SCHEDULE 14 C
INFORMATION STATEMENT PURSUANT TO SECTION 14 (C)
OF THE SECURITIES EXCHANGE ACT OF 1934
Check the appropriate box:
[X] Preliminary information statement
[ ] Definitive information statement
Confidential, for use of the Commission only (as permitted by Rule 14c-5(d)(2))
THE AMERICAN SPORTS MACHINE, INC.
(NAME OF COMPANY AS SPECIFIED IN ITS CHARTER)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14c-5(g) and 0-11.
(1) Title of each class of securities to which transaction applies: Not
Applicable.
(2) Aggregate number of securities to which transaction applies: Not
Applicable.
(3) Per unit price or other underlying value of transaction computed pursuant
to Exchange Act Rule 0-11 (set forth the amount on which the filing fee is
calculated and state how it was determined): Not Applicable.
(4) Proposed maximum aggregate value of transaction: Not Applicable.
(5) Total fee paid: Not Applicable.
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11 (a) (2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid: Not Applicable.
(2) Form, Schedule or Registration Statement No. : Not Applicable.
(3) Filing Party: Not Applicable.
(4) Date Filed: Not Applicable.
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THE AMERICAN SPORTS MACHINE, INC.
222 LAKEVIEW AVENUE, SUITE 160-146
WEST PALM BEACH, FLORIDA 33401
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March 9, 2000
DEAR SHAREHOLDER:
Enclosed are materials relating to a reincorporation of The American Sports
Machine, Inc., a Florida corporation (the "Company"), in Delaware through a
merger of the Company into SoftQuad Software, Ltd., a newly formed wholly-owned
Delaware subsidiary of the Company ("SoftQuad") with SoftQuad surviving the
merger. The reincorporation is intended to be effected on April 9, 2000 and
will result in (i) the Company's name being changed to "SoftQuad Software,
Ltd.," (ii) your shares of common stock of the Company being converted into the
right to receive one share of common stock of SoftQuad for each share of common
stock, preferred stock or special voting stock of the Company owned by you as of
the date of reincorporation (iii) the persons serving presently as officers and
directors of SoftQuad Software, Ltd. to serve in their respective capacities
after the reincorporation; and (iv) the Articles of Incorporation of the Company
being changed to (A) increase the par value of shares of common stock the
Company from $.0001 to $.001, and (B) changing the preferred stock the Company
is authorized to issue from no par value to $.001 per share.
The Board of Directors of the Company and shareholders owning approximately
70% of the outstanding common stock of the company as of March 9, 2000 carefully
considered means to reorganize the Company into an attractive acquisition
candidate and concluded the reincorporation to be an integral part of the
process and in the best interests of the Company and its shareholders.
The Company urges you to follow the instructions set forth in the enclosed
Information Statement under the section entitled "Reincorporation in Delaware --
How to Exchange Company Stock for SoftQuad Stock" if you elect to surrender the
Company Certificate(s) representing your shares for certificates representing
shares of stock of SoftQuad. If you wish to dissent from the reincorporation
and seek a judicial determination of the value of your shares, you may do so by
following the instructions in the Information Statement section entitled
"Reincorporation in Delaware -- Rights of Dissenting Shareholders."
Sincerely,
/s/James D. Brock, Jr.
-------------------------
James D. Brock, Jr., President
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THE AMERICAN SPORTS MACHINE, INC.
222 LAKEVIEW AVENUE, SUITE 160-146
WEST PALM BEACH, FLORIDA 33401
March 9, 2000
INFORMATION STATEMENT
This Information Statement is being furnished to holders of the common
stock, par value $.0001 per share (the "Company Common Stock"), the holders of
Class A Convertible Preferred Stock ("Company Class A Preferred Stock"), Class B
Convertible Preferred Stock ("Company Class B Preferred Stock") and Company
Special Voting Stock of The American Sports Machine, Inc., a Florida corporation
(the "Company"), to inform the holders that the board of directors of the
Company (the "Board of Directors") and the holders of shares representing a
majority of the Company Common Stock (the "Majority Holders") have authorized,
by written consent dated March 9, 2000, the reincorporation of the Company in
Delaware (the "Reincorporation") and the change of the Company's name to
SoftQuad Software, Ltd., all to be effected April 9, 2000 or as soon thereafter
possible (the "Effective Date"). The Company Common Stock, Company Class A
Preferred Stock, Company Class B Preferred Stock and Company Special Voting
Stock are hereinafter collectively referred to as "Company Stock." The close of
business on March 9, 2000 has been fixed by the Board of Directors as the record
date for determining the stockholders of the Company entitle to notice of the
Reincorporation.
MANAGEMENT IS NOT ASKING FOR YOUR PROXY AND YOU ARE
---------------------------------------------------
REQUESTED NOT TO SEND US YOUR PROXY
The Reincorporation will be accomplished by a merger (the "Merger"), on the
Effective Date, of the Company into SoftQuad Software, Ltd., a newly formed
wholly owned Delaware subsidiary of the Company ("SoftQuad"), pursuant to an
Plan and Agreement of Merger (the "Plan of Merger") between the Company and
SoftQuad dated March 9, 2000, with SoftQuad surviving the merger (upon the
effectiveness of the Merger, "SoftQuad").
In the Merger (i) holders of Company Common Stock will receive one share of
common stock of SoftQuad, par value $.001, ("SoftQuad Common Stock") for each
share of Company Common Stock owned by each such holder as of the day preceding
the Effective Date of the Merger, (ii) holders of Special Voting Stock of the
Company will receive one share of Special Voting Stock of SoftQuad, par value
$.001, for each share of Special Voting Stock of the Company owned by each such
holder as of the day preceding the Effective Date of the Merger, (iii) holders
of Class A Convertible Preferred Stock of the Company will receive one share of
Class A Convertible Preferred Stock of SoftQuad, par value $.001, for each share
of Class A Convertible Preferred Stock of the Company owned by each such holder
as of the day preceding the Effective Date of the Merger, and (iv) holders of
Class B Convertible Preferred Stock of the Company will receive one share of
Class B Convertible Preferred Stock of SoftQuad, par value $.001, for each share
of Class B Convertible Preferred Stock of the Company owned by each such holder
as of the day preceding the Effective Date of the Merger. The Class A
Convertible Preferred Stock of the Company is collectively referred to as the
"Company Preferred Stock," the Class A Convertible Preferred Stock and Class B
Convertible Preferred Stock of SoftQuad is collectively referred to as "SoftQuad
Preferred Stock."
Attached as Exhibit F is a form letter of transmittal with instructions for
effecting the surrender of the certificate or certificates which immediately
prior to the Effective Date represented issued and outstanding shares of Company
Common Stock, Company Special Voting Stock or Company Preferred Stock ("Company
Certificates"), in exchange for certificates representing SoftQuad Common Stock,
SoftQuad Special Voting Stock or SoftQuad Preferred Stock ("SoftQuad
Certificates"). Upon surrender of a Company Certificate for cancellation to
SoftQuad together with a duly executed letter of transmittal, the holder of such
Company Certificate will be entitled to receive, as soon as practicable after
the Effective Date, in exchange therefor a SoftQuad Certificate representing
that number of shares of SoftQuad Common Stock, SoftQuad Special Voting Stock or
SoftQuad Preferred Stock into which the shares of Company Common Stock
theretofore represented by the Company Certificate so surrendered will have been
converted pursuant to the provisions of the Plan of Merger, and the Company
Certificate so surrendered will forthwith be canceled.
The Reincorporation will also result in (i) SoftQuad being governed by
Delaware law, which may grant officers and directors greater protection from
personal liability than Florida law and provides anti-takeover protections that
may not be available under Florida law and (ii) the officers and directors of
SoftQuad as constituted immediately prior to the Merger becoming the officers
and directors of SoftQuad, which will result in the persons who are currently
directors of the Company being on the board of directors of SoftQuad (the "New
Board of Directors") and the officers of SoftQuad being the persons who are
currently officers of the Company. See "Reincorporation in Delaware--Officers
and Directors."
The purpose of this Information Statement is to inform holders of Company
Common Stock who have not given the Company their written Consent to the
foregoing corporate actions of such actions and their effects and, as required
by Florida law, to give any holder of Company Common Stock who so desires the
right to dissent from the Merger and Reincorporation and to receive the "fair
value" of his Company Common Stock in lieu of SoftQuad Common Stock and any cash
for canceled SoftQuad fractional share interests to which such holder would
otherwise be entitled in the Merger. See "Reincorporation in Delaware--Rights
of Dissenting Shareholders."
As of March 9, 2000, 7,336,703 shares of Company Common Stock were issued
and outstanding.
Attached as Exhibit D is a copy of the Company's Annual Report on Form
10-KSB for the year ending September 30, 1999 and Exhibit E is a copy of the
Company's Current Report on Form 8-K dated March 9, 2000.
REINCORPORATION IN DELAWARE
The following discussion summarizes certain aspects of the Reincorporation
of the Company in Delaware. This summary is not intended to be complete and is
subject to, and qualified in its entirety by reference to the Plan of Merger
between the Company and SoftQuad, a copy of which is attached hereto as Exhibit
A, and the Certificate of Incorporation of SoftQuad (the "Delaware
Certificate"), a copy of which is attached hereto as Exhibit B. Copies of the
Articles of incorporation and the By-Laws of the Company (the "Florida Articles"
and the "Florida By-Laws," respectively) and the By-Laws of SoftQuad (the
"Delaware By-Laws") are available for inspection at the principal office of the
Company and copies will be sent to shareholders upon request.
PRINCIPAL REASONS FOR REINCORPORATION
The Board of Directors believes that the Reincorporation will give the
Company a greater measure of flexibility and simplicity in corporate governance
than is available under Florida law and will increase the marketability of the
Company's securities.
The State of Delaware is recognized for adopting comprehensive modern and
flexible corporate laws which are periodically revised to respond to the
changing legal and business needs of corporations. For this reason, many major
corporations have initially incorporated in Delaware or have changed their
corporate domiciles to Delaware in a manner similar to that proposed by the
Company. Consequently, the Delaware judiciary has become particularly familiar
with corporate law matters and a substantial body of court decisions has
developed construing Delaware law. Delaware corporate law, accordingly, has
been, and is likely to continue to be, interpreted in many significant judicial
decisions, a fact which may provide greater clarity and predictability with
respect to the Company's corporate legal affairs. For these reasons, the Board
of Directors believes that the Company's business and affairs can be conducted
to better advantage if the Company is able to operate under Delaware law. See
"Certain Significant Differences between the Corporation Laws of Delaware and
Florida."
PRINCIPAL FEATURES OF THE REINCORPORATION
The Reincorporation will be effected by the merger of the Company, a
Florida corporation, with and into, SoftQuad, a wholly-owned subsidiary of the
Company that was incorporated on March 9, 2000 under the General Corporation
Laws of the State of Delaware (the "Delaware GCL") for the sole purpose of
effecting the Reincorporation. The Reincorporation will become effective upon
the filing of the requisite merger documents in Delaware and Florida, which
filings will occur on the Effective Date or as soon as practicable thereafter.
Following the Merger, SoftQuad will be the surviving corporation and will
operate under the name "SoftQuad Software, Ltd."
On the Effective Date, (i) each outstanding share of Company Common Stock,
$.0001 par value, shall be converted into 5 shares of SoftQuad Common Stock,
$.001 par value, except for those shares of Company Common Stock with respect to
which the holders thereof duly exercise their dissenters' rights under Florida
law, (ii) any fractional shares of SoftQuad Common Stock that a holder of shares
of Company Common stock would otherwise be entitled to receive upon exchange of
his Company Common Stock will be canceled with the holder thereof being entitled
to receive the next highest number of whole shares of SoftQuad Common Stock not
convertible into a whole share of SoftQuad Common Stock, and (iii) each
outstanding share of SoftQuad Common Stock held by the Company shall be retired
and canceled and shall resume the status of authorized and unissued SoftQuad
Stock.
No certificates or scrip representing fractional shares of SoftQuad Common
Stock will be issued upon the surrender for exchange of Company Common Stock no
dividend or distribution of SoftQuad shall relate to any fractional share, and
no fractional SoftQuad Common Stock interest will entitle the owner thereof to
vote or to any right of a stockholder of SoftQuad. In lieu thereof, the
Exchange Agent will deliver to each holder otherwise entitled to a fractional
share of SoftQuad Common Stock the next highest number of whole shares of
SoftQuad Common Stock.
At the Effective Date, SoftQuad will be governed by the Delaware
Certificate, the Delaware By-Laws and the Delaware GCL, which include a number
of provisions that are not present in, the Florida Articles, the Florida By-Laws
or the Florida Business Corporation Act (the "Florida BCA"). Accordingly, as
described below, a number of significant changes in shareholders' rights will be
effected in connection with the Reincorporation, some of which may be viewed as
limiting the rights of shareholders. In particular, the Delaware Certificate
includes a provision authorized by the Delaware GCL that would limit the
liability of directors to SoftQuad and its stockholders for breach of fiduciary
duties. The Delaware Certificate will provide directors and officers with
modern limited liability and indemnification rights authorized by the GCL of
Delaware. The Board of Directors believes that these provisions will enhance
its ability to attract and retain qualified directors and encourage them to
continue to make entrepreneurial decisions on behalf of SoftQuad. Accordingly,
implementation of these provisions has been included as part of the
Reincorporation. The Company believed that the Reincorporation will contribute
to the long-term quality and stability of the Company's governance. The Board
of Directors has concluded that the benefit to shareholders of improved
corporate governance from the Reincorporation outweighs any possible adverse
effects on shareholders of reducing the exposure of directors to liability and
broadening director indemnification rights.
Upon consummation of the Merger, the daily business operations of SoftQuad
will continue as they are presently conducted by the Company, at the SoftQuad's
principal executive offices at 161 Eglinton Avenue East, Suite 400, Toronto,
Ontario, Canada M4P 1J5. The authorized capital stock of SoftQuad will consist
of 50,000,000 shares of SoftQuad Common Stock, par value $.001 per share, one
share of Special Voting Stock, par value $.001, and 10,000,000 shares of
preferred stock, $.001 par value per share (the "Preferred Stock"). The
Preferred Stock will be issuable in series by action of the New Board of
Directors. The New Board of Directors will be authorized, without further
action by the stockholders, to fix the designations, powers, preferences and
other rights and the qualifications, limitations or restrictions of the unissued
Preferred Stock including shares of Preferred Stock having preferences and other
terms that might discourage takeover attempts by third parties.
The New Board of Directors will consist of those persons presently serving
on the board of directors of SoftQuad. The individuals who will serve as
executive officers of SoftQuad are those who currently serve as executive
officers of SoftQuad. Such persons and their respective terms of office are set
forth below under the caption "Reincorporation in Delaware - Officers and
Directors."
Pursuant to the terms of the Plan of Merger, the Merger may be abandoned by
the Board of Directors of the Company and SoftQuad at any time prior to the
Effective Date. In addition, the Board of Directors of the Company may amend
the Plan of Merger at any time prior to the Effective Date provided that any
amendment made may not, without approval by the Majority Holders, alter or
change the amount or kind of SoftQuad Common Stock to be received in exchange
for or on conversion of all or any of the Company Common Stock, alter or change
any term of the Delaware Certificate or alter or change any of the terms and
conditions of the Plan of Merger if such alteration or change would adversely
affect the holders of Company Common Stock.
HOW TO EXCHANGE COMPANY CERTIFICATES FOR SOFTQUAD CERTIFICATES
Enclosed are (i) a form letter of transmittal and (ii) instructions for
effecting the surrender of the Company Certificates in exchange for SoftQuad
Certificates. Upon surrender of a Company Certificate for cancellation to
SoftQuad, together with a duly executed letter of transmittal, the holder of
such Company Certificate shall, as soon as practicable following the Effective
Date, be entitled to receive in exchange therefor a SoftQuad Certificate
representing that number of shares of SoftQuad Stock into which the Company
Stock theretofore represented by the Company Certificate so surrendered have
been converted in the Merger and the Company Certificate so surrendered will be
canceled.
Because of the reincorporation in Delaware as a result of the Merger,
holders of Company Stock are not required to exchange their Company Certificates
for SoftQuad Certificates. Dividends and other distributions declared after the
Effective Date with respect to SoftQuad Stock and payable to holders of record
thereof after the Effective Date will be paid to the holder of any unsurrendered
Company Certificate with respect to the shares of SoftQuad Stock, which by
virtue of the Merger are represented thereby and such holder will be entitled to
exercise any right as a holder of SoftQuad Stock, until such holder has
surrendered the Company Certificate.
CAPITALIZATION
The authorized capital of the Company, prior to the Effective Date,
consisted of 50,000,000 shares of Company Common Stock and 10,000,000 shares of
Preferred Stock. The authorized capital of SoftQuad, which will be the
authorized capital of SoftQuad, presently consists of 50,000,000 shares of
SoftQuad Common Stock, one share of Special Voting Stock and 10,000,000 shares
of Preferred Stock. After the Merger (assuming no exercise of dissenters'
rights), SoftQuad will have outstanding approximately 7,336,703 shares of
SoftQuad Common Stock, one share of Special Voting Stock, 1,473,405 shares of
Class A Convertible Preferred Stock and 1,722,222 shares of Class B Convertible
Preferred Stock. 3,195,627 shares of Common Stock will be reserved for issuance
upon conversion of the Class A and Class B Convertible Preferred Stock,
___________ shares of Common Stock will be reserved for issuance in exchange for
Exchangeable Shares issued by SoftQuad Acquisition Corp., an Ontario, Canada
corporation, and ___________ shares of Common Stock will be reserved for
issuance pursuant to options, warrants or other rights to acquire Common Stock.
Accordingly, the New Board of Directors will have available approximately
____________ shares of SoftQuad Common Stock, and 6,804,373 shares of Preferred
Stock which are authorized but presently unissued and unreserved, and which will
be available for issuance from time to time in connection with, acquisitions of
other companies and other corporate purposes. The Reincorporation will not
affect total stockholder equity or total capitalization of the Company.
The New Board of Directors may in the future authorize, without further
stockholder approval, the issuance of such shares of SoftQuad Common Stock or
Preferred Stock to such persons and for such consideration upon such terms as
the New Board of Directors determines. Such issuance could result in a
significant dilution of the voting rights and, possibly, the stockholders'
equity of then existing stockholders.
There are no present plans, understandings or agreements, and the Company
is not engaged in any negotiations that will involve the issuance of the
Preferred Stock to be authorized. However, the New Board of Directors believes
it prudent to have shares of Preferred Stock available for such corporate
purposes as the New Board of Directors may from time to time deem necessary and
advisable including, without limitation, acquisitions, the raising of additional
capital and assurance of flexibility of action in the future.
It should be recognized that the issuance of additional authorized SoftQuad
Common Stock (or Preferred Stock, the terms and conditions of which including
voting and conversion rights, may be set at the discretion of the Board of
Directors) may have the effect of deterring or thwarting persons seeking to take
control of SoftQuad through a tender offer, proxy fight or otherwise or to bring
about removal of incumbent management or a corporate transaction such as merger.
For example, the issuance of SoftQuad Common Stock or Preferred Stock could be
used to deter or prevent such a change of control through dilution of stock
ownership of persons seeking to take control or by rendering a transaction
proposed by such persons more difficult.
