Agreement and Plan of Merger
3.1 3 Articles of Incorporation Incorporated*
by Reference
3.2 3 Bylaws Incorporated*
by Reference
9 9 Shareholders Agreement
10.1 10 Memorandum of Understanding re: Placement Agent
10.2 10 Tashenberg Consulting Agreement
10.3 10 Creekmoore Consulting Agreement
10.4 10 Letter Agreement re: Master Distribution
10.5 10 Consulting Agreement
21 21 List of Subsidiaries
27 27 Financial Statement Schedule
</TABLE>
_________
* Incorporated by reference to the Form 10-SB of the Registrant filed with the
Commission on October 30, 1998
** Incorporated by reference to Amendment No. 1 to the Form 10-SB of the
Registrant filed with the Commission on July 2, 1999
21
<PAGE>
SIGNATURES
Pursuant to the requirements of section 13 or 15(d) of the Securities
Exchange Act of 1934, as amended, the Registrant has duly caused this report to
be signed on it behalf by the undersigned, thereunto duly authorized.
Contessa Corporation
Dated: April 4, 2000 By_________________________
Thomas Knudson, President
& Treasurer
Pursuant to the requirements of the Securities Exchange Act of 1934, as
amended, this report has been signed below by the following persons on behalf of
the Registrant and in the capacities indicated on this ___the day of April 2000.
Contessa Corporation
By /s/ Anthony Markofsky
-------------------------
Anthony Markofsky, Director
By /s/ Thomas Knudson
-------------------------
Thomas Knudson, Director
22
<PAGE>
CONTESSA CORPORATION
Proforma Consolidated Financial Statements
(Unaudited)
The following unaudited proforma consolidated financial statements present a
combined balance sheet and related statements of income, cash flows and
stockholders' equity of Contessa Corporation (the "Company"), Fullcomm
Acquisition Corp. ("Acquisition") and Fullcomm, Inc. ("Fullcomm") giving effect
to the reverse acquisition and using the pooling method of accounting for the
proposed combination pursuant to Merger Agreement and Plan of Merger
("Agreement"), which was dated on January 28, 2000.
The combination with Fullcomm is reflected is being accounted for as a
transfer and is accounted for at historical cost as a pooling of interests with
the recording of the net assets acquired at their historical book value whereby
the Company will issue 5,136,100 shares of common stock in exchange for all of
the issued and outstanding shares of Fullcomm and the issuance of a stock
dividend of 695,994 shares of common stock to the present shareholders of the
Company as consideration for the merger.
The proforma consolidated financial statements of the Company consist of the
balance sheet as at February 26, 1000 subsequent to the effect of transferring
the assets and liabilities of the Company's restaurant subsidiary to
Gastronnomia Bocca Di Rosa, Inc., which is controlled by Pietro Bortolatti,
project manager and the cancellation of 562,500 shares of common stock giving
effect to the proposed transactions as if they had been in effect throughout the
periods presented. The information shown is based upon numerous assumptions and
estimates and is not necessarily indicative of the results of future operations
of the uncombined entities or the actual results that would have occurred had
the transaction been consummated during the periods indicated. These statements
should be read in conjunction with the consolidated financial statements of the
Company.
F-1
<PAGE>
CONTESSA CORPORATION
PROFORMA CONSOLIDATED BALANCE SHEET
MARCH 1, 2000
<TABLE>
<CAPTION>
Contessa Fullcomm, Contessa
Corporation Inc. Adjustments Corporation
----------- --------- ----------- -----------
<S> <C> <C> <C> <C>
Assets
Current assets
Cash and cash equivalents $1 $1,439 1,440
-- ------
Total current assets 1 1,439 1,440
Property and equipment-net 14,594 14,594
Other assets
Patent costs 1,917 1,917
----- -----
Total other assets 1,917 1,917
------- -------
Total assets $1 $17,950 $17,951
== ======= =======
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued
expenses $57,168 $57,168
Loan payable 25,315 25,315
------ ------
Total current liabilities 82,483 82,483
Stockholders' equity
Preferred stock- authorized
5,000,000 shares. $.001 par value
each. At March 31, 2000, the
number of shares outstanding was
- -0-.
Common Stock authorized 20,000,000 231 250,236 (249,582) 815
shares, $.0001 par value each. At 70
March 1, 2000, there are 2,304,006
shares outstanding prior to the
issuance of 5,136,100 for the
acquisition and 695,994 shares
issued as a stock dividend respectively.
Additional paid in capital 310,806 (310,806) 249,652
249,582
(70)
Deficit accumulated during
development stage (311,036) (314,769) 310,806 (314,769)
-------- ------- ------- --------
Total stockholders' equity 1 (64,533) -0- (64,532)
- ------- - -------
Total liabilities and
stockholders' equity $1 $17,950 $-0- $17,951
== ======= ==== =======
</TABLE>
See accompanying notes to proforma financial statements.
F-2
<PAGE>
CONTESSA CORPORATION
PROFORMA CONSOLIDATED STATEMENT OF OPERATIONS
MARCH 1, 2000
<TABLE>
<CAPTION>
Contessa Fullcomm, Contessa
Corporation Inc. Adjustments Corporation
--------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Revenue $-0- $-0- $-0-
Costs of goods sold -0- -0- -0-
----------- ---------- ------------ -----------
Gross profit -0- -0- -0-
Operations:
General and administrative -0- 295,163 295,163
Research and development -0- 18,000 18,000
Depreciation and amortization -0- 1,622 1,622
--------- ----------- ---------
Total expense -0- 314,785 314,785
Loss from operations -0- (314,785) (314,785)
Other income and expenses
Interest income -0- 562 562
Interest expenses -0- (546) (546)
Total other Income -0- 16 16
Net income (loss) $-0- $ (314,769) $ (314,769)
--------- ----------- -----------
Net income (loss) per share-basic $-0- $ (0.04) $ (0.04)
--------- ----------- -----------
Number of shares outstanding-basic 8,136,100 8,136,100 8,136,100
--------- ----------- -----------
</TABLE>
See accompanying notes to proforma financial statements.
F-3
<PAGE>
CONTESSA CORPORATION
PROFORMA CONSOLIDATED STATEMENT OF CASH FLOWS
MARCH 1, 2000
<TABLE>
<CAPTION>
Contessa Fullcomm, Contessa
Corporation Inc. Adjustments Corporation
----------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss) $-0- $(314,769) $(314,769)
Adjustments to reconcile net loss to cash used in operating
activities
Depreciation 1,622 1,622
Accounts payable and accrued expenses 57,168 57,168
---- --------- ---------
TOTAL CASH FLOWS FROM OPERATIONS (255,979) (255,979)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan payable 25,315 25,315
Sale of common stock-net of offering expenses 250,236 250,236
---- --------- ---------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES 275,551 275,551
CASH FLOWS FROM INVESTING ACTIVITIES
Patent costs (1,917) (1,917)
Purchase of fixed assets (16,216) (16,216)
---- --------- ---------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES (18,133) (18,133)
NET INCREASE (DECREASE) IN CASH -0- 1,439 1,439
CASH BALANCE BEGINNING OF PERIOD 1 -0- 1
---- --------- ---------
CASH BALANCE END OF PERIOD $ 1 $ 1,439 $ 1,440
---- --------- ---------
</TABLE>
See accompanying notes to proforma financial statements
F-4
<PAGE>
CONTESSA CORPORATION
PROFORMA CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
MARCH 1, 2000
<TABLE>
<CAPTION>
Deficit
Common Common Additional accumulated during
Date Stock Stock paid in capital development stage Total
- ---- ------------ ------------ --------------- ------------------ -----------
<S> <C> <C> <C> <C> <C>
Initial issuance of shares 2,100,000 $ 210 $ 210
Issuance of shares for legal 50,000 5 9,995 10,000
services
Cancellation of shares (750,000) $ (75) $ (75)
Sale of shares 850,000 85 299,915 300,000
Net loss $ (155,362) $ (155,362)
----------- -----------
Balance 12-31-1996 2,250,000 $ 225 $ 291,910 (155,362) $ 136,773
Issuance of shares for acquisition 562,000 $ 56 $ 196,644 196,700
Net loss (21,298) (21,298)
----------- -----------
Balance 12-31-1997 2,812,000 $ 281 $ 488,554 (176,660) $ 312,175
Sale of shares under rule 504 54,006 6 18,896 18,902
Net loss (114,866) (114,866)
----------- -----------
Balance 12-31-1998 2,866,506 287 507,450 (291,526) 216,211
Net loss 12-31-1999 (63,691) (63,691)
----------- -----------
Balance 12-31-1999 2,866,506 287 507,450 $ (355,217) 152,520
Sale of discontinued subsidiary (562,500) (56) (196,644) (44,181) (152,519)
2-23-2000 (1)
---------- ----------- ---------- ------------- -----------
Balance 2-23-2000 2,304,006 231 310,806 $ (311,036) $ 1
Capital restructuring (2) (310,806) $ 310,806
Issuance of shares for reverse 5,136,100 514 249,722 $ (314,769) $ (64,533)
merger(2)
Stock dividend 695,994 70 (70) -0-
---------- ----------- ---------- ------------- -----------
Balance 3-1-2000 8,136,100 815 249,652 $ (314,999) $ (64,532)
========== =========== ========== ============ ===========
</TABLE>
(1) Gives effect to the discontinuance of restauarnt subsidiary and sale of
operations to Pietro Bortolatti
(2) Gives effect to the pooling method of accounting for the reverse merger
and recapitalization
(3) Gives effect to the stock dividend
See accompanying notes to proforma financial statements
F-5
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
Note 1. Organization of Company and Issuance of Common Stock
a. Creation of the Company
Contessa Corporation (the "Company") was first formed under the laws of
Delaware on March 7, 1996 under the name United Health Management, Inc. with an
initial capitalization of 20,000,000 shares of common stock, $.0001 par value
each and 1,000,000 shares of blank check preferred stock, .001 par value each.
On March 26, 1996, the Company amended its certificate of incorporation to
change its name to United Health Partners, Inc. On September 17, 1997, the
Company amended its certificate to change its name to Contessa Corporation and
increase the authorized number of shares of preferred shares to 5,000,000, $.001
par value each.
b. Description of the Company
Contessa Corporation was formed under the name United Health Management,
Inc. to operate as a managed health care provider. On September 16, 1997, the
board of directors of the Company changed the name of the Company to Contessa
Corporation. On September 26, 1997, the Company entered into an acquisition
agreement, whereby the Company acquired all of the issued and outstanding shares
of Gastronnomia Bocca Di Rosa, Inc., a Florida corporation formed on June 12,
1997 ("GBDR") in exchange for 562,500 shares of the common stock. The Company
became the parent company of GBDR, a wholly-owned subsidiary. Prior to the
Acquisition, GBDR was a wholly owned subsidiary of Giuditta Investments, Inc., a
corporation organized under the laws of Florida.
On February 23, 2000, the management of the Company effectuated the
transfer to Pietro Bortolatti, project manager the assets related to GBDR in
consideration for his assumption of all related liabilities and return of the
562,500 shares of common stock used to purchase GBDR.
On March 1, 2000, the Company entered into a Merger Agreement and Plan of
Merger (the "Agreement") with Fullcomm, Inc.("Fullcomm"), a New Jersey
corporation, whereby the Company issued 5,136,100 shares of common stock in
exchange for all of the issued and outstanding shares of Fullcomm. The
combination with Fullcomm is reflected is being accounted for as a transfer
and is accounted for at historical cost as a pooling of interests with the
recording of the net assets acquired at their historical book value.
Fullcomm is a development stage company that was organized as a successor
to Fullcomm, LLC ("Fullcomm, LLC") to commercially exploit technology developed
in connection with the secure transmission of digital media and other data on
the Internet.
The combination with Fullcomm is reflected is being accounted for as a
transfer and is accounted for at historical cost as a pooling of interests with
the recording of the net assets acquired at their historical book value whereby
the Company will issue 5,136,100 shares of common stock in exchange for all of
the issued and outstanding shares of Fullcomm and the issuance of a stock
dividend of 695,994 shares of common stock to the present shareholders of the
Company as consideration for the merger
F-6
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
c. Issuance of Shares of Common Stock
On February 23, 2000, the Company cancelled 562,500 shares of common stock
originally issued to GBDR in connection with the purchase of the assets of GBDR
valued at $196,644 or $0.35.
On March 1, 2000, the Company issued 5,136,100 shares of common stock in
consideration for and outstanding shares of Fullcomm. The shares were valued at
an aggregate of $250,236 or $0.05 per share.
The Company issued a stock dividend of 695,994 shares of common stock to
the present shareholders of the Company as consideration for the merger valued
at $70 or $0.0001 per share.
Note 2 - Summary of Significant Accounting Policies
------------------------------------------
a. Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on a going concern
basis, which contemplates the realization of assets and the satisfaction of
liabilities in the normal course of business. The Company incurred net losses of
$355,217 for the period from inception March 7, 1996 to December 31, 1999. These
factors indicate that the Company's continuation as a going concern is dependent
upon its ability to obtain adequate financing. The Company is anticipating that
with the completion of a private placement and with the increase in working
capital, the Company will be able to complete the research and development and
bring into production its technology and experience an increase in sales. The
Company will require substantial additional funds to finance its business
activities on an ongoing basis and will have a continuing long-term need to
obtain additional financing. The Company's future capital requirements will
depend on numerous factors including, but not limited to, continued progress
developing its source of inventory, continued research and development and
initiating marketing penetration. The Company plans to engage in such ongoing
financing efforts on a continuing basis.
The proforma consolidated financial statements presented at March 1, 2000,
consist of the consolidated balance sheet of the Company as at December 31, 1999
and the related consolidated statements of operations, stockholders equity and
cash flows for the year ended December 31, 1999 and gives effect to the sale of
the assets and the assumption of liabilities by Pietro Bortolatti on February
23, 2000 and the return of the shares of common stock; and the balance sheet of
Fullcomm at December 31, 1999 and the statements of operations, stockholders
equity and cash flows for the year ended December 31, 1999.
F-7
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
b. Cash and cash equivalents
The Company treats temporary investments with a maturity of less than three
months as cash when purchased with cash.
c. Loss Per Share:
Basic loss per common share is computed by dividing the loss by the
weighted average number of common shares outstanding during the period. For the
year ended December 31, 1999, there were no dilutive securities outstanding. The
calculation of the shares used in computing basic and diluted EPS include the
shares of common stock issued for the sale of GBDR, the stock dividend and the
shares issued for the reverse merger.
Shares used in calculating basic and diluted net income per share were as
follows:
March 1,
2000
---------
Total number common
shares outstanding 8,136,100
---------
Shares used in calculating
per share amounts - Diluted 8,136,100
=========
d. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
e. Significant Concentration of Credit Risk
At December 31, 1999, the Company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0- which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been covered
by the federal insurance.
F-8
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
f. Research and Development Expenses
Research and development expenses are charged to operations when incurred.
g. Patent Costs
Costs incurred to acquire exclusive licenses of patentable technology or
costs incurred to patent technologies are capitalized and amortized over the
shorter of a five year period or the term of the license or patent. The portion
of these amounts determined to be attributable to patents is amortized over
their remaining lives and the remainder is amortized over the estimated period
of benefit but not more than 40 years on a straight line basis.
h. Comprehensive Income
On January 1, 1998, the Company adopted Statements of Financial Accounting
Standards for reporting and presentation of comprehensive income and its
components an a full set of financial statements. The statement requires only
additional disclosures in the consolidated financial statements; it does not
affect the Company's financial position or results of operations. No relevant
effects resulted from the application from the application of this statement.
Note 3 - Discontinued Operations
On February 23, 2000, the Company transferred to Pietro Bortolatti, project
manager the assets related to GBDR in consideration for his assumption of all
related liabilities and return of the 562,500 shares of common stock used to
purchase GBDR. The transaction was treated as a sale of assets net of related
liabilities with the gain on the transfer accounted for as discontinued
operations.
Note 4 - Transfer of Assets
The Company is a development stage company that was organized as a predecessor
to Fullcomm, LLC ("Fullcomm") to commercially exploit technology developed in
connection with the secure transmission of digital media and other data on the
Internet.
Fullcomm, Inc. entered into an Agreement and Plan of Merger (the
"Agreement") on May 14, 1999 which was consummated on May 18, 1999, with
Fullcomm, LLC, pursuant to which the Company exchanged all the membership
interests in Fullcomm, Inc. for an aggregate of 4,536,750 shares of common stock
of the Company. The shares of common stock were divided amongst the Members of
Fullcomm, LLC in the same ratio as the Membership interests.
F-9
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
The transaction has been accounted for as a transfer and is accounted for
at historical cost as if a pooling of interests had occurred with the recording
of the net assets acquired at their historical book value. The financial
statements of the Fullcomm, Inc. have been retroactively restated to include the
combined statements of operations and cash flows for the period from inception,
May 13, 1999, to December 31, 1999 and the statements of operations and cash
flows of Fullcomm, L.L.C. for the period from January 15, 1999 to December 31,
1999.
Note 5 - Property, Plant and Equipment
Property Plant and Equipment consists of the following at December 31,
1999:
Furniture and fixtures 16,216
Less accumulated depreciation 1,622
-------
Property Plant and Equipment-net $14,594
=======
Note 6 - Related Party transactions
a. Leased Office Space
Fullcomm has entered into a sub lease agreement with Phillip O. Escaravage
for the lease of office space located at 11 Chambers Street, Princeton, New
Jersey for a monthly rent of $ 2,400 per month.
Rent paid pursuant to this lease agreement for the period from inception to
December 31, 1999 is $13,080.
b. Officer Salaries
No officer has received a salary in excess of $100,000.
c. Loan Payable-Shareholder
On December 10, 1999, Philip O. Escaravage and an entity that is controlled
by him The Umbrella Project, Inc., pursuant to a short term loan agreement
loaned an aggregate of $25,000 to the Company due within one year from date and
with interest at prime plus 2%. As of December 31, 1999, the balance due is
$25,000 with accrued interest of $315.
Note 7 - Preferred Stock
The Board of Directors of the Company has the authority to establish and
designate any shares of stock in series or classes and to fix any variations in
the designations, relative rights, preferences and limitations between series as
it deems appropriate, by a majority vote.
F-10
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
The preferred stock may be issued in series, each of which may vary, as
determined by the board of directors, as to the designation and number of shares
in such series, voting power of the holders thereof, dividend rate, redemption
terms and prices, voluntary and involuntary liquidation preferences, and
conversion rights and sinking fund requirements, if any, of such series.
The number of shares of preferred stock outstanding at December 31, 1999 and
March 1, 2000 is -0- and -0- respectively.
Note 8 - Income Taxes
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of March 1, 2000, the Company had no
material current tax liability, deferred tax assets, or liabilities to impact on
the Company's financial position because the deferred tax asset related to the
Company's net operating loss carryforward and was fully offset by a valuation
allowance.
At March 1, 2000, the Company has net operating loss carry forwards for
income tax purposes of $314,999. This carryforward is available to offset future
taxable income, if any, and expires in the year 2010. The Company's utilization
of this carryforward against future taxable income may become subject to an
annual limitation due to a cumulative change in ownership of the Company of more
than 50 percent.
The proforma components of the net deferred tax asset as of March 1, 2000
are as follows:
Deferred tax asset:
Net operating loss carry forward $ 105,752
Valuation allowance $(105,752)
---------
Net deferred tax asset $ -0-
The Company recognized no income tax benefit for the loss generated in the
period from inception, March 7, 1996, to December 31, 1999.
SFAS No. 109 requires that a valuation allowance be provided if it is more
likely than not that some portion or all of a deferred tax asset will not be
realized. The Company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income. Because the Company has
yet to recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.
F-11
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
Note 9 - Commitments and Contingencies
a. Engineering Services Agreement
On April 29, 1999, Fullcomm entered into an agreement with System Design
Group ("SDG") whereby, SDG is contracted to provide Fullcomm with a project
specifications document for the Fullcomm's Internet Media Security board that
will detail the functionality of certain items under development. The cost of
the project is $18,000. The work product of SDG is the property of Fullcomm.
As of December 31, 1999, Fullcomm has paid an aggregate of $9,000.
b. Marketing Consulting Agreement
On August 11, 1999, Fullcomm entered into a marketing consulting agreement
with The Management Network Group, Inc. for a daily consulting fee of $2,000 per
day plus out of pocket expenses, subject to adjustments for other services.
As of December 31, 1999, Fullcomm has paid an aggregate of $2,955.
c. Financial Consulting Agreement
On May 12, 1999, Fullcomm entered into a financial consulting agreement
with Steven Katz & Associates, Inc. to provide strategic, financing and/or its
management to Fullcomm for an hourly fee of $255 per hour plus out of pocket
expenses.
As of December 31, 1999, Fullcomm has paid an aggregate of $33,329.
d. Stock Dividend
Subsequent to December 31, 1999, Fullcomm's board of directors passed a
resolution that upon the consummation of the Fullcomm's second private placement
of Fullcomm's shares of common stock, each investor in Fullcomm's first private
placement will be entitled to receive an additional number of shares of
Fullcomm's shares of common stock equal to 20% of their current holdings. Such
shares have not been issued, but if and when the second private placement
closes, such investors will be entitled to receive shares of Contessa
Corporation as a result of the merger. The aggregate number of shares to be
issued is 16,850.
As of March 1, 2000, the Company has reserved 16,850 shares of common stock
pending completion of the private placement by the Company.
Note 10 - Business and Credit Concentrations
The amount reported in the financial statements for cash approximates fair
market value. Because the difference between cost and the lower of cost or
market is immaterial, no adjustment has been recognized and investments are
recorded at cost
F-12
<PAGE>
CONTESSA CORPORATION
(A DEVELOPMENT STAGE COMPANY)
NOTES TO PROFORMA CONSOLIDATED FINANCIAL STATEMENTS
MARCH 1, 2000
Note 11 - Development Stage Company
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the financial resources of the
Company's management and from the net proceeds of a private placement for its
continued existence. The Company will also be dependent upon its ability to
raise additional capital to complete is research and development, prototype
development, production scheduling, sourcing inventory and its marketing
program, acquire additional equipment, management talent, inventory and working
capital to engage in any profitable business activity. Since its organization,
the Company's activities have been limited to the preliminary development of its
new products, filing of a patent application, hiring personnel and acquiring
equipment and office space, conducting research and development of its
technology and preparation of documentation and the sale of a private placement
offering.
F-13
<PAGE>
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(973) 790-8775
Fax (973) 790-8845
To The Board of Directors and Shareholders
of Fullcomm, Inc. (a development stage company)
I have audited the accompanying balance sheet of Fullcomm, Inc. (a development
stage company) as of December 31, 1999 and the related statements of
operations, cash flows and shareholders' equity for the period from inception,
May 13, 1999, to December 31, 1999. These financial statements are the
responsibility of the Company's management. My responsibility is to express an
opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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 and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Fullcomm, Inc. (a development
stage company) as of December 31, 1999 and the results of its operations,
shareholders equity and cash flows for period from inception, May 13, 1999, to
December 31, 1999 in conformity with generally accepted accounting principles.
The accompanying financial statements have been prepared assuming that
Fullcomm, Inc. (a development stage company) will continue as a going concern.
As more fully described in Note 2, the Company has incurred operating losses
since the date of reorganization and requires additional capital to continue
operations. These conditions raise substantial doubt about the Company's ability
to continue as a going concern. Management's plans as to these matters are
described in Note 2. The financial statements do not include any adjustments to
reflect the possible effects on the recoverability and classification of assets
or the amounts and classifications of liabilities that may result from the
possible inability of Fullcomm, Inc. (a development stage company) to continue
as a going concern.
______________________
Thomas P. Monahan, CPA
January 19, 2000
Paterson, New Jersey
F-14
<PAGE>
<TABLE>
<CAPTION>
FULLCOMM, INC.
BALANCE SHEET
DECEMBER 31, 1999
Assets
<S> <C>
Current assets
Cash and cash equivalents........................................ 1,439
------
Total current assets............................................. 1,439
Property and equipment-net........................................ 14,594
Other assets
Patent costs..................................................... 1,917
------
Total other assets................................................ 1,917
------
Total assets...................................................... $17,950
------
Liabilities and Stockholders' Equity
Current liabilities
Accounts payable and accrued expenses............................ $57,168
Loan payable..................................................... 25,315
------
Total current liabilities........................................ 82,483
Stockholders' equity
Common Stock authorized 10,000,000 shares, no par value each..... 250,236
At December 31, 1999, there are 4,584,250 shares outstanding......
Retained earnings deficit........................................ (314,769)
-------
Total stockholders' equity........................................ (64,533)
------
Total liabilities and stockholders' equity........................ $17,950
------
</TABLE>
See accompanying notes to financial statements.
F-15
<PAGE>
FULLCOMM, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD FROM INCEPTION, MAY 13, 1999 TO DECEMBER 31, 1999
<TABLE>
<CAPTION>
<S> <C>
Revenue.................................................... $ -0-
Costs of goods sold........................................ -0-
---
Gross profit............................................... -0-
Operations:
General and administrative................................ 295,163
Research and development.................................. 18,000
Depreciation and amortization............................. 1,622
-------
Total expense............................................. 314,795
Loss from operations....................................... (314,785)
Other income and expenses
Interest income........................................... 562
Interest expenses......................................... (546)
---
Total other Income......................................... 16
Net income (loss).......................................... $(314,769)
-------
Net income (loss) per share - basic........................ $(0.07)
----
Number of shares outstanding - basic....................... 4,500,000
---------
</TABLE>
See accompanying notes to financial statements.