SIGNIFICANT CHANGES IN THE COMPANY'S CHARTER AND BY-LAWS TO BE IMPLEMENTED BY
THE REINCORPORATION
CHANGE OF CORPORATE NAME. The Reincorporation will effect a change in the
Company's name to "SoftQuad Software, Ltd." The Board of Directors believes
that this corporate name is in the best interests of the Company and its
shareholders and that the name continues to reflect the nature of the Company's
present intention to merge with an operating business.
LIMITATION OF LIABILITY. The Delaware Certificate contains a provision
limiting or eliminating, with certain exceptions, the liability of directors to
SoftQuad and its shareholders for monetary damages for breach of their fiduciary
duties. The Florida Articles contains no similar provision. The Board of
Directors believes that such provision will better enable SoftQuad to attract
and retain as directors responsible individuals with the experience and
background required to direct SoftQuad's business and affairs. It has become
increasingly difficult for corporations to obtain adequate liability insurance
to protect directors from personal losses resulting from suits or other
proceedings involving them by reason of their service as directors. Such
insurance is considered a standard condition of directors' engagement. However,
coverage under such insurance is no longer routinely offered by insurers and
many traditional insurance carriers have withdrawn from the market. To the
extent such insurance is available, the scope of coverage is often restricted,
the dollar limits of coverage are substantially reduced and the premiums have
risen dramatically.
At the same time directors have been subject to substantial monetary damage
awards in recent years. Traditionally, courts have not held directors to be
insurers against losses a corporation may suffer as a consequence of directors'
good faith exercise of business judgment, even if, in retrospect the directors'
decision was an unfortunate one. In the past, directors have had broad
discretion to make decisions on behalf of the corporation under the "business
judgment rule." The business judgment rule offers protection to directors who,
after reasonable investigation, adopt a course of action that they reasonably
and in good faith believe will benefit the corporation, but which ultimately
proves to be disadvantageous. Under those circumstances, courts have typically
been reluctant to subject directors' business judgments to further scrutiny.
Some recent court cases have, however, imposed significant personal liability on
directors for failure to exercise an informed business judgment with the result
that the potential exposure of directors to monetary damages has increased.
Consequently legal proceedings against directors relating to decisions made by
directors on behalf of corporations have significantly increased in number, cost
of defense and level of damages claimed. Whether or not such an action is
meritorious, the cost of defense can be well beyond the personal resources of a
director.
The Delaware General Assembly considered such developments a threat to the
quality and stability of the governance of Delaware corporations because of the
unwillingness of directors, in many instances, to serve without the protection
which insurance traditionally has provided and because of the deterrent effect
on entrepreneurial decision making by directors who do serve without the
protection of traditional insurance coverage. In response, in 1986 the Delaware
General Assembly adopted amendments to the Delaware GCL which permit a
corporation to include in its charter a provision to limit or eliminate, with
certain exceptions, the Personal liability Of Directors to a corporation and its
shareholders for monetary damages for breach of their fiduciary duties. Similar
charter provisions limiting a director's liability are not permitted under
Florida law.
The Board of Directors believes that the limitation on directors' liability
permitted under Delaware law will assist SoftQuad in attracting and retaining
qualified directors by limiting directors' exposure to liability. The
Reincorporation proposal will implement this limitation on liability of the
directors of SoftQuad, inasmuch as the Delaware Certificate provides that to the
fullest extent that the Delaware GCL now or hereafter permits the limitation or
elimination of the liability of directors, no director will be liable to
SoftQuad or its stockholders for monetary damages for breach of fiduciary duty.
Under such provision, SoftQuad's directors will not be liable for monetary
damages for acts or omissions occurring on or after the Effective Date of the
Reincorpora-tion, even if they should fail through negligence or gross
negligence, to satisfy their duty of care (which requires directors to exercise
informed business judgment in discharging their duties). The Delaware
Certificate would not limit or eliminate any liability of directors for acts or
omissions occurring prior to the Effective Date. As provided under Delaware
law, The Delaware Certificate cannot eliminate or limit the liability of
directors for breaches of their duty of loyalty to SoftQuad; acts or omissions
not in good faith or involving intentional misconduct or a knowing violation of
law, paying a dividend or effecting a stock repurchase or redemption which is
illegal under the Delaware GCL, or transactions from which a director derived an
improper personal benefit. Further, The Delaware Certificate would not affect
the availability of equitable remedies, such as an action to enjoin or rescind a
transaction involving a breach of a director's duty of care. The Delaware
Certificate pertains to breaches of duty by directors acting as directors and
not to breaches of duty by directors acting as officers (even if the individual
in question is also a director). In addition, The Delaware Certificate would
not affect a director's liability to third parties or under the federal
securities laws.
The Delaware Certificate is worded to incorporate any future statutory
revisions limiting directors' liability. It provides, however, that no
amendment or repeal of its provision will apply to the liability of a director
for any acts or omissions occurring prior to such amendment or repeal, unless
such amendment has the affect of further limiting or eliminating such liability.
The Company has not received notice of any lawsuit or other proceeding to
which The Delaware Certificate might apply. In addition, The Delaware
Certificate is not being included in the Delaware Certificate in response to any
director's resignation or any notice of an intention to resign. Accordingly,
the Company is not aware of any existing circumstances to which The Delaware
Certificate might apply. The Board of Directors recognizes that The Delaware
Certificate may have the effect of reducing the likelihood of derivative
litigation against directors, and may discourage or deter stockholders from
instituting litigation against directors for breach of their duty of care, even
though such an action, if successful, might benefit SoftQuad and its
shareholders. However, given the difficult environment and potential for
incurring liabilities currently facing directors of publicly held corporations,
the Board of Directors believes that The Delaware Certificate is in the best
interests of SoftQuad and its stockholders, since it should enhance SoftQuad's
ability to retain highly qualified directors and reduce a possible deterrent to
entrepreneurial decision making. In addition, the Board of Directors believes
that The Delaware Certificate may have a favorable impact over the long term on
the availability, cost, amount and scope of coverage of directors' liability
insurance, although there can be no assurance of such an effect.
The Delaware Certificate may be viewed as limiting the rights of
stockholders, and the broad scope of the indemnification provisions of
SoftQuad's could result in increased expense to SoftQuad. The Company believes,
however, that these provisions will provide a better balancing of the legal
obligations of, and protections for, directors and will contribute to the
quality and stability of SoftQuad's governance. The Board of Directors has
concluded that the benefit to stockholders of improved corporate governance
outweighs any possible adverse effects on stockholders of reducing the exposure
of directors to liability and broad-ening indemnification rights. Because The
Delaware Certificate deals with the potential liability of directors, the
members of the Board of Directors may be deemed to have a personal interest in
effecting the Reincorporation.
INDEMNIFICATION. As part of the 1986 legislation permitting a corporation
to limit or eliminate the liability of directors, the Delaware General Assembly,
for the reasons noted under "Limitation of Liability" above also amended the
provisions of the Delaware GCL governing indemnification to clarify and broaden
the indemnification rights which corporations may provide to their directors,
officers and other corporate agents. The Florida BCA also contains broad
indemnification provisions. The Delaware Certificate reflects the provisions of
Delaware law, as recently amended, and, as discussed below, provides broad
rights to indemnification.
In recent years, investigations, actions, suits and proceedings, including
actions, suits and proceedings by or in the right of a corporation to procure a
judgment in its favor (referred to together as "proceedings"), seeking to impose
liability on, or involving as witnesses, directors and officers of publicly-held
corporations have become increasingly common. Such proceedings are typically
very expensive, whatever their eventual outcome. In view of the costs and
uncertainties of litigation in general it is often prudent to settle proceedings
in which claims against a director or officer are made. Settlement amounts,
even if material to the corporation involved and minor compared to the enormous
amounts frequently claimed, often exceed the financial resources of most
individual defendants. Even in proceedings in which a director or officer is
not named as a defendant he may incur substantial expenses and attorneys' fees
if he is called as a witness or otherwise becomes involved in the proceeding.
Although the Company's directors and officers have not incurred any liability or
significant expense as a result of any proceeding to date the potential for
substantial loss does exist. As a result, an individual may conclude that the
potential exposure to the costs and risks of proceedings in which he may become
involved may exceed any benefit to him from serving as a director or officer of
a public corporation. This is particularly true for directors who are not also
officers of the corporation. The increasing difficulty and expense of obtaining
directors' and officers' liability insurance discussed above has compounded the
problem.
The broad scope of indemnification now available under Delaware law will
permit SoftQuad to continue to offer its directors and officers greater
protection against these risks. The Board of Directors believes that such
protection is reasonable and desirable in order to enhance SoftQuad's ability to
attract and retain qualified directors as well as to encourage directors to
continue to make good faith decisions on behalf of SoftQuad with regard to the
best interests of SoftQuad and its stockholders.
The Delaware Certificate is quite different from the Florida Articles and
require indemnification of SoftQuad's directors and officers to the fullest
extent permitted under applicable law as from time to time in affect, with
respect to expenses, liability or loss (including, without limitation,
attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts
paid or to be paid in settlement) actually and reasonably incurred by any person
in connection with any actual or threatened proceeding by reason of the fact
that such person is or was a director or officer of SoftQuad or is or was
serving at the request of SoftQuad as a director or officer of another
corporation or of a partnership, joint venture; trust, employee benefit plan or
other enterprise at the request of SoftQuad. The right to indemnification
includes the right to receive payment of expenses in advance of the final
disposition of such proceeding; consistent with applicable law from time to time
in effect; provided, however, that if the Delaware GCL requires the payment of
such expenses in advance of the final disposition of a proceeding, payment shall
be made only if such person undertakes to repay SoftQuad if it is ultimately
determined that he or she was not entitled to indemnification. Directors and
officers would not be indemnified for lose, liability or expenses incurred in
connection with proceedings brought against such persons otherwise than in the
capacities in which they serve SoftQuad. Under the Delaware SoftQuad may,
although it has no present intention to do so, by action of the New Board of
Directors, provide the same indemnification to its employees, agents, attorneys
and representatives as it provides to its directors and officers. The Delaware
Certificate provides that such practices are not exclusive of any other rights
to which persons seeking indemnification may otherwise be entitled under any
agreement or otherwise.
The Delaware Certificate specifies that the right to indemnification is a
contract right. The Delaware Certificate also provides that a person seeking
indemnification from SoftQuad may bring suit against SoftQuad to recover any and
all amounts entitled to such person provided that such person has filed a
written claim with SoftQuad has failed to pay such claim within thirty days of
receipt thereof. In addition, SoftQuad authorize SoftQuad to purchase and
maintain indemnity insurance, if it so chooses to guard against future expense.
The Delaware Certificate provides for payment of all expenses incurred,
including those incurred to defend against a threatened proceeding.
Additionally, the Delaware Certificate provides that indemnification shall
continue as to a person who has ceased to be a director or officer and shall
inure to the benefit of the heirs, executors and administrators of such a
person. The Delaware also provide that to the extent any director or officer
who is, by reason of such a position, a witness in any proceeding, he or she
shall be indemnified for all reasonable expenses incurred in connection
therewith.
Under Delaware law, as with Florida law, rights to indemnification and
expenses need not be limited to those provided by statute. As a result, under
Delaware law and the Delaware Certificate, SoftQuad will be permitted to
indemnity its directors and officers, within the limits established by law and
public policy, pursuant to an express contract, a by-law provision, a
stockholder vote or otherwise, any or all of which could provide indemnification
rights broader than those currently available under the Florida Articles or
expressly provided for under Florida or Delaware law.
Insofar as the Delaware Certificate provides indemnification to directors
or officers for liabilities arising under the Securities Act of 1933, it is the
position of the Securities and Exchange Commission that such indemnification
would be against public policy as expressed in such statute and, therefore,
unenforceable.
The Board of Directors recognizes that SoftQuad may in the future be
obligated to incur substantial expense as a result of the indemnification rights
conferred under the Delaware Certificate, which are intended to be as broad as
possible under applicable law. Because directors of SoftQuad may personally
benefit from the indemnification provisions of SoftQuad , the members of the
Board of Directors may be deemed to have a personal interest in the effectuation
of the Reincorporation.
OFFICERS AND DIRECTORS
Upon the Effective Date the present officers and directors of SoftQuad will
continue to be the officers and directors of SoftQuad. This will result in the
following persons holding the positions indicated below in SoftQuad until
SoftQuad's next annual meeting or until their respective successors are elected
and qualified:
<TABLE>
<CAPTION>
Name Age Title
- ------------------------------- ---- -----------------------------------------
<S> <C> <C>
Roberto Drassinower . . . . . ____ Director, President and Chief Executive
Officer
Pamela Geoga. . . . . . . . . ____ Vice President
David T. Adams. . . . . . . . ____ Chief Financial Officer and
Chief Operating Officer
Jonathan Sachs. . . . . . . . ____ Director and Vice President, Sales &
Marketing
Bruce Sharpe. . . . . . . . . ____ Director and Chief Technology Officer
Peter Sharpe. . . . . . . . . ____ Director and Chief Scientist
</TABLE>
MR. ROBERT DRASSINOWER has been President, Chief Executive Officer and a
Director of the Company since inception. Mr. Drassinower has guided the
company's strategic development and positioned SoftQuad as one of the hottest
technology companies in North America. Under his leadership, SoftQuad enhanced
its reputation as the leading developer of XML enabling technologies and
commerce solutions for e-business.
Prior to joining SoftQuad, Mr. Drassinower was President of Carolian Systems, a
UNIX nextwork management company, wehre he was responsible for R&D, product
development, technical support, and a succesful corporate sales team serving
Compaq, Pepsi and 3M. In 1995 Mr. Drassinower joined SoftQuad International as
VP of the Professional Services Division. Under his guidance, he doubled the
divisions revenue for three consecutive years and was responsible for securing
many blue chip accounts including AT&T, HP, Unisys, Bell South and Nortel.
MR. DAVID T. ADAMS has been Chief Financial Officer and Chief Operating Officer
of the Company since
MS. PAMELA GEOGA has been Vice President of the Company since its inception.
Ms. Geoga has more than 25 years of exeperience working for IBM Corp. and its
subsidiariy Lotus Developmetn Corp. In her most recent position as Vice
President, North America for Lotus, Ms. Geoga was responsible for over US$600
million in revenue, closing over US$100 million in software contracts, and
managing a staff of over 800. Mr. Geoga was responsible for corporate,
government, channel, business and strategic partner sales. Under her direction,
the North American division evolved from a group of independent operating uits,
into a fully integrated operation with dynamic, cross-orgnaizational teams
focused on specific market segments. Mr. Geoga also introduced the Lotus
Solution Sales process, a process which became a standard for IBM senior
executives worldwide.
MR. JONATHAN SACHS has been Vice President, Sales and Marketing and a Director
of the Company since its inception.
MR. BRUCE SHARPE has been Chief Technology Officer and a Director of the Company
since its inception.
MR. PETER SHARPE has been Chief Scientist and a Director of the Company since
its inception.
CERTAIN SIGNIFICANT DIFFERENCES BETWEEN THE CORPORATION LAWS OF FLORIDA AND
DELAWARE
Although it is impractical to compare all of the differences between the
corporation laws of Florida and Delaware the following is a summary of certain
significant differences between the provisions of Florida law applicable to the
Company and those of Delaware law which will be applicable to SoftQuad.
DIVIDENDS. A Florida corporation may not make distributions to
shareholders if, after giving it effect, in the judgment of the board of
directors: (a) The corporation would not be able to pay its debts as they
become due in the usual course of business; and (b) The corporation's total
assets would be less than the sum of its total liabilities plus (unless the
articles of incorporation permit otherwise) the amount that would be needed, if
the corporation were to be dissolved at the time of the distribution, to satisfy
the preferential rights upon dissolution of shareholders whose preferential
rights are superior to those receiving the distribution. In contrast, a
Delaware corporation may pay dividends either out of surplus or, if there is no
surplus, and except in very limited circumstances, out of net profits for the
fiscal year in which the dividend is declared or out of net profits for the
preceding fiscal year. In any event, SoftQuad does not anticipate paying
dividends in the foreseeable future.
RIGHT TO INSPECT BOOKS AND RECORDS. Under Florida law, any shareholder
upon written demand at least five business days before the date on which the
shareholder wishes to inspect and copy, made "in good faith and for a proper
purpose," may examine the corporation's books and records, including minutes of
meetings, accounting records and the record of shareholders that are directly
connected with the shareholder's purpose. Under Delaware law, any stockholder
of a corporation, regardless of his percentage of ownership, has the right to
inspect the corporation's stock ledger, list of stockholders and its other books
and records, upon a written demand under oath in which the stockholder states a
"proper purpose" for such inspection.
INTERESTED DIRECTOR TRANSACTIONS. Under both Florida and Delaware law,
certain contracts or transactions in which one or more of a corporation's
directors have an interest are not void or voidable because of such interest if
the contract or transaction is fair to the corporation when authorized or if it
is approved in good faith by the shareholders or by the directors who are not
interested therein after the material facts as to the contract or transaction
and the interest of any interested directors are disclosed. With certain
exceptions, Florida and Delaware law are the same in this area. Under Florida
law, if approval of the Board of Directors is to be relied upon for this
purpose, the contract or transaction may be approved by a majority vote of a
quorum of the directors without counting the vote of the interested director or
directors (except for purposes of establishing quorum). Under Delaware law, the
approval of the board of directors can be obtained for the contract or
transaction by the vote of a majority of the disinterested directors, even
though less than a majority of a quorum. Accordingly, it is possible that
certain transactions that the Board of Directors of the Company currently might
not be able to approve itself because of the number of interested directors
could be approved by a majority of the disinterested directors of SoftQuad,
although less than a majority of a quorum. The Company is not aware of any
plans to propose any transaction involving directors of the Company which could
not be approved by the Board of Directors under Florida law but could be
approved by the New Board of Directors under Delaware law.
SPECIAL MEETINGS OF SHAREHOLDERS. Under Florida law, a special meeting of
shareholders may be called by the Board of Directors or by the holders of at
least 10% of the shares entitled to vote at the meeting or by such other persons
or groups as may be authorized in the articles of incorporation or the by-laws.
Under Delaware law, a special meeting may be called by the board of directors
and only such other persons as are authorized by the certificate of
incorporation or the by-laws. The Certificate of Incorporation of SoftQuad,
unlike the Company's By-Laws, provides that a special meeting of stockholders
may be called only by the board of directors or by a committee of the board of
directors which has been duly delegated such authority by the board of directors
and by no other person.
SEQUESTRATION OF SHARES. Delaware law provides that the shares of any
person in a Delaware corporation may be attached or "sequestered" for debts or
other demands. Such provision could be used to assert jurisdiction against a
non-resident holder of the Delaware corporation's shares, thereby compelling the
non-resident holder to appear in an action brought in a Delaware court. Florida
law has no comparable provision.
CERTAIN ACTIONS. Delaware law provides that stockholders have six years in
which to bring an action against directors responsible for the payment of an
unlawful dividend. Under Florida law, all directors voting for or assenting to
an unlawful distribution are jointly and severally liable to the corporation for
the excess of the amount of dividend over what could have been distributed
lawfully. Florida law requires that any action be commenced within two (2)
years after the date of the distribution. Florida law and Delaware law require
that the plaintiff held stock at the time when the transaction complained of
occurred. Under Florida law a successful shareholder has a statutory right to
expenses, including attorney's fee, if the court so directs. Under Delaware law
recovery of fees and expenses by a successful shareholder is governed by case
law.