F-16
<PAGE>
FULLCOMM, INC.
STATEMENT OF CASH FLOWS
FOR THE PERIOD FROM INCEPTION, MAY 13, 1999 TO DECEMBER 31, 1999
<TABLE>
<S> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income (loss)....................................................... $(314,769)
Adjustments to reconcile net loss to cash used in operating activities
Depreciation............................................................ 1,622
Accounts payable and accrued expenses................................... 57,168
--------
TOTAL CASH FLOWS FROM OPERATIONS......................................... (255,979)
CASH FLOWS FROM FINANCING ACTIVITIES
Loan payable............................................................ 25,315
Sale of common stock-net of offering expenses........................... 250,236
-------
TOTAL CASH FLOWS FROM FINANCING ACTIVITIES............................... 275,551
CASH FLOWS FROM INVESTING ACTIVITIES
Patent costs............................................................ (1,917)
Purchase of fixed assets................................................ (16,216)
-------
TOTAL CASH FLOWS FROM INVESTING ACTIVITIES............................... (18,133)
NET INCREASE (DECREASE) IN CASH.......................................... 1,439
CASH BALANCE BEGINNING OF PERIOD......................................... -0-
-----
CASH BALANCE END OF PERIOD............................................... $ 1,439
-----
</TABLE>
See accompanying notes to financial statements
F-17
<PAGE>
FULLCOMM, INC.
STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Common Common Retained
Date Stock Stock earnings deficit Total
- ---- ------ ------ ---------------- -----
<S> <C> <C> <C> <C>
Sale of initial shares 4,500,000 $60,000 $60,000
Sale of shares through private 84,250 252,750 252,750
placement
Offering expenses $(62,514) (62,514)
Net loss (314,769) (314,769)
--------- --------
4,584,250 $250,236 $(314,769) $(64,533)
========= ======== ========= ========
</TABLE>
See accompanying notes to financial statements
F-18
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 1 - Formation of Company and Issuance of Common Stock
a. Formation and Description of the Company
Fullcomm, Inc. (the "Company"), was formed under the laws of the State of New
Jersey on May 13, 1999 and authorized to issue to 10,000,000 shares of common
stock, no par value.
b. Description of Company
The Company is a development stage company that was organized as a
predecessor to Fullcomm, LLC ("Fullcomm") to commercially exploit technology
developed in connection with the secure transmission of digital media and other
data on the Internet.
c. Issuance of Shares of Common Stock
In January, 1999, the Company sold an aggregate of 4,500,000 shares of
common stock for an aggregate of cash consideration of $60,000 or $0.013 per
share.
As of December 31, 1999, the Company sold 84,250 shares of common stock
through a private placement at $3.00 per share for an aggregate consideration of
$252,750 less offering costs aggregating $62,514 for net proceeds of $190,236.
Note 2-Summary of Significant Accounting Policies
a. Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $314,769 for the period from inception, January 13, 1999, December 31,
1999. These factors indicate that the Company's continuation as a going
concern is dependent upon its ability to obtain adequate financing. The
Company is anticipating that with the completion of a private placement and
with the increase in working capital, the Company will be able to complete
the research and development and bring into production its technology and
experience an increase in sales. The Company will require substantial
additional funds to finance its business activities on an ongoing basis and
will have a continuing long-term need to obtain additional financing. The
Company's future capital requirements will depend on numerous factors
including, but not limited to, continued progress developing its source of
inventory, continued research and development and initiating marketing
penetration. The Company plans to engage in such ongoing financing efforts on a
continuing basis.
The financial statements presented at December 31, 1999 consist of
the balance sheet as at December 31, 1999 and the statements of operations,
cash flows and stockholders equity for the period from inception, January 15,
1999, to December 31, 1999.
F-19
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
b. Cash and Cash Equivalents
Cash and Cash Equivalents - Temporary investments with a maturity of less
than three months when purchased are treated as cash
d. Loss Per Share:
Basic loss per common share is computed by dividing the loss by the
weighted average number of common shares outstanding during the period. During
the period from inception on January 13, 1999 through December 31, 1999, there
were no dilutive securities outstanding.
e. Revenue recognition
Revenue is recognized when products are shipped or services are rendered.
f. Research and Development Expenses
Research and development expenses are charged to operations when incurred.
g. Patent Costs
Costs incurred to acquire exclusive licenses of patentable technology or
costs incurred to patent technologies are capitalized and amortized over the
shorter of a five year period or the term of the license or patent. The portion
of these amounts determined to be attributable to patents is amortized over
their remaining lives and the remainder is amortized over the estimated period
of benefit but not more than 40 years on a straight line basis.
h. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that effect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
i. Asset Impairment
The Company adopted the provisions of SFAS No. 121, Accounting for the
impairment of long lived assets and for long-lived assets to be disposed of
effective January 1, 1996. SFAS No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the estimated undiscounted cash flows to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. Long-
lived assets and certain
F-20
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
identifiable intangibles are reviewed for impairment whenever events or changes
in circumstances indicate that full recoverability is questionable. There was no
effect of such adoption on the Company's financial position or results of
operations.
j. Significant Concentration of Credit Risk
At December 31, 1999, the Company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0- which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been covered
by the federal insurance.
k. Recent Accounting Standards
Accounting for Derivative Instruments and Hedging Activities
Statement of Financial Accounting Standards No. 133, "Accounting for
Derivative Instruments and Hedging Activities" (SFAS 133) was issued in June
1998. It is effective for all fiscal years beginning after June 15, 1999. The
new standard requires companies to record derivatives on the balance sheet as
assets or liabilities, measured at fair value. Gains or losses resulting from
changes in the values of those derivatives would be accounted for depending on
the use of the derivatives and whether they qualify for hedge accounting. The
key criterion for hedge accounting is that the hedging relationship must be
highly effective in achieving offsetting changes in fair value or cash flows.
The Company does not currently engage in derivative trading or hedging activity.
The Company will adopt SFAS 133 in the fiscal year ending December 31, 2000,
although no impact on operating results or financial position is expected.
Note 3 - Transfer of Assets
The Company entered into an Agreement and Plan of Merger (the "Agreement")
on May 14, 1999 which was consummated on May 18, 1999, with Fullcomm, pursuant
to which the Company exchanged all the membership interests in Fullcomm for an
aggregate of 4,536,750 shares of common stock of the Company. The shares of
common stock were divided amongst the Members of Fullcomm in the same ratio as
the Membership interests.
The transaction has been accounted for as a transfer and is accounted for
at historical cost as if a pooling of interests had occurred with the recording
of the net assets acquired at their historical book value. The financial
statements of the Company have been retroactively restated to include the
combined statements of operations and cash flows for the period from inception,
May 13, 1999, to December 31, 1999 and the statements of operations and cash
flows of Fullcomm, L.L.C. for the period from January 15, 1999 to December 31,
1999.
F-21
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
Note 4 - Related Party transactions
a. Leased Office Space
The Company has entered into a sub lease agreement with Phillip O.
Escaravage for the lease of office space located at 11 Chambers Street,
Princeton, New Jersey for a monthly rent of $ 2,400 per month.
Rent paid pursuant to this lease agreement for the period from inception to
December 31, 1999 is $13,080.
b. Officer Salaries
No officer has received a salary in excess of $100,000.
c. Loan Payable-Shareholder
On December 10, 1999, Philip O. Escaravage and an entity that is controlled
by him The Umbrella Project, Inc. , pursuant to a short term loan agreement
loaned an aggregate of $25,000 to the Company due within one year from date and
with interest at prime plus 2%. As of December 31, 1999, the balance due is
$25,000 with accrued interest of $315.
.
Note 5 - Property Plant and Equipment
Property Plant and Equipment consists of the following at December 31,
1999:
Furniture and fixtures 16,216
Less accumulated depreciation 1,622
-------
Property Plant and Equipment -net $14,594
=======
Note 6 - Income Taxes
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any, represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 1999, the Company had
no material current tax liability, deferred tax assets, or liabilities to impact
on the Company's financial position because the deferred tax asset related to
the Company's net operating loss carry forward and was fully offset by a
valuation allowance.
F-22
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
At December 31, 1999, the Company has net operating loss carry forwards for
income tax purposes of $314,769. These carry forward losses are available to
offset future taxable income, if any, and expire in the year 2010. The Company's
utilization of this carry forward against future taxable income may become
subject to an annual limitation due to a cumulative change in ownership of the
Company of more than 50 percent.
The components of the net deferred tax asset as of December 31, 1999 are as
follows:
Deferred tax asset:
Net operating loss carry forward $ 107,021
Valuation allowance $ (197,021)
----------
Net deferred tax asset $ -0-
The Company recognized no income tax benefit for the loss generated for the
period from inception, January 15, 1999, to December 31, 1999.
The Company recognized no income tax benefit from the loss generated for
the period from inception, January 13, 1999 to December 31, 1998. SFAS No. 109
requires that a valuation allowance be provided if it is more likely than not
that some portion or all of a deferred tax asset will not be realized. The
Company's ability to realize benefit of its deferred tax asset will depend on
the generation of future taxable income. Because the Company has yet to
recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.
Note 7 - Commitments and Contingencies
a. Engineering Services Agreement
On April 29, 1999, the Company entered into an agreement with System Design
Group ("SDG") whereby, SDG is contracted to provide the Company with a project
specifications document for the Company's Internet Media Security board that
will detail the functionality of certain items under development. The cost of
the project is $18,000. The work product of SDG is the property of the Company.
As of December 31, 1999, the Company has paid an aggregate of $9,000.
b. Marketing Consulting Agreement
On August 11, 1999, The Company entered into a marketing consulting
agreement with The Management Network Group, Inc. for a daily consulting fee of
$1,850 plus out of pocket expenses, subject to adjustments for other services.
As of December 31, 1999, the Company has paid an aggregate of $2,955.
F-23
<PAGE>
FULLCOMM, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1999
c. Financial Consulting Agreement
On May 12, 1999, the Company entered into a financial consulting agreement
with Steven Katz & Associates, Inc. to provide strategic, financing and/or its
management to the Company for an hourly fee of $255 per hour plus out of pocket
expenses.
As of December 31, 1999, the Company has paid an aggregate of $33,329.
Note 8 - Business and Credit Concentrations
The amount reported in the financial statements for cash approximates fair
market value. Because the difference between cost and the lower of cost or
market is immaterial, no adjustment has been recognized and investments are
recorded at cost.
Note 9 - Development Stage Company
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the financial resources of the
Company's management and from the net proceeds of a private placement for its
continued existence. The Company will also be dependent upon its ability to
raise additional capital to complete is research and development, prototype
development, production scheduling, sourcing inventory and its marketing
program, acquire additional equipment, management talent, inventory and working
capital to engage in any profitable business activity. Since its organization,
the Company's activities have been limited to the preliminary development of
its new products, filing of a patent application, hiring personnel and
acquiring equipment and office space, conducting research and development
of its technology and preparation of documentation and the sale of a private
placement offering.
F-24
<PAGE>
THOMAS P. MONAHAN
CERTIFIED PUBLIC ACCOUNTANT
208 LEXINGTON AVENUE
PATERSON, NEW JERSEY 07502
(973) 790-8775
To The Board of Directors and Shareholders
of Contessa Corporation (a development stage company)
I have audited the accompanying consolidated balance sheet of Contessa
Corporation (a development stage company) as of December 31, 1999 and the
related consolidated statements of operations, cash flows and shareholders'
equity for the years ending December 31, 1998 and 1999. These consolidated
financial statements are the responsibility of the company's management. My
responsibility is to express an opinion on these financial statements based on
my audit.
I conducted my audit in accordance with generally accepted auditing
standards. Those standards require that I 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 and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Contessa
Corporation (a development stage company) as of December 31, 1999 and the
related consolidated statements of operations, cash flows and shareholders'
equity for the years ending December 31, 1998 and 1999 in conformity with
generally accepted accounting principles.
The accompanying consolidated financial statements have been prepared
assuming that Contessa Corporation ( a development stage company) will continue
as a going concern. As more fully described in Note 2, the Company has incurred
operating losses since inception and requires additional capital to continue
operations. These conditions raise substantial doubt about the Company's
ability to continue as a going concern. Management's plans as to these matters
are described in Note 2. The financial statements do not include any
adjustments to reflect the possible effects on the recoverability and
classification of assets or the amounts and classifications of liabilities that
may result from the possible inability of Contessa Corporation (a development
stage company) to continue as a going concern.
/s/ Thomas P. Monahan
---------------------------------
Thomas P. Monahan, CPA
February 19,2000
Paterson, New Jersey
F-25
<PAGE>
December 31,
1999
------------
Assets
Current assets
Cash and cash equivalents $ 1
---------
Total current assets 1
Capital assets 132,148
Other assets
Excess of purchase paid over book values 196,644
Security deposits 10,533
---------
Total other assets 207,177
---------
Total assets $339,326
=========
Liability and Stockholders' Equity
Current liabilities
Loans payable related party $176,656
Loan payable 10,150
---------
Total liabilities 186,806
Stockholders equity
Preferred stock-$.001 par value, authorized
5,000,000 shares. The number of shares
outstanding at December 31, 1999 is -0-.
Common stock-$.0001 par value, authorized
20,000,000 shares. The number of shares
outstanding at December 31, 1999 was 2,866,506 287
Additional paid in capital 507,450
Accumulated deficit during development stage (355,217)
--------
Total stockholders equity 152,520
--------
Total liabilities and stockholders equity $339,326
========
F-26
<PAGE>
CONTESSA CORPORATION
(a development stage company)
CONSOLIDATED STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
For the
period
For the For the from inception
year ended year ended March 7, 1996 to
December 31, December 31, December 31,
1998 1999 1999
------------- ------------- -----------------
<S> <C> <C> <C>
Income $ -0- $ -0- $ -0-
Costs of goods sold - -0- -0- -0-
---------- ---------- ----------
Gross profit -0- -0- -0-
Operations:
General and 114,866 63,691 355,217
administration
Depreciation and
amortization -0- -0- -0-
---------- ---------- ----------
Total expense 114,866 63,691 355,217
Net Profit (Loss)
from operations $ (114,866) $ (63,691) $ (355,217)
========== ========== ==========
Net income per
share-basic $(.04) $(.02) $(.12)
========== ========== ==========
Total number of
shares outstanding 2,812,000 2,866,506 2,866,506
========== ========== ==========
</TABLE>
F-27
<PAGE>
CONTESSA CORPORATION
(a development stage company)
CONSOLIDATED STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
For the
period
For the For the from inception
year ended year ended March 7, 1996 to
December 31, December 31, December 31,
1998 1999 1999
------------- ------------- -----------------
<S> <C> <C> <C>
Cash Flows from Operating Activities
Net profit (loss) $(114,866) $(63,691) $(355,217)
Depreciation and amortization -0- -0- -0-
Non-cash transactions 10,056
---------- --------- ----------
Total Cash Flows from
Operations (114,866) (63,691) (345,161)
Cash Flows from Financing Activities
Loan payable 10,150 10,150
Loan payable-affiliated parties 49,224 176,656
Sale of stock 18,902 301,037
---------- --------- ----------
Total Cash Flows from
Financing Activities 18,902 59,374 487,843
Cash Flows from Investing Activities
Capital assets (29,878) (132,148)
Security deposit (7,022) (10,533)
---------- --------- ----------
Total Cash Flows from
Investing Activities (31,400) (142,681)
Net Increase(Decrease)in Cash (23,818) (4,317) 1
Cash Balance Beginning
of Period 28,136 4,318 -0-
--------- -------- ---------
Cash Balance End of Period $ 4,318 $ 1 $ 1
========= ======== =========
</TABLE>
F-28
<PAGE>
CONTESSA CORPORATION
(a development stage company)
CONSOLIDATED STATEMENT OF STOCKHOLDERS EQUITY
<TABLE>
<CAPTION>
Deficit
Accumulated
during
Date Preferred Preferred Common Common Additional development
Stock Stock Stock Stock paid in stage Total
<S> <C> <C> <C> <C> <C>
Initial issuance of shares 2,100,000 $210 $ 210
Issuance of shares
for legal services 50,000 5 9,995 10,000
Cancellation of shares (750,000) (75) (75)
Sale of shares 850,000 85 299,915 300,000
Net loss (155,362) (155,362)
--------- ---- -------- --------- --------
Balance 12-31-1996 2,250,000 225 291,910 (155,362) 136,773
Issuance of shares
for acquisition 562,000 56 196,644 196,700
Net loss (21,298) (21,298)
--------- ---- -------- --------- --------
12-31-1997 2,812,000 $281 $488,554 (176,660) $312,175
Sale of shares
under rule 504 54,006 6 18,896 18,902
Net loss (114,866) (114,866)
--------- ---- -------- --------- ---------
Balance 12-31-1998 2,866,506 $287 $507,450 (291,526) $216,211
Net loss (63,691) (63,691)
--------- ---- -------- --------- --------
Balance 12-31-1999 2,866,506 $287 $507,450 $(355,217) $152,520
========= ==== ======== ========= ========
</TABLE>
F-29
<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Note 1. Organization of Company and Issuance of Common Stock
----------------------------------------------------
a. Creation of the Company
Contessa Corporation (the "Company") was first formed under the laws of
Delaware on March 7, 1996 under the name United Health Management, Inc. with an
initial capitalization of 20,000,000 shares of common stock, $.0001 par value
each and 1,000,000 shares of blank check preferred stock, .001 par value each.
On March 26, 1996, the Company amended its certificate of incorporation to
change its name to United Health Partners, Inc. On September 17, 1997, the
Company amended its certificate to change its name to Contessa Corporation and
increase the authorized number of shares of preferred shares to 5,000,000, $.001
par value each.
b. Description of the Company
Contessa Corporation was formed under the name United Health Management,
Inc. to operate as a managed health care provider. On September 16, 1997, the
board of directors of the Company changed the business of the Company to
Contessa Corporation. On September 26, 1997, the Company entered into an
acquisition agreement, whereby the Company acquired all of the issued and
outstanding shares of Gastronnomia Bocca Di Rosa, Inc., a Florida corporation
formed on June 12, 1997 ("GBDR") in exchange for 562,500 shares of the common
stock. The Company became the parent company of GBDR, a wholly-owned subsidiary.
Prior to the Acquisition, GBDR was a wholly owned subsidiary of Giuditta
Investments, Inc. and controlled by Mr. Pietro Bortolatti, a corporation
organized under the laws of Florida.
On February 26, 2000, the Company agreed to transfer to Pietro Bortolatti,
project manager the stock of GBDR in consideration for his assumption of all
related liabilities and return of the 562,500 shares of common stock used to
purchase GBDR.
c. Issuance of Capital Stock
In March, 1996, the Company sold 2,100,000 shares of common stock for an
aggregate consideration of $210 and issued shares as follows: 750,000 shares to
Rudy Roig, 300,000 shares
F-30
<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
to Anthony Markofsky, 525,000 shares to Viking Investment Group II, Inc. and
525,000 shares to Fancois Parenteau Corp.
On September 16, 1996, pursuant to an escrow agreement between the Company
and Rudy Roig, Mr. Roig returned his shares to the Company for cancellation.
In April, 1996, the Company issued 50,000 shares of common stock in
consideration for legal services valued at $10,000 or $0.20 per share pursuant
to Rule 701 of the Securities Act of 1933, as amended.
In October, 1996, the Company sold 850,000 shares of common stock for an
aggregate consideration of $300,000 or $0.3529411 per share pursuant to Rule 504
of Regulation D, under the Securities Ac t of 1933, as amended.
On September 30, 1997, the Company issued 562,000 shares of common stock
for the acquisition of GBDR. valued at $196,700 or $0.35 per share.
Pursuant to a private placement under Rule 504 of the Securities Act of
1933, as amended, (Rule 504), the Company offered in June, 1998, 100,000 shares
of common stock at $0.35 per share. As of June 30, 1998, the Company had sold
54,006 shares common stock for an aggregate consideration of $18,902.
Note 2-Summary of Significant Accounting Policies
------------------------------------------
a. Basis of Financial Statement Presentation
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the satisfaction
of liabilities in the normal course of business. The Company incurred net losses
of $355,217 for the period from inception March 7, 1996 to December 31, 1999.
These factors indicate that the Company's continuation as a going concern is
dependent upon its ability to obtain adequate financing. The Company is
anticipating that with the funds raised from the completion of its private
placement and with additional loans from officers of the Company and credit
extended by equipment and food vendors and with the increase in working capital
from operations once the store is opened, the
F-31
<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Company will complete the restaurant and experience an increase in sales. The
Company will require substantial additional funds to finance its business
activities on an ongoing basis and will have a continuing long-term need to
obtain additional financing. The management of the Company believes that it has
sufficient resources to fund operations for the next 12 months. The Company's
future capital requirements will depend on numerous factors. The Company plans
to engage in such ongoing financing efforts on a continuing basis.
The financial statements presented consist of the consolidated balance
sheet of the Company as at December 31, 1999 and the related consolidated
statements of operations, stockholders equity and cash flows for the years ended
December 31, 1998 and 1999 and the related consolidated statements of
operations, stockholders equity and cash flows for the period from inception,
March 7, 1996, to December 31, 1999.
b. Cash and cash equivalents
The Company treats temporary investments with a maturity of less than
three months as cash.
c. Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is computed over the estimated useful lives using the straight line
methods over a period of five years. Maintenance and repairs are charged against
income and betterment's are capitalized.
d. Earnings per share
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, EARNINGS PER SHARE
("Statement No. 128"). Statement No. 128 applies to entities with publicly held
common stock or potential common stock and is effective for financial statements
issued for periods ending after December 15, 1997. Statement No. 128 replaces
APB Opinion 15, Earnings per Share ("EPS"). Statement No. 128 requires dual
presentation of basic and diluted earnings per share by entities with complex
capital
F-32
<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
structures. Basic EPS includes no dilution and is computed by dividing net
income by the total number of common shares outstanding for the period. Diluted
EPS reflects the potential dilution of securities that could dilute the shares
in computing the earnings of the Company such as common stock which may be
issuable upon exercise of outstanding common stock options or the conversion of
debt into common stock.
Pursuant to the requirements of the Securities and Exchange Commission, the
calculation of the shares used in computing basic and diluted EPS include the
shares of common stock issued for the acquisition of GBDR .
Shares used in calculating basic and diluted net income per share were as
follows:
Year ended Year ended
December 31, December 31,
1998 1999
----------------------------
Total number common
shares outstanding 2,866,506 2,866,506
--------- ---------
Shares used in calculating
per share amounts - Diluted 2,866,506 2,866,506
========= =========
e. Revenue recognition
Revenue is recognized when products are shipped or services are rendered.
f. Selling and Marketing Costs
Selling and Marketing - Selling and marketing costs are expensed in
the period in which the cost is incurred.
F-33
<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
g. Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
h. Significant Concentration of Credit Risk
At December 31, 1999, the Company has concentrated its credit risk by
maintaining deposits in several banks. The maximum loss that could have resulted
from this risk totaled $-0-which represents the excess of the deposit
liabilities reported by the banks over the amounts that would have been covered
by the federal insurance.
i. Asset Impairment
The Company adopted the provisions of SFAS No. 121, Accounting for the
impairment of long lived assets and for long-lived assets to be disposed of
effective January 1, 1996. SFAS No. 121 requires impairment losses to be
recorded on long-lived assets used in operations when indicators of impairment
are present and the estimated undiscounted cash flows to be generated by those
assets are less than the assets' carrying amount. SFAS No. 121 also addresses
the accounting for long-lived assets that are expected to be disposed of. There
was no effect of such adoption on the Company's financial position or results of
operations.
j. The Company has adopted the provisions of SOP 98-5 requiring that
certain expenses classified as pre-opening expenses accumulated in connection
with the activities of the restaurant prior to its opening be charged as
incurred, As of December 31, 1999, the Company has charged $84,554 to
operations.
F-34
<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Note 3 - Capital Assets
--------------
Capital Assets consisted of the following at December 31, 1999:
Asset Accumulated
Cost Depreciation Total
Store equipment $132,148 $-0- $132,148
-------- --------
Note 4 - Preferred Stock
---------------
The Board of Directors of the Company has the authority to establish and
designate any shares of stock in series or classes and to fix any variations in
the designations, relative rights, preferences and limitations between series as
it deems appropriate, by a majority vote.
The preferred stock may be issued in series, each of which may vary, as
determined by the board of directors, as to the designation and number of shares
in such series, voting power of the holders thereof, dividend rate, redemption
terms and prices, voluntary and involuntary liquidation preferences, and
conversion rights and sinking fund requirements, if any, of such series.
The number of shares of preferred stock outstanding at December 31, 1999
is -0-.
Note 5 - Related Party transactions
--------------------------
a. Issuance of Shares of Capital Stock
In March, 1996, the Company sold 2,100,000 shares of common stock for an
aggregate consideration of $210 and issued shares as follows: 750,000 shares to
Rudy Roig, 300,000 shares to Anthony Markofsky, 525,000 shares to Viking
Investment Group II, Inc. and 525,000 shares to Fancois Parenteau Corp.
On September 16, 1996, Rudy Roig returned his shares to the Company for
cancellation.
F-35
<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
On September 30, 1997, the Company issued 562,000 shares of common stock for the
acquisition of GBDR. valued at $196,700 or $0.35 per share.
b. Officer Compensation
For the period from inception, March 7, 1996 to December 31, 1999, the
Company has not paid any officer in excess of $100,000.
Note 6 - Income Taxes
------------
The Company provides for the tax effects of transactions reported in the
financial statements. The provision if any, consists of taxes currently due plus
deferred taxes related primarily to differences between the basis of assets and
liabilities for financial and income tax reporting. The deferred tax assets and
liabilities, if any represent the future tax return consequences of those
differences, which will either be taxable or deductible when the assets and
liabilities are recovered or settled. As of December 31, 1999, the Company had
no material current tax liability, deferred tax assets, or liabilities to impact
on the Company's financial position because the deferred tax asset related to
the Company's net operating loss carryforward and was fully offset by a
valuation allowance.
At December 31, 1999, the Company has net operating loss carry forwards
for income tax purposes of $355,217. This carryforward is available to offset
future taxable income, if any, and expires in the year 2010. The Company's
utilization of this carryforward against future taxable income may become
subject to an annual limitation due to a cumulative change in ownership of the
Company of more than 50 percent.
The components of the net deferred tax asset as of December 31, 1999 are
as follows:
Deferred tax asset:
Net operating loss carry forward $ 120,771
Valuation allowance $(120,771)
---------
Net deferred tax asset $ -0-
=========
F-36
<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
The Company recognized no income tax benefit for the loss generated in the
period from inception, March 7, 1996, to December 31, 1999.
SFAS No. 109 requires that a valuation allowance be provided if it is
more likely than not that some portion or all of a deferred tax asset will not
be realized. The Company's ability to realize benefit of its deferred tax asset
will depend on the generation of future taxable income. Because the Company has
yet to recognize significant revenue from the sale of its products, the Company
believes that a full valuation allowance should be provided.
Note 7 - Business and Credit Concentrations
----------------------------------
The amount reported in the financial statements for cash, trade accounts
receivable and investments approximates fair market value. Because the
difference between cost and the lower of cost or market is immaterial, no
adjustment has been recognized and investments are recorded at cost.
Financial instruments that potentially subject the company to credit
risk consist principally of trade receivables. Collateral is generally not
required.
Note 8 - Commitments and Contingencies
-----------------------------
a. Lease agreement for Restaurant Space
On July 1, 1997, GBDR leased 1,812 square feet of space to used for the
restaurant. The lease is for 10 years with the option to extend the lease for
additional 10 years upon written notice 18 months prior to the termination date
of the lease. Rent for the first 3 years is $3,511 per month or $42,136 per
year plus GBDR's allocated share of real estate taxes and insurance. For the
year ending December 31, 1999, this amounts to an additional $598 per month
added to the monthly rent. The rent payable for years 4 through 20 is
incremented by a cost of living increase. GBDR has paid a security deposits
aggregating of $10,533. As of December 31, 1999, the location has not been
placed into operations.
F-37
<PAGE>
CONTESSA CORPORATION
(a development stage company)
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1999
Note 9 - Development Stage Company
-------------------------
The Company is considered to be a development stage company with little
operating history. The Company is dependent upon the financial resources of the
Company's management for its continued existence. The Company will also be
dependent upon its ability to raise additional capital to complete the
construction of the restaurant and complete its marketing program, acquire
additional equipment, management talent, inventory and working capital to engage
in profitable business activity. Since its organization, the Company's
activities have been limited to the acquisition of the restaurant location,
construction, hiring personnel, and the preparation of documentation and the
sale of a private placement offering.
F-38
<PAGE>
Exhibit 2
AMENDED AND RESTATED
MERGER AGREEMENT AND PLAN OF MERGER
among
Contessa Corporation,
and
Fullcomm Acquisition Corp.
and
Fullcomm, Inc.,
the Shareholders of Fullcomm, Inc. and the
Principal Stockholders of Contessa Corporation
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C> <C>
ARTICLE I. THE MERGER............................................................................ 2
ARTICLE II. REPRESENTATIONS AND WARRANTIES OF CONTESSA,
ACQUISITION AND THE PRINCIPAL STOCKHOLDERS............................................ 4
ARTICLE III. COVENANTS OF CONTESSA, ACQUISITION AND
THE PRINCIPAL STOCKHOLDERS............................................................ 12
ARTICLE IV. REPRESENTATIONS AND WARRANTIES OF FULLCOMM
AND THE FULLCOMM SHAREHOLDERS......................................................... 15
ARTICLE V. CONDUCT PRIOR TO CLOSING.............................................................. 19
ARTICLE VI. ADDITIONAL AGREEMENTS................................................................. 20
ARTICLE VII. CONDITIONS TO OBLIGATIONS OF THE PARTIES.............................................. 23
ARTICLE VIII. CONDITIONS PRECEDENT TO OBLIGATIONS OF CONTESSA,
ACQUISITION, AND THE PRINCIPAL STOCKHOLDERS........................................... 24
ARTICLE IX. CONDITIONS PRECEDENT TO OBLIGATIONS OF
CONTESSA, ACQUISITION AND THE PRINCIPAL STOCKHOLDERS................................ 25
ARTICLE X. THE CLOSING........................................................................... 27
ARTICLE XI. MISCELLANEOUS......................................................................... 29
</TABLE>
(ii)
<PAGE>
Exhibits:
Exhibit A: Case Employment Agreement
Exhibit B: Fullcomm Officer's Certificate
Exhibit C-1: Contessa Officer's Certificate
Exhibit C-2: Acquisition Officer's Certificate
Exhibit D: Contessa Principal Stockholder's Certificate
Exhibit E: Opinion of Kaplan Gottbetter
Exhibit F: Secretary's Certificate
Exhibit G: Opinion of Buchanan Ingersoll
Exhibit H: Confidentiality Agreements
Exhibit I: Shareholders Agreement
Schedules:
1.2 Fullcomm Shareholders and Merger Shares
2.2(a) Holders of Contessa Common Stock
2.11 Lawsuits, Litigation, etc.
2.16 Contessa Bank Accounts
2.19 Affiliate Business Arrangements
4.1 Fullcomm affiliates
4.2 Other Options, Rights, etc.
4.9 Fullcomm Litigation, etc.
4.10 Patents, Trademarks, etc.
4.15 Fullcomm Property, Contracts, Employees
Addendum Regarding Post-Merger Disposition
of Fullcomm Assets
(iii)
<PAGE>
AMENDED AND RESTATED
MERGER AGREEMENT
AND
PLAN OF MERGER
THIS AMENDED AND RESTATED MERGER AGREEMENT AND PLAN OF MERGER,
(hereinafter referred to as the "Agreement") amends and restates the MERGER
AGREEMENT AND PLAN OF MERGER made and entered into on the 28th day of January
2000 (the "Initial Agreement") by and among CONTESSA CORPORATION, a Delaware
corporation (hereinafter referred to as "Contessa"), the stockholders of
Contessa listed on the signature pages hereof (collectively, the "Principal
Stockholders"), the shareholders of Fullcomm, Inc. listed on the signature pages
(collectively, the "Fullcomm Shareholders"), FULLCOMM ACQUISITION CORP., a
Delaware corporation (hereinafter referred to as "Acquisition"), and FULLCOMM,
INC., a New Jersey corporation (hereinafter referred to as "Fullcomm").
RECITALS
WHEREAS, the parties hereto entered into the Initial Agreement on
January 28, 2000 providing for the merger of Fullcomm with and into Contessa's
wholly-owned subsidiary, Acquisition, whereby Acquisition shall be the surviving
entity pursuant to the terms and conditions set forth herein and whereby the
transaction shall qualify as a tax free exchange pursuant to Section 351 of the
Internal Revenue Code ("IRC");
WHEREAS, in furtherance of such combination, the Boards of Directors
and/or shareholders of Contessa, Acquisition and Fullcomm have each approved the
merger of Fullcomm with and into Acquisition (the "Merger"), upon the terms and
subject to the conditions set forth herein, in accordance with the applicable
provisions of the Delaware General Corporation Law (the "DGCL") and the New
Jersey Business Corporation Act (the "NJBCA");
WHEREAS, the Fullcomm Shareholders desire to exchange all of their
ownership interest in Fullcomm for shares of Contessa common stock representing
60.53% of the total issued and outstanding common stock of Contessa on the
partially diluted basis set forth in Section 1.2(d) and in the respective
amounts set forth in Schedule 1.2 hereto as a tax free exchange pursuant to
Section 351 of the IRC;
WHEREAS, the parties hereto desire to reorganize, pursuant to Section
368(a)(1)(A) of the IRC, the management, operations and principal place of
business of Contessa and Acquisition;
1
<PAGE>
WHEREAS, certain provisions of the Initial Agreement have been modified
by agreement among the parties; and
WHEREAS, the parties hereto wish to amend and restate the Initial
Agreement to reflect the changes agreed to by the parties.
NOW, THEREFORE, the parties hereto, intending to amend and restate the
Initial Agreement as of the date of its initial execution and delivery and in
consideration of the premises and mutual representations, warranties and
covenants herein contained, hereby agree as follows:
ARTICLE I
THE MERGER
SECTION 1.1 (a) Merger and Plan of Reorganization. At the Effective
Time (as defined in Section 1.1(b) hereof), and subject to and upon the terms
and conditions of this Agreement, the DGCL and the NJBCA, Fullcomm shall be
merged with and into Acquisition, the separate corporate existence of Fullcomm
shall cease, and Acquisition shall continue as the surviving corporation.
Acquisition after the Effective Time is sometimes referred to herein as the
"Surviving Corporation." Contessa shall change its name to "Fullcomm
Technologies, Inc." or a any other name to be approved by the shareholders of
Contessa, Acquisition shall change its name to "Fullcomm, Inc." and the renamed
Acquisition shall remain a wholly-owned subsidiary of Contessa. As consideration
for their agreement to surrender their ownership interests in Fullcomm and to
approve the Merger, the Fullcomm Shareholders shall receive not less than Four
Million, Six Hundred and One Thousand, One Hundred (4,601,100) shares (the
"Merger Shares") of authorized but previously unissued Contessa common stock,
par value $0.0001 per share. Fullcomm shareholders will be entitled to receive
Merger Shares on a one for one basis in accordance with Schedule 1.2. As
consideration for the Merger, the shareholders of Contessa shall receive a stock
dividend of Six Hundred and Ninety Five Thousand, Nine Hundred and Ninety Four
(695,994) shares after which the former holders of the Two Million, Three
Hundred and Four Thousand, Six (2,304,006) shares of Contessa common stock
issued and outstanding after the GBDR Disposition shall hold Three Million
(3,000,000) shares of Contessa common stock as set forth on Schedule 2.2(a). The
parties hereto further agree that as promptly as practicable after the Closing,
the necessary steps shall be taken in order to effect the relocation of
Acquisition's principal place of business to Fullcomm's facility in Princeton,
New Jersey; and the management and operations of Acquisition will be reorganized
to become engaged in the current business endeavors of Fullcomm.
(b) The Effective Time. As promptly as practicable after
the satisfaction or waiver of the conditions set forth in Articles VII, VIII and
IX, the parties hereto shall cause the merger to be consummated by filing the
certificates of merger as contemplated by the DGCL and the NJBCA (the
"Certificates of Merger"), together with any required related documents, with
the appropriate administrator, as indicated in the DGCL and the NJBCA, as the
case may be, in such
2
<PAGE>
form as required by, and executed in accordance with the relevant provisions of,
the DGCL and the NJBCA, as the case may be. The Merger shall be effective at the
time indicated in such Certificates of Merger (the "Effective Time").
SECTION 1.2 Issuance of Shares.
(a) At the Effective Time, Contessa shall cause to be issued and
delivered to the Fullcomm Shareholders or their designees, stock certificates
evidencing ownership of the Merger Shares in the amounts set forth in Schedule
1.2 hereto.
(b) The Merger Shares to be issued hereunder are deemed "restricted
securities" as defined by Rule 144 promulgated by the Securities and Exchange
Commission (the "Commission") under the Securities Act of 1933, as amended (the
"Securities Act"), and the recipients shall represent that they are acquiring
the Merger Shares for investment purposes only and without the intent to make a
further distribution of the Merger Shares. All Merger Shares to be issued under
the terms of this Agreement shall be issued pursuant to exemptions from the
registration requirements of the Securities Act and the rules and regulations
promulgated thereunder. Certificates representing the restricted Merger Shares
shall bear the following, or similar legend:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND
MAY NOT BE OFFERED FOR SALE, SOLD OR OTHERWISE TRANSFERRED
EXCEPT IN COMPLIANCE WITH THE REGISTRATION PROVISIONS OF SUCH
ACT OR PURSUANT TO AN EXEMPTION FROM SUCH REGISTRATION
PROVISIONS, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO
THE SATISFACTION OF THE COMPANY.
Merger Shares received by Messrs. Elliott, Lee, and Escaravage and shares issued
in connection with any Ancillary Agreement shall bear a restrictive legend
stating that they are subject to the terms of a 3 year lockup provision.
(c) Notional denominator for calculation of above percentages. The
percentage of 60.53 in the recitals above is based on a notional denominator of
Seven Million, Six Hundred and One Thousand, One Hundred (7,601,100) shares and
are not intended to include shares issuable under the (i) Plan; (ii) the Case
Employment Agreement; (iii) the Tashenberg Advisory Agreement; (iv) the
Creekmore Advisory Agreement; (v) the Grace Agreements; and (vi) the Grace
Private Placement.
3
<PAGE>
SECTION 1.3 Actions to be Taken by the Board of Directors. As a
condition concurrent with the consummation of the Merger, the Board of Directors
of Contessa shall take the following actions in accordance with the DGCL:
(a) The election of Brendan G. Elliott as a member of the Board of
Directors of Contessa as of and at the Closing Date;
(b) The election of Richard T. Case, Brendan G. Elliott, Wayne H. Lee
and C. Bradley Tashenberg as members of the Board of Directors of Acquisition as
of and at the Closing Date; and
(c) The acceptance of the resignations of the current officers of
Contessa and appointment of the following individuals as officers of Contessa
and of Acquisition as of and at the Closing Date:
1. Brendan G. Elliott, President and Treasurer;
2. Richard T. Case, Chief Executive Officer; and
3. Wayne H. Lee, Executive Vice President and Secretary.
SECTION 1.4 Closing. Unless this Agreement shall have been terminated
pursuant to Article X, and subject to the satisfaction or waiver, if
permissible, of the conditions set forth in Articles VII, VIII and IX, the
closing of the transactions contemplated by this Agreement (the "Closing") shall
take place (i) at the offices of Kaplan Gottbetter & Levenson, LLP, as promptly
as practicable (and in any event within five business days) after satisfaction
or waiver, if permissible, of the conditions set forth in Articles VII, VIII and
IX or (ii) at such other time, date or place as Fullcomm and Contessa may
mutually agree.
ARTICLE II
REPRESENTATIONS AND WARRANTIES
OF
CONTESSA, ACQUISITION AND THE PRINCIPAL STOCKHOLDERS
As an inducement for Fullcomm and the Fullcomm Shareholders to enter
into this Agreement, Contessa and each Principal Stockholder hereby makes
jointly and severally, as of the date hereof and as of the Closing Date, the
following representations and warranties to Fullcomm and the Fullcomm
Shareholders except that each Principal Stockholder makes no representation or
warranties with respect to Sections 2.2(b) and 2.4:
SECTION 2.1 Organization of Contessa and Affiliates. (a) Contessa is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware, is duly qualified and in good standing as a foreign
corporation in every jurisdiction in which such qualification is necessary, and
has the corporate power and authority to own its properties and assets and to
transact the business in which it is engaged. With the exception of Acquisition
and Gastronnomia Boca di Rosa, Inc. ("GBDR"), there are no corporations or other
entities with respect
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to which (i) Contessa owns any of the outstanding stock or other interests, or
(ii) Contessa may be deemed to be in control. Contessa, Acquisition and the
Principal Stockholders have all requisite corporate power and authority to
execute and deliver this Agreement, the Ancillary Agreements (as defined below)
and to consummate the transactions contemplated hereby and thereby, and except
for the approval of this Agreement, the Merger and the transactions contemplated
hereby and thereby, or notice thereof, by the shareholders of Contessa as
required by the DGCL and the federal securities laws, have taken all corporate
or other action necessary to consummate the transactions contemplated hereby and
thereby and to perform their respective obligations hereunder and thereunder.
This Agreement, upon its execution and delivery, is the legal, valid and binding
obligation of Contessa, Acquisition and the Principal Stockholders, enforceable
against Contessa, Acquisition, and the Principal Stockholders in accordance with
its terms, and each of the Ancillary Agreements, upon its execution and
delivery, is the legal, valid and binding obligation of Contessa in accordance
with its terms, except to the extent that such enforcement may be limited by
applicable bankruptcy, insolvency and other similar laws affecting creditors'
rights generally.
(b) Acquisition is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware, is duly qualified and
in good standing as a foreign corporation in every jurisdiction in which such
qualification is necessary, and has the corporate power and authority to own its
properties and assets and to transact the business in which it is engaged. There
are no corporations or other entities with respect to which (i) Acquisition owns
any of the outstanding stock or other interests, or (ii) Acquisition may be
deemed to be in control.
SECTION 2.2 Capitalization of Contessa and Acquisition. (a) The
authorized capital stock of Contessa consists of Twenty Million (20,000,000)
shares of common stock, par value $0.0001 per share (the "Common Stock"), of
which Two Million, Eight Hundred and Sixty Six Thousand, Five Hundred and Six
(2,866,506) shares of Common Stock are issued and currently outstanding, and
Five Million (5,000,000) shares of preferred stock, par value $0.001 per share,
with such rights, privileges, preferences and other terms and conditions as
shall be approved by its Board of Directors pursuant to a duly adopted
resolution thereof, of which no shares are issued and outstanding. All shares of
Common Stock currently issued and outstanding have been duly authorized and
validly issued and are fully paid and non-assessable, and have been issued in
compliance with any and all applicable federal and state laws or pursuant to
appropriate exemptions therefrom. There are no options, warrants, rights, calls,
commitments or agreements of any character obligating Contessa to issue any
shares of its capital stock or other securities or any security representing the
right to purchase or otherwise receive any such stock or other securities. The
Merger Shares, when issued, will be duly authorized, validly issued, fully paid
and non-assessable.
(b) To the best knowledge of Contessa and Acquisition,
Schedule 2.2(a) sets forth the name of each holder of shares of Common Stock, as
well as the number of shares of Common Stock held by each such holder, subject
to the GBDR Disposition as defined in Section 2.7(c) below.
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(c) Other than the transactions contemplated by this Agreement
and the GBDR Disposition as defined below, there is no outstanding vote, plan,
pending proposal or right of any person to cause any redemption of Common Stock
or the merger or consolidation of Contessa with or into any other entity.
Contessa is not under any obligation under any agreement to register any of its
securities under federal or state securities laws.
(d) To the best knowledge of Contessa, Acquisition and the
Principal Stockholders, there are no agreements among shareholders of Contessa,
or otherwise, voting trusts, proxies or other agreements or understanding of any
character, whether written or oral, with respect to or concerning the purchase,
sale, transfer or voting of the Common Stock or any other security of Contessa.
(e) None of Contessa, Acquisition or any Principal Stockholder
has any legal obligations, absolute or contingent, to any other Person to sell
the assets or to sell any capital stock or any other security of Contessa or any
of its subsidiaries or to effect any merger, consolidation or other
reorganization of Contessa or any of its subsidiaries or to enter into any
agreement with respect thereto, except pursuant to this Agreement and pursuant
to the GBDR Disposition.
(f)(i) Acquisition and GBDR, each a Delaware corporation, are
the only subsidiaries of Contessa. Each of GBDR and Acquisition is a corporation
duly organized, validly existing and in good standing under the laws of its
jurisdiction of incorporation.
(ii) There are Two Hundred (200) shares of common stock, with
a par value of $0.001 per share (the "Acquisition Stock"), of Acquisition
authorized, which are all outstanding and held by Contessa. The Acquisition
Stock was validly issued, fully paid and non-assessable and not subject to any
preemptive rights created by statute, Acquisition's Certificate of Incorporation
or By-Laws or any contract. There is no outstanding vote, plan, pending proposal
or right of any person to cover any redemption of the Acquisition Stock as for
the merger or consolidation of Acquisition with or into any other entity, except
as contemplated hereby. Acquisition holds no assets and conducts no business.
SECTION 2.3 Charter Documents. Certified copies of the Contessa and
Acquisition Certificate of Incorporation and By-Laws, as amended to date, as
have been or will be delivered to Fullcomm prior to the Closing are true,
correct and complete copies thereof.
SECTION 2.4 Corporate Documents. The Contessa shareholders' list and
corporate minute books are complete and accurate in all material respects and
the corporate minute books contain the recorded minutes of all corporate
meetings or the written consents of shareholders and directors.
SECTION 2.5 Financial Statements. (a) Contessa's audited financial
statements for the fiscal year ended December 31, 1998 and the unaudited
September 30, 1999 financial statements (collectively, the "Contessa Financial
Statements"), copies of which have been delivered to
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Fullcomm, are true and complete in all material respects, having been prepared
in accordance with generally accepted accounting principles applied on a
consistent basis for the period covered by such statements, and fairly present,
in accordance with generally accepted accounting principles, the financial
condition of Contessa and its subsidiaries, on a consolidated basis, and results
of its operations for the periods covered thereby. Contessa and each of its
subsidiaries maintains a system of internal accounting controls sufficient to
provide reasonable assurance that (i) transactions are executed with
management's authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP and to
maintain accountability for assets, (iii) access to assets is permitted only in
accordance with management's authorizations and (iv) the recorded accountability
for assets if compared with existing assets at reasonable intervals and
appropriate action is taken with respect to any difference. Neither Contessa nor
any of its subsidiaries has engaged in any transaction, maintained any bank
account or used any corporate funds except for transactions bank accounts or
funds which have been and are reflected in the normally maintained books and
records. Except as otherwise set forth on Schedule 2.5(a) and as set forth
herein, there has been no material adverse change in the business operations,
assets, properties, prospects or condition (financial or otherwise) of Contessa
taken as a whole (a "Material Adverse Effect") from that reflected in the
financial statements referred to in this Section 2.5.
(b) SEC Documents. Contessa has furnished Fullcomm with a true
and complete copy of each report, schedule, registration statement and
definitive proxy statement filed by Contessa with the Commission since November
30, 1998 (as such documents have since the time of their filing been amended,
the "Contessa SEC Documents") and since that date Contessa has filed with the
Commission all documents required to be filed pursuant to Section 12(g) of the
Securities Exchange Act of 1934, as amended (the "Exchange Act"). As of their
respective dates, the Contessa SEC Documents complied in all material respects
with the requirements of the Securities Act of 1933 or the Exchange Act, as the
case may be, and the rules and regulations of the Commission thereunder
applicable to such Contessa SEC Documents, and none of the Contessa SEC
Documents contained any untrue statement of a material fact or omitted to state
a material fact required to be stated therein or necessary to make the
statements therein, in light of the circumstances under which they were made,
not misleading. The financial statements of Contessa included in the Contessa
SEC Documents comply as to form in all material respects with applicable
accounting requirements and with the published rules and regulations of the SEC
with respect thereto, are accurate, complete and in accordance with the books
and records of Contessa, have been prepared in accordance with generally
accepted accounting principles applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto or, in the case of the
unaudited statements, as permitted by Form 10-Q) and fairly present (subject, in
the case of the unaudited statements, to normal, recurring audit adjustments)
the consolidated financial position of Contessa as at the dates thereof and the
consolidated results of its operations and cash flows for the periods then
ended.
SECTION 2.6 Absence of Certain Changes or Events. Since September 30,
1999, and except as disclosed otherwise herein, Contessa has not (i) issued or
sold any promissory note, stock, bond, option or other security of which it was
an issuer or other obligor, (ii) discharged or satisfied any lien or encumbrance
or paid any obligation or liability, absolute or contingent, direct or indirect,
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(iii) incurred or suffered to be incurred any liability or obligation
whatsoever, (iv) cause or permitted any lien, encumbrance or security interest
to be created or arise on or in any of its properties or assets, (v) declared or
made any dividend, payment or distribution to shareholders or purchased or
redeemed or agreed to purchase or redeem any shares of its capital stock, (vi)
reclassified its shares of capital stock, (vii) amended its Certificate of
Incorporation or By-Laws, (viii) acquired any equity interest in any other
Person, or (ix) entered into any agreement or transaction except in connection
with the execution and performance of this Agreement. Neither Contessa nor
Acquisition, has entered into any Agreement to do any of the foregoing action
described in this Section 2.6, except with respect to the GBDR Disposition.
SECTION 2.7 Assets and Liabilities. (a) Contessa has good and
marketable title to all of its assets and property, free and clear of any and
all liens, claims and encumbrances. As of the date hereof, Contessa does not
have any debts, liabilities or obligations of any nature, whether accrued,
absolute, contingent, or otherwise, whether due or to become due, that are not
fully reflected in the Contessa Financial Statements.
(b) Acquisition has no assets and no liabilities.
(c) Contessa has entered into an agreement of sale with
respect to its investment in GBDR whereby it shall sell to a non-affiliated
existing shareholder of Contessa its stock holding in GBDR, and will receive in
return therefor such shareholder's stock holding which is comprised of 562,500
shares of Contessa (the "GBDR Disposition").