TENDER OFFER AND BUSINESS COMBINATION STATUTES. Florida law regulates
tender offers and business combinations involving Florida corporations as well
as certain corporations incorporated outside Florida that conduct business in
Florida. The Florida law provides that any acquisition by a person, either
directly or indirectly, of ownership of, or the power to direct the voting of,
20% or more ("Control Shares") of the outstanding voting securities of a
corporation is a "Control Share Acquisition." A Control Share Acquisition must
be approved by a majority of each class of outstanding voting securities of such
corporation excluding the shares held or controlled by the person seeking
approval before the Control Shares may be voted. A special meeting of
shareholders must be held by the corporation to approve a Control Share
Acquisition within 50 days after a request for such meeting is submitted by the
person seeking to acquire control. If the Control Shares are accorded full
voting rights and the acquiring person has acquired Control Shares with a
majority or more of the voting power of the Corporation, all shareholders shall
have dissenter's rights as provided by applicable Florida law.
Florida law regulates mergers and other business combinations between a
corporation and a shareholder who owns more than 10% of the outstanding voting
shares of such corporation ("Interested Shareholder"). Specifically, any such
merger between a corporation and an Interested Shareholder must be approved by
the vote of the holders of two-thirds of the voting shares of such corporation
excluding the shares beneficially owned by such shareholder. The approval by
shareholders is not required, however, if (i) such merger or business
combination is approved by a majority of disinterested directors, (ii) such
Interested Shareholder is the beneficial owner of at least 90% of the
outstanding voting shares excluding the shares acquired directly from the
subject corporation in a transaction not approved by a majority of disinterested
directors, or (iii) the price paid to shareholders in connection with a merger
or a similar business combination meets the statutory test of "fairness."
Delaware law regulates hostile takeovers by providing that an "interested
stockholder," defined as a stockholder owning 15% or more of the corporation's
voting stock or an affiliate or associate thereof, may not engage in a "business
combination" transaction, defined to include a merger, consolidation or a
variety of self-dealing transactions with the corporation for a period of three
years from the date on which such stockholder became an "interested stockholder"
unless (a) prior to such date the corporation's board of directors approved
either the "business combination" transaction or the transaction in which the
stockholder became an "interested stockholder', (b) the stockholder, in a single
transaction in which he became an "interested stockholder," acquires at least
85% of the voting stock outstanding at the time the transaction commenced
(excluding shares owned by certain employee stock plans and persons who are
directors and also officers of the corporation) or (c) on or subsequent to such
date, the "business combination" transaction is approved by the corporation's
board of directors and authorized at an annual or special meeting of the
corporation's stockholders, by the affirmative vote of at least two-thirds of
the outstanding voting stock not owned by the "interested stockholder."
Thus, the effect of such provision of Delaware law is to prevent any
attempted hostile takeover of a Delaware corporation from being completed for
three years unless (a) at least 85% of the voting shares of the target are
acquired in a single transaction; (b) at least two-thirds of the voting shares
of the target, excluding the shares held by the bidder, vote in favor of the
acquisition; or (c) the corporation opts out of the statutory protection.
DISSENTERS' RIGHTS. Under Florida laws shareholders may dissent from, and
demand cash payment of the fair value of their shares in respect of, (i) a
merger or consolidation of the corporation, and (ii) a sale or exchange of all
or substantially all of a corporation's assets, including a sale in dissolution.
Under Delaware law, dissenters' rights are not available with respect to a
sale, lease, exchange or other disposition of all or substantially all of a
corporation's assets or any amendment of its charter, unless such corporation's
charter expressly provides for dissenters' rights in such instances. The
Delaware Certificate contains no such provision. Stockholders of a Florida
corporation have no dissenters' rights in the case of a merger or consolidation
if their shares are either listed on a national securities exchange or quoted on
the NASDAQ National Market System. Stockholders of a Delaware corporation have
no dissenters' rights in the case of a merger or consolidation if their shares
are either listed on a national securities exchange or held of record by more
than 2,000 stockholders or the corporation is the survivor of a merger that did
not require the stockholders to vote for its approval; provided, however, that
dissenters' rights will be available in such instances, if stockholders are
required under the merger or. consolidation to accept for their shares anything
other than shares of stock of the surviving corporation, shares of stock of a
corporation either listed on a national securities exchange or held of record by
more than 2,000 stockholders, cash, in lieu of fractional shares, or any
combination of the foregoing.
FEDERAL INCOME TAX CONSEQUENCES OF THE REINCORPORATION
The Company believes that for federal income tax purposes no gain or loss
will be recognized by the Company, SoftQuad or the shareholders of the Company
who receive SoftQuad Common Stock for their Company Common Stock in connection
with the Reincorporation. The adjusted tax basis of each whole share of
SoftQuad Common Stock received by a shareholder of the Company as a result of
the Reincorporation will be the same as the shareholder's aggregate adjusted tax
basis in the shares of Company Common Stock converted into such shares of
SoftQuad Common Stock. A shareholder who holds Company Common Stock will
include in his holding period for the SoftQuad Common Stock that he receives as
a result of the Reincorporation his holding period for the Company Common Stock
converted into such SoftQuad Common Stock.
The receipt of cash for any fractional shares of SoftQuad Common Stock or
pursuant to the exercise of dissenters' rights, as the fair value for shares of
the Company Common Stock will be a taxable transaction for federal income tax
purposes to shareholders receiving such cash. A shareholder who receives cash
in lieu of fractional shares or in exercise of dissenters rights will recognize
gain of loss measured by the differences between the cash so received and such
shareholder's adjusted tax basis in the shares of the Company Common Stock
exchanged therefor. Such gain or loss will be treated as a capital gain or loss
if the shares of the Company Common Stock are capital assets in the hands of
such shareholders, and will be long-term capital gain or loss if such
shareholder has held shares for more than six months.
BECAUSE OF THE COMPLEXITY OF THE CAPITAL GAINS AND LOSS PROVISIONS OF THE
INTERNAL REVENUE CODE OF 1986 AND BECAUSE OF THE UNIQUENESS OF EACH INDIVIDUALS
CAPITAL GAIN OR LOSS SITUATION, SHAREHOLDERS CONTEMPLATING EXERCISING STATUTORY
APPRAISAL RIGHTS SHOULD CONSULT THEIR OWN TAX ADVISOR REGARDING THE FEDERAL
INCOME TAX CONSEQUENCES OF EXERCISING SUCH RIGHTS. STATE, LOCAL OR FOREIGN
INCOME TAX CONSEQUENCES TO SHAREHOLDERS MAY VARY FROM THE FEDERAL INCOME TAX
CONSEQUENCES DESCRIBED ABOVE, AND SHAREHOLDERS ARE URGED TO CONSULT THEIR OWN
TAX ADVISOR AS TO THE CONSEQUENCES TO THEM OF THE REINCORPORATION UNDER ALL
APPLICABLE TAX LAWS.
RIGHTS OF DISSENTING SHAREHOLDERS
Shareholders who have not consented to the Reincorporation and who comply
with the dissenters' rights provisions of the Florida Business Corporation Act
will have the right to be paid in cash the fair value of their Company Common
Stock. Such fair value will be determined as of the close of business on March
9, 2000 the day before the Majority Holders approved the Reincorporation by
written consent excluding any appreciation or depreciation directly or
indirectly induced by the Reincorporation or the authorization of it.
In order to receive cash payment for his Company Common Stock, a dissenting
shareholder must comply with the procedures specified by Sections 607.1302 to
607.1320 of the Florida BCA, which are attached as Exhibit C to this information
Statement. Any shareholder considering exercising his dissenters' rights is
urged to review Sections 607.1302 and 607.1320 carefully. The following summary
of the principal provisions of Sections 607.1302 to 607.1320 is qualified in its
entirety by reference to the text thereof. Further, the following discussion is
subject to the possibility that the Company may abandon the Reincorporation if
the Board of directors determines that in light of the potential liability of
the Company that might result from the exercise of dissenters' rights, the
Reincorporation would be impracticable, undesirable or not in the best interests
of the Company's shareholders. If the Company abandons the Reincorporation, the
rights of dissenting shareholders would terminate and such dissenters would be
reinstated to all of their rights as shareholders.
Any shareholder who wishes to dissent from the Reincorporation and receive
a cash payment for his Company Common Stock, (a) must file with the Company,
prior to the Effective Date, a written objection to the Reincorporation
demanding payment for his Company Common Stock if the Reincorporation is
consummated and setting forth his name, address and the number of shares of
Company Common Stock held by him and (b) must not be one of the Majority Holders
who consented to the Reincorporation.
FAILURE TO FILE THE REQUIRED NOTICE OR DEMAND PRIOR TO THE EFFECTIVE DATE
WILL NOT SATISFY THE NOTICE REQUIREMENTS OF SECTION 607.1320 AND WILL RESULT IN
THE FORFEITURE OF DISSENTERS RIGHTS.
COMMUNICATIONS WITH RESPECT TO DISSENTERS' RIGHTS SHOULD BE ADDRESSED TO
THE COMPANY AT 161 EGLINTON AVENUE EAST, SUITE 400, TORONTO, ONTARIO, CANADA M4P
1J5.
Upon filing a notice of election to dissent a dissenting shareholder will
cease to have any of the rights of a shareholder except the right to be paid the
fair value of his Company Common Stock pursuant to Section 607.1320. If a
shareholder loses his dissenters' rights, either by withdrawal of his demand,
abandonment of the Reincorporation by the Company or otherwise, he will not have
the right to receive a cash payment for his Company Common Stock and will be
reinstated to all of his rights as a shareholder as they existed at the time of
the filing of his demand.
AT THE TIME OF DEMANDING PAYMENT FOR HIS SHARES OF COMPANY COMMON STOCK,
EACH SHAREHOLDER DEMANDING PAYMENT SHALL SUBMIT THE CERTIFICATE OR CERTIFICATES
REPRESENTING HIS SHARES OF COMPANY COMMON STOCKS FOR NOTATION THEREON THAT SUCH
DEMAND HAS BEEN MADE. FAILURE TO DO SO SHALL, AT THE OPTION OF THE COMPANY,
TERMINATE HIS DISSENTER'S RIGHTS UNLESS A COURT, FOR GOOD CAUSE, DETERMINES
OTHERWISE.
Within 60 days after the Effective Date of the Reincorporation, SoftQuad,
as successor to the Company, will give written notice thereof to each dissenting
shareholder who timely filed a demand and will make a written offer to each such
shareholder to pay for his Company Common Stock at a specified price determined
by the Company to be the fair value thereof. If, within 30 days after the
Reincorporation, SoftQuad and a dissenting shareholder agree upon the price to
be paid for his Company Common Stock; SoftQuad shall make such payment within 90
days following the effective date of the Reincorporation, upon surrender by such
shareholder to SoftQuad of the certificates representing his Company Common
Stock. Upon payment, the dissenting shareholder shall cease to have any
interest in the Company Common Stock.
If SoftQuad and any dissenting shareholder fail to agree upon the price to
be paid for his Company Common Stock within the aforementioned 30-day period,
then within 30 days after receipt of written demand from any dissenting
shareholder given within 60 days after the date the Reincorporation is effected,
SoftQuad shall, or at any time within such 60 day period SoftQuad may, file an
action in any court of general civil jurisdiction in the county in Florida where
the registered office, of the Company is located, requesting that the fair value
of such Company Common Stock be found and determined. If SoftQuad fails to
institute the proceeding within such 60-day period, any dissenting shareholder
may institute such proceeding. All dissenting shareholders, except those who
have agreed on the price to be paid for their Company Common Stock, are required
to be made parties to such a proceeding.
In any such proceeding, the court, at SoftQuad's request, will determine
whether or not any particular dissenting shareholder is entitled to receive
payment for his Company Common Stock. If SoftQuad does not request such a
determination or if the court finds that a dissenting shareholder is so
entitled, the court, directly or through an appraiser, will fix the value of the
Company Common Stock as of the day prior to the date the Majority Holders
consented to the Reincorporation, excluding any appreciation or depreciation
directly or indirectly induced by the Reincorporation or the proposal to
authorize it. The expenses of any such proceeding, as determined by the court,
shall be assessed against SoftQuad, except that the court may apportion costs to
any dissenting shareholder whom it finds to have been acting arbitrarily,
vexatiously or otherwise not in good faith in refusing an offer by SoftQuad.
THE PROVISIONS OF SECTIONS 607.1302 TO 607.1320 ARE TECHNICAL AND COMPLEX.
IT IS SUGGESTED THAT ANY SHAREHOLDER WHO DESIRES TO EXERCISE HIS RIGHT TO
DISSENT CONSULT HIS LEGAL COUNSEL, AS FAILURE TO COMPLY STRICTLY WITH SUCH
PROVISIONS MAY LEAD TO A LOSS OF DISSENTERS RIGHTS.
MARKET FOR THE AMERICAN SPORTS MACHINE, INC. COMMON STOCK
Shares of the Company's common stock have been registered with the
Securities and Exchange Commission (the "Commission") and are included on the
OTC Bulletin Board price quotation for the Company's shares published by such
service.
As of March 9, 2000, there were _____ holders of record of the Company's
common stock.
As of the date hereof, the Company has issued and outstanding
______________ shares of common stock. Of this total, 500,000 shares were
originally issued in transactions more than three (3) years ago. Such shares
may be sold or otherwise transferred without restriction pursuant to the terms
of rule 144 ("Rule 144") of the Act. The remaining 900,000 shares were issued
subject to Rule 144 and may not be sold and/or transferred without further
registration under the Act or pursuant to an applicable exemption.
DIVIDEND POLICY
The Company has not declared or paid cash dividends or made distributions
in the past, and the Company does not anticipate that it will pay cash dividends
or make distributions in the foreseeable future. The Company currently intends
to retain and reinvest future earnings, if any, to finance its operations.
MISCELLANEOUS
The Company requests brokers, custodians, nominees and fiduciaries to
forward this Information Statement to the beneficial owners of Company Stock and
the Company will reimburse such holders for their reasonable expenses in
connection therewith. Additional copies of this Information Statement may be
obtained at no charge from the Exchange Agent by writing to it at the following
address: Atlas Stock Transfer Corporation, 5899 South State Street, Salt Lake
City, Utah 84107.
<PAGE>
EXHIBITS INDEX
A. PLAN AND AGREEMENT OF MERGER
B. DELAWARE CERTIFICATE OF INCORPORATION
C. FLORIDA STATUTES
D. ANNUAL REPORT ON FORM 10-K
E. CURRENT REPORT ON FORM 8-K
F. LETTER OF TRANSMITTAL
<PAGE>
EXHIBIT A
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (hereinafter referred to as this
"Agreement") dated as of March 9, 2000, is made and entered into by and between
The American Sports Machine, Inc., a Florida corporation ("Company") and
SoftQuad Software, Ltd., a Delaware corporation ("SoftQuad").
W-I-T-N-E-S-S-E-T-H:
WHEREAS, the Company is a corporation organized and existing under the laws
of the State of Florida; and
WHEREAS, SoftQuad is a wholly-owned subsidiary corporation of the Company,
having been incorporated on March 9, 2000; and
NOW THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that the
Company shall be merged into SoftQuad (the "merger") upon the terms and
conditions hereinafter set forth.
ARTICLE I
Merger
On April 9, 2000 as soon as practicable thereafter (the "Effective Date");
the Company shall be merged into SoftQuad, the separate existence of the Company
shall cease and SoftQuad (following the Merger referred to as "SoftQuad") shall
continue to exist under the name of "SoftQuad Software, Ltd.," by virtue of, and
shall be governed by, the laws of the State of Delaware. The address of the
registered office of SoftQuad in the State of Delaware will be The Corporation
Trust Company, 1209 Orange Street, in the City of Wilmington, County of
Newcastle, State of Delaware.
ARTICLE II
Certificate of Incorporation of SoftQuad
The Certificate of Incorporation of SoftQuad Software, Ltd. shall be the
Certificate of Incorporation of SoftQuad as in effect on the date hereof without
change unless and until amended in accordance with applicable law.
ARTICLE III
By-Laws of SoftQuad
The By-Laws of SoftQuad shall be the By-Laws of SoftQuad as in effect on
the date hereof without change unless and until amended or repealed in
accordance with applicable law.
ARTICLE IV
Effect of Merger on Stock of Constituent Corporation
4.01 On the Effective Date, (i) each outstanding share of Company common
stock, $.0001 par value ("Company Common Stock") shall be converted into one
share of SoftQuad common stock, $.001 par value, ("SoftQuad Common Stock"),
except for those shares of Company Common Stock with respect to which the
holders thereof duly exercise their dissenters' rights under Florida law, (ii)
any fractional SoftQuad Common Stock interests to which a holder of Company
Common Stock would be entitled will be canceled with the holder thereof being
entitled to receive the next highest number of whole shares of SoftQuad Common
Stock and (iii) each outstanding share of Company Common Stock held by the
Company shall be retired and canceled and shall resume the status of an
authorized and unissued SoftQuad Common Stock.
4.02 All options and rights to acquire Company Common Stock under or
pursuant to any options or warrants which are outstanding on the Effective Date
of the Merger will automatically be converted into equivalent options and rights
to purchase that whole number of SoftQuad Common Stock into which the number of
Company Common Stock subject to such options or warrants immediately prior to
the Effective Date would have been converted in the merger had such rights been
exercised immediately prior thereto (with any fractional SoftQuad Common Stock
interest resulting from the exercise being settled in cash in the amount such
holder would have received for any such fraction in the merger had he exercised
such warrants or options immediately prior to the Merger). The option price per
share of SoftQuad Common Stock shall be the option price per share of Company
Common Stock in affect prior to the Effective Date. All plans or agreements of
the Company under which such options and rights are granted or issued shall be
continued and assumed by SoftQuad unless and until amended or terminated in
accordance with their respective terms.
4.03 (a) The Company shall act as exchange agent in the Merger.
(b) Prior to, or as soon as practicable, after the Effective Date, SoftQuad
shall mail to each person who was, at the time of mailing or at the Effective
Date, a holder of record of issued and outstanding Company Common Stock (i) a
form letter of transmittal and (ii) instructions for effecting the surrender of
the certificate or certificates, which immediately prior the Effective Date
represented issued and outstanding shares of Company Common Stock ("Company
Certificates"), in exchange for certificates representing SoftQuad Common Stock.
Upon surrender of a Company Certificate for cancellation to SoftQuad, together
with a duly executed letter of transmittal, the holder of such Company
Certificate shall subject to paragraph (f) of this section 4.03 be entitled to
receive in exchange therefor a certificate representing that number of SoftQuad
Common Stock into which the Company Common Stock theretofore represented by the
Company Certificate so surrendered shall have been converted pursuant to the
provisions of this Article IV; and the Company Certificate so surrendered shall
forthwith be canceled.
(c) No dividends or other distributions declared after the Effective Date
with respect to SoftQuad Common Stock and payable to holders of record thereof
after the Effective Date shall be paid to the holder of any unsurrendered
Company Certificate with respect to SoftQuad Common Stock which by virtue of the
Merger are represented thereby, nor shall such holder be entitled to exercise
any right as a holder of SoftQuad Common Stock; until such holder shall
surrender such Company Certificate. Subject to the effect, if any, of
applicable law and except as otherwise provided in paragraph (f) of this Section
4.03, after the subsequent surrender and exchange of a Company Certificate, the
holder thereof shall be entitled to receive any such dividends or other
distributions, without any interest thereon, which became payable prior to such
surrender and exchange with respect to SoftQuad Common Stock represented by such
Company Certificate.