SECTION 2.8 Tax Returns and Payments. (a) All of Contessa's tax returns
(federal, state, city, county or foreign) which are required by law to be filed
on or before the date of this Agreement, have been duly filed and are complete
and accurate in all material respects. Contessa has paid all taxes due on said
returns, any assessments made against Contessa and all other taxes, fees and
similar charges imposed on Contessa by any governmental authority (other than
those, the amount or validity of which is being contested in good faith by
appropriate proceedings). No tax liens have been filed and no claims are being
assessed with respect to any such taxes, fees or other similar charges. Contessa
and Acquisition know of (i) no other tax returns or reports which are required
to be filed which have not been so filed and (ii) no unpaid assessment for
additional taxes for any fiscal period or any basis thereof.
(b) Acquisition, which was incorporated on June 24, 1999, has
not filed, and has not yet been required to file, any tax return.
SECTION 2.9 Required Authorizations. There have been or will be timely
filed, given, obtained or taken, all applications, notices, consents, approvals,
orders, registrations, qualifications waivers or other actions of any kind
required by virtue of execution and delivery of this Agreement by Contessa or
the consummation by it of the transactions contemplated hereby. Prior to the
Closing, a majority of the shareholders of Contessa and Acquisition shall have
approved this Agreement and
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the transactions contemplated hereunder and appropriate corporate filings shall
have been made with the State of Delaware, as required.
SECTION 2.10 Compliance with Law and Government Regulations. Contessa
and Acquisition are in compliance with and are not in violation of, applicable
federal, state, local or foreign statutes, laws and regulations (including
without limitation, any applicable building, zoning or other law, ordinance or
regulation) affecting Contessa, Acquisition, or either of their respective
properties or the operation of their respective businesses, except where failure
to be in compliance would not result in a Material Adverse Effect. To the best
knowledge of Contessa, Acquisition, and the Principal Stockholders, Contessa and
Acquisition are not subject to any order, decree, judgment or other sanction of
any court, administrative agency or other tribunal.
SECTION 2.11 Litigation. Except as set forth on Schedule 2.11, there is
no litigation, arbitration, proceeding or investigation pending, or to the best
knowledge of Contessa, Acquisition and the Principal Stockholders, threatened or
anticipated, to which Contessa or Acquisition is a party or which may result in
a Material Adverse Effect, or which might result in any liability on the part of
Contessa or Acquisition, or which questions the validity of this Agreement or of
any action taken or to be taken pursuant to or in connection with the provisions
of this Agreement, and to the best knowledge of Contessa and Acquisition, there
is no basis for any such litigation, arbitration, proceeding or investigation.
To the best knowledge of Contessa, Acquisition and the Principal Stockholders,
there are presently no outstanding judgments, decrees or orders of any court or
any governmental or administrative agency against or affecting Contessa or
Acquisition or any of either of their assets that is not disclosed herein.
Schedule 2.11 contains a complete and accurate description of all claims, suits,
litigations, proceedings, investigations, disputes, writs, injunctions,
judgments and decrees since inception to which Contessa has been a party.
SECTION 2.12 Trade Names and Rights. Contessa does not use any trade
mark, service mark, trade name, or copyright in its business, nor does it own
any trade marks, trade mark registrations or applications, trade names, service
marks, copyrights, copyright registrations or applications. To the knowledge of
Contessa and Acquisition, no Person owns any trade mark, trade mark registration
or application, service mark, trade name, copyright or copyright registration or
application, the use of which is necessary or contemplated in connection with
the operation of Contessa's business.
SECTION 2.13 Governmental Consent. No consent, approval, authorization
or order of, or registration, qualification, designation, declaration or filing
with, any governmental authority on the part of Contessa, Acquisition or the
Principal Stockholders is required in connection with the execution and delivery
of this Agreement or the Ancillary Agreements or the carrying out of any
transactions contemplated hereby or thereby with the exception of the necessary
corporate filings with the State of Delaware and the State of New Jersey
relating to the proposed exchange of shares.
SECTION 2.14 No Disqualifying Orders. Neither Contessa, Acquisition,
the Principal Stockholders nor any of their respective affiliates, directors,
officers or principals is subject to any
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disqualifying order under the "Bad Boy" provisions of the federal or any state
securities law. As used herein, "Bad Boy" provisions include Rule 262 of
Regulation A, Rule 507 of Regulation D and other similar disqualifying
provisions of federal and state securities laws.
SECTION 2.15 Business. Contessa and Acquisition: (i) do not own or
lease any real property or personal property; (ii) are not a party to any
contract; (iii) have no employees or anyone who acts as an employee; (iv) have
only the bank accounts listed on Schedule 2.16 hereto; and (v) are not required
to have any Permits.
SECTION 2.16 No Conflict or Violation; Consent. None of the execution,
delivery or performance of this Agreement, the Ancillary Agreements, the
consummation of the transactions contemplated hereby or thereby, nor compliance
by Contessa, Acquisition or any Principal Stockholder with any of the provisions
hereof or thereof, will (a) violate or conflict with any provision of the
governing documents of Contessa, any of its subsidiaries or any Principal
Stockholder, (b) violate, conflict with, or result in a breach of or constitute
a default (with or without notice of passage of time) under, or result in the
termination of, or accelerate the performance required by, or result in a right
to terminate, accelerate, modify or cancel under, or require a notice under, or
result in the creation of any encumbrance upon any of their respective assets
under, any contract, lease, sublease, license, sublicense, franchise, permit,
indenture, agreement or mortgage for borrowed money, instrument of indebtedness,
security interest or the arrangement to which Contessa, any of its subsidiaries
or any Principal Stockholder is a party or by which Contessa, any of its
subsidiaries or any Principal Stockholder is bound or to which any of their
respective assets are subject, (c) violate any applicable regulation or court
order or (d) impose any encumbrance on any of their respective assets. No
notices to, declaration, filing or registration with, approvals or consents of,
or assignments by, any Person (including any federal, state or local
governmental or administrative authorities) are necessary to be made or obtained
by Contessa, any of its subsidiaries or any Principal Stockholder in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
SECTION 2.17 Full Disclosure. None of the representations and
warranties made by Contessa, Acquisition or the Principal Stockholders herein,
or in any Ancillary Agreement, exhibit, certificate or memorandum furnished or
to be furnished by Contessa, Acquisition or the Principal Stockholders on their
behalf pursuant hereto or thereto, contains or will contain any untrue statement
of material fact, or omits any material fact, the omission of which would be
misleading. The information with respect to Contessa and Fullcomm which is to be
included in any information statement or proxy statement to be sent to the
shareholders of Contessa will not contain any untrue statement of material fact,
or omit to state any material fact necessary to make the statement or fact
contained herein or therein not misleading.
SECTION 2.18 Brokerage. No broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in connection
with the Merger based upon arrangements made by or on behalf of Contessa or
Acquisition, or with respect to the GBDR Disposition.
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SECTION 2.19 Transactions with Affiliates. Except as set forth on
Schedule 2.19, no director or officer of Contessa, Acquisition or any Principal
Stockholder or any member of his or her immediate family, is a party to any
contract or other business arrangement or relationship of any kind with
Contessa, has an ownership interest in any business, corporate or otherwise,
which is a party to, or in any property which is the subject of, business
arrangements or relationships of any kind with Contessa.
SECTION 2.20 Environmental Matters.
(i) Contessa, its subsidiaries and Acquisition
are in compliance in all material respects with all Environmental Laws (as
defined below).
(ii) Contessa has no knowledge of an existing
or potential Environmental Claim (as defined below), nor has Contessa or any
Principal Stockholder received any notification or has knowledge of alleged,
actual or potential responsibility for, or any inquiry or investigation
regarding, any disposal, release, or threatened release at any location of any
Hazardous Substance (as defined below) stored, generated or transported by
Contessa, its subsidiaries or Acquisition.
(iii) To the best knowledge of Contessa,
Acquisition and the Principal Stockholders, (A) no underground tank or other
underground storage receptacle for Hazardous Substance has leaked from any
underground tank or related piping at any time; and (B) there have been no
releases of Hazardous Substances by Contessa on, upon or into any properties of
Contessa, any of its subsidiaries or any of their respective predecessors.
(iv) To the best knowledge of Contessa,
Acquisition and the Principal Stockholders, there has never been any PCBs or
asbestos located at or on any owned or leased property by Contessa, any of its
subsidiaries, or any of their respective predecessors.
(v) No environmental lien has ever been
attached to any real property owned or leased by Contessa, any of its
subsidiaries or any of their respective predecessors.
(vi) Definitions. For purposes of this
Agreement, "Environmental Laws" shall mean all federal, state, district, local
and foreign laws, all rules or regulations promulgated thereunder, and all
orders, consent orders, judgments, notices, permits, or demand letters issued,
promulgated, or entered pursuant thereto, relating to pollution or protection of
the environment (including without limitation ambient air, surface water, ground
water, land surface, or subsurface strata), including without limitation (x)
laws relating to emissions, discharges, releases or threatened releases, or
threatened releases of pollutants, contaminants, chemicals, materials, wastes or
other substances into the environment and (y) laws relating to the
identification, generation, manufacture, processing, distribution, use,
treatment, storage, disposal, recovery, transport or other handling of
pollutants, contaminants, chemicals, industrial materials, wastes or other
substances.
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For purposes of this Agreement, "Environmental Claims" shall mean all
accusations, allegations, notice of violations, liens, claims, demands, suits or
causes of action or any damage, including without limitation, personal injury,
property damage (including any depreciation of property values), lost use of
property, or consequential damages, arising directly or indirectly out of
Environmental Conditions or Environmental Laws.
For purposes of this Agreement, "Environmental Conditions" shall mean
the state of environment, including natural resources (e.g. flora and fauna),
soil, surface water, ground water, any present or potential drinking water
supply, subsurface strata, or ambient air, relating to or arising out of the
use, handling, storage, treatment, recycling, generation, transportation,
release, spilling, leaking, pumping, pouring, emptying, discharging, injection,
escaping, leaching, disposal, dumping, or threatened release of Hazardous
Substances by Contessa, any of its subsidiaries or any of their respective
predecessors or such predecessors in interest, agents, representatives,
employees, or independent contractors.
For purposes of this Agreement, "Hazardous Substances" shall mean all
pollutants, contaminants, chemicals, wastes, and any other carcinogenic,
ignitable, corrosive, reactive, toxic, or otherwise hazardous substances or
materials (whether solids, liquids or gases), including but not limited to any
substances, materials, or wastes subject to regulation, control, or remediation
under Environmental Laws.
ARTICLE III
COVENANTS OF CONTESSA, ACQUISITION AND
THE PRINCIPAL STOCKHOLDERS
SECTION 3.1 Conduct Prior to the Closing. Between the date hereof and
the Closing, other than actions or transactions referred to herein:
(a) Contessa and Acquisition will not enter into any material
agreement, contract or commitment, whether written or oral, or engage in any
transaction, without the prior written consent of Fullcomm;
(b) Contessa and Acquisition will not pay, incur or declare any
dividends or distributions with respect to its capital stock or amend their
respective Certificates of Incorporation or By-Laws, without the prior written
consent of Fullcomm;
(c) Other than with respect to the GBDR Disposition, Contessa and
Acquisition will not authorize, issue, sell, purchase or redeem any shares of
its capital stock or any options or other rights to acquire its capital stock,
without the prior written consent of Fullcomm;
(d) Contessa and Acquisition will comply with all requirements which
federal or state law may impose on it with respect to this Agreement and the
transactions contemplated hereby, and will promptly cooperate with and furnish
written information to Fullcomm in connection with any such
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requirements imposed upon the parties hereto in connection therewith and will
provide Fullcomm with the opportunity to review and approve any mailing or proxy
to be delivered to shareholders of Contessa;
(e) Contessa and Acquisition will not incur any indebtedness for money
borrowed, or issue or sell any debt securities, incur or suffer to be incurred
any liability or obligation of any nature whatsoever, or cause or permit any
lien, encumbrance or security interest to be created or arise on or in any of
its properties or assets, acquire or dispose of fixed assets, change employment
terms, enter into any material or long-term contract, guarantee obligations of
any third party, settle or discharge any balance sheet receivable for less than
its stated amount or enter into any other transaction other than in the regular
course of business, except to comply with the terms of this Agreement, without
the prior written consent of Fullcomm;
(f) Contessa and Acquisition will not make any investment of capital
nature either by purchase of stock or securities, contribution to capital,
property transfer or otherwise, or by the purchase of any property or assets of
any other Person;
(g) Contessa and Acquisition will not enter into any contract
whatsoever, including any employment contract or any other compensation
arrangement;
(h) Contessa and Acquisition will not do any other act which would
cause any representation or warranty of Contessa in this Agreement to be or
become untrue in any material respect or that is not in the ordinary course of
business consistent with past practice;
(i) None of Contessa, Acquisition or any Principal Stockholder shall
directly or indirectly (a) solicit any inquiry or proposals or enter into or
continue any discussions, negotiation or agreements relating to (i) the sale or
exchange of Contessa's or Acquisition's capital stock, or (ii) the merger of
Contessa or Acquisition with any Person other than Fullcomm or (b) provide any
assistance or any information to other otherwise cooperate with any Person in
connection with any such inquiry, proposal or transaction;
(j) Contessa and Acquisition shall grant to Fullcomm and its counsel,
accountants and other representatives, full access during normal business hours
during the period prior to the Closing to all of their respective properties,
books, contracts, commitments and records and, during such period, furnish
promptly to Fullcomm and such representatives all information relating to
Contessa as Fullcomm may reasonably request, and shall extend to Fullcomm the
opportunity to meet with Contessa's accountants and attorneys to discuss the
consolidated financial condition of Contessa; and
(k) Except for the transactions contemplated by this Agreement and the
GBDR Disposition, Contessa and Acquisition will conduct its business in the
normal course consistent with past practice, and shall not sell, pledge or
assign any of its assets without the prior written consent of Fullcomm.
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SECTION 3.2 Pre-Closing Affirmative Covenants. Prior to Closing,
Contessa will do the following:
(a) Use its best efforts to accomplish all actions necessary to
consummate this Agreement, including satisfaction of all conditions contained in
this Agreement without limitation, declaration of the stock dividend necessary
to result in the Three Million (3,000,000) shares issued and outstanding;
(b) Promptly notify Fullcomm in writing of any material adverse change
in the financial condition, business, operations or key personnel of Contessa or
Acquisition, any threatened material litigation or investigation, any breach of
its representations or warranties contained herein, and any material contract,
agreement, license or other agreement which, if in effect on the date of this
Agreement, should have been included in this Agreement or in a schedule hereto;
(c) Use its best efforts to obtain approval of this Agreement from its
shareholders and otherwise satisfy all consents of or notices to its
shareholders under federal and state securities laws and state corporate law;
(d) Obtain the written resignations of its existing officers and
appoint as new officers the individuals listed in Section 1.3(c), which
appointment shall be effective upon the Closing;
(e) File all necessary filings with the Commission to the extent it
needs to do so.
SECTION 3.3 Post-Closing Affirmative Covenants.
(a) As promptly as practicable after the Closing, Contessa shall
deliver notice of and hold a Special Meeting of Shareholders (the "Contessa
Shareholder Meeting") in accordance with the DGCL and with the Exchange Act and
all other applicable federal securities laws to transact the following business:
(i) To consider and vote upon a proposal to amend the Certificate
of Incorporation of Contessa to change the name of Contessa to "Fullcomm
Technologies, Inc." or to any other name to be approved by the shareholders of
Contessa, in order to more accurately describe the new business of Contessa;
(ii) To elect Directors of Contessa for the ensuing year and until
their successors shall have been elected and qualified; and
(iii) To consider and vote upon a proposal to adopt Contessa's
2000 Stock Plan;
(b) The Board of Directors of Contessa will nominate Richard T. Case,
Brendan G. Elliott, Wayne H. Lee, Anthony Markofsky and C. Bradley Tashenberg as
management's slate of directors (the "Board Slate") for election at the Contessa
Shareholder Meeting; and
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(c) The Principal Stockholders will vote their shares in favor of the
name change referred to above, in favor of the adoption of Contessa's 2000 Stock
Plan and in favor of the election of the Board Slate at such Contessa
Shareholder Meeting.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF FULLCOMM
Fullcomm hereby represents, warrants and agrees that:
SECTION 4.1 Organization of Fullcomm. Fullcomm is a corporation
duly organized, validly existing and in good standing under the laws of the
State of New Jersey, is duly qualified or will become duly qualified and in good
standing in every jurisdiction in which such qualification is necessary.
Fullcomm is the surviving entity from the merger with Fullcomm, LLC, a New
Jersey limited liability company ("Fullcomm LLC"), which merger became effective
on May 18, 1999, and pursuant thereto Fullcomm became vested with all
properties, rights, privileges, franchises, licenses or other properties
formerly owned by Fullcomm LLC. There are no corporations or other entities with
respect to which (i) Fullcomm owns any of the outstanding stock or other
interests, or (ii) Fullcomm may be deemed to be in control except as otherwise
disclosed in Schedule 4.1 annexed hereto and by this reference made a part
hereof.
SECTION 4.2 Share Ownership. Prior to the consummation of the
Ancillary Agreements to which it is party, and after giving pro forma effect to
the issuance of a 20% stock dividend to its current private places, all of the
issued and outstanding capital stock of Fullcomm is owned as set forth on
Schedule 1.2. There are no options, warrants, rights, calls, commitments or
agreements of any character obligating Fullcomm to issue, now or at any future
time or upon any circumstance whether or not existing, any units of ownership,
shares or other equity interest, except as otherwise disclosed in Schedule 4.2
annexed hereto.
SECTION 4.3 Charter Documents. Complete and correct copies of the
Certificate of Incorporation and By-Laws of Fullcomm and all amendments thereto,
have been or will be delivered to Contessa prior to the Closing.
SECTION 4.4 Financial Statements, Assets and Liabilities.
Fullcomm's and Fullcomm LLC's unaudited financial statements for the stub period
from inception to and through the period ending December 31, 1999, have been or
will be delivered to Contessa and are true and complete in all material aspects.
Fullcomm has good and marketable title to all of its assets and property to be
delivered to Contessa hereunder free and clear of any and all liens, claims and
encumbrances, except as may be otherwise set forth herein and in its financial
statements. Fullcomm maintains a system of internal accounting controls
sufficient to provide reasonable assurance that (i) transactions are executed
with management's authorizations, (ii) transactions are recorded as necessary to
permit preparation of financial statements in accordance with GAAP and to
maintain accountability for
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assets, (iii) access to assets is permitted only in accordance with management's
authorizations and (iv) the recorded accountability for assets if compared with
existing assets at reasonable intervals and appropriate action is taken with
respect to any difference. Fullcomm has not engaged in any transaction,
maintained any bank account or used any corporate funds except for transactions,
bank accounts or funds which have been and are reflected in the normally
maintained books and records of Fullcomm.
SECTION 4.5 Absence of Certain Changes or Events. Since June 30,
1999 and except as disclosed otherwise herein, Fullcomm has not (i) issued or
sold any promissory note, evidence of indebtedness, bond, option or other
security of which it was an issuer or other obligor, (ii) discharged or
satisfied any lien or encumbrance or paid any obligation or liability, absolute
or contingent, direct or indirect, except in the ordinary course of its
business, (iii) incurred or suffered to be incurred any liability or obligation
whatsoever, except in the ordinary course of its business, (iv) cause or
permitted any lien, encumbrance or security interest to be created or arise on
or in any of its properties or assets, (v) declared or made any dividend,
payment or distribution to shareholders, purchased or redeemed or agreed to
purchase or redeem any shareholder's ownership rights, (vi) reclassified its
shares of capital stock, or (vii) entered into any agreement or transaction
except in connection with the execution and performance of this Agreement.
SECTION 4.6 Tax Returns and Payments. As of the date hereof,
Fullcomm has not filed tax returns (federal, state, city, county or foreign).
Fullcomm knows of (i) no other tax returns or reports which are required to be
filed which have not been so filed and (ii) no unpaid assessment for additional
taxes for any fiscal period or any basis thereof.
SECTION 4.7 Required Authorizations. There have been or will be
timely filed, given, obtained or taken, all applications, notices, consents,
approvals, orders, registrations, qualifications waivers or other actions of any
kind required by virtue of execution and delivery of this Agreement by Fullcomm
or the consummation by it of the transactions contemplated hereby and
appropriate corporate filings shall have been made in the State of New Jersey,
as required.
SECTION 4.8 Compliance with Law and Government Regulations.
Fullcomm is, to the best of its knowledge, in compliance with all applicable
statutes, regulations, decrees, orders, restrictions, guidelines and standard
affecting its properties and operations, imposed by the United States of America
or any state to which Fullcomm is subject, the failure to comply with which
would, either individually or in the aggregate, have a Material Adverse Effect.
SECTION 4.9 Litigation. There is no litigation, arbitration,
proceeding or investigation pending or, to the best of its knowledge, threatened
to which Fullcomm is a party or which may result in any Material Adverse Effect,
or which might result in any liability on the part of Fullcomm, or which
questions the validity of this Agreement or of any action taken or to be taken
pursuant to or in connection with the provisions of this Agreement, and to the
best knowledge of Fullcomm, there is no basis for any such litigation,
arbitration, proceeding or investigation except as otherwise set forth in
Schedule 4.9. To the best of its knowledge, there are presently no outstanding
judgments, decrees
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or orders of any court or any governmental or administrative agency against or
affecting Fullcomm or any of its assets that is not disclosed herein.
SECTION 4.10 Patents, Trademarks, Trade Names and Rights. Schedule
4.10 annexed hereto and by this reference is made a part hereof, contains a
complete list of all patents, assignments of patents, patent licenses,
trademarks, service marks, trade marks, service mark, trademark and service mark
registrations, applications and licenses with respect to the forgoing owned or
held by Fullcomm. Fullcomm has no knowledge of any facts and nothing has come to
its attention that would lead it to believe that it has infringed or
misappropriated or is infringing upon any trademark, copyright, patent or other
similar right of any person. No claim relating thereto is pending or, to the
knowledge of Fullcomm, is threatened. Fullcomm has no knowledge of any rights
owned by third parties in the patents, trademarks and other intellectual
property rights listed in Schedule 4.10, except as set forth in Schedule 4.10.
SECTION 4.11 Governmental Consent. No consent, approval,
authorization or order of, or registration, qualification, designation,
declaration or filing with, any governmental authority on the part of Fullcomm
is required in connection with the execution and delivery of this Agreement or
the Ancillary Agreements or the carrying out of any transactions contemplated
hereby or thereby other than filing the Agreement together with a Certificate of
Merger with the State of Delaware and State of New Jersey.
SECTION 4.12 Authority. Fullcomm and each of the Fullcomm
Shareholders have approved this Agreement and duly authorized the execution
hereof. Fullcomm has full power, authority and legal right to enter into this
Agreement and to consummate the transactions contemplated hereby, and all
corporate actions necessary to authorize the execution and delivery of this
Agreement and the consummation of the transactions contemplated hereby has been
duly and validly taken. The execution and delivery of this Agreement, the
consummation of the transactions contemplated hereby and compliance by Fullcomm
with the provisions hereof will not (a) conflict with or result in a breach of
any provisions of, or constitute a default (or an event which, with notice or
lapse of time or both, would constitute a default) under, or result in the
creation of any lien, security interest, charge or encumbrance upon any of the
properties or assets of Fullcomm under, any of the terms, conditions or
provisions of the Certificate of Incorporation or By-Laws of Fullcomm, or any
note, bond, mortgage, indenture, license, agreement or any instrument or
obligation to which Fullcomm is a party or by which it is bound; or (b) violate
any order, writ, injunction, decree, statute, rule or regulation applicable to
Fullcomm or any of its properties or assets.
SECTION 4.13 Investment Purpose. Fullcomm has received or shall receive
representations from the Fullcomm Shareholders that the recipients of the
restricted Merger Shares hereunder are acquiring the shares for investment
purposes only and acknowledges that the Contessa Shares issued hereunder are
"restricted securities" and may not be sold, traded or otherwise transferred
without registration under the Securities Act or exemption therefrom, and in
addition, shares issuable under the Ancillary Agreements and Merger Shares
receivable by Messrs. Elliott, Lee, and Escaravage are also subject to the terms
of the three year "lockup" provision referred to herein.
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SECTION 4.14 Nonexistence of Disqualifying Orders. Neither
Fullcomm nor any of its affiliates, directors, officers or principals is subject
to any disqualifying order under the "Bad Boy" provisions of the federal or any
state securities law which are defined in Section 2.14.
SECTION 4.15 Business. Except as listed on Schedule 4.15,
Fullcomm: (i) does not own or lease any real property or personal property; (ii)
is not a party to any contract; (iii) has no employees or anyone who acts as an
employee; and (iv) is not required to have any Permits.