(d) If any stock certificate representing SoftQuad Common Stock is to be
issued in a name other than that in which the Company Certificate surrendered
with respect thereto is registered, it shall be a condition of such issuance
that the Company Certificate so surrendered shall be properly endorsed or
otherwise in proper form for transfer and that the person requesting such
issuance shall pay any transfer or other taxes required by reason of the
issuance to a person other than the registered holder of the Company Certificate
surrendered or shall establish to the satisfaction of SoftQuad that such tax has
been paid or is not applicable.
(a) After the Effective Date, there shall be no further registration of
transfers on the stock transfer books of the Company of the Shares of Company
Common Stock, or of any other shares of stock of the Company, which were
outstanding immediately prior to the Effective Date. If after the Effective
Date certificates representing such shares are presented to the "SoftQuad" they
shall be canceled and, in the case of Company Certificates, exchanged for
certificates representing SoftQuad Common Stock and, as appropriate, cash as
provided in this Article IV.
(f) No certificates or scrip representing fractional SoftQuad Common Stock
shall be issued upon the surrender for exchange of Company Certificates, no
dividend or distribution of SoftQuad shall relate to any fractional SoftQuad
Common Stock interest, and no such fractional share interest will entitle the
owner thereof to vote or to any right of a stockholder of SoftQuad. In lieu
thereof, SoftQuad shall pay to each holder of Company Common Stock convertible
into a fractional interest in SoftQuad Common Stock the Cancellation Price.
ARTICLE V
Corporate Existence, SoftQuad and Liabilities of SoftQuad
5.01 On the Effective Date, the separate existence of the Company shall
cease. The Company shall be merged with and into SoftQuad, SoftQuad, in
accordance with the provisions of this Agreement. Thereafter, SoftQuad shall
possess all the rights, privileges, powers and franchises as well of a public as
of a private nature, and shall be subject to all the restrictions, disabilities
and duties of each of the parties to this Agreement and all and singular; the
rights, privileges, powers and franchises of the Company and SoftQuad, and all
property, real, personal and mixed, and all debts due to each of them on
whatever account, shall be vested in SoftQuad; and all property, rights,
privileges, powers and franchises, and all and every other interest shall be
thereafter an effectually the property of SoftQuad, as they were of the
respective constituent entities, and the title to any real estate whether by
deed or otherwise vested in the Company and SoftQuad or either of them, shall
not revert to be in any way impaired by reason of the Merger; but all rights of
creditors and all liens upon any property of the parties hereto, shall be
preserved unimpaired, and all debts, liabilities and duties of the respective
constituent entities, shall thenceforth attach to SoftQuad, and may be enforced
against it to the same extent as if said debts, liabilities and duties had been
incurred or contracted by it.
5.02 The Company agrees that it will execute and deliver, or cause to be
executed and delivered, all such deeds, assignments and other instruments, and
will take or cause to be taken such further or other action as SoftQuad may deem
necessary or desirable in order to vest in and confirm to SoftQuad title to and
possession of all the property, rights, privileges, immunities, powers, purposes
and franchises, and all and every other interest, of the Company and otherwise
to carry out the intent and purposes of this Agreement.
ARTICLE VI
Officers and Directors of SoftQuad
6.01 Upon the Effective Date, the officers and directors of SoftQuad shall
be officers and directors of SoftQuad in office at such date, and such persons
shall hold office in accordance with the By-Laws of SoftQuad or until their
respective successors shall have been appointed or elected.
6.02 If, upon the Effective Date, a vacancy shall exist in the Board of
Directors of SoftQuad, such vacancy shall be filled in the manner provided by
its By-Laws.
ARTICLE VII
Approval by Shareholders; Amendment; Effective Date
7.01 This Agreement and the Merger contemplated hereby are subject to
approval by the requisite vote of shareholders in accordance with applicable
Florida law. As promptly as practicable after approval of this Agreement by
shareholders in accordance with applicable law, duly authorized officers of the
respective parties shall make and execute Articles of Merger and a Certificate
of Merger and shall cause such documents to be filed with the Secretary of State
of Florida and the Secretary of State of Delaware, respectively, in accordance
with the laws of the States of Florida and Delaware. The Effective Date of the
Merger shall be the date on which the Merger becomes effective under the laws of
Florida or the date on which the Merger becomes effective under the laws of
Delaware, whichever occurs later.
7.02 The Board of Directors of the Company and SoftQuad may amend this
Agreement at any time prior to the Effective Date, provided that an amendment
made subsequent to the approval of the merger by the shareholder of Company
shall not (1) alter or change the amount or kind of shares to be received in
exchange for or on conversion of all or any of the Company Common Stock (2)
alter or change any term of the Certificate of Incorporation of SoftQuad, or (3)
alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of Company Common Stock.
ARTICLE VIII
Termination of Merger
This Agreement may be terminated and the Merger abandoned at any time prior
to the filing of this Agreement with the Secretary of State of Florida and the
Secretary of State of Delaware, whether before or after shareholder approval of
this Agreement, by the consent of the Board of Directors of the Company and
SoftQuad.
ARTICLE IX
Miscellaneous
In order to facilitate the filing and recording of this Agreement, this
Agreement may be executed in counterparts, each of which when so executed shall
be deemed to be an original and all such counterparts shall together constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, all as of the day and year first above
written.
THE AMERICAN SPORTS MACHINE, INC.
a Florida corporation
By:/s/James D. Brock, Jr.
--------------------------------------
James D. Brock, Jr., President
SOFTQUAD SOFTWARE, LTD.
a Delaware corporation
By:/s/Roberto Drassinower
--------------------------------------
Roberto Drassinower, President
<PAGE>
EXHIBIT B
CERTIFICATE OF INCORPORATION
OF
SOFTQUAD SOFTWARE, LTD.
ARTICLE I
NAME
The name of the Corporation is SoftQuad Software, Ltd.
ARTICLE II
DURATION
The Corporation is to have perpetual existence.
ARTICLE III
REGISTERED OFFICE AND AGENT
The address of its registered office in the State of Delaware is the
Corporation Trust Center at 1209 Orange Street, in the City of Wilmington,
County of New Castle, State of Delaware. The name of its registered agent at
such address is The Corporation Trust Company.
ARTICLE IV
PURPOSES
The purpose for which the Corporation is organized is to transact all
lawful business for which corporations may be incorporated pursuant to the laws
of the State of Delaware. The Corporation shall have all the powers of a
corporation organized under the General Corporation Law of the State of
Delaware.
ARTICLE V
CAPITAL STOCK
A. Number and Designation. The Corporation shall have authority to issue
-----------------------
fifty million and one (50,000,001) shares of capital stock, of which 25 million
shall be shares of common stock, par value $0.001 per share ("Common Stock"),
and one share shall be special voting stock, par value $0.001 per share
("Special Voting Stock") 25 million shall be shares of preferred stock, par
value $0.001 per share ("Preferred Stock"). The shares may be issued by the
Corporation from time to time as approved by the board of directors of the
Corporation without the approval of the stockholders except as otherwise
provided in this Article V or the rules of a national securities exchange if
applicable. The consideration for the issuance of the shares shall be paid to
or received by the Corporation in full before their issuance and shall not be
less than the par value per share. The consideration for the issuance of the
shares shall be cash, services rendered, personal property (tangible or
intangible), real property, leases of real property or any combination of the
foregoing. In the absence of actual fraud in the transaction, the judgment of
the board of directors as to the value of such consideration shall be
conclusive. Upon payment of such consideration such shares shall be deemed to
be fully paid and nonassessable. In the case of a stock dividend, the part of
the surplus of the Corporation which is transferred to stated capital upon the
issuance of shares as a stock dividend shall be deemed to be the consideration
for their issuance.
A description of the different classes and series (if any) of the
Corporation's capital stock, and a statement of the relative powers,
designations, preferences and rights of the shares of each class and series (if
any) of capital stock, and the qualifications, limitations or restrictions
thereof, are as follows:
B. Common Stock and Special Voting Stock. The holders of Common Stock and
--------------------------------------
the holders of Special Voting Stock shall have the respective rights and
preferences set forth in this Article V.
(1) Rights and Privileges. Except as provided in this Certificate, the
-----------------------
holders of the Common Stock and Special Voting Stock shall exclusively possess
all voting power. Except as otherwise provided in this Article V or as
otherwise required by applicable law, all shares of Common Stock and Special
Voting Stock will be identical and will entitle the holders thereof to the same
rights and privileges and shall rank equally, share ratably, and be identical in
all respects as to all matters.
(2) Voting Rights. Except as otherwise required by law: (i) the holders
--------------
of Common Stock will be entitled to one vote per share on all matters to be
voted on by the Corporation's shareholders; (ii) the holder of the share of
Special Voting Stock shall have a number of votes equal to the number of
Exchangeable Shares (the "Exchangeable Shares") of Softquad Acquisition Corp.,
an Ontario corporation, issued and outstanding from time to time which are not
owned by the Corporation or any of its direct or indirect subsidiaries. Except
as otherwise required by law or this Certificate of Incorporation, (iii) the
holders of Common Stock and the Special Voting Stock shall vote together as a
single class in the election of directors and on all matters submitted to a vote
of stockholders of the Corporation; (iv) no holder of Common Stock or Special
Voting Stock shall have the right to cumulate votes in the election of Directors
of the Corporation or for any other purpose.
(3) Payment of Dividends. Whenever there shall have been paid, or
----------------------
declared and set aside for payment, to the holders of the outstanding shares of
any class or series of stock having preference over the Common Stock as to the
payment of dividends, the full amount of dividends and sinking fund or
retirement fund or other retirement payments, if any, to which such holders are
respectively entitled in preference to the Common Stock, then dividends may be
paid on the Common Stock, Special Voting Stock, and on any class or series of
stock entitled to participate therewith as to dividends, out of any assets
legally available for the payment of dividends, but only when and as declared by
the board of directors of the Corporation.
(4) Distributions in Liquidation. In the event of any liquidation,
------------------------------
dissolution or winding up of the Corporation, after there shall have been paid,
or declared and set aside for payment, to the holders of the outstanding shares
of any class having preference over the Common Stock in any such event, the full
preferential amounts to which they are respectively entitled, the holders of the
Common Stock Special Voting Stock and of any class or series of stock entitled
to participate therewith, in whole or in part, as to distribution of assets
shall be entitled, after payment or provision for payment of all debts and
liabilities of the Corporation, to participate ratably on a per share basis in
all distributions of the remaining assets of the Corporation available for
distribution, in cash or in kind, as though all shares of Common Stock and
Special Voting Stock were of a single class.
(5) Limitation on Stock Splits, Combinations or Reclassifications.
-------------------------------------------------------------------
(a) The Corporation shall not: (i) subdivide its outstanding Common
Stock by stock dividend or otherwise; or (ii) combine its outstanding Common
Stock into a smaller number of shares; or (iii) reclassify its outstanding
Common Stock (including any reclassification in connection with a merger,
consolidation or other business combination in which the Corporation is the
surviving corporation); unless at the same time the Corporation subdivides,
combines or reclassifies, as applicable, the shares of outstanding Special
Voting Stock on the same basis as the Corporation so subdivides, combines or
reclassifies the outstanding Common Stock.
(b) The Corporation shall not: (i) subdivide its outstanding Special
Voting Stock by stock dividend or otherwise; or (ii) combine its outstanding
Special Voting Stock into a smaller number shares; or (iii) reclassify its
outstanding Special Voting Stock (including any reclassification in connection
with a merger, consolidation or other business combination in which the
Corporation is the surviving corporation); unless at the same time the
Corporation subdivides, combines or reclassifies, as applicable, the shares of
outstanding Common Stock on the same basis as the Corporation so subdivides,
combines or reclassifies the outstanding Special Voting Stock.
C. Serial Preferred Stock. Except as provided in this Certificate, the
------------------------
board of directors of the Corporation is authorized, by resolution or
resolutions from time to time adopted, to provide for the issuance of serial
preferred stock in series and to fix and state the powers, designations,
preferences and relative, participating, optional or other special rights of the
shares of each such series, and the qualifications, limitation or restrictions
thereof, including, but not limited to determination of any of the following:
(1) the distinctive serial designation and the number of shares
constituting such series;
(2) the rights in respect of dividends, if any, to be paid on the shares
of such series, whether dividends shall be cumulative and, if so, from which
date or dates, the payment or date or dates for dividends, and the participating
or other special rights, if any, with respect to dividends;
(3) the voting powers, full or limited, if any, of the shares of such
series;
(4) whether the shares of such series shall be redeemable and, if so, the
price or prices at which, and the terms and conditions upon which such shares
may be redeemed;
(5) the amount or amounts payable upon the shares of such series in the
event of voluntary or involuntary liquidation, dissolution or winding up of the
Corporation;
(6) whether the shares of such series shall be entitled to the benefits of
a sinking or retirement fund to be applied to the purchase or redemption of such
shares, and, if so entitled, the amount of such fund and the manner of its
application, including the price or prices at which such shares may be redeemed
or purchased through the application of such funds;
(7) whether the shares of such series shall be convertible into, or
exchangeable for, shares of any other class or classes or any other series of
the same or any other class or classes of stock of the Corporation and, if so
convertible or exchangeable, the conversion price or prices, or the rate or
rates of exchange, and the adjustments thereof, if any, at which such conversion
or exchange may be made, and any other terms and conditions of such conversion
or exchange;
(8) the subscription or purchase price and form of consideration for which
the shares of such series shall be issued; and
(9) whether the shares of such series which are redeemed or converted
shall have the status of authorized but unissued shares of serial preferred
stock and whether such shares may be reissued as shares of the same or any other
series of serial preferred stock.
Each share of each series of serial preferred stock shall have the same
relative powers, preferences and rights as, and shall be identical in all
respects with, all the other shares of the Corporation of the same series,
except the times from which dividends on shares which may be issued from time to
time of any such series may begin to accrue.
D. Class A Convertible Preferred Stock.
---------------------------------------
Designation and Amount
The designation of this class of shares shall be "Class A
Convertible Preferred Stock" (the "Class A Preferred Stock"), $.001; the initial
stated value per share shall be $1.3574 (the "Initial Stated Value"); and the
number of shares constituting such class shall be 1,473,405. The number of
shares of the Class A Preferred Stock may be decreased from time to time by a
resolution or resolutions of the Board of Directors; provided, however, that
such number shall not be decreased below the aggregate number of shares of the
Class A Preferred Stock then outstanding.
Rank
(a) With respect to dividends, the Class A Preferred Stock
shall rank on a parity with the Corporation's Common Stock and Special Voting
Stock. With respect to dividends, all Equity Securities of the Corporation
(other than convertible debt securities) to which the Class A Preferred Stock
ranks junior, with respect to dividends, are collectively referred to herein as
the "Senior Dividend Securities."
(b) With respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the Class A Preferred Stock shall rank (i) on a parity with each
other class of preferred stock; and (ii) senior to the Common Stock and Special
Voting Stock, and, except as specified above, all other classes of capital stock
of the Corporation hereafter issued by the Corporation. With respect to the
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, all Equity Securities of the
Corporation to which the Class A Preferred Stock ranks senior, including the
Common Stock, are collectively referred to herein as "Junior Liquidation
Securities"; all Equity Securities of the Corporation (other than convertible
debt securities) to which the Class A Preferred Stock ranks on parity are
collectively referred to herein as "Parity Liquidation Securities."
(c) The Class A Preferred Stock shall be subject to the
creation of Junior Liquidation Securities, but no Parity Liquidation Securities
or Senior Dividend Securities shall be created except in accordance with the
terms hereof.
Dividends
Dividends on the Class A Preferred Stock shall be paid only when,
as and if declared by the Board of Directors from time to time out of funds then
legally available for the payment of dividends.
Liquidation Preference
(a) In the event of a liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of then
outstanding shares of Class A Preferred Stock shall be entitled to receive out
of the assets of the Corporation, whether such assets are capital or surplus of
any nature, an amount per share equal to the Initial Stated Value thereof,
before any payment shall be made or any assets distributed to the holders of any
Junior Liquidation Securities (the "Initial Preferred Distribution"). After the
Initial Preferred Distribution has been made, the holders of Class A Preferred
Stock shall be entitled to share pro rata with the holders of Common Stock and
Special Voting Stock in the distribution of any remaining assets of the
Corporation on the basis of each whole outstanding share of the Class A
Preferred Stock receiving an amount equal to the Formula Number then in effect
times such distribution on each share of the Common Stock and Special Voting
Stock. The distributions on the Class A Preferred Stock pursuant to the
immediately preceding sentence of this paragraph (a) are hereinafter referred to
as "Participating Liquidation Distributions." No distribution on the Common
Stock or Special Voting Stock in respect of which a Participating Liquidation
Distribution is required shall be paid or set aside for payment on the Common
Stock or Special Voting Stock unless a Participating Liquidation Distribution in
respect of such distribution is concurrently paid.
(b) All the assets of the Corporation available for
distribution to stockholders shall be distributed ratably (in proportion to the
full distributable amounts to which holders of Class A Preferred Stock and
Parity Liquidation Securities, if any, are respectively entitled upon such
dissolution, liquidation or winding up) among the holders of the then
outstanding shares of Class A Preferred Stock and Parity Liquidation Securities,
if any, when such assets are not sufficient to pay in full the aggregate amounts
payable thereon.
(c) Neither a consolidation or merger of the Corporation with
or into any other Person or Persons, nor a sale, conveyance, lease, exchange or
transfer of all or part of the Corporation's assets for cash, securities or
other property to a Person or Persons shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this Section D, but
the holders of shares of Class A Preferred Stock shall nevertheless be entitled
from and after any such consolidation, merger or sale, conveyance, lease,
exchange or transfer of all or part of the Corporation's assets to the rights
provided by this Section D following any such transaction. Notice of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when, and the place or places
where, the amounts distributable to each holder of shares of Class A Preferred
Stock in such circumstances shall be payable, shall be given by first-class
mail, postage prepaid, mailed not less than 30 days prior to any payment date
stated therein, to holders of record as they appear on the stock record books of
the Corporation as of the date such notices are first mailed.
Voting Rights
(a) The holders of Class A Preferred Stock shall be entitled
to the number of votes per share of Class A Preferred Stock equal to the number
of shares of Common Stock for which such share of Class A Preferred Stock is
then convertible pursuant to this Section D at each meeting of stockholders of
the Corporation with respect to any and all matters presented to the
stockholders of the Corporation for their action and consideration.
(b) So long as any shares of the Class A Preferred Stock are
outstanding, (i) each share of Class A Preferred Stock shall entitle the holder
thereof to vote on all matters voted on by holders of Common Stock and Special
Voting Stock; and (ii) the shares of Class A Preferred Stock shall vote together
with shares of Common Stock and Special Voting Stock as a single class.
(c) The foregoing rights of holders of shares of Class A
Preferred Stock to take any actions as provided in this Section D may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of the minimum number of shares required to take
such action, if action by written consent of stockholders of the Corporation is
then permitted.
(d) The Corporation shall not enter into any agreement or
issue any security that prohibits, conflicts or is inconsistent with, or would
be breached by, the Corporation's performance of its obligations hereunder.
Conversion
The holders of the Class A Preferred Stock shall have conversion
rights as follows:
(a) Each share of Class A Preferred Stock shall be
convertible at the direction of, and by notice to the Corporation from, the
holder thereof, at any time, at the office of the Corporation or any transfer
agent for such Class, into one (1) fully paid and nonassessable share of Common
Stock subject (x) to adjustment from time to time as provided below (as so
adjusted, the "conversion ratio") and (y) to limitations resulting from the
available number of shares of Common Stock which may be reserved for issuance
upon such conversion.
(b) If a holder of Class A Preferred Stock gives notice
(a "Conversion Notice") of conversion under paragraph (a) above, such holder
shall surrender with such Conversion Notice the duly endorsed certificate or
certificates for the Class A Preferred Stock being converted, at the office of
the Corporation or of any transfer agent for such Class, and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. The Corporation shall, as soon as practicable after the
surrender of a Class A Preferred Stock certificate or certificates pursuant to a
Conversion Notice, issue and deliver at such office to such holder, or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such Conversion Notice and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the recordholder or holders of such shares
of Common Stock as of such date. The issuance of certificates or shares of
Common Stock upon conversion of shares of Class A Preferred Stock shall be made
without charge for any issue, stamp or other similar tax in respect of such
issuance.
(c) No fractional shares shall be issued upon conversion
of any shares of Class A Preferred Stock and the number of shares of Common
Stock to be issued shall be rounded down to the nearest whole share, and the
holder of Class A Preferred Stock shall be paid in cash for any fractional
share.
(d) In case at any time or from time to time the
Corporation shall pay any dividend or make any other distribution to the holders
of its Common Stock or other class of securities, or shall offer for
subscription pro rata to the holders of its Common Stock or other class of
securities any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
Stock of the Corporation or consolidation or merger of the Corporation with or
into another corporation, or any sale or conveyance to another corporation of
the property of the Corporation as an entirety or substantially as an entirety,
or there shall be a voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, then, in any one or more of said cases the Corporation
shall give at least 20 days' prior written notice (the time of mailing of such
notice shall be deemed to be the time of giving thereof) to the registered
holders of the Class A Preferred Stock at the addresses of each as shown on the
books of the Corporation maintained by the Transfer Agent thereof of the date on
which (i) the books of the Corporation shall close or a record shall be taken
for such stock dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, sale or conveyance,
dissolution, liquidation or winding up shall take place, as the case may be,
provided that in the case of any Transaction to which paragraph (h) applies the
Corporation shall give at least 30 days' prior written notice as aforesaid.
Such notice shall also specify the date as of which the holders of the Common
Stock of record shall participate in said dividend, distribution or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance or participate in such dissolution,
liquidation or winding up, as the case may be. Failure to give such notice
shall not invalidate any action so taken.
(e) The Corporation shall at all times reserve and
keep available out of its authorized but unissued shares of Common Stock, solely
for the purpose of effecting the conversion of the shares of Class A Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Class A
Preferred Stock, and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Class A Preferred Stock, then in addition to such other
remedies as shall be available to the holder of Class A Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
(f) Any notice required by the provisions of paragraph
(d) to be given the holders of shares of Class A Preferred Stock shall be deemed
given if sent by facsimile transmission, by telex, or if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at his, her
or its address appearing on the books of the Corporation.
(g) The conversion ratio shall be subject to adjustment
from time to time as follows:
(i) In case the Corporation shall at any time or
from time to time after the Issue Date (A) pay a dividend or make a
distribution, on the outstanding shares of Common Stock in shares of Common
Stock, (B) subdivide the outstanding shares of Common Stock into a larger number
of shares of Common Stock, (C) combine the outstanding shares of Common Stock
into a smaller number of shares or (D) issue by reclassification of the shares
of Common Stock any shares of capital stock of the Corporation, then, and in
each such case, the conversion ratio in effect immediately prior to such event
or the record date therefor, whichever is earlier, shall be adjusted so that the
holder of any shares of Class A Preferred Stock thereafter surrendered for
conversion shall be entitled to receive the number of shares of Common Stock or
other securities of the Corporation that such holder would have owned or have
been entitled to receive after the happening of any of the events described
above, had such shares of Class A Preferred Stock been surrendered for
conversion immediately prior to the happening of such event or the record date
therefor, whichever is earlier. An adjustment made pursuant to this clause (i)
shall become effective (x) in the case of any such dividend or distribution,
immediately after the close of business on the record date for the determination
of holders of shares of Common Stock entitled to receive such dividend or
distribution, or (y) in the case of any such subdivision, reclassification or
combination, at the close of business on the day upon which such corporate
action becomes effective.
(ii) In the case the Corporation shall, after the
Issue Date, issue shares of Common Stock at a price per share, or securities
convertible into or exchangeable for shares of Common Stock ("Convertible
Securities") having a "Conversion Price" (as defined below) less than the
Current Market Price (for a period of 15 consecutive Trading Days prior to such
date), then, and in each such case, the conversion ratio shall be adjusted so
that the holder of each share of Class A Preferred Stock shall be entitled to
receive, upon the conversion thereof, the number of shares of Common Stock
determined by multiplying (A) the applicable conversion ratio on the day
immediately prior to such date by (B) a fraction, the numerator of which shall
be the sum of (1) the number of shares of Common Stock outstanding on the date
on which such shares or Convertible Securities are issued and (2) the number of
additional shares of Common Stock issued, or into which the Convertible
Securities may convert, and the denominator of which shall be the sum of (x) the
number of shares of Common Stock outstanding on such date and (y) the number of
shares of Common Stock which the aggregate consideration receivable by the
Corporation for the total number of shares of Common Stock so issued, or the
number of shares of Common Stock which the aggregate of the Conversion Price of
such Convertible Securities so issued, would purchase at such Current Market
price on such date. An adjustment made pursuant to this clause (ii) shall be
made on the next Business Day following the date on which any such issuance is
made and shall be effective retroactively immediately after the close of
business on such date. For purposes of this clause (ii), the aggregate
consideration receivable by the Corporation in connection with the issuance of
any securities shall be deemed to be the sum of the aggregate offering price to
the public (before deduction of underwriting discounts or commissions and
expenses payable to third parties), and the "Conversion Price" of any
Convertible Securities is the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities (before deduction of underwriting discounts or commissions and
expenses payable to third parties) plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion, exchange or exercise of any such Convertible Securities. Neither
(A) the issuance of any shares of Common Stock (whether treasury shares or newly
issued shares) pursuant to a dividend or distribution on, or subdivision,
combination or reclassification of, the outstanding shares of Common Stock
requiring an adjustment in the conversion ratio pursuant to clause (i) of this
Section D, or pursuant to any employee benefit plan or program of the
Corporation or pursuant to any option, warrant, right, or Convertible Security
outstanding as of the date hereof nor (B) the issuance of shares of Common Stock
pursuant thereto shall be deemed to constitute an issuance of Common Stock or
Convertible Securities by the Corporation to which this clause (ii) applies.
Upon expiration of any Convertible Securities that shall not have been exercised
or converted and for which an adjustment shall have been made pursuant to this
clause (ii), the Conversion Price computed upon the original issue thereof shall
upon such expiration be recomputed as if the only additional shares of Common
Stock issued were such shares of Common Stock (if any) actually issued upon
exercise of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Corporation for the issue of such
Convertible Securities (whether or not exercised or converted) plus the
consideration actually received by the Corporation upon such exercise of
conversion.
(iii) In case the Corporation shall at any time or
from time to time after the Issue Date declare, order, pay or make a dividend or
other distribution (including, without limitation, any distribution of stock or
other securities or property or rights or warrants to subscribe for securities
of the Corporation or any of its Subsidiaries by way of dividend or spin-off),
on its Common Stock, other than dividends or distributions of shares of Common
Stock that are referred to in clause (i) of this paragraph (g), then, and in
each such case, the conversion ratio shall be adjusted so that the holder of
each share of Class A Preferred Stock shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock determined by
multiplying (1) the applicable conversion ratio on the day immediately prior to
the record date fixed for the determination of stockholders entitled to receive
such dividend or distribution by (2) a fraction, the numerator of which shall be
the then Current Market Price per share of Common Stock for the period of 20
Trading Days preceding such record date, and the denominator of which shall be
such Current Market Price per share of Common Stock for the period of 20 Trading
Days preceding such record date less the Fair Market Value (as defined in
Section (vii)) per share of Common Stock (as determined in good faith by the
Board of Directors of the Corporation, a certified resolution with respect to
which shall be mailed to each holder of shares of Class A Preferred Stock) of
such dividend or distribution; provided, however, that in the event of a
distribution of shares of capital stock of a Subsidiary of the Corporation (a
"Spin-Off") made to holders of shares of Common Stock, the numerator of such
fraction shall be the sum of the Current Market Price per share of Common Stock
for the period of 20 Trading Days preceding the 35th Trading Day after the
effective date of such Spin-Off and the Current Market Price of the number of
shares (or the fraction of a share) of capital stock of the Subsidiary which is
distributed in such Spin-Off in respect of one share of Common Stock for the
period of 20 Trading Days preceding such 35th Trading Day and the denominator of
which shall be the current market price per share of the Common Stock for the
period of 20 Trading Days proceeding such 35th Trading Day. An adjustment made
pursuant to this clause (iii) shall be made upon the opening of business on the
next Business Day following the date on which any such dividend or distribution
is made and shall be effective retroactively immediately after the close of
business on the record date fixed for the determination of stockholders entitled
to receive such dividend or distribution; provided, however, if the proviso to
the preceding sentence applies, then such adjustment shall be made and be
effective as of such 35th Trading Day after the effective date of such Spin-Off.
(iv) For purposes of this paragraph (g), the number
of shares of Common Stock at any time outstanding shall not include any shares
of Common Stock then owned or held by or for the account of the Corporation.
(v) Anything in this paragraph (g) to the contrary
notwithstanding, the Corporation shall not be required to give effect to any
adjustment in the conversion ratio unless and until the net effect of one or
more adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the conversion ratio by at least
one-hundredth of one share of Common Stock, and when the cumulative net effect
of more than one adjustment so determined shall be to change the conversion
ratio by at least one-hundredth of one share of Common Stock, such change in
conversion ratio shall thereupon be given effect.
(vi) The certificate of any firm of independent
public accountants of recognized standing selected by the Board of Directors of
the Corporation (which may be the firm of independent public accountants
regularly employed by the Corporation) shall be presumptively correct for any
computation made under this paragraph (g).
(vii) If the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
paragraph (g) or in the conversion ratio then in effect shall be required by
reason of the taking of such record.
(viii) There shall be no adjustment of the
conversion ratio in case of the issuance of any stock of the Corporation in a
merger, reorganization, acquisition or other similar transaction except as set
forth in paragraph (g)(i), G(ii) and H of this Section D.
(h) In case of any reorganization or reclassification of
outstanding shares of Common Stock (other than a reclassification covered by
paragraph (g)(i) of this Section D), or in case of any consolidation or merger
of the Corporation with or into another corporation, or in the case of any sale
or conveyance to another corporation of the property of the Corporation as an
entirety or substantially as an entirety (each of the foregoing being referred
to as a "Transaction"), each share of Class A Preferred Stock then outstanding
shall thereafter be convertible into, in lieu of the Common Stock issuable upon
such conversion prior to consummation of such Transaction, the kind and amount
of shares of stock and other securities and property receivable (including cash)
upon the consummation of such Transaction by a holder of that number of shares
of Common Stock into which one share of Class A Preferred Stock was convertible
immediately prior to such Transaction (including, on a pro rata basis, the cash,
securities or property received by holders of Common Stock in any tender or
exchange offer that is a step in such Transaction). In case securities or
property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all reference in this paragraph (h) shall be
deemed to apply, so far as appropriate and as nearly as may be, to such other
securities or property.
(i) Upon any adjustment of the conversion ratio then in
effect and any increase or decrease in the number of shares of Common Stock
issuable upon the operation of the conversion set forth in this Section D, then,
and in each such case, the Corporation shall promptly deliver to the registered
holders of the Class A Preferred and Common Stock, a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the conversion ratio then in
effect following such adjustment and the increased or decreased number of shares
issuable upon the conversion set forth in this Section D.
E. Class B Convertible Preferred Stock
---------------------------------------
Designation and Amount
The designation of this class of shares shall be "Class B
Convertible Preferred Stock" (the "Class B Preferred Stock"), $.001; the initial
stated value per share shall be $2.903226 (the "Initial Stated Value"); and the
number of shares constituting such class shall be 1,722,222. The number of
shares of the Class B Preferred Stock may be decreased from time to time by a
resolution or resolutions of the Board of Directors; provided, however, that
such number shall not be decreased below the aggregate number of shares of the
Class B Preferred Stock then outstanding.
Rank
(a) With respect to dividends, the Class B Preferred Stock
shall rank on a parity with the Corporation's Common Stock and Special Voting
Stock. With respect to dividends, all Equity Securities of the Corporation
(other than convertible debt securities) to which the Class B Preferred Stock
ranks junior, with respect to dividends, are collectively referred to herein as
the "Senior Dividend Securities."
(b) With respect to the distribution of assets upon
liquidation, dissolution or winding up of the Corporation, whether voluntary or
involuntary, the Class B Preferred Stock shall rank (i) on a parity with each
other class of preferred stock; and (ii) senior to the Common Stock and Special
Voting Stock, and, except as specified above, all other classes of capital stock
of the Corporation hereafter issued by the Corporation. With respect to the
distribution of assets upon liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, all Equity Securities of the
Corporation to which the Class B Preferred Stock ranks senior, including the
Common Stock, are collectively referred to herein as "Junior Liquidation
Securities"; all Equity Securities of the Corporation (other than convertible
debt securities) to which the Class B Preferred Stock ranks on parity are
collectively referred to herein as "Parity Liquidation Securities."
(c) The Class B Preferred Stock shall be subject to the
creation of Junior Liquidation Securities, but no Parity Liquidation Securities
or Senior Dividend Securities shall be created except in accordance with the
terms hereof.
Dividends
Dividends on the Class B Preferred Stock shall be paid only when,
as and if declared by the Board of Directors from time to time out of funds then
legally available for the payment of dividends.
Liquidation Preference
(a) In the event of a liquidation, dissolution or winding up
of the Corporation, whether voluntary or involuntary, the holders of then
outstanding shares of Class B Preferred Stock shall be entitled to receive out
of the assets of the Corporation, whether such assets are capital or surplus of
any nature, an amount per share equal to the Initial Stated Value thereof,
before any payment shall be made or any assets distributed to the holders of any
Junior Liquidation Securities (the "Initial Preferred Distribution"). After the
Initial Preferred Distribution has been made, the holders of Class B Preferred
Stock shall be entitled to share pro rata with the holders of Common Stock and
Special Voting Stock in the distribution of any remaining assets of the
Corporation on the basis of each whole outstanding share of the Class B
Preferred Stock receiving an amount equal to the Formula Number then in effect
times such distribution on each share of the Common Stock and Special Voting
Stock. The distributions on the Class B Preferred Stock pursuant to the
immediately preceding sentence of this paragraph (a) are hereinafter referred to
as "Participating Liquidation Distributions." No distribution on the Common
Stock or Special Voting Stock in respect of which a Participating Liquidation
Distribution is required shall be paid or set aside for payment on the Common
Stock or Special Voting Stock unless a Participating Liquidation Distribution in
respect of such distribution is concurrently paid.
(b) All the assets of the Corporation available for
distribution to stockholders shall be distributed ratably (in proportion to the
full distributable amounts to which holders of Class B Preferred Stock and
Parity Liquidation Securities, if any, are respectively entitled upon such
dissolution, liquidation or winding up) among the holders of the then
outstanding shares of Class B Preferred Stock and Parity Liquidation Securities,
if any, when such assets are not sufficient to pay in full the aggregate amounts
payable thereon.
(c) Neither a consolidation or merger of the Corporation with
or into any other Person or Persons, nor a sale, conveyance, lease, exchange or
transfer of all or part of the Corporation's assets for cash, securities or
other property to a Person or Persons shall be deemed to be a liquidation,
dissolution or winding up of the Corporation for purposes of this Section D, but
the holders of shares of Class B Preferred Stock shall nevertheless be entitled
from and after any such consolidation, merger or sale, conveyance, lease,
exchange or transfer of all or part of the Corporation's assets to the rights
provided by this Section D following any such transaction. Notice of any
voluntary or involuntary liquidation, dissolution or winding up of the
Corporation, stating the payment date or dates when, and the place or places
where, the amounts distributable to each holder of shares of Class B Preferred
Stock in such circumstances shall be payable, shall be given by first-class
mail, postage prepaid, mailed not less than 30 days prior to any payment date
stated therein, to holders of record as they appear on the stock record books of
the Corporation as of the date such notices are first mailed.
Voting Rights
(a) The holders of Class B Preferred Stock shall be entitled
to the number of votes per share of Class B Preferred Stock equal to the number
of shares of Common Stock for which such share of Class B Preferred Stock is
then convertible pursuant to this Section D at each meeting of stockholders of
the Corporation with respect to any and all matters presented to the
stockholders of the Corporation for their action and consideration.
(b) So long as any shares of the Class B Preferred Stock are
outstanding, (i) each share of Class B Preferred Stock shall entitle the holder
thereof to vote on all matters voted on by holders of Common Stock and Special
Voting Stock; and (ii) the shares of Class B Preferred Stock shall vote together
with shares of Common Stock and Special Voting Stock as a single class.
(c) The foregoing rights of holders of shares of Class B
Preferred Stock to take any actions as provided in this Section E may be
exercised at any annual meeting of stockholders or at a special meeting of
stockholders held for such purpose as hereinafter provided or at any adjournment
thereof, or by the written consent, delivered to the Secretary of the
Corporation, of the holders of the minimum number of shares required to take
such action, if action by written consent of stockholders of the Corporation is
then permitted.
(d) The Corporation shall not enter into any agreement or
issue any security that prohibits, conflicts or is inconsistent with, or would
be breached by, the Corporation's performance of its obligations hereunder.
Conversion
The holders of the Class B Preferred Stock shall have conversion
rights as follows:
(a) Each share of Class B Preferred Stock shall be
convertible at the direction of, and by notice to the Corporation from, the
holder thereof, at any time, at the office of the Corporation or any transfer
agent for such Class, into one (1) fully paid and nonassessable share of Common
Stock subject (x) to adjustment from time to time as provided below (as so
adjusted, the "conversion ratio") and (y) to limitations resulting from the
available number of shares of Common Stock which may be reserved for issuance
upon such conversion.
(b) If a holder of Class B Preferred Stock gives notice
(a "Conversion Notice") of conversion under paragraph (a) above, such holder
shall surrender with such Conversion Notice the duly endorsed certificate or
certificates for the Class B Preferred Stock being converted, at the office of
the Corporation or of any transfer agent for such Class, and shall state therein
the name or names in which the certificate or certificates for shares of Common
Stock are to be issued. The Corporation shall, as soon as practicable after the
surrender of a Class B Preferred Stock certificate or certificates pursuant to a
Conversion Notice, issue and deliver at such office to such holder, or to the
nominee or nominees of such holder, a certificate or certificates for the number
of shares of Common Stock to which such holder shall be entitled as aforesaid.
Such conversion shall be deemed to have been made immediately prior to the close
of business on the date of such Conversion Notice and the person or persons
entitled to receive the shares of Common Stock issuable upon such conversion
shall be treated for all purposes as the recordholder or holders of such shares
of Common Stock as of such date. The issuance of certificates or shares of
Common Stock upon conversion of shares of Class B Preferred Stock shall be made
without charge for any issue, stamp or other similar tax in respect of such
issuance.
(c) No fractional shares shall be issued upon conversion
of any shares of Class B Preferred Stock and the number of shares of Common
Stock to be issued shall be rounded down to the nearest whole share, and the
holder of Class B Preferred Stock shall be paid in cash for any fractional
share.