SECTION 4.16 No Conflict or Violation: Consent. None of the
execution, delivery or performance of this Agreement, the Ancillary Agreements,
the consummation of the transactions contemplated hereby or thereby, nor
compliance by Fullcomm with any of the provisions hereof or thereof, will (a)
violate or conflict with any provision of the governing documents of Fullcomm,
(b) violate, conflict with, or result in a breach of or constitute a default
(with or without notice of passage of time) under, or result in the termination
of, or accelerate the performance required by, or result in a right to
terminate, accelerate, modify or cancel under, or require a notice under, or
result in the creation of any encumbrance upon any of its assets under, any
contract, lease, sublease, license, sublicense, franchise, permit, indenture,
agreement or mortgage for borrowed money, instrument of indebtedness, security
interest or the arrangement to which Fullcomm is a party or by which Fullcomm is
bound or to which any of its assets are subject, (c) violate any applicable
regulation or court order or (d) impose any encumbrance on any of its assets. No
notices to, declaration, filing or registration with, approvals or consents of,
or assignments by, any Person (including any federal, state or local
governmental or administrative authorities) are necessary to be made or obtained
by Fullcomm, any of its Subsidiaries or any Principal Stockholder in connection
with the execution, delivery or performance of this Agreement or the
consummation of the transactions contemplated hereby.
SECTION 4.17 Full Disclosure. None of the representations and
warranties made by Fullcomm herein, or in any Ancillary Agreement, exhibit,
certificate or memorandum furnished or to be furnished by, on its behalf
pursuant hereto or thereto, contains or will contain any untrue statement of
material fact, or omits any material fact, the omission of which would be
misleading.
SECTION 4.18 Transactions and Affiliates. No Fullcomm Shareholder
or any member of his or her immediate family, is a party to any contract or
other business arrangement or relationship of any kind with Fullcomm has an
ownership interest in any business, corporate or otherwise, which is a party to,
or in any property which is the subject of, business arrangements or
relationships of any kind with Fullcomm.
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ARTICLE V
CONDUCT PRIOR TO CLOSING
SECTION 5.1 Conduct Prior to the Closing. Between the date hereof
and the Closing:
(a) Except within the regular course of business or in connection
with its financing activities previously disclosed to Contessa, including,
without limitation the Ancillary Agreements and the Grace Private Placement,
Fullcomm will not enter into any material agreement, contract or commitment,
whether written or oral, without the prior written consent of Contessa;
(b) Fullcomm will not pay, incur or declare any dividends or
distributions with respect to its shareholders or amend its Certificate of
Incorporation or By-Laws, without the prior written consent of Contessa ;
(c) Except for the shares of Common Stock of Fullcomm to be issued
in connection with the Ancillary Agreements and the Grace Private Placement
Agreement, Fullcomm will not authorize, issue, sell, purchase, or redeem any
shares of capital stock or any options or other rights to acquire ownership
interests without the prior written consent of Contessa;
(d) Except within the regular course of business and in its
financing activities previously disclosed to Contessa, Fullcomm will not incur
any indebtedness for money borrowed (other than the South Edge Loan) or issue
any debt securities, or incur or suffer to be incurred any liability or
obligation of any nature whatsoever, or cause or permit any lien, encumbrance or
security interest to be created or arise on or in any of its properties or
assets, without the prior written consent of Contessa;
(e) Fullcomm will not make any investment of capital nature either
by purchased stock or securities, contribution to capital, property transfer or
otherwise, or by the purchase of any property or assets of any other Person;
(f) Fullcomm will not do any other act which would cause
representation or warranty of Contessa in this Agreement to be or become untrue
in any material respect or that is not in the ordinary course of business
consistent with past practice;
(g) Fullcomm shall not directly or indirectly (a) solicit any
inquiry or proposals or enter into or continue any discussions, negotiation or
agreements relating to (i) the sale or exchange of Fullcomm's capital stock or
(ii) the merger of Fullcomm with any Person other than Acquisition or (b)
provide any assistance or any information to other otherwise cooperate with any
Person in connection with any such inquiry, proposal or transaction;
(h) Fullcomm will comply with all requirements which federal or
state law may impose on it with respect to this Agreement and the transactions
contemplated hereby, and will promptly
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cooperate with and furnish written information to Contessa in connection with
any such requirements imposed upon the parties hereto in connection therewith;
and
(i) Fullcomm shall grant to Contessa and its counsel, accountants
and other representatives, full access during normal business hours during the
period to the Closing to all its respective properties, books, contracts,
commitments and records and, during such period, furnish promptly to Contessa
and such representatives all information relating to Fullcomm as Contessa may
reasonably request, and shall extend to Contessa the opportunity to meet with
Fullcomm's accountants and attorneys to discuss the financial condition of
Fullcomm.
SECTION 5.2 Affirmative Covenants. Prior to Closing, Fullcomm will
do the following:
(a) Use its best efforts to accomplish all actions necessary to
consummate this Agreement, including satisfaction of all conditions contained in
this Agreement and declaration of a stock dividend, or taking of other corporate
action to result in the Four Million, Six Hundred and One Thousand, One Hundred
(4,601,100) share ownership on Schedule 1.2; and
(b) Promptly notify Contessa in writing of any material adverse
change in the financial condition, business, operations or key personnel of
Fullcomm, any threatened material litigation or investigation, any breach of its
representations or warranties contained herein, and any material contract,
agreement, license or other agreement which, if in effect on the date of this
Agreement, should have been included in this Agreement.
ARTICLE VI
ADDITIONAL AGREEMENTS
SECTION 6.1 Expenses. All costs and expenses incurred in
connection with this Agreement and the transactions contemplated hereby shall be
paid by the party incurring such expense except as provided for in Section 11.1
herein.
SECTION 6.2. Brokers and Finders. Except for the fees to be paid
under the Grace Agreements, each of the parties hereto represents, as to itself,
that no agent, broker, investment banker or firm or person is or will be
entitled to any broker's or finder's fee or any other commission or similar fee
in connection with any of the transactions contemplated by this Agreement.
SECTION 6.3 Necessary Actions. Subject to the terms and conditions
herein provided, each of the parties hereto agrees to use all reasonable efforts
to take, or cause to be taken, all action, and to do or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement.
In the event at any time after the Closing, any further action is necessary or
desirable to carry out the
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purpose of this Agreement, the proper managers, officers and/or directors of
Contessa, Acquisition or Fullcomm, as the case may be, shall take all such
necessary action.
SECTION 6.4 Indemnification.
(a) General.
(i) Subsequent to the Closing, the Principal
Stockholders shall, jointly and severally, indemnify Fullcomm, and each of the
Fullcomm Shareholders ("Fullcomm Indemnified Parties") against, and hold each of
the Fullcomm Indemnified Parties harmless from any damage, claim, loss, cost,
liability or expense, including without limitation, interest, penalties,
reasonable attorneys' fees and expenses of investigation, diminution of value,
response action, removal action or remedial action (collectively "Damages")
incurred by any such Fullcomm Indemnified Party, that are incident to, arise out
of, in connection with, or related to, whether directly or indirectly, the
breach of any warranty, representation, covenant or agreement of Contessa,
Acquisition or the Principal Stockholders contained in this Agreement, the
Ancillary Agreements or any schedule hereto or thereto or in any certificate or
instrument of conveyance (including, without limitation, any notice to be
delivered to the shareholders of Contessa) delivered by or on behalf of Contessa
or the Principal Stockholders pursuant to this Agreement, the Ancillary
Agreements or in connection with the transactions contemplated hereby or
thereby.
(ii) Subsequent to the Closing, Fullcomm shall
indemnify Contessa and the Principal Stockholders ("Contessa Indemnified
Parties"), against, and hold each of the Contessa Indemnified Parties harmless
from, any Damages incurred by such Contessa Indemnified Party, that are incident
to, arise out of, in connection with, or related to, whether directly or
indirectly, the breach of any warranty, representation, covenant or agreement of
Fullcomm contained in this Agreement, the Ancillary Agreements, any schedule
hereto or thereto or in any certificate or instrument of conveyance delivered by
or on behalf of Fullcomm pursuant to this Agreement, the Ancillary Agreements or
in connection with the transactions contemplated hereby or thereto.
(iii) The term "Damages" as used in this Section
6.4 is not limited to matters asserted by third parties against Fullcomm
Indemnified Parties or Contessa Indemnified Parties, but includes Damages
incurred or sustained by such persons in the absence of third party claims.
(b) Procedure for Claims.
(i) If a claim for Damages (a "Claim') is to
be made by a person entitled to indemnification hereunder, the person claiming
such indemnification (the "Indemnified Party"), subject to clause (ii) below,
shall give written notice (a "Claim Notice") to the indemnifying person (the
"Indemnifying Party") as soon as practicable after the Indemnified Party becomes
aware of any fact, condition or event which may give rise to Damages for which
indemnification may be sought under this Section 6.4. The failure of any
Indemnified Party to give timely notice hereunder shall not
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affect rights to indemnification hereunder, except and only to the extent that,
the Indemnifying Party demonstrates actual material damage caused by such
failure. In the case of a Claim involving the assertion of a claim by a third
party (whether pursuant to a lawsuit or other legal action or otherwise, a
"Third-Party Claim"), if the Indemnifying Party shall acknowledge in writing to
the Indemnified Party that the Indemnifying Party shall be obligated to
indemnify the Indemnified Party under the terms of its indemnity hereunder in
connection with such Third-Party Claim, then (A) the Indemnifying Party shall be
entitled and, if it so elects, shall be obligated at its own cost, risk and
expense, (1) to take control of the defense and investigation such Third-Party
Claim and (2) to pursue the defense thereof in good faith by appropriate actions
or proceedings promptly taken or instituted and diligently pursued, including,
without limitation, to employ and engage attorneys of its own choice reasonably
acceptable to the Indemnified Party to handle and defend the same, and (B) the
Indemnifying Party shall be entitled (but not obligated), if it so elects, to
compromise or settle such claim, which compromise or settlement shall be made
only with the written consent of the Indemnified Party, such consent not to be
unreasonably withheld. In the event the Indemnifying Party elects to assume
control of the defense and investigation of such lawsuit or other legal action
in accordance with this Section 6.4, the Indemnified Party may, at its own cost
and expense, participate in the investigation, trial and defense of such
Third-Party Claim; provided that, if the named persons to a lawsuit or other
legal action include both the Indemnifying Party and the Indemnified Party and
the Indemnified Party has been advised in writing by counsel that there may be
one or more legal defenses available to such Indemnified Party that are
different from or additional to those available to the Indemnifying Party, the
Indemnified Party shall be entitled, at the Indemnifying Party's cost, risk and
expense, to separate counsel of its own choosing. If the Indemnifying Party
fails to assume the defense of such Third-Party Claim in accordance with this
Section 6.4 within 10 calendar days after receipt of the Claim Notice, the
Indemnified Party against which such Third-Party Claim has been asserted shall
upon delivering notice to such effect to the Indemnifying Party have the right
to undertake, at the Indemnifying Party's cost, risk and expense, the defense,
compromise and settlement of such Third-Party Claim on behalf of and for the
account of the Indemnifying Party; provided that such Third-Party Claim shall
not be compromised or settled without the written consent of the Indemnifying
Party, which consent shall not be unreasonably withheld. In the event the
Indemnifying Party assumes the defense of the claim, the Indemnifying Party
shall keep the Indemnified Party reasonably informed of the progress of any such
defense, compromise or settlement, and in the event the Indemnified Party
assumes the defense of the claim, the Indemnified Party shall keep the
Indemnifying Party reasonably informed of the progress of any such defense,
compromise or settlement. The Indemnifying Party shall be liable for any
settlement of any Third-Party Claim effected pursuant to and in accordance with
this Section 6.4 and for any final judgment (subject to any right of appeal),
and the Indemnifying Party agrees to indemnify and hold harmless each
Indemnified Party from and against any and all Damages by reason of such
settlement or judgment.
(ii) Notwithstanding clause (i) above, in the
event that the Indemnified Party is a Contessa Indemnified Party, any Claim
Notice election or other notification or correspondence required pursuant to
such clause (i) shall be valid if it is delivered to each Contessa Principal
Stockholder (the "Stockholder Representative"). Each Principal Stockholder
hereby irrevocably appoints the Stockholder Representative as its agent and
attorney-in-fact with respect to
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the matters set forth in this Section 6.4, and hereby irrevocably grants to the
Stockholder Representative the authority to administer Claims on behalf of such
Contessa Indemnified Party, to exercise such other rights and powers as are set
forth in this Agreement and to enter into, and to bind such Stockholder with
respect to, the settlement of any such Claim. Each Fullcomm Indemnified Party
shall be entitled to rely on the agreements and representations of, and notices
and other correspondence from, the Stockholder Representative as such agent and
attorney-in-fact in connection with any Claim by or against any Contessa
Indemnified Party pursuant to this Section 6.4.
(c) No Right of Contribution. After the Closing, no Principal
Stockholder shall have any right of contribution against the Surviving
Corporation for any breach of any representation, warranty, covenant or
agreement of Contessa. Fullcomm and Contessa shall be entitled to specific
performance and injunctive relief, without posting bond or other security, for
the purpose of asserting their respective rights under this Section 6.4. The
remedies described in this Section 6.4 shall be in addition to, and not in lieu
of, and any other remedies at law or in equity that the parties may elect to
pursue.
ARTICLE VII
CONDITIONS TO OBLIGATIONS OF THE PARTIES
The obligations of the parties under this Agreement are subject to
the fulfillment and satisfaction of each of the following conditions:
SECTION 7.1 Legal Action. No preliminary or permanent injunction
or other order by any federal or state court which prevents the consummation of
this Agreement or any of the transactions contemplated by this Agreement shall
have been issued and remain in effect.
SECTION 7.2 Absence of Termination. The obligations to consummate
the transactions contemplated hereby shall not have been canceled pursuant to
Article X hereof.
SECTION 7.3 Required Approvals. Contessa, Acquisition and Fullcomm
shall have received all such approvals, consents, authorizations or
modifications as may be required to permit the performance by Contessa,
Acquisition and Fullcomm of their respective obligations under this Agreement,
and the consummation of the transactions herein contemplated, whether from
governmental authorities or other Persons, and Contessa, Acquisition and
Fullcomm shall each have received any and all permits and approvals from any
regulatory authority having jurisdiction required for the lawful consummation of
this Agreement and the transactions contemplated hereby.
SECTION 7.4 "Blue Sky" Compliance. There shall have been obtained
any and all permits, approvals and consents of the appropriate state securities
commissions of any jurisdictions, and of any other governmental body or agency,
which counsel for Contessa or Fullcomm may reasonably deem necessary or
appropriate so that consummation of the transactions contemplated by this
Agreement may be in compliance with all applicable laws.
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ARTICLE VIII
CONDITIONS PRECEDENT TO OBLIGATIONS OF
CONTESSA, ACQUISITION AND THE PRINCIPAL STOCKHOLDERS
All obligations of Contessa, Acquisition and the Principal
Stockholders under this Agreement are subject to the fulfillment and
satisfaction by Fullcomm prior to or at the time for Closing, of each of the
following conditions, any one or more of which may be waived by Contessa.
SECTION 8.1 Representations and Warranties True at Closing. All
representations and warranties of Fullcomm contained in this Agreement will be
true and correct at and as of the time of the Closing, and Fullcomm shall have
delivered to Contessa a duly executed Officer's Certificate, dated the Closing
Date, in the form of Exhibit B.
SECTION 8.2 Performance. The obligations of Fullcomm to be
performed on or before the Closing pursuant to the terms of this Agreement shall
be duly performed at such time, and Fullcomm shall have delivered to Contessa a
duly executed Officer's Certificate, dated the Closing Date, in the form of
Exhibit B.
SECTION 8.3 Authority. All action required to be taken by, or on
the part of Fullcomm and the Fullcomm Shareholders to authorize the execution,
delivery and performance of this Agreement by Fullcomm and the Fullcomm
Shareholders and the consummation of the transactions contemplated hereby, shall
have been duly and validly taken.
SECTION 8.4 Absence of Certain Changes or Events. There shall not
have occurred, since the date hereof, any material adverse change in the
business, condition (financial or otherwise), assets or liabilities of Fullcomm
or any event or condition of any character adversely affecting Fullcomm, and it
shall have delivered to Contessa, a duly executed Officer's Certificate, dated
the Closing Date, in the form of Exhibit B hereto.
SECTION 8.5 Acceptance by Fullcomm Shareholders. Prior to the
Closing, each shareholder of Fullcomm shall have approved this Agreement and
agreed to the Merger.
SECTION 8.6 Closing Documents and South Edge Loan. Fullcomm shall
have delivered to Contessa the documents and other items described in Section
10.2 and such other documents and items as Contessa shall reasonably request.
All Ancillary Documents shall have been executed and delivered. Fullcomm shall
have received not less than $100,000 in loan proceeds from the South Edge Loan.
SECTION 8.7 Completion of Due Diligence. Contessa and Acquisition
shall have completed their due diligence which shall include, but not be limited
to, review of the terms and legal status of the Grace Agreements, regulatory
status of R.K. Grace and Company and the licensed
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broker-dealer R.K Grace, receipt of audited year-end financial statements of
Fullcomm as at and for the period ending December 31, 1999 , and such other
matters as may be, in their, opinion necessary and desirable, and the results of
all such inquiry shall be satisfactory to Contessa and Acquisition in their sole
judgement.
ARTICLE IX
CONDITIONS TO OBLIGATIONS OF
FULLCOMM AND THE FULLCOMM SHAREHOLDERS
All obligations of Fullcomm and the Fullcomm Shareholders under
this Agreement are subject to the fulfillment and satisfaction by Contessa,
Acquisition and the Principal Stockholders prior to or at the time of Closing,
of the following conditions, any one or more of which may be waived by Fullcomm.
SECTION 9.1 Representations and Warranties True at Closing. All
representations and warranties of Contessa, Acquisition and the Principal
Stockholders contained in this Agreement will be true and correct at and as of
the time of the Closing, and Contessa, Acquisition and the Principal
Stockholders shall have delivered to Fullcomm a duly executed Officer's
Certificate and a Principal Stockholders' Certificate, each dated the Closing
Date, substantially in the form of Exhibits C-1, C-2 and D.
SECTION 9.2 Performance. The obligations of Contessa, Acquisition
and the Principal Stockholders to be performed on or before the Closing pursuant
to the terms of this Agreement shall have been duly performed at such time, and
Contessa, Acquisition and the Principal Stockholders shall have delivered to
Fullcomm a duly executed Officer's Certificate and a Principal Stockholders'
Certificate, each dated the Closing Date, substantially in the form of Exhibits
C-1, C-2 and D.
SECTION 9.3 Authority. All action required to be taken by, or on
the part of Contessa and Acquisition and their respective shareholders to
authorize the execution, delivery and performance of this Agreement by Contessa,
Acquisition and the Principal Stockholders and the consummation of the
transactions contemplated hereby, shall have been duly and validly taken.
SECTION 9.4 Absence of Certain Changes or Events. There shall not
have occurred, since the date hereof, any material adverse change in the
business, condition (financial or otherwise), assets or liabilities of Contessa
or Acquisition or any event or condition of any character adversely affecting
Contessa or Acquisition, and each shall have delivered to Fullcomm, an officer's
certificate, dated the Closing Date, substantially in the form of Exhibits C-1
and C-2.
SECTION 9.5 Actions by Contessa Shareholders, David S. Rector and
Officers of Contessa and Acquisition. Prior to the Closing, the shareholders of
Contessa shall have taken the actions required under Section 9.12, David S.
Rector shall have submitted his resignation as a director of Contessa and the
officers of Contessa and Acquisition shall have submitted their resignations.
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SECTION 9.6 Employment Agreements and Ancillary Agreements.
Contessa shall have entered into employment agreements with Brendan G. Elliott
for a term of not less than two (2) years and in form and substance satisfactory
to each party. The Case Employment Agreement shall have been executed. The
remaining Ancillary Documents shall have been executed.
SECTION 9.7 Indemnification Agreements. Contessa shall have
executed indemnification agreements in favor of all directors of Contessa
(collectively, the "Indemnification Agreements").
SECTION 9.8 Opinion of Counsel. Contessa shall deliver to Fullcomm
an opinion of counsel substantially in the form of Exhibit E stating, among
other things, that the transactions contemplated in this Agreement do not
violate any state or federal securities laws.
SECTION 9.9 Closing Documents. Contessa and the Principal
Stockholders, as the case may be, shall have delivered to Fullcomm the documents
and other items described in Section 10.1 and such other documents and items as
Fullcomm may reasonably require.
SECTION 9.10 Exemption Under Federal and State Securities Laws.
The issuance of shares of Contessa in the Merger shall not violate any federal
or state securities laws.
SECTION 9.11 Completion of Fullcomm Diligence. Fullcomm shall have
completed its business and legal due diligence to its satisfaction, in its sole
judgment.
SECTION 9.12 Stockholder Approval/Notice. Contessa shall have
taken all actions related to the due authorization of the Merger as may be
required under the federal and state law, including the DGCL, the NJBCA and
federal securities laws.
SECTION 9.13 Board of Directors Approval. The Merger shall have
been approved by appropriate action of the Board of Directors of Contessa.
SECTION 9.14 Directors and Officers Insurance. Contessa shall have
obtained Directors and Officers insurance on each post-Merger director and
officer.
26
<PAGE>
ARTICLE X
CLOSING
On the Closing Date:
SECTION 10.1 Deliveries by Contessa. Contessa shall deliver (or
cause to be delivered) to Fullcomm:
(a) any consents required to be obtained by Contessa and the
Principal Stockholders;
(b) Contessa and Acquisition shall each deliver an Officer's
Certificate and the Principal Stockholders shall have delivered similar
certificates as described in Sections 9.1, 9.2 and 9.4 hereof, dated the Closing
Date, that all representations, warranties, covenants and conditions set forth
herein by Contessa, Acquisition and the Principal Stockholders, as the case may
be, are true and correct as of, or have been fully performed and complied with
by the Closing Date;
(c) all Contessa company books and records.
(d) an opinion of legal counsel to Contessa dated as of the
Closing Date, in substantially the form of Exhibit E;
(e) the Merger Shares to be issued to the Fullcomm
Shareholders in accordance with Section 1.2;
(f) evidence that this Agreement and the transactions
contemplated hereby have been approved by the shareholders of Contessa;
(g) certificates of good standing from Delaware and any other
state in which Contessa is required to be qualified to do business;
(h) a Secretary's Certificate of Contessa, substantially in
the form of Exhibit F, attaching thereto the current Certificate of
Incorporation of Contessa, By-Laws of Contessa and meeting minutes from all
Board and shareholder meetings for the last five years as well as verifying that
no other director or stockholder minutes exist and no other director or
stockholder meetings took place; and
(i) such other documents and certificates duly executed as may
reasonably be requested by Fullcomm or the Fullcomm Shareholders prior to the
Closing Date.
27
<PAGE>
SECTION 10.2 Delivered by Fullcomm. Fullcomm shall deliver to
Contessa:
(a) any consents required to be obtained by Fullcomm;
(b) an Officer's Certificate as described in Section 8.1 and
8.2 hereof, dated the Closing Date, stating that all representations,
warranties, covenants and conditions set forth herein by Fullcomm are true and
correct as of, or have been, fully performed and complied with by the Closing
Date;
(c) all company books and records;
(d) an opinion of Buchanan Ingersoll Professional Corporation,
counsel to Fullcomm, dated as of the Closing Date, substantially in the form of
Exhibit G;
(e) Employment Agreements in the form of Exhibit I from
Messrs. Lee and Elliott;
(f) a Secretary's Certificate of Fullcomm, substantially in
the form of Exhibit F, attaching thereto the current Certificate of
Incorporation of Fullcomm, By-Laws of Fullcomm and meeting minutes from all
Board and shareholder meetings since inception as well as verifying that no
other director or stockholder minutes exist and no other director or stockholder
meetings took place; and
(g) copies of the Shareholders Agreement executed by Messrs.
Lee, Elliott, and Escaravage and all Ancillary Agreement parties receiving any
shares thereunder; and
(h) such other documents and certificates duly executed as may
reasonably be requested by Contessa, Acquisition or the Principal Stockholders
prior to the Closing Date.
SECTION 10.3 Termination. Notwithstanding anything herein or
elsewhere to the contrary, this Agreement may be terminated:
(a) By mutual agreement of the parties hereto at any
time prior to the Closing;
(b) By the Board of Directors of Contessa at any
time prior to the Closing, if:
(i) a condition to performance by Contessa
under this Agreement or a covenant of Fullcomm
contained herein shall not be fulfilled on or before
the date of the Closing or at such other time and
date specified in this Agreement for the fulfillment
for such covenant or condition; or
(ii) a material default or breach of this
Agreement shall be made by Fullcomm;
28
<PAGE>
(c) By Fullcomm at any time prior to the Closing,
if:
(i) a condition to Fullcomm's performance
under this Agreement or a covenant of Contessa or
Acquisition contained herein shall not be fulfilled
on or before the date of the Closing or at such
other time and date specified in this Agreement for
the fulfillment for such covenant or condition; or
(ii) a material default or breach of this
Agreement shall be made by Contessa or Acquisition
or a Principal Stockholder; or
(d) By either party if it notifies the other that it
is not satisfied with its due diligence review.
SECTION 10.4 Effect of Termination. If this Agreement is
terminated, this Agreement, except as to Section 11.1 and Section 11.2, shall no
longer be of any force or effect and there shall be no liability on the part of
any party or their respective directors, officers or shareholders; provided
however, that in the case of a termination pursuant to Section 10.3(b)(ii) or
10.3(c)(ii) hereof because of a material breach of this Agreement by another
party, the damages which the aggrieved party or parties may recover from the
defaulting party or parties shall in no event exceed the amount of out-of-pocket
costs and expenses incurred by such aggravated party or parties in connection
with this Agreement, and no party to this Agreement shall be entitled to any
injunctive relief.
ARTICLE XI
MISCELLANEOUS
SECTION 11.1 Costs and Expenses. In the event of any termination
of this Agreement pursuant to Section 10.1, subject to the provisions of Section
10.2, each party hereto will bear his or its own respective expenses.
SECTION 11.2 Extension of time: Waivers. At any time prior to
the Closing:
(a) Contessa may in its sole discretion (i) extend the time for
the performance of any of the obligations or other acts of Fullcomm, (ii) waive
any inaccuracies in the representations and warranties of Fullcomm contained
herein or in any documents delivered pursuant hereto by Fullcomm and (iii) waive
compliance with any of the agreements or conditions contained herein to be
performed by Fullcomm. Any agreement on the part of Contessa to any such
extension or waiver shall be valid only if set forth in an instrument, in
writing, signed on behalf of Contessa and shall only be effective in the
specific instance. No waiver or any condition or provision shall be deemed to be
a subsequent waiver of such condition or provision or a waiver of any condition
or provision other than the one specifically waived.
29
<PAGE>
(b) Fullcomm may in its sole discretion (i) extend the time for
the performance of any of the obligations or other acts of Contessa,
Acquisition, or the Principal Stockholders, (ii) waive any inaccuracies in the
representations and warranties of Contessa, Acquisition or the Principal
Stockholders contained herein or in any documents delivered pursuant hereto by
Contessa, Acquisition or the Principal Stockholders and (iii) waive compliance
with any of the agreements or conditions contained herein to be performed by
Contessa, Acquisition or the Principal Stockholders. Any agreement on the part
of Fullcomm to any such extension or waiver shall be valid only if set forth in
an instrument, in writing, signed on behalf of Fullcomm and shall only be
effective in the specific instance. No waiver or any condition or provision
shall be deemed to be a subsequent waiver of such condition or provision or a
waiver of any condition or provision other than the one specifically waived.
SECTION 11.3 Notices. Any notice to any party hereto pursuant to
this Agreement shall be in writing and given by Certified or Registered Mail,
FedEx or by facsimile, addressed as follows:
Fullcomm, Inc.
c/o Buchanan Ingersoll Professional Corporation
650 College Road East
Princeton, NJ 08540
Att.: David J. Sorin, Esq.
Contessa Corporation and
Fullcomm Acquisition Corp.
c/o Kaplan Gottbetter & Levenson, LLP
630 Third Avenue
New York, NY 10017
Att.: Adam S. Gottbetter, Esq.
Additional notices are to be given as to each party, at such other
address as should be designated in writing complying as to delivery with the
terms of this Section 11.3. All such notices shall be effective when sent,
addressed as aforesaid.
SECTION 11.4 Parties in Interest. This Agreement shall inure to
the benefit of and be binding upon the parties hereto and the respective
successors and assigns. Nothing in this Agreement is intended to confer,
expressly or by implication, upon any other person any rights or remedies under
or by reason of this Agreement.
SECTION 11.5 Counterparts. This Agreement may be executed in one
or more counterparts, each of which shall be deemed an original and together
shall constitute one document. The delivery by facsimile of an executed
counterpart of this Agreement shall be deemed to be an original and shall have
the full force and effect of an original executed copy.
30
<PAGE>
SECTION 11.6 Severability. The parties hereto agree and affirm if
any part of this Agreement is deemed to be unenforceable, the remainder of the
Agreement shall remain in full force and effect.
SECTION 11.7 Headings and Schedules. The "Article" and "Section"
headings are provided herein for convenience of reference only and do not
constitute a part of this Agreement. The Schedules, on the other hand, are
hereby expressly incorporated into this Agreement.
SECTION 11.8 Survival of Representations and Warranties. All
terms, conditions, representations and warranties set forth in this Agreement or
in any instrument, certificate, opinion, or other writing providing for in it,
shall survive the Closing and the delivery of the Contessa Shares issued
hereunder at the Closing, for a period of eighteen months from the Closing
regardless of any investigation made by or on behalf of any of the parties
hereto, or whether made before or after Closing.
SECTION 11.9 Assignability. This Agreement shall not be assigned
by any of the parties hereto without the prior written consent of the other
parties.
SECTION 11.10 Amendment. This Agreement may be amended with the
approval of the Boards of Directors of Contessa, Acquisition and Fullcomm at any
time before or after approval thereof by shareholders of Contessa, if required,
and Fullcomm; but after such approval by the Contessa shareholders, no amendment
shall be made which substantially and adversely changes the terms hereof. This
Agreement may not be amended except by an instrument, in writing, signed on
behalf of each of the parties hereto.
SECTION 11.11 Choice of Law. This Agreement shall be construed,
interpreted and the rights of the parties determined in accordance with the laws
of the State of New Jersey except with respect to matters of law concerning the
internal corporate affairs of any corporate entity which is a party to or the
subject of this Agreement, and as to those matters the law of the jurisdiction
under which the respective entity derives its powers shall govern.
SECTION 11.12 Publicity. Except as required by law or on advice of
counsel, no party shall issue any press release or make any public statement
regarding the transactions contemplated hereby without the prior approval of the
other parties, and the parties hereto shall issue a mutually acceptable press
release as soon as practicable after the date hereof and after the Closing Date.
SECTION 11.13 No Third Party Beneficiaries. This Agreement shall
be binding upon and inure solely to the benefit of each party hereto, and
nothing in this Agreement, express or implied, is intended to or shall confer
upon any other person any right, benefit or remedy of any nature whatsoever
under or by reason of this Agreement, including, without limitation, by way of
subrogation, except as specifically set forth in Article IX hereof.
31
<PAGE>
SECTION 11.14 Cancellation of Initial Agreement. Upon complete
execution of this Agreement, such Agreement shall supercede and cancel the
Initial Agreement.
SECTION 11.15 Definitions.
"Ancillary Agreements" means the Case Employment Agreement,
the Grace Agreements, the Indemnification Agreements, the Master Distribution
Agreement, the Creekmore Advisory Agreement, the Tashenberg Advisory Agreement,
the Shareholders Agreement and all other agreements required hereunder to
consummate the Merger.
"Case Employment Agreement" shall mean the agreement between
Fullcomm and Richard Case in the form of Exhibit A hereto.
"Creekmore Advisory Agreement" shall mean an agreement
satisfactory in form and substance to Gregory Creekmore pursuant to which
Gregory Creekmore provides consulting services to Fullcomm and which shall
entitle him to 175,000 shares of Contessa common stock payable upon consummation
of the Merger.
"Grace Agreements" shall mean the agreements entered into by
Fullcomm and one or more affiliates of R.K. Grace and Company consisting of a
(i) Memorandum of Understanding: Placement Agent and Financial Advisory
Engagement dated January 4, 2000 between Fullcomm and R.K. Grace and Company,
and (ii) a Consulting Agreement between Grace Consulting, Inc. and Fullcomm
dated as of December 27, 1999.
"Grace Private Placement" shall mean the securities placement
by R.K. Grace and Company of not less than 400,000 shares, and up to 1.2 million
shares, of common stock, in each case, of Fullcomm, at a price not less than
$2.50 per share.
"Master Distribution Agreement" shall mean a "Master
Distributor's Agreement" between Creative Web Solutions, Incorporated and
Fullcomm Inc. satisfactory in form and substance to Contessa and Fullcomm.
"Permits" means all licenses, permits, franchises, approvals,
authorizations, consents or order of, or filing with, any governmental
authority, whether foreign, federal, state or local, necessary or desirable for
the past, present or anticipated conduct or operation of the business or
ownership of the assets of such person.
"Person" means any person or entity, whether an individual,
trustee, corporation, limited liability company, general partnership, limited
partnership, trust, unincorporated organization, business association, firm,
joint venture, governmental agency or authority or any similar entity.
"Shareholders Agreement" means agreement, in form and
substance satisfactory to Contessa, whereby Contessa shall receive contractual
assurance (i) from Messrs. Elliott, Lee and
32
<PAGE>
Escaravage through irrevocable proxy (or otherwise) entitling it to elect one
member of the Board of Directors and (ii) that recipients of Fullcomm shares
under the Ancillary Agreements agree to be bound by the terms of the "unwind"
provisions of the "Addendum Regarding Post-Merger Disposition of Fullcomm
Assets" attached hereto and made a part hereof.
"South Edge Loan" shall mean a loan from South Edge
International Limited to Fullcomm (i) to be repaid on the earlier of (A) one
year from the making thereof; and (B) the receipt of not less than $1 million in
gross proceeds and (ii) repayment of which has been personally guaranteed by
Messrs. Elliott and Escaravage.
"Tashenberg Advisory Agreement" shall mean an agreement
satisfactory in form and substance to C. Bradley Tashenberg pursuant to which C.
Bradley Tashenberg (i) acts as director for two (2) years, and (ii) provides
consulting services to Fullcomm and which shall entitle him to175,000 shares of
Contessa common stock payable upon consummation of the Merger.
33
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed and delivered
this Agreement in a manner legally binding upon them as of February 24, 2000.
CONTESSA CORPORATION
By: _____________________________
Anthony Markofsky
Vice President
FULLCOMM, INC.
By: _____________________________
Brendan Elliott
President
FULLCOMM ACQUISITION CORP.
By: _____________________________
Anthony Markofsky
President
THE FULLCOMM SHAREHOLDERS
_____________________________
Phillip O. Escaravage
_____________________________
Wayne H. Lee
34
<PAGE>
_____________________________
Brendan G. Elliott
THE CONTESSA PRINCIPAL STOCKHOLDERS
_____________________________
Anthony Markofsky, as Principal Stockholder
VIKING INVESTMENTS GROUP II, INC.
By: _____________________________
Name:
Title:
PARENTEAU CORPORATION
By: _____________________________
Name:
Title:
35
<PAGE>
SCHEDULE 1.2
Fullcomm shareholder list and number of Merger Shares to be issued to Fullcomm:
Name Shares of Fullcomm No. Merger Shares
- -------------------------------------------------------------------------------
Brendan G. Elliott 1,800,000 1,800,000
Phillip O. Escaravage 1,575,000 1,575,000
Wayne H. Lee 1,125,000 1,125,000
Private Placees:
- ---------------
Hugh Schields 4,500 4,500
Edward Ludwig 6,000 6,000
Liang Rong Hsu 18,000 18,000
Guillermo Freile 18,000 18,000
Wayne Cooper 19,200 19,200
Kwang Suhn Lee 9,000 9,000
Hsin Li and San Huey Li 4,800 4,800
James C.C. Li 1,800 1,800
Chun-Der Li 1,800 1,800
Viking Investment Group II, Inc. 18,000 18,000
Totals*: 4,601,100 4,601,100
*Purchasers of
Grace Private Placement Not presently "one for one"
<PAGE>
Schedule 2.2(a)
Holders of Contessa common stock
NAME AND ADDRESS NO. OF POST
SHARES DIVIDEND
Erik Nikischer 2,000 2,600
10269 Tanguay
Montreal Quebec H3L 3G6
Canada
Denise Parenteau 1,000 1,300
5345 Garneau
St. Hyacinthe Quebec J2S 1E8
Canada
Patrick Lacasse 20,000 26,000
2065 Impasse Carillon
St. Hyacinthe Quebec J2S 7X1
Canada
Alain Trottier 5,000 6,500
2194 De Murcie
Laval Quebec H7M 3V3
Canada
Louis Belanger 2,000 2,600
122 Campbell
St. Hilaire Quebec J3H 3T6
Canada
Guylaine Jodoin 1,000 1,300
2065 Impasse Carillon
St. Hyacinthe Quebec J2S 7X1
Canada
David Harries 1,000 1,300
115 Wolseley Avenue
Montreal West Quebec H4X 1V8
Canada
Stephane Guertin 1,000 1,300
420 St. Jean, Apt. 202
Montreal Quebec H2Y 2S1
Canada
Linda Moses 2,000 2,600
122 Campbell
St. Hilaire Quebec J3H 3T6
Canada
<PAGE>
NAME AND ADDRESS NO. OF POST
SHARES DIVIDEND
Eve Parenteau 1,000 1,300
5345 Garneau
St. Hyacinthe Quebec 52S 1E8
Canada
Claude Paris 1,000 1,300
9175 Andre Matthieu
Anjou Quebec H1K 5A1
Canada
Jack Gramas 1,000 1,300
322 Raymond Casgrotin
Laval Quebec H7N 5N8
Canada
Jean Francois Perreault 1,000 1,300
5901 Terrace Boisvert
St. Hubert Quebec J3Y 6E1
Canada
Johanne Bettan 1,000 1,300
5328 Mountain Sights
Montreal Quebec H3W 2Y3
Canada
Pierre Marcotte 1,000 1,300
190 Perron
La Prairie Quebec J5R 5Z5
Canada
Martin Laplante 1,006 1,307
5675 Theroux
St. Hyacinthe Quebec J2S 8L8
Canada
Julie Bourne 1,000 1,300
88 Columbia
Montreal Quebec H3Z 2C3
Canada
John Lincoln 1,000 1,300
2-284 Lake Street, Apt. 2
Peterborough Ontario K9J 2H5
Canada
Daniel Benhamou 1,000 1,300
7062 Wavell
Montreal Quebec H4W 1L7
Canada
Richard Hull 4,000 5,200
955 Ch. Perras
Coaticook Quebec J1A 2S6
Canada
<PAGE>
NAME AND ADDRESS NO. OF POST
SHARES DIVIDEND
Matthew Dunn 2,000 2,600
141 Av. du Mont-Royal O.
Montreal Quebec H2T 2S9
Canada
Chay Benhamou 2,000 2,600
7062 Wavell
Montreal Quebec H4W 1L7
Canada
Max Lincoln 1,000 1,300
141 Mont-Royal Avenue W.
Montreal, Quebec H2T 2S9
Canada
Shangri-La Investments Ltd. 141,665 184,165
Oakbridge House
6 West Hill Street
P.O. Box N-8195
Nassau
BAHAMAS
Tradewinds Investments Ltd. 141,665 184,165
Charlotte House
Charlotte Street
P.O. Box N-7755
Nassau, BAHAMAS
Partner Marketing AG 141,665 184,165
Habsburgerstrasse 20
Postfach
6002 Luzeriz
Switzerland
CCDC Consulting Distribution AG 141,665 184,165
Glockengasse 4
Postfach
4001 Basel
Switzerland
A&H Leasing 141,665 184,165
Esslinggasse 2
A-1010 Vienna
AUSTRIA
Tel-Ex-Ka AG 141,675 184,178
Zuerichstrasse 28
8306 Bruettiselleiz
Switzerland
Anthony Markofsky 300,000 390,000
c/o Tamboril Cigar Company
2600 S.W. 3rd Ave.
Miami, FL 33129
S.S. No. ###-##-####
<PAGE>
NAME AND ADDRESS NO. OF POST
SHARES DIVIDEND
Viking Investment Group II, Inc. 525,000 682,500
c/o Kaplan Gottbetter & Levenson, LLP
630 Third Avenue
New York, NY 10017
EIN 51-0364556
Parenteau Corporation 525,000 682,500
4446 St. Laurent Boulevard
Suite 801
Quebec H2W 1Z5
Canada
Kaplan Gottbetter & Levenson, LLP 50,000 65,000
630 Third Avenue
New York, NY 10017
EIN 13-3914020
Number of Shareholders: 34
Total: 2,304,006 3,000,000
<PAGE>
Schedule 2.11
Description of suits, litigations, etc.
On September 26, 1994, a shareholder of Contessa commenced a
shareholder derivative action against a company and its principal officer for
breach of an exchange agreement. On December 11, 1995, a default judgment was
entered in favor of plaintiff shareholder. The judgment awarded plaintiff, and
hence Contessa, the sum of $40,440.04. This judgment has been deemed
uncollectible (See notes to Contessa's financial statements). Copies of the
pleadings and other relevant litigation papers have been provided to Fullcomm.
<PAGE>
Schedule 2.16
Contessa Bank Accounts
None.
<PAGE>
Schedule 2.19
Affiliate Business Relationships
None.
<PAGE>
Schedule 4.1
Other entities owned or controlled by Fullcomm
None.
<PAGE>
Schedule 4.2
Other Options, Rights, etc. re: Fullcomm capital stock
Shares of Common Stock of Fullcomm to be issued in connection with the
Ancillary Agreements as follows.
Case Employment Agreement 175,000 share option at 10(cent)per share
Grace Consulting Agreement 175,000 warrants at $2.75 per share
Grace Placement Agency Agreement 10% warrant override
Fullcomm has engaged R.K. Grace to undertake a private placement of up
to 1.2 million shares at not less than $2.50 per share. In addition, the Board
of Directors of Fullcomm has authorized the private placement of an additional
2.8 million shares at not less than $2.50 per share.
<PAGE>
Schedule 4.9
Fullcomm Litigation
None.
<PAGE>
Schedule 4.10
List of patents, assignments of patents, trademarks, etc.
Fullcomm intends to file a patent application relating to its hardware
and software encryption technology for secure transmissions of digital and other
data.
<PAGE>
Schedule 4.15
Fullcomm Property, Contracts, Employees
Contract
Design Team Contract to be delivered to Contessa prior to Closing.
Employees
Brendan G. Elliott -- President and Treasurer
Wayne H. Lee-- Vice President and Secretary
<PAGE>
Addendum regarding post-Merger Disposition of Fullcomm assets
This addendum is made a part of the Merger Agreement and Plan of Merger
dated the date hereof among Contessa Corporation and Fullcomm Acquisition Corp.
and Fullcomm, Inc., the Shareholders of Fullcomm, Inc. and the Principal
Stockholders of Contessa Corporation, as if set forth in full therein.
The parties hereto agree that if the minimum amount of $1,000,000 in
gross proceeds is not received under the Grace Private Placement on or prior to
the date 30 days following the effectiveness of the Merger of Fullcomm and
Acquisition (or if such 30th day is not a business day upon the next succeeding
business day), then the parties hereto agree to take all necessary actions to
"unwind" the Merger so that the parties are restored to their ownership status
as in effect prior to the Merger. Such unwind may take the form of (i) an asset
disposition, (ii) a share for share exchange by which the former Fullcomm
shareholders receive back their share ownership in Fullcomm (or its successor by
merger) in exchange for surrendering their post-Merger shares in Contessa, or
(iii) such other transaction structure as may be advisable in order to
effectuate the goal of restoring the parties to their pre-Merger statuses. The
parties agree to work with all reasonable diligence to effectuate such unwinding
and the costs of such effectuation shall be equally borne by Contessa and the
entity into which the Former Fullcomm pre-Merger assets are vested.
In order to effectuate the foregoing, Contessa is hereby expressly
authorized to delay issuance and delivery of the post-Merger shares to former
Fullcomm shareholders pending the possible application of the 30-day unwind
contingency provided for above, and in addition, should such unwind contingency
be operative, Contessa's obligation to issue Merger shares to the former
shareholders of Fullcomm is hereby deemed to be null and void.
Date: January 28, 2000
<PAGE>
Exhibit 9
SHAREHOLDERS AGREEMENT, dated as of February 24, 2000, (the
"Agreement") by and among Anthony Markofsky (such individual, together with any
successor, being the "Contessa Nominee"), Brendan G. Elliott, Richard T. Case
and Wayne H. Lee (collectively and together with any successors, the "Fullcomm
Nominees" and, each, a "Fullcomm Nominee"), Viking Investment Group II, Inc.
("Viking"), Parenteau Corporation ("Parenteau"), Contessa Corporation
("Contessa"), the three principal stockholders, Messrs. Elliott, Lee and
Escaravage, of Fullcomm (as hereinafter defined) (collectively, the "Principal
Stockholders" and, each, a "Principal Stockholder") whose signatures appear
beside their names below, and the "Ancillary Stockholders" as hereinafter
defined, who consist of both natural and legal persons whose signatures appear
beside, or on behalf of, their respective names below.
WHEREAS, the Principal Stockholders have "beneficial ownership" as that
term is defined under the Securities Exchange Act of 1934, as amended, (the
"Exchange Act") of an aggregate of 4,500,000 shares of common stock, no par
value per share, ("Fullcomm Shares") of Fullcomm, Inc., a New Jersey
corporation, ("Fullcomm") in the amounts set forth opposite their signatures;
WHEREAS, Viking and Parenteau are the largest stockholders of Contessa
prior to the Merger referred to below (Viking and Parenteau collectively being
the "Contessa Principal Stockholders");
WHEREAS, the Contessa Principal Stockholders wish to ensure that they
will have, at all times, a respective Contessa Nominee on the Board of Directors
of Contessa, and the Principal Stockholders wish to ensure that they will have,
at all times, respective Fullcomm Nominees on the Board of Directors of
Contessa;
WHEREAS, Richard T. Case, Gregory Creekmore, C. Bradley Tashenberg,
Grace Securities, Inc. and R.K. Grace and Company have, as the case may be,
entered into the Case Employment Agreement, the Creekmore Advisory Agreement,
the Tashenberg Advisory Agreement, the Grace Consulting Agreement and the Grace
Placement Agency Agreement, each as defined in that certain Amended and Restated
Merger Agreement and Plan of Merger dated as of January 28, 2000 (the "Merger
Agreement"), and these various agreements (which comprise some, but not all, of
the "Ancillary Agreements" under the Merger Agreement) involve the issuance of
common stock, $.0001 par value per share, of Contessa ("Contessa Common Stock")
which is intended to be restricted for a three year period as an essential
condition of the Merger;
WHEREAS, the recipients of such restricted stock under the Ancillary
Agreements are referred to herein as the "Ancillary Stockholders" and it is
desired to make the share transfer restrictions set forth in Article II hereof
applicable to such Ancillary Stockholders; and
WHEREAS, pursuant to the Merger Agreement, Fullcomm will be merged with
and into Fullcomm Acquisition Corp., a Delaware corporation and a wholly-owned
subsidiary of Contessa,
<PAGE>
also a Delaware corporation, and the stockholders of Fullcomm shall receive one
share of Contessa Common Stock for each share of common stock they currently
hold in Fullcomm, and whereas it is a condition precedent, under the Merger
Agreement, that this Agreement be entered into.
NOW, THEREFORE, in consideration of the mutual promises contained
herein, the parties hereto agree as follows:
ARTICLE I. Agreement to Vote.
1.1 Voting by Principal Stockholders and Principal Contessa
Stockholders; Mutual Agreement to Vote.
Each of the Principal Stockholders agrees that, subject to Article III
of the Merger Agreement, each Principal Stockholder shall vote his respective
Contessa Common Stock, whether now owned or hereafter acquired, for the election
of the Contessa Nominee as a director in accordance with Section 3.3 of the
Merger Agreement at any meeting, whether regular or special, of Contessa's
stockholders at which directors are designated. Each of the Contessa Principal
Stockholders agrees that, subject to Article III of the Merger Agreement, each
Contessa Principal Stockholder shall vote his respective Contessa Common Stock,
whether now owned or hereafter acquired, for the election of the Fullcomm
Nominees as directors in accordance with Section 3.3 of the Merger Agreement at
any meeting, whether regular or special, of Contessa's stockholders at which
directors are designated. Without limiting the generality of the foregoing, the
Principal Stockholders and the Contessa Principal Stockholders agree to take any
and all actions (including, without limitation, nomination, setting of record
dates and the like) and to execute and deliver any and all documents, agreements
and instruments, including, without limitation, proxies, as Viking and Parenteau
shall reasonably request or that the Principal Stockholders shall reasonably
request, so that there shall be at all times a Contessa Nominee and three
Fullcomm Nominees, as the case may be, each sitting as a director of Contessa.
1.2 Special Meeting Upon Default.
In the event of a default under, or a breach of, this Agreement which
(in the reasonable judgment of the Contessa Principal Stockholders or the
Principal Stockholders, as the case may be) materially adversely affects the
rights and privileges bestowed hereunder, Contessa shall, upon the receipt of
written notice from the Contessa Principal Stockholders or the Principal
Stockholders, as the case may be, call a special meeting of the stockholders,
all costs of which shall be borne entirely by Contessa, and (i) the Contessa
Principal Stockholders each agree that they shall vote at such meeting in favor
of the Fullcomm Nominees and (ii) the Principal Stockholders each agree that
they shall at such meeting vote in favor of the Contessa Nominee. Each Contessa
Principal Stockholder and each Principal Stockholder, as the case may be, hereby
agrees to take no action to contravene, limit, prevent, frustrate or terminate
the board election mechanism provided for herein, or to cause the removal of any
director so elected.
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1.3 Preservation of Constituent Documents.
The provisions of Sections 1.1 and 1.2 above are in consonance with the
amendments to the Certificate of Incorporation and Bylaws of Contessa (the
"Constituent Documents") as set forth in the shareholder consents and
Certificate of Merger filed, or to be filed, in connection with the Merger,
attached hereto as Exhibits A and B, and incorporated herein by this reference
(the "Resolutions"). Contessa, the Contessa Principal Stockholders, and the
Principal Stockholders agree that they shall not introduce or vote for, any
amendment, alteration, or change to Contessa's Constituent Documents which would
have the effect of preventing, or hindering the presence of the Contessa
Nominee, or the Fullcomm Nominees, as the case may be, upon Contessa's Board of
Directors. If Contessa, its directors, or the stockholders of Contessa purport
to amend such Constituent Documents, notice shall be given to each Nominee, and
upon any Nominee's written demand therefor, a meeting of the Board of Directors
or a special meeting of the stockholders shall be called and Contessa hereby
agrees to pay all expenses in connection with any such meeting(s), and the
Contessa Principal Stockholders, and the Principal Stockholders, each agree that
they shall vote all of their Contessa Common Stock, whether now owned or
hereafter acquired, for the Constituent Documents to be restored to or retained,
as the case may be, to the form as set forth in the Resolutions.