(d) In case at any time or from time to time the
Corporation shall pay any dividend or make any other distribution to the holders
of its Common Stock or other class of securities, or shall offer for
subscription pro rata to the holders of its Common Stock or other class of
securities any additional shares of stock of any class or any other right, or
there shall be any capital reorganization or reclassification of the Common
Stock of the Corporation or consolidation or merger of the Corporation with or
into another corporation, or any sale or conveyance to another corporation of
the property of the Corporation as an entirety or substantially as an entirety,
or there shall be a voluntary or involuntary dissolution, liquidation or winding
up of the Corporation, then, in any one or more of said cases the Corporation
shall give at least 20 days' prior written notice (the time of mailing of such
notice shall be deemed to be the time of giving thereof) to the registered
holders of the Class B Preferred Stock at the addresses of each as shown on the
books of the Corporation maintained by the Transfer Agent thereof of the date on
which (i) the books of the Corporation shall close or a record shall be taken
for such stock dividend, distribution or subscription rights or (ii) such
reorganization, reclassification, consolidation, merger, sale or conveyance,
dissolution, liquidation or winding up shall take place, as the case may be,
provided that in the case of any Transaction to which paragraph (h) applies the
Corporation shall give at least 30 days' prior written notice as aforesaid.
Such notice shall also specify the date as of which the holders of the Common
Stock of record shall participate in said dividend, distribution or subscription
rights or shall be entitled to exchange their Common Stock for securities or
other property deliverable upon such reorganization, reclassification,
consolidation, merger, sale or conveyance or participate in such dissolution,
liquidation or winding up, as the case may be. Failure to give such notice
shall not invalidate any action so taken.
(e) The Corporation shall at all times reserve and keep
available out of its authorized but unissued shares of Common Stock, solely for
the purpose of effecting the conversion of the shares of Class B Preferred
Stock, such number of its shares of Common Stock as shall from time to time be
sufficient to effect the conversion of all outstanding shares of Class B
Preferred Stock, and if at any time the number of authorized but unissued shares
of Common Stock shall not be sufficient to effect the conversion of all then
outstanding shares of Class B Preferred Stock, then in addition to such other
remedies as shall be available to the holder of Class B Preferred Stock, the
Corporation will take such corporate action as may, in the opinion of its
counsel, be necessary to increase its authorized but unissued shares of Common
Stock to such number of shares as shall be sufficient for such purposes.
(f) Any notice required by the provisions of paragraph
(d) to be given the holders of shares of Class B Preferred Stock shall be deemed
given if sent by facsimile transmission, by telex, or if deposited in the United
States mail, postage prepaid, and addressed to each holder of record at his, her
or its address appearing on the books of the Corporation.
(g) The conversion ratio shall be subject to adjustment
from time to time as follows:
(i) In case the Corporation shall at any time or from
time to time after the Issue Date (A) pay a dividend or make a distribution, on
the outstanding shares of Common Stock in shares of Common Stock, (B) subdivide
the outstanding shares of Common Stock into a larger number of shares of Common
Stock, (C) combine the outstanding shares of Common Stock into a smaller number
of shares or (D) issue by reclassification of the shares of Common Stock any
shares of capital stock of the Corporation, then, and in each such case, the
conversion ratio in effect immediately prior to such event or the record date
therefor, whichever is earlier, shall be adjusted so that the holder of any
shares of Class B Preferred Stock thereafter surrendered for conversion shall be
entitled to receive the number of shares of Common Stock or other securities of
the Corporation that such holder would have owned or have been entitled to
receive after the happening of any of the events described above, had such
shares of Class B Preferred Stock been surrendered for conversion immediately
prior to the happening of such event or the record date therefor, whichever is
earlier. An adjustment made pursuant to this clause (i) shall become effective
(x) in the case of any such dividend or distribution, immediately after the
close of business on the record date for the determination of holders of shares
of Common Stock entitled to receive such dividend or distribution, or (y) in the
case of any such subdivision, reclassification or combination, at the close of
business on the day upon which such corporate action becomes effective.
(ii) In the case the Corporation shall, after the
Issue Date, issue shares of Common Stock at a price per share, or securities
convertible into or exchangeable for shares of Common Stock ("Convertible
Securities") having a "Conversion Price" (as defined below) less than the
Current Market Price (for a period of 15 consecutive Trading Days prior to such
date), then, and in each such case, the conversion ratio shall be adjusted so
that the holder of each share of Class B Preferred Stock shall be entitled to
receive, upon the conversion thereof, the number of shares of Common Stock
determined by multiplying (A) the applicable conversion ratio on the day
immediately prior to such date by (B) a fraction, the numerator of which shall
be the sum of (1) the number of shares of Common Stock outstanding on the date
on which such shares or Convertible Securities are issued and (2) the number of
additional shares of Common Stock issued, or into which the Convertible
Securities may convert, and the denominator of which shall be the sum of (x) the
number of shares of Common Stock outstanding on such date and (y) the number of
shares of Common Stock which the aggregate consideration receivable by the
Corporation for the total number of shares of Common Stock so issued, or the
number of shares of Common Stock which the aggregate of the Conversion Price of
such Convertible Securities so issued, would purchase at such Current Market
price on such date. An adjustment made pursuant to this clause (ii) shall be
made on the next Business Day following the date on which any such issuance is
made and shall be effective retroactively immediately after the close of
business on such date. For purposes of this clause (ii), the aggregate
consideration receivable by the Corporation in connection with the issuance of
any securities shall be deemed to be the sum of the aggregate offering price to
the public (before deduction of underwriting discounts or commissions and
expenses payable to third parties), and the "Conversion Price" of any
Convertible Securities is the total amount received or receivable by the
Corporation as consideration for the issue or sale of such Convertible
Securities (before deduction of underwriting discounts or commissions and
expenses payable to third parties) plus the minimum aggregate amount of
additional consideration, if any, payable to the Corporation upon the
conversion, exchange or exercise of any such Convertible Securities. Neither
(A) the issuance of any shares of Common Stock (whether treasury shares or newly
issued shares) pursuant to a dividend or distribution on, or subdivision,
combination or reclassification of, the outstanding shares of Common Stock
requiring an adjustment in the conversion ratio pursuant to clause (i) of this
Section E, or pursuant to any employee benefit plan or program of the
Corporation or pursuant to any option, warrant, right, or Convertible Security
outstanding as of the date hereof nor (B) the issuance of shares of Common Stock
pursuant thereto shall be deemed to constitute an issuance of Common Stock or
Convertible Securities by the Corporation to which this clause (ii) applies.
Upon expiration of any Convertible Securities that shall not have been exercised
or converted and for which an adjustment shall have been made pursuant to this
clause (ii), the Conversion Price computed upon the original issue thereof shall
upon such expiration be recomputed as if the only additional shares of Common
Stock issued were such shares of Common Stock (if any) actually issued upon
exercise of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Corporation for the issue of such
Convertible Securities (whether or not exercised or converted) plus the
consideration actually received by the Corporation upon such exercise of
conversion.
(iii) In case the Corporation shall at any time or
from time to time after the Issue Date declare, order, pay or make a dividend or
other distribution (including, without limitation, any distribution of stock or
other securities or property or rights or warrants to subscribe for securities
of the Corporation or any of its Subsidiaries by way of dividend or spin-off),
on its Common Stock, other than dividends or distributions of shares of Common
Stock that are referred to in clause (i) of this paragraph (g), then, and in
each such case, the conversion ratio shall be adjusted so that the holder of
each share of Class B Preferred Stock shall be entitled to receive, upon the
conversion thereof, the number of shares of Common Stock determined by
multiplying (1) the applicable conversion ratio on the day immediately prior to
the record date fixed for the determination of stockholders entitled to receive
such dividend or distribution by (2) a fraction, the numerator of which shall be
the then Current Market Price per share of Common Stock for the period of 20
Trading Days preceding such record date, and the denominator of which shall be
such Current Market Price per share of Common Stock for the period of 20 Trading
Days preceding such record date less the Fair Market Value (as defined in
Section (vii)) per share of Common Stock (as determined in good faith by the
Board of Directors of the Corporation, a certified resolution with respect to
which shall be mailed to each holder of shares of Class B Preferred Stock) of
such dividend or distribution; provided, however, that in the event of a
distribution of shares of capital stock of a Subsidiary of the Corporation (a
"Spin-Off") made to holders of shares of Common Stock, the numerator of such
fraction shall be the sum of the Current Market Price per share of Common Stock
for the period of 20 Trading Days preceding the 35th Trading Day after the
effective date of such Spin-Off and the Current Market Price of the number of
shares (or the fraction of a share) of capital stock of the Subsidiary which is
distributed in such Spin-Off in respect of one share of Common Stock for the
period of 20 Trading Days preceding such 35th Trading Day and the denominator of
which shall be the current market price per share of the Common Stock for the
period of 20 Trading Days proceeding such 35th Trading Day. An adjustment made
pursuant to this clause (iii) shall be made upon the opening of business on the
next Business Day following the date on which any such dividend or distribution
is made and shall be effective retroactively immediately after the close of
business on the record date fixed for the determination of stockholders entitled
to receive such dividend or distribution; provided, however, if the proviso to
the preceding sentence applies, then such adjustment shall be made and be
effective as of such 35th Trading Day after the effective date of such Spin-Off.
(iv) For purposes of this paragraph (g), the number of
shares of Common Stock at any time outstanding shall not include any shares of
Common Stock then owned or held by or for the account of the Corporation.
(v) Anything in this paragraph (g) to the contrary
notwithstanding, the Corporation shall not be required to give effect to any
adjustment in the conversion ratio unless and until the net effect of one or
more adjustments (each of which shall be carried forward), determined as above
provided, shall have resulted in a change of the conversion ratio by at least
one-hundredth of one share of Common Stock, and when the cumulative net effect
of more than one adjustment so determined shall be to change the conversion
ratio by at least one-hundredth of one share of Common Stock, such change in
conversion ratio shall thereupon be given effect.
(vi) The certificate of any firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Corporation (which may be the firm of independent public accountants regularly
employed by the Corporation) shall be presumptively correct for any computation
made under this paragraph (g).
(vii) If the Corporation shall take a record of the
holders of its Common Stock for the purpose of entitling them to receive a
dividend or other distribution, and shall thereafter and before the distribution
to stockholders thereof legally abandon its plan to pay or deliver such dividend
or distribution, then thereafter no adjustment in the number of shares of Common
Stock issuable upon exercise of the right of conversion granted by this
paragraph (g) or in the conversion ratio then in effect shall be required by
reason of the taking of such record.
(viii) There shall be no adjustment of the conversion
ratio in case of the issuance of any stock of the Corporation in a merger,
reorganization, acquisition or other similar transaction except as set forth in
paragraph (g)(i), (g)(ii) and (h) of this Section E.
(h) In case of any reorganization or reclassification of
outstanding shares of Common Stock (other than a reclassification covered by
paragraph (g)(i) of this Section E), or in case of any consolidation or merger
of the Corporation with or into another corporation, or in the case of any sale
or conveyance to another corporation of the property of the Corporation as an
entirety or substantially as an entirety (each of the foregoing being referred
to as a "Transaction"), each share of Class B Preferred Stock then outstanding
shall thereafter be convertible into, in lieu of the Common Stock issuable upon
such conversion prior to consummation of such Transaction, the kind and amount
of shares of stock and other securities and property receivable (including cash)
upon the consummation of such Transaction by a holder of that number of shares
of Common Stock into which one share of Class B Preferred Stock was convertible
immediately prior to such Transaction (including, on a pro rata basis, the cash,
securities or property received by holders of Common Stock in any tender or
exchange offer that is a step in such Transaction). In case securities or
property other than Common Stock shall be issuable or deliverable upon
conversion as aforesaid, then all reference in this paragraph (h) shall be
deemed to apply, so far as appropriate and as nearly as may be, to such other
securities or property.
(i) Upon any adjustment of the conversion ratio then in
effect and any increase or decrease in the number of shares of Common Stock
issuable upon the operation of the conversion set forth in this Section D, then,
and in each such case, the Corporation shall promptly deliver to the registered
holders of the Class B Preferred and Common Stock, a certificate signed by the
President or a Vice President and by the Treasurer or an Assistant Treasurer or
the Secretary or an Assistant Secretary of the Corporation setting forth in
reasonable detail the event requiring the adjustment and the method by which
such adjustment was calculated and specifying the conversion ratio then in
effect following such adjustment and the increased or decreased number of shares
issuable upon the conversion set forth in this Section D.
F. Additional Definitions
-----------------------
For the purposes of this Certificate of Incorporation, the following
terms shall have the meanings indicated:
"Business Day" means any day, other than a Saturday, Sunday or a
day on which banking institutions in the State of New York are authorized or
obligated by law or executive order to close.
"Current Market Price," when used with reference to shares of
Common Stock or other securities on any date, shall mean the closing price per
share of Common Stock or such other securities on such date and, when used with
reference to shares of Common Stock or other securities for any period shall
mean the average of the daily closing prices per share of Common Stock or such
other securities for such period. The closing price for each day shall be the
last sale price, regular way, or, in case no such sale takes place on such day,
the average of the closing bid and asked prices, regular way, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed or admitted to trading on the New York Stock Exchange or,
if the Common Stock or such other securities are not listed or admitted to
trading on the New York Stock Exchange, as reported in the principal
consolidated transaction reporting system with respect to securities listed on
the principal national securities exchange on which the Common Stock or such
other securities are listed or admitted to trading or, if the Common Stock is
not listed or admitted to trading on any national securities exchange, the last
quoted sale price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. National Market System or such other
securities are not quoted by any such organization, the average of the closing
bid and asked prices as furnished by a professional market maker making a market
in the Common Stock or such other securities selected by the Board of Directors
of the Corporation. If the Common Stock or such other securities are not
publicly held or so listed or publicly traded, "Current Market Price" shall mean
the Fair Market Value per share of Common Stock or of such other securities as
determined in good faith by the Board of Directors of the Corporation based on
an opinion of an independent investment banking firm with an established
national reputation as a valuer of securities, which opinion may be based on
such assumption as such firm shall deem to be necessary and appropriate.
"Equity Securities" of any Person means any and all common stock,
preferred stock and any other class of capital stock of, and any partnership or
limited liability company interests of such Person or any other similar
interests of any Person that is not a corporation, partnership or limited
liability company.
"Fair Market Value" shall mean the amount which a willing buyer
would pay a willing seller in an arm's-length transaction.
"Formula Number" shall mean one (1); provided, however, that if
the Corporation shall (i) declare or pay any dividend or make any distribution
on the Common Stock or Special Voting Stock, payable in shares of Common Stock
or Special Voting Stock; (ii) subdivide (by a stock split or otherwise) the
outstanding shares of Common Stock or Special Voting Stock into a larger number
of shares of Common Stock or Special Voting Stock; or (iii) combine (by a
reverse stock split or otherwise) the outstanding shares of Common Stock or
Special Voting Stock into a smaller number of shares of Common Stock or Special
Voting Stock, then in each such case the Formula Number in effect immediately
prior to such event shall be adjusted to a number determined by multiplying the
Formula Number then in effect by a fraction, the numerator of which is the
number of shares of Common Stock or Special Voting Stock outstanding immediately
after such event and the denominator of which is the number of shares of Common
Stock or Special Voting Stock that were outstanding immediately prior to such
event (and rounding the result to the nearest whole number); and provided
further, that, if the Corporation shall issue any shares of its capital stock in
a merger, reclassification, or change of the outstanding shares of Common Stock,
then in each such event the Formula Number shall be appropriately adjusted to
reflect such merger, reclassification, or change so that each share of Preferred
Stock continues to be the economic equivalent of a Formula Number of shares of
Common Stock and Special Voting Stock immediately prior to such merger,
reclassification, or change.
"Issue Date" shall mean the first date on which shares of Class A
Preferred Stock and Class B Preferred Stock respectively are issued.
"Person" means any individual, corporation, company, association,
partnership, joint venture, trust or unincorporated organization, or a
government or any agency or political subdivision thereof.
"Subsidiary" means, as to any Person, any other Person of which
more than 50% of the shares of the Voting Securities or other voting interests
are owned or controlled, or the ability to select or elect 50% or more of the
directors or similar managers is held, directly or indirectly, by such first
Person and one or more of its Subsidiaries.
"Trading Day" means a day on which the principal national
securities exchange on which the Common Stock is listed or admitted to trading
is open for the transaction of business or, if the Common Stock is not listed or
admitted to trading on any national securities exchange a Business Day.
"Voting Securities" means, (i) with respect to the Company, the
Equity Securities of the Company entitled to vote generally for the election of
directors of the Company, and (ii) with respect to any other Person, any
securities of or interests in such Person entitled to vote generally for the
election of directors or any similar managing person of such Person.
G. Miscellaneous
-------------
(a) Notices. Any notice referred to herein shall be in writing
and, unless first-class mail shall be specifically permitted for such notices
under the terms hereof, shall be deemed to have been given upon personal
delivery thereof, upon transmittal of such notice by telecopy (with confirmation
of receipt by telecopy or telex) or five days after transmittal by registered or
certified mail, postage prepaid, addressed as follows:
(i) if to the Corporation, to its office at 161 Eglinton Avenue
East, Suite 400, Toronto, Ontario, Canada M4P 1J5 (Attention: Secretary), or to
the transfer agent for the Class A and Class B Preferred Stock;
(ii) if to a holder of the Class A Preferred Stock or Class B
Preferred Stock, to such holder at the address of such holder as listed in the
stock record books of the Corporation (which may include the records of any
transfer agent for the Class A Preferred Stock or Class B Preferred Stock); or
(iii) to such other address as the Corporation or such holder,
as the case may be, shall have designated by notice similarly given.
(b) Reacquired Shares. Any shares of Class A Preferred Stock or
Class B Preferred Stock purchased or otherwise acquired by the Corporation,
directly or indirectly, in any manner whatsoever shall be retired and canceled
promptly after the acquisition thereof (and shall not be deemed to be
outstanding for any purpose) and, if necessary to provide for the lawful
purchase of such shares, the capital represented by such shares shall be reduced
in accordance with the General Corporation Law of Delaware. All such shares of
Class A Preferred Stock or Class B Preferred Stock shall upon their cancellation
and upon the filing of an appropriate certificate with the Secretary of State of
the State of Delaware, become authorized but unissued shares of Preferred Stock,
$.001 par value, of the Corporation and may be reissued as part of another class
of Preferred Stock, $.001 par value, of the Corporation subject to the
conditions or restrictions on issuance set forth herein.
(c) Enforcement. Any registered holder of shares of Class A
Preferred Stock or Class B Preferred Stock may proceed to protect and enforce
its rights and the rights of such holders by any available remedy by proceeding
at law or in equity to protect and enforce any such rights, whether for the
specific enforcement of any provision in this Certificate of Incorporation or in
aid of the exercise of any power granted herein, or to enforce any other proper
remedy.
(d) Transfer Taxes. Except as otherwise agreed upon pursuant to
the terms of this Certificate of Incorporation, the Corporation shall pay any
and all documentary, stamp or similar issue or transfer taxes and other
governmental charges that may be imposed under the laws of the United States of
America or any political subdivision or taxing authority thereof or therein in
respect of any issue or delivery of Common Stock on conversion of, or other
securities or property issued on account of, shares of Class A Preferred Stock
or Class B Preferred Stock pursuant hereto or certificates representing such
shares or securities. The Corporation shall not, however, be required to pay
any such tax or other charge that may be imposed in connection with any transfer
involved in the issue or transfer and delivery of any certificate for Common
Stock or other securities or property in a name other than that in which the
shares of Class A Preferred Stock or Class B Preferred Stock so exchanged, or on
account of which such securities were issued, were registered and no such issue
or delivery shall be made unless and until the Person requesting such issue has
paid to the Corporation the amount of any such tax or has established to the
satisfaction of the Corporation that such tax has been paid or is not payable.
(e) Transfer Agent. The Corporation may appoint, and from time to
time discharge and change, a transfer agent for the Class A Preferred Stock and
Class B Preferred Stock. Upon any such appointment or discharge of a transfer
agent, the Corporation shall send notice thereof by first-class mail, postage
prepaid, to each holder of record of shares of Class A Preferred Stock or Class
B Preferred Stock.
(f) Record Dates. In the event that the Class A Preferred Stock
or Class B Preferred Stock shall be registered under either the Securities Act
of 1933, as amended, or the Securities Exchange Act of 1934, as amended, the
Corporation shall establish appropriate record dates with respect to payments
and other actions to be made with respect to the Class A Preferred Stock and
Class B Preferred Stock.
ARTICLE VI
PREEMPTIVE RIGHTS
No holder of any of the shares of any class or series of stock or of
options, warrants or other rights to purchase shares of any class or series of
stock or of other securities of the Corporation shall have any preemptive right
to purchase or subscribe for any unissued stock of any class or series, or any
unissued bonds, certificates of indebtedness, debentures or other securities
convertible into or exchangeable for stock or carrying any right to purchase
stock which may be issued pursuant to resolution of the board of directors of
the Corporation to such persons, firms, corporations or associations, whether or
not holders thereof.
ARTICLE VII
REPURCHASE OF SHARES
The Corporation may from time to time, pursuant to authorization by the
board of directors of the Corporation and without action by the stockholders,
purchase or otherwise acquire shares of any class, bonds, debentures, notes,
scrip, warrants, obligations, evidences or indebtedness, or other securities of
the Corporation in such manner, upon such terms, and in such amounts as the
board of directors shall determine; subject, however, to such limitations or
restrictions, if any, as are contained in the express terms of any class of
shares of the Corporation outstanding at the time of the purchase or acquisition
in question or as are imposed by law.
ARTICLE VIII
MEETINGS OF STOCKHOLDERS; CUMULATIVE VOTING
A. Cumulative Voting. There shall be no cumulative voting by stockholders
-----------------
of any class or series in the election of directors of the Corporation.
B. Place of Meetings. Meetings of stockholders may be held at such place
------------------
as the bylaws may provide.
ARTICLE IX
DIRECTORS
A. Number and Vacancies. The number of directors of the Corporation shall
--------------------
be such number, not less than one (exclusive of directors, if any, to be elected
by holders of preferred stock of the Corporation), as shall be provided from
time to time in a resolution adopted by the board of directors. Exclusive of
directors, if any, elected by holders of preferred stock, vacancies in the board
of directors of the Corporation, however caused, and newly created directorships
shall be filled by a vote of a majority of the directors then in office, whether
or not a quorum, and any director so chosen shall hold office for a term
expiring at the next annual meeting of stockholders or when the director's
successor is elected and qualified.
ARTICLE X
REMOVAL OF DIRECTORS
Notwithstanding any other provision of this Certificate or the bylaws of
the Corporation, any director or all the directors of a single class (but not
the entire board of directors) of the Corporation may be removed, at any time,
with or without cause by the affirmative vote or written consent of the holders
of a majority of the voting power of the outstanding shares of capital stock of
the Corporation entitled to vote generally in the election of directors
(considered for this purpose as one class). Notwithstanding the foregoing,
whenever the holders of any one or more series of preferred stock of the
Corporation shall have the right, voting separately as a class, to elect one or
more directors of the Corporation, the preceding provisions of this Article X
shall not apply with respect to the director or directors elected by such
holders of preferred stock.
ARTICLE XI
INDEMNIFICATION
Any person who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (whether or not by or in the right of
the corporation) by reason of the fact that he is or was a director, officer,
incorporator, employee, or agent of the corporation, or is or was serving at the
request of the corporation as a director, officer, incorporator, employee,
partner, trustee, or agent of another corporation, partnership, joint venture,
trust, or other enterprise (including an employee benefit plan), shall be
entitled to be indemnified by the corporation to the full extent then permitted
by law against expenses (including counsel fees and disbursements), judgments,
fines (including excise taxes assessed on a person with respect to an employee
benefit plan), and amounts paid in settlement incurred by him in connection with
such action, suit, or proceeding. Such right of indemnification shall inure
whether or not the claim asserted is based on matters which antedate the
adoption of this Article XV. Such right of indemnification shall continue as to
a person who has ceased to be a director, officer, incorporator, employee,
partner, trustee, or agent and shall inure to the benefit of the heirs and
personal representatives of such a person. The indemnification provided by this
Article XV shall not be deemed exclusive of any other rights which may be
provided now or in the future under any provision currently in effect or
hereafter adopted of the bylaws, by any agreement, by vote of stockholders, by
resolution of disinterested directors, by provisions of law, or otherwise.
ARTICLE XII
LIMITATIONS ON DIRECTORS' LIABILITY
A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, except: (A) for any breach of the director's duty of loyalty
to the Corporation or its stockholders, (B) for acts or omissions that are not
in good faith or that involve intentional misconduct or a knowing violation of
law, (C) under Section 174 of the General Corporation Law of the State of
Delaware, or (D) for any transaction from which the director derived any
improper personal benefit. If the General Corporation law of the State of
Delaware is amended after the date of filing of this Certificate to further
eliminate or limit the personal liability of directors, then the liability of a
director of the Corporation shall be eliminated or limited to the fullest extent
permitted by the General Corporation Law of the State of Delaware, as so
amended.
Any repeal or modification of the foregoing paragraph (b)y the stockholders
of the Corporation shall not adversely affect any right or protection of a
director of the Corporation existing at the time of such repeal or modification.
ARTICLE XIII
AMENDMENT OF BYLAWS
In furtherance and not in limitation of the powers conferred by statute,
the board of directors of the Corporation is expressly authorized to adopt,
repeal, alter, amend and rescind the bylaws of the Corporation by a vote of a
majority of the board of directors. Notwithstanding any other provision of this
Certificate or the bylaws of the Corporation, and in addition to any affirmative
vote required by law (and notwithstanding the fact that some lesser percentage
may be specified by law), the bylaws shall be adopted, repealed, altered,
amended or rescinded by the stockholders of the Corporation by the vote or
written consent of the holders of a majority of the voting power of the
outstanding shares of capital stock of the Corporation entitled to vote
generally in the election of directors (considered for this purpose as one
class).
ARTICLE XVIII
AMENDMENT OF CERTIFICATE OF INCORPORATION
Subject to the provisions hereof, the Corporation reserves the right to
repeal, alter, amend or rescind any provision contained in this Certificate in
the manner now or hereafter prescribed by law, and all rights conferred on
stockholders herein are granted subject to this reservation.
ARTICLE XIX
The name and address of the incorporator is:
Danyel Owens
770 South Post Oak Lane
Suite 435
Houston, Texas 77056-1913
I, THE UNDERSIGNED, being the incorporator, for the purpose of forming a
corporation pursuant to the General Corporation Law of Delaware, does make and
file this Certificate of Incorporation, hereby declaring and certifying that the
facts herein stated are true, and accordingly have hereunto set my hand this 7th
day of March, 2000.
/s/Danyel Owens
- ----------------
Danyel Owens
<PAGE>
EXHIBIT C
FLORIDA STATUTES
607.1301. DISSENTERS' RIGHTS; DEFINITIONS
The following definitions apply to ss. 607.1302 and 607.1320:
(1) "Corporation" means the issuer of the shares held by a
dissenting shareholder before the corporate action or the surviving or acquiring
corporation by merger or share exchange of that issuer.
(2) "Fair value" with respect to a dissenter's shares, means the
value of the shares as of the close of business on the day prior to the
shareholders' authorization date, excluding any appreciation or depreciation in
anticipation of the corporate action unless exclusion would be inequitable.
(3) "Shareholders' authorization date" means the date on which the
shareholders' vote authorizing the proposed action was taken, the date on which
the corporation received written consents without a meeting from the requisite
number of shareholders in order to authorize the action, or, in the case of a
merger pursuant to s. 607.1104, the day prior to the date on which a copy of the
plan of merger was mailed to each shareholder of record of the subsidiary
corporation.
607.1302. RIGHT OF SHAREHOLDERS TO DISSENT
(1) Any shareholder of a corporation has the right to dissent from, and
obtain payment of the fair value of his shares in the event of, any of the
corporate actions:
(a) Consummation of a plan of merger to which the corporation is a
party:
1. If the shareholder is entitled to vote on the merger, or
2. If the corporation is a subsidiary that is merged with its
parent under s. 507.1104, and the shareholders would have been entitled to vote
on action taken, except for the applicability of s. 607.1104;
(b) Consummation of a sale or exchange of all, or substantially
all, of the property of the corporation, other than in the usual and regular
course of business, if the shareholder is entitled to vote on the sale or
exchange pursuant to s. 607.1202, including a sale in dissolution but not
including a sale pursuant to court order or a sale for cash pursuant to a plan
by which all or substantially all of the net proceeds of the sale will be
distributed to the shareholders within 1 year after the date of sale;
(c) As provided in s. 607.0902(11), the approval of a
control-share acquisition;
(d) Consummation of a plan of share exchange to which the
corporation is a party as the corporation the shares of which will be acquired,
if the shareholder is entitled to vote on the plan;
(e) Any amendment of the articles of incorporation if the
shareholder is entitled to vote on the amendment and if such amendment would
adversely affect such shareholder by:
1. Altering or abolishing any preemptive rights attached to
any of his shares;
2. Altering or abolishing the voting rights pertaining to any
of his shares, except as such rights may be affected by the voting rights of new
shares then being authorized of any existing or new class or series of shares;
3. Effecting an exchange, cancellation, or reclassification
of any of his shares, when such exchange, cancellation, or reclassification
would alter or abolish his voting rights or alter his percentage of equity in
the corporation, or effecting a reduction or cancellation of accrued dividends
or other arrearages in respect to such shares;
4. Reducing the stated redemption price of any of his
redeemable shares, altering or abolishing any provision relating to any sinking
fund for the redemption or purchase of any of his shares, or making any of his
shares subject to redemption when they are not otherwise redeemable;
5. Making noncumulative, in whole or in part, dividends of
any of his preferred shares which had theretofore been cumulative;
6. Reducing the stated dividend preference of any of his
preferred shares; or
7. Reducing any stated preferential amount payable on any of
his preferred shares upon voluntary or involuntary liquidation; or
(f) Any corporate action taken, to the extent the articles of
incorporation provide that a voting or nonvoting shareholder is entitled to
dissent and obtain payment for his shares.
(2) A shareholder dissenting from any amendment specified in paragraph
(1)(e) has the right to dissent only as to those of his shares which are
adversely affected by the amendment.
(3) A shareholder may dissent as to less than all the shares registered
in his name. In that event, his rights shall be determined as if the shares as
to which he has dissented and his other shares were registered in the names of
different shareholders.
(4) Unless the articles of incorporation otherwise provide, this
section does not apply with respect to a plan of merger or share exchange or a
proposed sale or exchange of property, to the holders of shares of any class or
series which, on the record date fixed to determine the shareholders entitled to
vote at the meeting of shareholders at which such action is to be acted upon or
to consent to any such action without a meeting, were either registered on a
national securities exchange or held of record by not fewer than 2,000
shareholders.
(5) A shareholder entitled to dissent and obtain payment for his shares
under this section may not challenge the corporate action creating his
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
607.1320. PROCEDURE FOR EXERCISE OF DISSENTERS' RIGHTS
(1)(a) If a proposed corporate action creating dissenters' rights under s.
607.1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights and be accompanied by a copy of ss. 607.1301, 607.1302, and 607.1320. A
shareholder who wishes to assert dissenters' rights shall:
1. Deliver to the corporation before the vote is taken written
notice of his intent to demand payment for his shares if the proposed action is
effectuated, and
2. Not vote his shares in favor of the proposed action. A proxy
or vote against the proposed action does not constitute such a notice of intent
to demand payment.
(b) If proposed corporate action creating dissenters' rights under s.
607.1302 is effectuated by written consent without a meeting, the corporation
shall deliver a copy of ss. 607.1301, 607.1302, and 607.1320 to each shareholder
simultaneously with any request for his written consent or, if such a request is
not made, within 10 days after the date the corporation received written
consents without a meeting from the requisite number of shareholders necessary
to authorize the action.
(2) Within 10 days after the shareholders' authorization date, the
corporation shall give written notice of such authorization or consent or
adoption of the plan of merger, as the case may be, to each shareholder who
filed a notice of intent to demand payment for his shares pursuant to paragraph
(1)(a) or, in the case of action authorized by written consent, to each
shareholder, excepting any who voted for, or consented in Writing to, the
proposed action.
(3) Within 20 days after the giving of notice to him, any shareholder
who elects to dissent shall file with the corporation a notice of such election,
stating his name and address, the number, classes, and series of shares as to
which he dissents, and a demand for payment of the fair value of his shares.
Any shareholder failing to file such election to dissent within the period set
forth shall be bound by the terms of the proposed corporate action. Any
shareholder filing an election to dissent shall deposit his certificates for
certificated shares with the corporation simultaneously with the filing of the
election to dissent. The corporation may restrict the transfer of
uncertificated shares from the date the shareholder's election to dissent is
filed with the corporation.
(4) Upon filing a notice of election to dissent, the shareholder shall
thereafter be entitled only to payment as provided in this section and shall not
be entitled to vote or to exercise any other rights of a shareholder. A notice
of election may be withdrawn in writing by the shareholder at any time before an
offer is made by the corporation, as provided in subsection (5), to pay for his
shares. After such offer, no such notice of election may be withdrawn unless
the corporation consents thereto. However, the right of such shareholder to be
paid the fair value of his shares shall cease, and he shall be reinstated to
have all his rights as a shareholder as of the filing of his notice of election,
including any intervening preemptive rights and the right to payment of any
intervening dividend or other distribution or, if any such rights have expired
or any such dividend or distribution other than in cash has been completed, in
lieu thereof, at the election of the corporation, the fair value thereof in cash
as determined by the board as of the time of such expiration or completion, but
without prejudice otherwise to any corporate proceedings that may have been
taken in the interim, if:
(a) Such demand is withdrawn as provided in this section;
(b) The proposed corporate action is abandoned or rescinded or the
shareholders revoke the authority to effect such action;
(c) No demand or petition for the determination of fair value by a
court has been made or filed within the time provided in this section; or
(d) A court of competent jurisdiction determines that such
shareholder is not entitled to the relief provided by this section.
(5) Within 10 days after the expiration of the period in which
shareholders may file their notices of election to dissent, or within 10 days
after such corporate action is effected, whichever is later (but in no case
later than 90 days from the shareholders' authorization date), the corporation
shall make a written offer to each dissenting shareholder who has made demand as
provided in this section to pay an amount the corporation estimates to be the
fair value for such shares. If the corporate action has not been consummated
before the expiration of the 90-day period after the shareholders' authorization
date, the offer may be made conditional upon the consummation of such action.
Such notice and offer shall be accompanied by:
(a) A balance sheet of the corporation, the shares of which the
dissenting shareholder holds, as of the latest available date and not more than
12 months prior to the making of such offer; and
(b) A profit and loss statement of such corporation for the
12-month period ended on the date of such balance sheet or, if the corporation
was not in existence throughout such 12-month period. for the portion thereof
during which it was in existence.
(6) If within 30 days after the making of such offer any shareholder
accepts the same, payment for his shares shall be made within 90 days after the
making of such offer or the consummation of the proposed action, whichever is
later. Upon payment of the agreed value, the dissenting shareholder shall cease
to have any interest in such shares.
(7) If the corporation fails to make such offer within the period
specified therefor in subsection (5) or if it makes the offer and any dissenting
shareholder or shareholders fail to accept the same within the period of 30 days
thereafter, then the corporation, within 30 days after receipt of written demand
from any dissenting shareholder given within 60 days after the date on which
such corporate action was effected, shall, or at its election at any time within
such period of 60 days may, file an action in any court of competent
jurisdiction in the county in this state where the registered office of the
corporation is located requesting that the fair value of such shares be
determined. The court shall also determine whether each dissenting shareholder,
as to whom the corporation requests the court to make such determination, is
entitled to receive payment for his shares. If the corporation fails to
institute the proceeding as herein provided, any dissenting shareholder may do
so in the name of the corporation. All dissenting shareholders (whether or not
residents of this state), other than shareholders who have agreed with the
corporation as to the value of their shares, shall be made parties to the
proceeding as an action against their shares. The corporation shall serve a
copy of the initial pleading in such proceeding upon each dissenting shareholder
who is a resident of this state in the manner provided by law for the service of
a summons and complaint and upon each nonresident dissenting shareholder either
by registered or certified mail and publication or in such other manner as is
permitted by law. The jurisdiction of the court is plenary and exclusive. All
shareholders who are proper parties to the proceeding are entitled to judgment
against the corporation for the amount of the fair value of their shares. The
court may, if it so elects, appoint one or more persons as appraisers to receive
evidence and recommend a decision on the question of fair value. The appraisers
shall have such power and authority as is specified in the order of their
appointment or an amendment thereof. The corporation shall pay each dissenting
shareholder the amount found to be due him within 10 days after final
determination of the proceedings. Upon payment of the judgment, the dissenting
shareholder shall cease to have any interest in such shares.
(8) The judgment may, at the discretion of the court, include a fair
rate of interest, to be determined by the court.
(9) The costs and expenses of any such proceeding shall be determined
by the court and shall be assessed against the corporation, but all or any part
of such costs and expenses may be apportioned and assessed as the court deems
equitable against any or all of the dissenting shareholders who are parties to
the proceeding, to whom the corporation has made an offer to pay for the shares,
if the court finds that the action of such shareholders in failing to accept
such offer was arbitrary, vexatious, or not in good faith. Such expenses shall
include reasonable compensation for, and reasonable expenses of, the appraisers,
but shall exclude the fees and expenses of counsel for, and experts employed by,
any party. If the fair value of the shares, as determined, materially exceeds
the amount which the corporation offered to pay therefor or if no offer was
made, the court in its discretion may award to any shareholder who is a party to
the proceeding such sum as the court determines to be reasonable compensation to
any attorney or expert employed by the shareholder in the proceeding.
(10) Shares acquired by a corporation pursuant to payment of the agreed
value thereof or pursuant to payment of the judgment entered therefor, as
provided in this section, may be held and disposed of by such corporation as in
the case of other treasury shares, except that, in the case of a merger, they
may be held and disposed of as the plan of merger otherwise provides. The
shares of the surviving corporation into which the shares of such dissenting
shareholders would have been converted had they assented to the merger shall
have the status of authorized but unissued shares of the surviving corporation.
<PAGE>
EXHIBIT D
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______________ to ________________
Commission file no. 0-26327
---------------
American Sports Machine, Inc.
--------------------------------------------
(Name of small business issuer in its charter)
Florida 65-0877744
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 Lakeview Avenue, Suite 160-146
West Palm Beach, FL
33401
- - --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (561) 832-5698
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange
Title of each class on which registered
None
- ----------------------------- -------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.0001 par value
(Title of class)
-------------------
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 X No
----- -----
Check if there is no disclosure of delinquent filers in response to Item
405 of Regulation S-B 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. [X]
State issuer's revenues for its most recent fiscal year. $0.00.