ARTICLE II. Transfer Restrictions Upon Certain Shares
2.1 Restriction on Transfer of Contessa Common Stock by Principal
Stockholders and Ancillary Stockholders.
During the period commencing on the date hereof and continuing for
three years thereafter, each of the Principal Stockholders, and each of the
Ancillary Stockholders, agrees that he, or it, will not transfer, pledge or
assign his, or its, Contessa Common Stock, or any interest therein.
2.2 Legend on Principal Stockholder Stock Certificates.
Each Principal Stockholder shall submit to the Transfer Agent for the
Contessa Common Stock the certificates evidencing the Contessa Common Stock now
owned by such Principal Stockholder and Contessa shall cause the Transfer Agent
to imprint upon such certificates (or replacement certificates) a restrictive
legend as follows:
"The shares of stock represented by this certificate are subject to all
of the terms of that certain Shareholders Agreement dated February 24, 2000, a
copy of which is on file at the offices of the issuer of this certificate. The
shares are subject to certain voting and transfer restrictions. Any actions
taken in contravention to that Shareholders Agreement shall be null and void."
The terms of such endorsement and restrictions are hereby expressly
consented to and accepted.
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2.3 Legend on Ancillary Stockholder Stock Certificates.
Each Ancillary Stockholder shall submit to the Transfer Agent for the
Contessa Common Stock the certificates evidencing the Contessa Common Stock now
owned by such Ancillary Stockholder and Contessa shall cause the Transfer Agent
to imprint upon such certificates (or replacement certificates) a restrictive
legend as follows:
"The shares of stock represented by this certificate are subject to all
of the terms of that certain Shareholders Agreement dated February 24, 2000, a
copy of which is on file at the offices of the issuer of this certificate. The
shares are subject to certain transfer restrictions. Any actions taken in
contravention to that Shareholders Agreement shall be null and void."
The terms of such endorsement and restrictions are hereby expressly
consented to and accepted.
2.4 Shares of Contessa Principal Stockholders not restricted.
The shares of Contessa Common Stock currently held by the Contessa
Principal Stockholders shall not be subject to the foregoing restrictions upon
sale, and such shares may be sold or transferred in accordance with applicable
requirements under the Securities Act of 1933, as amended, (the "Securities
Act") and applicable rules thereunder, and various "Blue Sky" laws, and shall
not be required to bear any legend hereunder other than a standard Securities
Act legend.
ARTICLE III. Miscellaneous
3.1. Section of Merger Agreement deemed incorporated. Sections 1.3 and
3.3 of the Merger Agreement are hereby deemed to be incorporated herein, as if
set forth in haec verba, in order to effectuate the intent of the parties that
the director representation provisions so incorporated, be given effect
throughout the term of this Agreement.
3.2 Term. This Agreement shall terminate on the earlier to occur of (i)
ten (10) years from the Closing Date or (ii) the date upon which (A) Viking and
its affiliates and Parenteau and its affiliates no longer own, in the aggregate,
five percent (5%) of Contessa Common Stock or (B) the Principal Stockholders and
their respective affiliates no longer own, in the aggregate, five percent (5%)
of Contessa Common Stock. Notwithstanding the foregoing, the transfer
restrictions imposed under Article II hereof shall remain in effect for three
years irrespective of clause (ii) in the preceding sentence.
3.3 Further Assurances. From and after the date of this Agreement, the
parties hereto shall from time to time, at the request of any other party and
without further consideration, do execute and deliver, or cause to be done,
executed and delivered, all such further acts, things and instruments as
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may be reasonably requested or required more effectively to evidence and give
effect to the transactions provided for in this Agreement.
3.4 Modifications. This Agreement may not be modified or discharged
orally, but only in writing duly executed by the party to be charged.
3.5 Successors and Assigns. All the covenants, stipulations, promises
and agreements in this Agreement shall bind the parties' respective heirs,
successors and assigns, whether so expressed or not.
3.6 Headings. The headings of the various sections of this Agreement
are for convenience of reference only and shall in no way modify any of the
terms or provisions of this Agreement.
3.7 Governing Law and Submission to Jurisdiction. This Agreement shall
be governed by and construed in accordance with the laws of the State of
Delaware applicable to instruments made and to be performed entirely within such
State. Notwithstanding the foregoing, each party hereto submits to the
non-exclusive jurisdiction of the federal court for the Southern District of New
York, the federal court for the district of New Jersey, and the state courts of
New York and New Jersey located in New York County and Mercer County, New
Jersey, respectively.
3.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original but all of which
together shall constitute one and the same document. Facsimile transmission
shall be effective as manual delivery thereof.
3.9 Gender. All pronouns used herein are inserted for convenience only
and shall be applied in the masculine, feminine, or third person as appropriate
for each party signing hereto.
3.10 Defined Terms. Capitalized terms use in this Agreement but not
otherwise defined herein shall have the meanings given to them in the Merger
Agreement.
3.11. Obligations Several and not Joint. Notwithstanding any reference
herein to the Principal Stockholders, the Contessa Principal Stockholders or the
Ancillary Stockholders, all obligations imposed shall be several and not joint,
and there shall be no requirement of joinder of claims, or common proceedings,
in connection with any obligation hereunder, or the enforcement thereof.
3.12 Severability. If any provision of this Agreement is declared
invalid, unlawful, or ineffective, the remaining provisions shall be unaffected
and shall be construed so as to give effect to the intent of the parties as
evidenced by the original, entire Agreement.
3.13 No Requirement of Common Voting by Nominees. The mutual voting
obligations imposed on the Principal Stockholders and the Contessa Principal
Stockholders shall, in no way, obligate, either directly or by inference, either
the Contessa Nominee or the Fullcomm Nominee to
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act in accordance with the wishes of the other Nominee. Each Nominee shall
remain free to act independently and shall not be required to consult with,
pre-approve, or reach consensus with such other Nominee.
IV. Successor Nominees and Mutual Indemnification Provisions
4.1 Successor Nominees. The Contessa Nominee may resign at any time
upon the giving of written notice to Contessa delivered by mail, overnight
express, or facsimile transmission to the address of Contessa at 11 Chambers
Street, Princeton, NJ 08542, tel. 609-252-0657, fax 609-252- 0655, or at such
other address as Contessa shall have advised the Contessa Nominee. In such
instance, the Contessa Nominee shall be replaced by a successor Contessa Nominee
to be chosen from a list of candidates acceptable to Viking and Parenteau. Each
Fullcomm Nominee may likewise resign upon the giving of notice in a similar
manner, and in such instance, such Fullcomm Nominee shall be replaced by a
successor Fullcomm Nominee chosen from a list of candidates acceptable to two of
the three Principal Stockholders.
4.2. Mutual Indemnification. The Principal Stockholders agree to
indemnify, hold harmless, and reimburse the Contessa Nominee, and the Contessa
Principal Stockholders agree to indemnify, hold harmless, and reimburse the
Fullcomm Nominees, in either case, from any and all losses, liabilities, claims,
actions, damages, fees and expenses for all acts taken or not taken, in
connection with this Agreement and its performance.
[SIGNATURE PAGES TO FOLLOW]
6
<PAGE>
IN WITNESS WHEREOF, the parties have duly executed this Agreement as of
the date and year first above written.
- -------------------------- ----------------------------
Anthony Markofsky, as original Brendan G. Elliott, as original
Contessa Nominee Fullcomm Nominee
- -------------------------- ----------------------------
Richard T. Case, as original Wayne H. Lee, as original
Fullcomm Nominee Fullcomm Nominee
THE PRINCIPAL STOCKHOLDERS:
- -------------------------------
Brendan G. Elliott, individually 1,800,000 Fullcomm shares
- -------------------------------
Wayne H. Lee, individually 1,125,000 Fullcomm shares
- -------------------------------
Philippe Escaravage, individually 1,575,000 Fullcomm shares
7
<PAGE>
THE CONTESSA PRINCIPAL STOCKHOLDERS:
Viking Investment Group II, Inc.
By:______________________
Name:
Title:
Parenteau Corporation
By:_______________________
Name:
Title:
Consented to, and the obligations set forth in Article I are hereby agreed to:
Contessa Corporation
By:____________________________________
Name:
Title:
THE ANCILLARY STOCKHOLDERS:
- --------------------------------
Richard T. Case, individually
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- -----------------------------------
C. Bradley Tashenberg, individually
- --------------------------------
Gregory Creekmore, individually
Grace Securities, Inc.
By:_________________________
Name:
Title:
R.K. Grace and Company
By:__________________________
Name:
Title:
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<PAGE>
January 14, 1999
Fullcomm, Inc.
Brendan G. Elliot
President
11 Chambers Street
Princeton, NJ 08542
Re: Memorandum of Understanding: Placement Agent and Financial
Advisory Engagement
- --------------------------------------------------------------------------------
Board of Directors
Gentlemen:
We are pleased to submit the following proposal whereby R.K. Grace & Company
agrees to act as placement agent and financial advisor ("Agent/Advisor") to
Fullcomm, Inc. ("Fullcomm" or the "Company"), for purposes of this Agreement,
Fullcomm shall be deemed to include all affiliates of the Company. As
Agent/Advisor, R.K. Grace & Company will provide strategic and financial
advisory services including arranging debt and/or equity capital for the
Company. The services described herein shall be collectively referred to as the
"Engagement".
1. Fullcommm Objectives
It is our understanding that Fullcomm's objectives with respect to its future
strategic development include the following:
(i) to have Agent/Advisor review the final offering memorandum.
(ii) to offer and sell up to USD $3 million or such other amount as agreed
upon, in a private placement (the "financing") of common stock of the
Company, $.01 par value (the "securities"). Such private placement shall
be pursuant to an exemption from registration under all applicable
federal and state securities laws and regulations, including, but not
limited to, Rule 506 promulgated under Regulation D of the Securities
Act of 1933, and such private placement shall only be made to accredited
investors defined under Rule 501(a) thereunder.
(iii) to file a registration statement within the next eighteen months to do
an initial public offering of securities.
(iv) to establish relationships with investors to purchase the Securities,
and/or a strategic partner whose investment goals, objectives, operating
philosophy, strategic direction or business are consistent with those of
Fullcomm.
<PAGE>
2. General Services to be provided by the Agent/Advisor
The Agent/Advisor shall provide various financial advisory and
investment banking services, as reasonably requested by Fullcomm
including:
(i) anticipate future funding requirements;
(ii) advising Fullcomm of the reasonableness of its business, operating
forecasts and projections to be used to solicit prospective Investors;
(iii) helping Fullcomm develop and evaluate financial and strategic
alternatives with respect to the Financing and subsequent
capitalization;
(iv) assisting Fullcomm as needed to negotiate various contracts, financial
transactions, and other agreements in connection with strategic
alliances and acquisitions;
(v) providing such other financial advisory services as reasonably requested
by Fullcomm from time to time in connection with its investment banking
needs including corporate finance services and merger and acquisition
advice.
3. Compensation with respect to the Financing:
(i) A cash fee equal to ten percent (10%) of the Gross Proceeds of money
raised, this fee refers to the overall fee payable to an underwriting
group which will include the lead underwriter together with any members
of the selling group.
(ii) A number of common stock purchase warrants (the "Placement Agents
Warrants") equal to 10% of the shares sold in the Financing. The
warrants shall be exercisable for a period of seven years from the
initial closing date of the Financing. The exercise price of the
Placement Agent Warrants shall be 110% of the offering price of the
common stock. In the event that other than common stock is sold, the
Company and the Placement Agent will mutually agree on an exercise price
prior to the offering of such securities.
(iii) The Agent/Advisor shall be entitled to certain piggyback and demand
registration rights with respect to such common shares underlying the
Placement Agent Warrants. Such piggyback registration rights shall be as
follows: (a) from the date hereof until one year from the date of the
last closing of the Financing; such demand registration rights shall be
as follows: (b) from one year from the date of the last closing of the
Financing until two years from the date of the last closing of the
Financing.
(iv) A 2% non-accountable expense allowance payable in cash, based on the
Gross Proceeds of money raised in the Financing.
(v) Fullcomm will be responsible for the cost of printing expenses for the
Financing memorandum, travel and related expenses. All such non-
incidental expenses will be pre-approved by Fullcomm.
4. Merger & Acquisition Services:
<PAGE>
R.K. Grace & Company will advise Fullcomm with respect to the merger and/or
acquisitions of other companies and/or the potential merger or acquisition
of Fullcomm (including the possible merger of Fullcomm and Contessa Corp.),
R.K. Grace & Company will receive a fee based on the aggregate purchase price or
value of the entity being acquired or merged with as follows: 5% of the first
ten million, 4% of the second ten million, 3% thereafter of the aggregate
purchase price for the company being acquired/merged. Such fee will be payable
(in cash or stock at the discretion of the Agent/Advisor) upon completion of the
merger or acquisition completed during the term of this agreement.
5. Board Seat
R.K. Grace & Company will have the right to designate one person to sit on the
parent company's (Contessa Corp.) Board of Directors for a period of two years
from the closing of the private placement. The Board will be no more than five
members, including R.K. Grace & Company's designee.
6. Information
Fullcomm will furnish the Agent/Advisor with such information ("Information") as
such Agent/Advisor believes appropriate to the Engagement during the period of
this Engagement, including any extended period. Fullcomm recognizes and confirms
that the Agent/Advisor:
(i) will use and rely primarily on the Information and on publicly available
information in performing the services contemplated by the Engagement
without having independently verified same;
(ii) does not assume responsibility for the accuracy or completeness of the
Information and such other information;
(iii) will not make an appraisal of any assets of the Company.
To the best of Fullcomm's knowledge, the information to be furnished by Fullcomm
will be true and correct in all material respects and will contain all material
facts necessary to make the statements contained therein not misleading.
Fullcomm will promptly notify each Agent of its knowledge of any material
inaccuracy, change in facts, or misstatement in or material omission from, any
Information theretofore delivered to each such agent.
7. Confidentiality
The Agent/Advisor agrees to keep confidential, and not to disclose to
any third parties without discussion with Fullcomm, the Information. With
respect to confidentiality, the Information shall be understood not to include:
(i) publicly available information;
(ii) information received from third parties who are not officers, employees
or agents of the Company;
(iii) information required to be disclosed by applicable law, regulation,
certified public accountant or court proceeding.
8. Authority, Modification, Governing Law
<PAGE>
Fullcomm represents and warrants to the Agent/Advisor that it is
authorized to enter into this Engagement and to consummate the Financing. This
Engagement and the Agent/Advisor Indemnification Agreement and any other letter
attached hereto and made a part hereof, contain the entire agreement between the
parties hereto and may only be modified in writing by the parties hereto. This
agreement shall be interpreted and governed by the laws of the State of Florida.
9. Escrow
The Agent/Advisor and the Company hereto agree that any proceeds
raised in the Financing shall be held in escrow by a mutually agreed upon FDIC
insured Bank, in a non-interest bearing escrow account pending each closing of
the Financing. In the event such Financing is not consummated then such proceeds
held in Escrow will be returned to such investors. Such proceeds held in Escrow
will require written instructions from both the Agent/Advisor and the Company
prior to disbursement.
10. Term
This Agreement will be in effect for a one year period from the date of
signing.
11. Indemnification
Fullcomm and Agent/Advisor will indemnify each other as follows:
(i) The Company agrees to indemnify and defend the Agent/Advisor and each
person, if any, who controls the placement agent within the meaning of Section
15 of the Securities Act free and harmless from and against any and all loses,
claims, damages, liabilities and expenses, joint or several (including
reasonable legal or other expenses) incurred by Agent/Advisor and controlling
person in connection with defending any claims or liabilities, whether or not
resulting in any liability to the Agent/Advisor or to any controlling person
which the Agent/Advisor and controlling person mat incur under the Securities
Act or at common law or otherwise, but only to the extent that the losses,
claims, damages, liabilities and expenses shall arise out of or be based upon
any untrue statement, omission of material fact or alleged untrue statement of a
material fact contained in any of the offering documents.
(ii) The Agent/Advisor agrees to indemnify and defend Fullcomm from and
against any and all loses, claims, damages, liabilities and expenses in
defending any claims or liabilities, but only to the extent that the losses,
claims, damages, liabilities and expenses shall arise out of or be based upon
any untrue statement or other acts of negligence in any documents placed in
writing with respect to the offering by the Agent/Advisor.
(iii) The indemnity provisions contained in this section 10 shall survive the
any offering and shall inure to the benefit of the successors of any person who
controls the Agent/Advisor within the meaning of Section 15 of the Securities
Act, and shall be valid irrespective of any investigation made for on behalf of
the Agent/Advisor.
12. Assignment
The Company and the Representative agree in principle to the contents
hereof and plan to proceed on the terms set forth herein and in good faith to
finalize the offering. The agreement shall be binding upon and inure to the
benefit of the parties hereto and may not assigned by any party hereto.
<PAGE>
Should the Representative fail to raise any funds within ninety days
from the signing of this Agreement, the Company will have the option to pursue
any other venues for raising capital.
We look forward to working with you on the Engagement. If the above
agrees with your general understanding and intentions, please sign the enclosed
copy of this agreement.
Sincerely,
R.K. Grace & Company
By : /s/ John D. Kaweske
--------------------
Name : John D. Kaweske
Title : Chief Executive Officer
Accepted and agreed to
as of the date first Above written
Fullcomm, Inc.
By : /s/ Brendan G. Elliott
---------------------
Name : Brendan G. Elliott
Title : President
<PAGE>
Exhibit 10.2
Tashenberg Advisory Agreement
made as of the ___ day of February, 2000
BETWEEN Fullcom, Inc., a New Jersey corporation (the "Company") with
offices at 11 Chambers Street, Princeton, New Jersey, Contessa Corporation, a
Delaware Corporation and Brad Tashenberg ("Consultant"), an individual with
offices at 4265 San Felipe, Houston, Texas 77027.
WHEREAS Contessa Corporation ("Contessa") and the Company desire to merge
the Company with and into Contessa's wholly-owned subsidiary, Fullcomm
Acquisition Corp., whereby Acquisition shall be the surviving entity, and shall
change its name to Fullcomm, Inc. and whereby the transaction shall qualify as a
tax free exchange pursuant to Section 351 of the Internal Revenue Code ("IRC");
WHEREAS, in furtherance of such combination, the Boards of Directors
and/or shareholders of Contessa, Acquisition and the Company have each approved
the merger of Fullcomm with and into Acquisition (the "Merger"), upon the terms
and subject to the conditions set forth in the Merger Agreement and Plan of
Merger dated as of January 28, 2000 between the Company, Contessa, and certain
other parties (the "Merger Agreement"), in accordance with the applicable
provisions of the Delaware General Corporation Law (the "DGCL") and the New
Jersey Business Corporation Act (the "NJBCA").
WHEREAS, the Company Shareholders desire to exchange all of their
ownership interest in the Company for shares of Contessa common stock on the
basis set forth in Section 1.2(c) of the Merger Agreement and in the respective
amounts set forth in Schedule 1.2 thereto as a tax free exchange pursuant to
Section 351 of the IRC; and
WHEREAS, the execution of this Agreement is a condition to the Merger
taking place.
NOW THEREFORE, the parties hereto agree as follows:
1. Duties. Company agrees to engage Consultant to provide, and
Consultant agrees to provide, to the Company or to its designee,
advisory services relating to the marketing of computer hardware
security devices and strategic advisory services, all subject to the
terms and conditions contained herein.
2. No Consents or Conflicts. Consultant warrants to the Company that
Consultant is in a position to provide such services in accordance
with the provisions, and throughout the whole of the term, of this
Agreement without the consent of any other party.
3. Term. The engagement shall commence from the effectiveness of the
Merger referred to above and shall, subject to the provisions of
Section 10, continue for a period of two (2) years.
4. Remuneration. Contessa shall issue to Consultant 175,000 shares of
common stock for its services to be issued immediately upon the
consummation of the Merger.
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Contessa and Consultant agree to take all actions necessary to
ensure that in a dilutive transaction Consultant and the majority
stockholders of Contessa at the time the Merger is consummated
("Majority Stockholders") will be diluted at the same proportionate
rate and in any sale of substantially all of the assets or the
majority of the stock of Consultant and the Majority Stockholders
shall receive the same total compensation per share for their shares
of stock in Contessa. Further, Consultant and the Majority
Shareholders agree to enter into a shareholder's agreement with
mutually agreeable terms, including but not limited to rights of
first refusal.
5. Restricted Shares for Three (3) Years. It is understood and agreed
that the above shares will not have been registered and will be
"restricted" shares which are not freely tradeable, and may only be
sold if registered under the Securities Act of 1933, as amended and
appropriate "Blue Sky" provisions are observed. In addition, such
shares shall be, and hereby are, restricted, and there shall be no
transfer, pledge, or other alienation until three (3) years from the
effective date of the Merger, except under any right of first
refusal under a shareholders agreement.
6. Competition. Company and Contessa acknowledge that Consultant is
involved in companies and activities that compete in the marketplace
with the operations and technology of Company.
7. Non-Disclosure. Until the expiration of three (3) years following
the date of this Agreement, each party agrees, to keep confidential
and not disclose to any third party the terms of this Agreement and
any information received from the other parties, representatives or
advisors under this Agreement that is clearly labeled confidential.
This non-disclosure obligation shall not apply to any information
that was in the public domain prior to receipt or that becomes part
of the public domain other than by the receiving party's breach of
the provisions of this Agreement, was rightfully in the receiving
party's possession prior to receipt or is received from a third
party through no breach of any confidentiality obligation of the
receiving party. In addition, the parties may disclose information
to the extent required by the order of any court, administrative
agency or pursuant to any requirement of law or to its employees,
agents, and advisors to the extent reasonably necessary to carry out
the subject matter of this Agreement, with the disclosing party
taking all reasonable efforts to minimize the scope of disclosure
and to prevent further dissemination.
8. Return of Property. Following the termination of its engagement
hereunder, Consultant shall return to the Company on demand all
items of property belonging to the Company or any other affiliated
company or its or their customers or business associates which came
into its possession during its engagement hereunder, including (but
not limited to) lists of customers or clients, correspondence,
documents, computer diskettes or files or other material, whether
stored in written, electronic, digital or any other type of medium,
which may be in its possession or under its control. Consultant
shall refrain from removing or copying databases or commercial
information of the Company which is not in the public domain, for
the purpose of their subsequent commercial use for the benefit of
any party or parties outside the
2
<PAGE>
Company without express consent and approval to that effect having
been obtained from the Company's Board of Directors. Notwithstanding
the above, Consultant shall be entitled to keep and own any and all
if its work product generated during the term of this Agreement.
9. Termination. Notwithstanding the other provisions of this Agreement,
either party shall be entitled to terminate the engagement
established by this Agreement forthwith (but without prejudice to
the accrued rights and liabilities of either party hereunder and
Consultant's continuing obligations under Section 7 or 8) with or
without cause at any time. If Company terminates this Agreement
without cause, Consultant shall be entitled to retain all if the
shares provided under Section 4. herein and shall be released from
any restrictions on the sale thereof as soon as legally permitted by
Rule 144, promulgated under the Securities Act of 1933 as amended
and the "Blue Sky" provisions.
10. Notices. Any notice in writing to be served hereunder may be given
personally to the Secretary of the Company or to Consultant or its
representative as the case may be or may be posted to the office
mentioned above of either party for the time being or may be posted
to either party at their last known address. Any such notice sent by
post shall be deemed served ten (10) calendar days after it is
posted and in providing such notice it shall be sufficient to prove
that the notice was properly addressed and put in the post. Notices
may also be delivered by confirmed facsimile transmission.
11. Merger of prior agreements. This Agreement takes effect in
substitution for all previous agreements and arrangements whether
written, oral or implied between the Company and Consultant relating
to Consultant's services and which agreements and arrangements shall
be deemed to have been terminated by mutual consent as from the date
of this Agreement.
12. Incorporation of Defined Terms. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to them in the Merger
Agreement.
13. Miscellaneous. This Agreement shall be governed by the substantive
law of New Jersey and each party hereto (i) waives trial by jury,
(ii) submits to the jurisdiction of any court of general
jurisdiction located within the state of New Jersey, or the federal
district court resident therein, and (iii) waives any defense of
inconvenient forum.
14. Condition Subsequent. It shall be a condition subsequent to the
Company's and Contessa's obligations under this Agreement that the
Merger referred to in the recitals shall have been consummated
substantially in accordance with its terms. In the event that such
Merger is not so consummated, Company shall have no further
obligation hereunder except Company's obligations and agreements
under Sections 7, 9 and 13 shall survive and remain in full force
and effect and Consultant shall retain all rights to enforce such
obligations. Further, in the event of such Merger not being
consummated, Consultant's obligations and agreements under Sections
7, 8,
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and 13 shall survive and remain in full force and effect, and
Company shall retain all rights to enforce such obligations.
IN WITNESS WHEREOF this Agreement of four (4) pages has been signed by or
on behalf of the parties hereto the day and year first before written.
FULLCOM, INC. CONTESSA CORPORATION
By: __________________________________ By _________________________________
Name: ________________________________ Name: _______________________________
Title: _______________________________ Title: ______________________________
______________________________________
Brad Tashenberg
4
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Exhibit 10.3
Creekmoore Advisory Agreement
made as of the day of February, 2000
BETWEEN Fullcom, Inc., a New Jersey corporation (the "Company") with
offices at 11 Chambers Street, Princeton, New Jersey, Contessa Corporation, a
Delaware Corporation and Gregory Creekmoore ("Consultant"), an individual with
offices at 4265 San Felipe, Houston, Texas 77027.
WHEREAS Contessa Corporation ("Contessa") and the Company desire to merge
the Company with and into Contessa's wholly-owned subsidiary, Fullcomm
Acquisition Corp., whereby Acquisition shall be the surviving entity, and shall
change its name to Fullcomm, Inc. and whereby the transaction shall qualify as a
tax free exchange pursuant to Section 351 of the Internal Revenue Code ("IRC");
WHEREAS, in furtherance of such combination, the Boards of Directors
and/or shareholders of Contessa, Acquisition and the Company have each approved
the merger of Fullcomm with and into Acquisition (the "Merger"), upon the terms
and subject to the conditions set forth in the Merger Agreement and Plan of
Merger dated as of January 28, 2000 between the Company, Contessa, and certain
other parties (the "Merger Agreement"), in accordance with the applicable
provisions of the Delaware General Corporation Law (the "DGCL") and the New
Jersey Business Corporation Act (the "NJBCA").
WHEREAS, the Company Shareholders desire to exchange all of their
ownership interest in the Company for shares of Contessa common stock on the
basis set forth in Section 1.2(c) of the Merger Agreement and in the respective
amounts set forth in Schedule 1.2 thereto as a tax free exchange pursuant to
Section 351 of the IRC; and
WHEREAS, the execution of this Agreement is a condition to the Merger
taking place.
NOW THEREFORE, the parties hereto agree as follows:
1. Duties. Company agrees to engage Consultant to provide, and
Consultant agrees to provide, to the Company or to its designee,
advisory services relating to the marketing of computer hardware
security devices and strategic advisory services, all subject to the
terms and conditions contained herein.
2. No Consents or Conflicts. Consultant warrants to the Company that
Consultant is in a position to provide such services in accordance
with the provisions, and throughout the whole of the term, of this
Agreement without the consent of any other party.
3. Term. The engagement shall commence from the effectiveness of the
Merger referred to above and shall, subject to the provisions of
Section 10, continue for a period of two (2) years.
1
<PAGE>
4. Remuneration. Contessa shall issue to Consultant 175,000 shares of
common stock for its services to be issued immediately upon the
consummation of the Merger. Contessa and Consultant agree to take
all actions necessary to ensure that in a dilutive transaction
Consultant and the majority stockholders of Contessa at the time the
Merger is consummated ("Majority Stockholders") will be diluted at
the same proportionate rate and in any sale of substantially all of
the assets or the majority of the stock of Consultant and the
Majority Stockholders shall receive the same total compensation per
share for their shares of stock in Contessa. Further, Consultant and
the Majority Shareholders agree to enter into a shareholder's
agreement with mutually agreeable terms, including but not limited
to rights of first refusal
5. Restricted Shares for Three (3) Years. It is understood and agreed
that the above shares will not have been registered and will be
"restricted" shares which are not freely tradeable, and may only be
sold if registered under the Securities Act of 1933, as amended and
appropriate "Blue Sky" provisions are observed. In addition, such
shares shall be, and hereby are, restricted, and there shall be no
transfer, pledge, or other alienation until three (3) years from the
effective date of the Merger, except under any right of first
refusal under a shareholders agreement.
6. Competition. Company and Contessa acknowledge that Consultant is
involved in companies and activities that compete in the marketplace
with the operations and technology of Company.
7. Non-Disclosure. Until the expiration of three (3) years following
the date of this Agreement, each party agrees, to keep confidential
and not disclose to any third party the terms of this Agreement and
any information received from the other parties, representatives or
advisors under this Agreement that is clearly labeled confidential.
This non-disclosure obligation shall not apply to any information
that was in the public domain prior to receipt or that becomes part
of the public domain other than by the receiving party's breach of
the provisions of this Agreement, was rightfully in the receiving
party's possession prior to receipt or is received from a third
party through no breach of any confidentiality obligation of the
receiving party. In addition, the parties may disclose information
to the extent required by the order of any court, administrative
agency or pursuant to any requirement of law or to its employees,
agents, and advisors to the extent reasonably necessary to carry out
the subject matter of this Agreement, with the disclosing party
taking all reasonable efforts to minimize the scope of disclosure
and to prevent further dissemination.
8. Return of Property. Following the termination of its engagement
hereunder, Consultant shall return to the Company on demand all
items of property belonging to the Company or any other affiliated
company or its or their customers or business associates which came
into its possession during its engagement hereunder, including (but
not limited to) lists of customers or clients, correspondence,
documents, computer diskettes or files or other material, whether
stored in written, electronic, digital or any other type of medium,
which may be in its possession or under its control. Consultant
shall refrain from removing or copying databases or commercial
2
<PAGE>
information of the Company which is not in the public domain, for
the purpose of their subsequent commercial use for the benefit of
any party or parties outside the Company without express consent and
approval to that effect having been obtained from the Company's
Board of Directors. Notwithstanding the above, Consultant shall be
entitled to keep and own any and all if its work product generated
during the term of this Agreement.
9. Termination. Notwithstanding the other provisions of this Agreement,
either party shall be entitled to terminate the engagement
established by this Agreement forthwith (but without prejudice to
the accrued rights and liabilities of either party hereunder and
Consultant's continuing obligations under Section 7 or 8) with or
without cause at any time. If Company terminates this Agreement
without cause, Consultant shall be entitled to retain all if the
shares provided under Section 4. herein and shall be released from
any restrictions on the sale thereof as soon as legally permitted by
Rule 144, promulgated under the Securities Act of 1933 as amended
and the "Blue Sky" provisions.
10. Notices. Any notice in writing to be served hereunder may be given
personally to the Secretary of the Company or to Consultant or its
representative as the case may be or may be posted to the office
mentioned above of either party for the time being or may be posted
to either party at their last known address. Any such notice sent by
post shall be deemed served ten (10) calendar days after it is
posted and in providing such notice it shall be sufficient to prove
that the notice was properly addressed and put in the post. Notices
may also be delivered by confirmed facsimile transmission.
11. Merger of prior agreements. This Agreement takes effect in
substitution for all previous agreements and arrangements whether
written, oral or implied between the Company and Consultant relating
to Consultant's services and which agreements and arrangements shall
be deemed to have been terminated by mutual consent as from the date
of this Agreement.
12. Incorporation of Defined Terms. Capitalized terms not otherwise
defined herein shall have the meaning ascribed to them in the Merger
Agreement.
13. Miscellaneous. This Agreement shall be governed by the substantive
law of New Jersey and each party hereto (i) waives trial by jury,
(ii) submits to the jurisdiction of any court of general
jurisdiction located within the state of New Jersey, or the federal
district court resident therein, and (iii) waives any defense of
inconvenient forum.
14. Condition Subsequent. It shall be a condition subsequent to the
Company's and Contessa's obligations under this Agreement that the
Merger referred to in the recitals shall have been consummated
substantially in accordance with its terms. In the event that such
Merger is not so consummated, Company shall have no further
obligation hereunder except Company's obligations and agreements
under Sections 7, 9 and 13 shall survive and remain in full force
and effect and Consultant shall
3
<PAGE>
retain all rights to enforce such obligations. Further, in the event
of such Merger not being consummated, Consultant's obligations and
agreements under Sections 7, 8, and 13 shall survive and remain in
full force and effect, and Company shall retain all rights to
enforce such obligations.
IN WITNESS WHEREOF this Agreement of four (4) pages has been signed by or
on behalf of the parties hereto the day and year first before written.
FULLCOM, INC. CONTESSA CORPORATION
By: _________________________________ By: _________________________________
Name: _______________________________ Name: _______________________________
Title: ______________________________ Title: ______________________________
_____________________________________
Gregory Creekmoore
4
<PAGE>
Exhibit 10.4
January 28, 2000
Creative Web Solutions, Inc.
4265 San Felipe, Suite 800
Houston, Texas 77027
Attention: Mr. Brad Tashenberg
Dear Mr. Tashenberg:
On behalf of Fullcomm, Inc. ("Fullcomm"), I am pleased to provide you with
this binding Letter of Intent stating Creative Web Solutions, Inc. ("CWS") and
Fullcomm's intent to enter into good faith negotiations to agree upon and
memorialize the terms and conditions of an agreement for a master distribution
arrangement ("Definitive Agreement"). All references to Fullcomm and CWS may be
referred to in this Letter of Intent individually as a "party" and together as
the "parties".
1. Certain Terms and Conditions of Definitive Agreement. The Definitive
----------------------------------------------------
Agreement will set out the parties' respective rights, duties and obligations in
connection with CWS exclusively distributing various Fullcomm software and
hardware products ("Products"), as specified in Attachment A, which may be
------------
amended from time to time, and upon its execution shall supersede this Letter of
Intent. The Definitive Agreement shall include the grant from Fullcomm to CWS
to be Fullcomm's exclusive distributor in the United States and other
territories agreed upon by the parties. CWS shall have the right to distribute
the Products to companies for use of the Products for secure and compress
transmission of digital data, voice or other applications over
telecommunication, extranet, internet and intranet business systems, excluding
the use of the Products for audio distribution, video distribution, copyrighted
work publishing, secured teleconferencing and video conferencing systems. The
parties will agree to (i) yearly minimum royalties for each country that CWS has
distribution rights in; and (ii) a marketing plan for the distribution of the
Products in the said territories. The execution of the Definitive Agreement is
subject to the satisfactory completion, as determined by each party in its sole
reasonable discretion, of negotiation of mutually acceptable terms and
conditions in the Definitive Agreement.
2. Pilot Program. During the term of this Letter of Intent, Fullcomm shall
-------------
provide CWS with a reasonable number of alpha versions of various types of
Products in the timelines specified in Attachment A. The Products will be
------------
provided under a separate Beta Test Agreement or other type of agreement and
both parties' liabilities, restrictions, uses and other relevant information
shall be governed by such agreement. Also, during the term of this Letter of
Intent, the parties agree to meet monthly via teleconference or in person to
discuss the status of the Products, business plans and other relevant matters.
3. Disclosure. CWS and Fullcomm shall each (a) hold the Confidential
----------
Information (as defined below) of the other in trust and confidence and neither
disclose nor release the Confidential Information of the other to any person or
entity, and (b) not use the Confidential Information of the other for any
purpose whatsoever except for the purposes evaluating whether
1
<PAGE>
to enter into the Definitive Agreement. The standard of care imposed on each
party pursuant to this paragraph shall be the same degree of care as it uses to
avoid the unauthorized use, disclosure, or dissemination of its own Confidential
Information of a similar nature, but not less than a reasonable degree of care.
Each party shall disclose the Confidential Information of the other only to
those of its employees having a need to know such Confidential Information and
shall take all reasonable precautions to ensure that its employees comply with
the provisions of this paragraph. The term "Confidential Information" shall mean
any and all information (in every form and media) not generally known in the
relevant trade or industry and which has been or is hereafter disclosed by
either party to the other in connection with the efforts contemplated hereunder
including, without limitation, (a) all trade secrets, (b) information relating
to existing or contemplated Products, services, designs, technology, processes,
technical data, engineering, methodologies and concepts, and (c) information
relating to business plans, sales or marketing methods and customer lists or
requirements. The obligations of either party under this paragraph will not
apply to information that the receiving party can establish (i) was in its
possession at the time of disclosure and without restriction as to
confidentiality, (ii) at the time of disclosure is generally available to the
public or after disclosure becomes generally available to the public through no
breach of agreement or other wrongful act by the receiving party, (iii) has been
received from a third party without restriction on disclosure and without breach
of agreement or other wrongful act by the receiving party, (iv) is independently
developed by the receiving party without regard to the Confidential Information
of the other party, or (v) is legally required to be disclosed (but only to the
extent of such legal requirement).
4. Fees and Expenses. Each party will bear its own costs and expenses with
-----------------
respect to this Letter of Intent and the negotiation and preparation of the
Definitive Agreement, including fees of its respective counsel, consultants and
accountants.
5. Relationship. The parties are independent contractors, and this Letter of
------------
Intent will not be construed as constituting either party as partner, joint
venturer or fiduciary of the other or to create any other form of legal
association that would impose liability on one party for the act or failure to
act of the other or as providing either party with the right, power or authority
(express or implied) to create any duty or obligation of the other.
6. Restriction. During the term of this Letter of Intent, neither party (for
-----------
the purposes of this Paragraph 6, "contracting party") will negotiate with or
enter into a relationship with a third party, for such third party to provide
similar services as the other party with whom contracting party is attempting to
enter into a Definitive Agreement.
7. Termination. In the event that the parties are unable to agree prior to
-----------
January 31, 2001 on the terms and conditions of the Definitive Agreement and
execute such Definitive Agreement, either party may terminate this Letter of
Intent by providing the other party with written notice of such termination at
the address of such party set forth herein. Neither party shall have any
liability to the other party for terminating this Letter of Intent, pursuant to
the foregoing, so long as the party who terminates this Letter of Intent used
good faith during negotiations. Paragraphs 3, 4 and 5 shall survive termination
of this Letter of Intent.
2
<PAGE>
8. Good Faith Dispute Resolution Procedures. If a disagreement under this
----------------------------------------
Letter of Intent arises between the parties, prior to sending a formal demand
letter from counsel or filing a lawsuit, the parties will seek in good faith to
resolve the dispute by agreement. Agreement will not be considered unachievable
until the matter has been turned over to an executive officer of each party
respectively and they are unable to resolve the matter. Unreasonable delay on
the part of an officer to attend to a dispute will indicate that agreement is
unachievable. Agreement between the parties in a dispute may include
disposition of the matter, agreement to submit the dispute to arbitration or
agreement upon a conciliatory method.
9. Arbitration. Any controversy or claim arising out of or relating to
---------------
this Letter of Intent, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association ("AAA") by three (3) arbitrators. Each party shall appoint one
arbitrator who shall be independent and impartial. If a party fails to appoint
an arbitrator within thirty (30) days from the date a Demand to Arbitrate was
made under Rule 6, the AAA shall make the appointment of the arbitrator. The
three (3) arbitrators appointed shall constitute the arbitral tribunal. Should
any of the arbitrators appointed die, resign, refuse or become unable to act
before a decision is given, the vacancy shall be filled by the method set forth
in this clause for the original appointment. The arbitration shall be held in
the home office city of the party against whom arbitration is brought. Judgment
- ---------------------------------------------------------------------
upon the award rendered by the arbitrators may be entered in any court having
jurisdiction thereof. UNDER NO CIRCUMSTANCES SHALL EITHER PARTY BE RESPONSIBLE
FOR CONSEQUENTIAL, EXEMPLARY, OR INCIDENTAL DAMAGES, LOST PROFITS OR OTHER
SPECIAL DAMAGES, EVEN IF THEY HAVE BEEN APPRISED OF THE LIKELIHOOD OF SAME.
10. Purchase Opportunity. If during the term of this Agreement, CWS directly
introduces Fullcomm to a third party or parties who subsequently acquires all,
but not less than all, of Fullcomm's issued and outstanding capital stock within
one (1) year of such introduction, Fullcomm will pay to CWS a mutually agreeable
fee from the total purchase price paid by such third party, such amount to be
paid upon closing of such transaction. The preceding sentence in no way
obligates CWS to commence a search for such third party, nor obligates Fullcomm
to accept any such offer or present such offer to its Board of Directors or
stockholders nor changes the relationship of the parties in this Agreement.
Fullcomm covenants to include in such transaction an assignment of all rights
and title to the intellectual property rights in the Products, to which Fullcomm
has the right to assign.
11. Change of Control. Other than a change of control under Section 10
-----------------
above, Fullcomm shall be granted a minimum four year, renewable exclusive
distributorship for the Products in the market identified in Section 1 unless
CWS receives a mutually agreeable fee for its relinquishment of such right or as
otherwise specified in the terms of the Definitive Agreement.
12. Other. This Letter of Intent (a) will be governed by the substantive
----------
laws of the State of New Jersey without giving effect to any choice-of-law rules
that may require the application of the laws of another jurisdiction, (b) may
not be assigned by either party without the prior written consent of the other,
(c) may not be changed or modified orally or through a course of dealing, but
only by a written amendment or revision signed by the parties and (d) together
with any attachments
3
<PAGE>
hereto (each of which is incorporated into this Letter of Intent by this
reference), constitutes the entire agreement of the parties with respect to the
subject matter hereof, superseding any previous or contemporaneous
representations, understandings or agreements with respect to such subject
matter.
Please execute two copies of this Letter of Intent in the space provided below
to evidence your agreement to the terms and conditions set forth above and
return one fully executed copy to Fullcomm at your earliest convenience.
We are looking forward to finalizing the Definitive Agreement and working with
CWS.
Very truly yours,
FULLCOMM, INC.
By:
-----------------------------------
Title:
--------------------------------
Date:
---------------------------------
Accepted and Agreed To:
CREATIVE WEB SOLUTIONS, INC.
By: Brad Tashenberg
Title:Chairman
--------
Date: January 28, 2000
----------------
4
<PAGE>
Attachment A
[TO BE NEGOTIATED]
(needs to include all subsequent and replacement versions and models)
1
<PAGE>
CONSULTING AGREEMENT
- --------------------------------------------------------------------------------
This Agreement is made and entered into this 14th day of January, 2000 by and
between GRACE SECURITIES, INC., 1101 Brickell Avenue, S, Tower, 5th Floor,
Miami, FL 33131 (the "Consultant"), and FULLCOMM, INC. (the "Company"), with its
principal place of business located at 11 Chambers Street, Princeton, New Jersey
08542.
R E C I T A L S
WHEREAS the Consultant ("Grace Securities, Inc."), through its partners and
affiliates, has broad experience in providing technical and economic advice
concerning business development, strategic planning, organizational development,
operations and general management consulting; and the Consultant is willing to
consult with the Company and render advice to the Company to achieve the
Company's goals including acting as an interim Chief Executive Officer; and,
WHEREAS, the Company desires to obtain such services from Consultant and the
Company agrees to provide compensation for such services to Consultant pursuant
to the terms contained herein below.
NOW, THEREFORE, the parties do hereinafter agree as follows;
1. Duties of Consultant. The Company hereby retains the Consultant to perform
those duties delineated below and Consultant agrees to perform the following
activities on behalf of the Company;
(a) Revise and make recommendations to the Company's business plan and to
prepare a summary of said plan, if deemed necessary by Consultant and
Company;
(b) Assist in the preparation and analysis of the Company's financial
statements, their form and content;
(c) Analyze existing corporate organization and structure. Make
recommendations to the Company's management regarding suggested changes and
assist in recruiting new hires.
<PAGE>
(d) Assist in the preparation of a strategic plan; and provide leadership
in the implementation of such plan.
(e) Assist in the preparation of development, operating and marketing
plans; and provide leadership in the implementation of such plans. This
will include locating and negotiating with partners for various
activities, as deemed important by the Company and Consultant.
(f) Act as the interim Chief Executive Officer (Rich T. Case will assume
this position) of the Company and assume all job responsibilities
inherent in the position, including those duties as mentioned herein.
These specific objectives may be altered, modified or revised based on Company's
needs or new developments.
2. Compensation of Consultant.
(a) In consideration for the services to be provided by Consultant
herein, the Company will compensate Consultant on a monthly basis at the
rate of $5,000 per month, plus expenses during the term of this
Agreement. An initial retainer of $5,000 will be paid by Company to
Consultant upon the signing of this Agreement and the balance of
Consultant's fees plus expenses will be paid monthly during the term of
this Agreement.
(b) In addition, Consultant shall receive 175,000 warrants to purchase
shares of the Company's common stock. Such warrants shall be exercisable
for a period of seven years from the initial closing date of the
Company's private placement of its common stock. The exercise price of
such warrants shall be $2.75 per share.
(c) Company agrees that it is solely responsible for compensation to
Consultant. In the event Consultant agrees to take securities or other
non-cash compensation, the Company agrees to pay Consultant an amount in
cash sufficient to pay Consultant's taxes on said compensation.
(d) The Consultant shall be entitled to certain piggyback and demand
registration rights with respect to such common shares underlying the
Consultant's warrants. Such piggyback registration rights shall be as
follows: from the date hereof until
<PAGE>
one year from the date of the closing of the Company's financing. Such
demand registration rights shall be as follows: from one year from the
date of the last closing of the Company's financing until two years from
the date of the last closing of the Company's financing.
In the event of a disagreement related to Consultant's fee, Company and
Consultant agree to be guided by GAAP (Generally Accepted Accounting
Principles).
3. Obligations of Company. The Company will provide Consultant with all
pertinent information related to the Company's operations and copies of all
correspondence exchanged between Company and any third party referred by
Consultant, either directly or indirectly, and Company will, in general, keep
Consultant apprised in a timely fashion of the nature of any such proposed
transactions between Company and any third party referred or introduced by
Consultant.
4. Restrictive Covenants. The following restrictive covenants shall be in full
force and effect during the term of this agreement and for a period of two (2)
years after this Agreement has been terminated:
(a) Consultant will take all action necessary to insure that all
information provided by the Company to Consultant shall be kept in
strictest confidence by Consultant; and
(b) During the term of this restrictive covenant, Consultant agrees not to,
directly or indirectly, solicit any of the Company's clients for any other
entity other than on behalf of the Company.
5. Mandatory Arbitration. Any controversy or claim arising out of or relating to
this Agreement, or the breach thereof, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American Arbitration
Association, and judgment upon the award rendered by the arbitrator(s) may be
entered in any court having jurisdiction thereof. In the event Consultant
utilizes an attorney in order to collect its fees and Consultant prevails then
the Company shall reimburse Consultant for the costs of said action including
but not limited to reasonable attorneys fees.
<PAGE>
6. Term. The initial term of this Agreement is for a twelve (12) month period.
This Agreement shall renew itself for an additional six (6) month term. Either
party may terminate this agreement upon thirty (30) days notice, in writing, to
the other party. Termination of this Agreement shall not terminate Consultant's
fee or stock compensation, if earned during the period of this Agreement.
7. Authority to Act. The Company hereby represents and warrants that the
individual who executes this Agreement on behalf of the Company has been granted
the requisite authority to do so by the Company.
8. Indemnification. Company will indemnify and hold Consultant and its employees
harmless from any and all claims arising from its activities as financial
consultant to Company, except in the event the actions or inactions of the
Consultant are deemed to involve gross negligence. Such indemnification shall
include, but not be limited to, Consultant's reasonable attorney's fees.
9. Notice. Any notice required hereunder shall be complete upon certifed mailing
to that party at the address appearing herein, or at the address which shall
from time to time be provided to the other party. The parties shall notify the
other of any alteration or change in address hereinafter occurring.
10. Counterparts. This Agreement may be executed in multiple counterparts. Each
executed counterpart shall be considered an original, and taken together, shall
constitute one and the same document. Any signature, notice or other
communication with respect to the subject matter hereof may be given by telex,
telecopy or other facsimile transmission and relied upon to the same extent as
if it were an original.
11. Severability. If any provision, paragraph or subparagraph of this Agreement
is adjudged by any court to be void or unenforceable in whole or in part, this
adjudication shall not affect the validity of the remainder of the Agreement,
including any other provision, paragraph or subparagraph. Each provision,
paragraph or subparagraph of this Agreement is separable from every other
provision, paragraph and subparagraph and constitutes a separate and distinct
covenant.
12. Governing Law. This Agreement shall be subject to and governed by the laws
of the State of Florida.
<PAGE>
13. Amendment. This Agreement may only be amended in writing, duly endorsed by
the parties hereto.
IN WITNESS WHEREOF the parties have executed this Agreement, effective the date
first written above.
/s/ John D. Kaweske /s/ Brendan G. Elliott
- ----------------------------------- -----------------------------------
John D. Kaweske, President Brendan G. Elliott, President
Grace Securities, Inc. Fullcomm, Inc.
<PAGE>
Exhibit 21
Subsidiaries
Name Jurisdiction of Incorporation
Fullcomm Inc. Delaware
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
This schedule contains summary financial information extracted from financial
statements of Contessa Corporation for the twelve month period ended December
31, 1999 and is qualified in its entirety by reference to such financial
statements.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 1
<SECURITIES> 0
<RECEIVABLES> 0
<ALLOWANCES> 0
<INVENTORY> 0
<CURRENT-ASSETS> 0
<PP&E> 132,148
<DEPRECIATION> 0
<TOTAL-ASSETS> 339,326
<CURRENT-LIABILITIES> 186,806
<BONDS> 0
0
0
<COMMON> 287
<OTHER-SE> 152,233
<TOTAL-LIABILITY-AND-EQUITY> 339,326
<SALES> 0
<TOTAL-REVENUES> 0
<CGS> 0
<TOTAL-COSTS> (63,691)
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 0
<INCOME-PRETAX> (63,691)
<INCOME-TAX> 0
<INCOME-CONTINUING> (63,691)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (63,691)
<EPS-BASIC> (.02)
<EPS-DILUTED> (.02)
</TABLE>