Of the 1,400,000 shares of voting stock of the registrant issued and
outstanding as of December 15, 1999, 900,000 shares are held by
non-affiliates. Because of the absence of an established trading market for
the voting stock, the registrant is unable to calculate the aggregate market
value of the voting stock held by non-affiliates as of a specified date within
the past 60 days.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
The American Sports Machine, Inc. ("ASM") was organized on June 2, 1995,
under the laws of the State of Florida, having the stated purpose of engaging in
any lawful activities. ASM was formed with the contemplated purpose to build
recreational centers for small organized sports activities including basketball,
handball, racquetball, as well as video games and other computer board sports
activities. The business concept and plan was based upon information obtained
by the incorporator several years before while working for an unrelated company
with the same concept and business plan. The incorporator and sole shareholder
was unable to obtain the cooperation and assistance of workers and investors to
implement the proposed plan. The primary area of development was to be in
Florida, but was never brought to the development stage. After development of a
business plan and efforts to develop the business failed, all efforts were
abandoned in 1996. At that time ASM was unable to obtain the necessary
contracts, store locations, other facilities, and was unable to obtain the
necessary financing, therefore was unable to operate.
ASM never engaged in an active trade or business throughout the period from
June 1995 until just recently. The ASM charter was suspended (subject to
reinstatement) by the State of Florida in 1996 for inactivity and failure to pay
annual fees and costs. Its active status was reinstated on December 1, 1998,
upon payment of all past due fees and costs. On December 1, 1998, all of the
issued and outstanding shares of the common stock of ASM were acquired from
Joseph Ashley, its then sole shareholder. The shares were purchased from Mr.
Ashley on behalf of the investor group. Mr. Ashley distributed the shares
directly to each member of the investor group. The original incorporator and
shareholder agreed to exchange the 500,000 issued and outstanding shares held by
such shareholder to the new 25 member investor group in exchange for a
commitment by the new shareholder group to pay the cost of reactivating the
corporation, providing for its reinstatement, and bringing its books and records
up to date. The total of 500,000 shares was distributed 20,000 shares to each
of twenty-five (25) shareholders. In addition, ASM received gross proceeds in
the amount of $20,000 from the sale of a total of 400,000 shares of common
stock, $.0001 par value per share (the "Common Stock"), in an offering conducted
pursuant to Section 3(b) and 4(2) of the Securities Act of 1933, as amended (the
"Act"), and Rules 505 and 506 of Regulation D promulgated thereunder. This
offering was made in the State of Georgia and the State of Florida. ASM
undertook the offering of shares of Common Stock on December 1, 1998. Also on
December 1, 1998, ASM issued 500,000 shares of its Common Stock to Ms. Angela
Michelle Bartolotta, the President, Secretary and Treasurer of ASM in
consideration and in exchange for services valued at $25,000.00 in connection
with the re-organization of ASM. On March 12, 1999, Ms. Bartolotta resigned
her position due to personal conflicts and other personal reasons and tendered
her 500,000 shares of stock to ASM for cancellation. Such shares were in fact
canceled. The company issued 500,000 shares of its common stock to James Donald
Brock, Jr., in consideration and in exchange for services valued at $25,000.00
to complete the reorganization of ASM. James Donald Brock, Jr. was also elected
President, Secretary, Treasurer, and Director of ASM. (See "Recent Sales of
Unregistered Securities")
ASM then began to consider and investigate potential business opportunities.
ASM is considered a development stage company and, due to its status as a
"shell" corporation, its principal business purpose is to locate and consummate
a merger or acquisition with a private entity. Because of ASM's current status
of having limited assets and no recent operating history, in the event ASM does
successfully acquire or merge with an operating business opportunity, it is
likely that ASM's present shareholders will experience substantial dilution and
there will be a probable change in control of ASM.
On December 1, 1998, ASM also determined it should become active in
seeking potential operating businesses and business opportunities with the
intent to acquire or merge with such businesses.
Any target acquisition or merger candidate of ASM will become subject to
the same reporting requirements as ASM upon consummation of any such business
combination. Thus, in the event that ASM successfully completes an acquisition
or merger with another operating business, the resulting combined business must
provide audited financial statements for at least the two most recent fiscal
years, or in the event that the combined operating business has been in business
less than two years, audited financial statements will be required from the
period of inception of the target acquisition or merger candidate.
ASM's principal executive offices are located at 222 Lakeview Avenue, Suite
160-157, West Palm Beach, FL 33401 and its telephone number is (561) 832-5698.
Business of Issuer
ASM has no recent operating history and no representation is made, nor is
any intended, that ASM will be able to carry on future business activities
successfully. Further, there can be no assurance that ASM will have the ability
to acquire or merge with an operating business, business opportunity or property
that will be of material value to ASM.
Management plans to investigate, research and, if justified, potentially
acquire or merge with one or more businesses or business opportunities. ASM
currently has no commitment or arrangement, written or oral, to participate in
any business opportunity and management cannot predict the nature of any
potential business opportunity it may ultimately consider. Management will have
broad discretion in its search for and negotiations with any potential business
or business opportunity.
SOURCES OF BUSINESS OPPORTUNITIES
ASM intends to use various sources in its search for potential business
opportunities including its officer and director, consultants, special advisors,
securities broker-dealers, venture capitalists, member of the financial
community and others who may present management with unsolicited proposals.
Because of ASM's limited capital, it may not be able to retain on a fee basis
professional firms specializing in business acquisitions and reorganizations.
Rather, ASM will most likely have to rely on outside sources, not otherwise
associated with ASM, that will accept their compensation only after ASM has
finalized a successful acquisition or merger. ASM will rely upon the expertise
and contacts of such persons, will use notices in written publications and
personal contacts to find merger and acquisition candidates, the exact number of
such contacts dependent upon the skill and industriousness of the participants
and the conditions of the marketplace. None of the participants in the process
will have any past business relationship with management. To date, ASM has not
engaged nor entered into any definitive agreements nor understandings regarding
retention of any consultant to assist ASM in its search for business
opportunities, nor is management presently in a position to actively seek or
retain any prospective consultants for these purposes.
ASM does not intend to restrict its search to any specific kind of industry or
business. ASM may investigate and ultimately acquire a venture that is in its
preliminary or development stage, is already in operation, or in various stages
of its corporate existence and development. Management cannot predict at this
time the status or nature of any venture in which ASM may participate. A
potential venture might need additional capital or merely desire to have its
shares publicly traded. The most likely scenario for a possible business
arrangement would involve the acquisition of, or merger with, an operating
business that does not need additional capital, but which merely desires to
establish a public trading market for its shares. Management believes that ASM
could provide a potential public vehicle for a private entity interested in
becoming a publicly held corporation without the time and expense typically
associated with an initial public offering.
EVALUATION
Once ASM has identified a particular entity as a potential acquisition or
merger candidate, management will seek to determine whether acquisition or
merger is warranted or whether further investigation is necessary. Such
determination will generally be based on management's knowledge and experience,
(limited solely to working history - See "Item 5. Directors, Executive
Officers, etc.") or with the assistance of outside advisors and consultants
evaluating the preliminary information available to them. Management may elect
to engage outside independent consultants to perform preliminary analysis of
potential business opportunities. However, because of ASM's limited capital it
may not have the necessary funds for a complete and exhaustive investigation of
any particular opportunity. Management will not devote full time to finding a
merger candidate, will continue to engage in outside unrelated activities, and
anticipates devoting no more than an average of five (5) hours weekly to such
undertaking.
In evaluating such potential business opportunities, ASM will consider, to
the extent relevant to the specific opportunity, several factors including
potential benefits to ASM and its shareholders; working capital, financial
requirements and availability of additional financing; history of operation, if
any; nature of present and expected competition; quality and experience of
management; need for further research, development or exploration; potential for
growth and expansion; potential for profits; and other factors deemed relevant
to the specific opportunity.
Because ASM has not located or identified any specific business opportunity
as of the date hereof, there are certain unidentified risks that cannot be
adequately expressed prior to the identification of a specific business
opportunity. There can be no assurance following consummation of any
acquisition or merger that the business venture will develop into a going
concern or, if the business is already operating, that it will continue to
operate successfully. Many of the potential business opportunities available to
ASM may involve new and untested products, processes or market strategies which
may not ultimately prove successful.
FORM OF POTENTIAL ACQUISITION OR MERGER
Presently ASM cannot predict the manner in which it might participate in a
prospective business opportunity. Each separate potential opportunity will be
reviewed and, upon the basis of that review, a suitable legal structure or
method of participation will be chosen. The particular manner in which ASM
participates in a specific business opportunity will depend upon the nature of
that opportunity, the respective needs and desires of ASM and management of the
opportunity, and the relative negotiating strength of the parties involved.
Actual participation in a business venture may take the form of an asset
purchase, lease, joint venture, license, partnership, stock purchase,
reorganization, merger or consolidation. ASM may act directly or indirectly
through an interest in a partnership, corporation, or other form of
organization, however, ASM does not intend to participate in opportunities
through the purchase of minority stock positions.
Because of ASM's current status and recent inactive status for the prior
two (2) years, and its concomitant lack of assets and relevant operating
history, it is likely that any potential merger or acquisition with another
operating business will require substantial dilution to ASM's existing
shareholders interests. There will probably be a change in control of ASM, with
the incoming owners of the targeted merger or acquisition candidate taking over
control of ASM. Management has not established any guidelines as to the amount
of control it will offer to prospective business opportunity candidates, since
this issue will depend to a large degree on the economic strength and
desirability of each candidate, and the corresponding relative bargaining power
of the parties. However, management will endeavor to negotiate the best
possible terms for the benefit of ASM's shareholders as the case arises.
Management may actively negotiate or otherwise consent to the purchase of any
portion of their common stock as a condition to, or in connection with, a
proposed merger or acquisition. In such an event, existing shareholders may not
be afforded an opportunity to approve or consent to any particular stock buy-out
transaction. However the terms of the sale of shares held by present management
of ASM will be extended equally to all other current shareholders.
Management does not have any plans to borrow funds to compensate any
persons, consultants, or promoters in conjunction with its efforts to find and
acquire or merge with another business opportunity. Management does not have
any plans to borrow funds to pay compensation to any prospective business
opportunity, or shareholders, management, creditors, or other potential parties
to the acquisition or merger. In either case, it is unlikely that ASM would be
able to borrow significant funds for such purposes from any conventional lending
sources. In all probability, a public sale of ASM's securities would also be
unfeasible, and management does not contemplate any form of new public offering
at this time. In the event that ASM does need to raise capital, it would most
likely have to rely on the private sale of its securities. Such a private sale
would be limited to persons exempt under the Commissions's Regulation D or other
rule, or provision for exemption, if any applies. However, no private sales are
contemplated by ASM's management at this time. If a private sale of ASM's
securities is deemed appropriate in the future, management will endeavor to
acquire funds on the best terms available to ASM. However, there can be no
assurance that the Company will be able to obtain funding when and if needed, or
that such funding, if available, can be obtained on terms reasonable or
acceptable to them. ASM does not anticipate using Regulation S promulgated
under the Securities Act of 1933 to raise any funds any time within the next
year, subject only to its potential applicability after consummation of a merger
or acquisition.
In the event of a successful acquisition or merger, a finder's fee, in the
form of cash or securities of ASM, may be paid to persons instrumental in
facilitating the transaction. ASM has not established any criteria or limits
for the determination of a finder's fee, although most likely an appropriate
finder's fee will be negotiated between the parties, including the potential
business opportunity candidate, based upon economic considerations and
reasonable value as estimated and mutually agreed upon at that time. A finder's
fee would only be payable upon completion of the proposed acquisition or merger
in the normal case, and management does not contemplate any other arrangement at
this time. Current management has not in the past used any particular
consultants, advisors or finders. Management has not actively undertaken a
search for, nor retention of, any finder's fee arrangement with any person. It
is possible that a potential merger or acquisition candidate would have its own
finder's fee arrangement, or other similar business brokerage or investment
banking arrangement, whereupon the terms may be governed by a pre-existing
contract; in such case, ASM may be limited in its ability to affect the terms of
compensation, but most likely the terms would be disclosed and subject to
approval pursuant to submission of the proposed transaction to a vote of ASM's
shareholders. Management cannot predict any other terms of a finder's fee
arrangement at this time. If such a fee arrangement was proposed, independent
management and directors would negotiate the best terms available to ASM so as
not to compromise the fiduciary duties of the representative in the proposed
transaction, and ASM would require that the proposed arrangement would be
submitted to the shareholders for prior ratification in an appropriate manner.
Management does not contemplate that ASM would acquire or merge with a
business entity in which any officer or director of ASM has an interest. Any
such related party transaction, however remote, would be submitted for approval
by an independent quorum of the Board of Directors and the proposed transaction
would be submitted to the shareholders for prior ratification in an appropriate
manner. ASM's management has not had any contact, discussions, or other
understandings regarding any particular business opportunity at this time,
regardless of any potential conflict of interest issues. Accordingly, the
potential conflict of interest is merely a remote theoretical possibility at
this time.
POSSIBLE BLANK CHECK COMPANY STATUS
While ASM may be deemed a "shell" company at this time, it does not
constitute a "blank check" company under pertinent securities law standards. A
"blank check" company under pertinent securities law standards is a company
whose business plan is to primarily pursue a merger or acquisition candidate
(i.e. no specific business plan), and which files a Registration Statement under
the 1933 Act and at such time priced its shares at less than $5.00 per share
while it continued to have no specific business plan. Accordingly, ASM is not
subject to securities regulations imposed upon companies deemed to be "blank
check companies." If ASM were to file a registration statement under Securities
Act of 1933 and, at such time, priced its shares at less than $5.00 per share
and continued to have no specific business plan, it would then be classified as
a blank check company.
If in the future ASM were to become a blank check company, adverse
consequences could attach to ASM. Such consequences can include, but are not
limited to, time delays of the registration process, significant expenses to be
incurred in such an offering, loss of voting control to public shareholders and
the additional steps required to comply with various federal and state laws
enacted for the protection of investors, including so-called "lock-up"
agreements pending consummation of a merger or acquisition that would take it
out of blank check company status.
Many states (excluding Florida where ASM is incorporated) have statutes,
rules and regulations limiting the sale of securities of "blank check" companies
in their respective jurisdictions. Management does not intend to undertake any
efforts to cause a market to develop in the companies securities or to undertake
any offering of ASM's securities, either debt or equity, until such time as ASM
has successfully implemented its business plan described herein. In the event
ASM undertakes the filing of a registration statement under circumstances that
classifies it as a blank check company the provisions of Rule 419 and other
applicable provisions will be complied with.
RIGHTS OF SHAREHOLDERS
ASM amended its Articles of Incorporation on March 10, 1999, to expressly
provide that the Board of Directors is authorized to enter into on behalf of the
corporation and to bind the corporation without shareholder approval, any and
all acts approving the terms and conditions of a merger and/or a share exchange,
and shareholders affected thereby, shall not be entitled to dissenters rights
with respect thereto under any applicable statutory dissenters rights provision.
This provision expressly eliminates shareholder participation in the merger
and/or share exchange contemplated by ASM and expressly eliminates any
shareholders dissenters rights. ASM does not intend to provide its shareholders
with complete disclosure documentation including audited finance statements
concerning a target company and its business prior to any mergers or
acquisitions.
COMPETITION
Because ASM has not identified any potential acquisition or merger
candidate, it is unable to evaluate the type and extent of its likely
competition. ASM is aware that there are several other public companies with
only nominal assets that are also searching for operating businesses and other
business opportunities as potential acquisition or merger candidates. ASM will
be in direct competition with these other public companies in its search for
business opportunities and, due to ASM's limited funds, it may be difficult to
successfully compete with these other companies.
EMPLOYEES
As of the date hereof, ASM does not have any employees and has no plans for
retaining employees until such time as business warrants the expense, or until
ASM successfully acquires or merges with an operating business. The Company may
find it necessary to periodically hire part-time clerical help on an as-needed
basis.
INDUSTRY SEGMENTS
No information is presented regarding industry segments. ASM is presently
a development stage company seeking a potential acquisition of or merger with a
yet to be identified business opportunity. Reference is made to the statements
of income included herein in response to part F/S of this Form 10-SB for a
report of ASM's operating history for the past two fiscal years.
ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES
ASM is currently using at no cost to ASM, as its principal place of
business offices of its current management, James Donald Brock, Jr., located in
Atlanta, Georgia. Although ASM has no written agreement and pays no rent for the
use of this facility, it is contemplated that at such future time as an
acquisition or merger transaction may be completed, ASM will secure commercial
office space from which it will conduct its business. Until such an acquisition
or merger, ASM lacks any basis for determining the kinds of office space or
other facilities necessary for its future business. ASM has no current plans to
secure such commercial office space. It is also possible that a merger or
acquisition candidate would have adequate existing facilities upon completion of
such a transaction, and ASM's principal offices may be transferred to such
existing facilities.
ITEM 3. LEGAL PROCEEDINGS
ASM is currently not a party to any pending legal proceedings and no such
action by, or to the best of its knowledge, against ASM has been threatened.
ASM was inactive from 1996 through the date of this Form 10-SB.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's shareholders, through
the solicitation of proxies or otherwise from the Company's inception to the
close of the 1999 fiscal year ended September 30, 1999, covered by this report.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Shares of ASM's common stock have previously been registered with the
Securities and Exchange Commission (the "Commission"). ASM intends to and has
made application to the NASD for ASM's shares to be quoted on the OTC Bulletin
Board. ASM's application to the NASD consists of current corporate information,
financial statements and other documents as required by Rule 15c211 of the
Securities Exchange Act of 1934, as amended. Inclusion on the OTC Bulletin
Board, when approved, permits price quotation for ASM's shares to be published
by such service.
ASM is not aware of any existing trading market for its common stock.
ASM's common stock has never traded in a public market. There are no plans,
proposals, arrangements or understandings with any person(s) with regard to the
development of a trading market in any of ASM's securities.
If and when ASM's common stock is traded in the over-the-counter market,
most likely the shares will be subject to the provisions of Section 15(g) and
Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth
certain requirements for transactions in penny stocks and Rule 15g9(d)(1)
incorporates the definition of penny stock as that used in Rule 3a51-1 of the
Exchange Act.
The Commission generally defines penny stock to be any equity security that
has a market price less than $5.00 per share, subject to certain exceptions.
Rule 3a51-1 provides that any equity security is considered to be a penny stock
unless that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
The NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
issuer's net tangible assets; or exempted from the definition by the Commission.
If ASM's shares are deemed to be a penny stock, trading in the shares will be
subject to additional sales practice requirements on broker-dealers who sell
penny stocks to persons other than established customers and accredited
investors, generally persons with assets in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
the monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker dealers to
trade and/or maintain a market in ASM's common stock and may affect the ability
of shareholders to sell their shares.
As of December 15, 1999, there were 26 holders of record of ASM's common
stock.
As of December 15, 1999, ASM has issued and outstanding One Million Four
Hundred Thousand [1,400,000] shares of common stock. Of this total, Five
Hundred Thousand [500,000] shares were originally issued in transactions more
than three (3) years ago. Such shares may be sold or otherwise transferred
without restriction pursuant to the terms of rule 144 (ARule 144") of the
Securities Act of 1933, as amended (the "Act"), unless held by an affiliate.
------------
The remaining Nine Hundred Thousand [900,000] shares were issued subject to Rule
144 and may not be sold and/or transferred without further registration under
the Act or pursuant to an applicable exemption
DIVIDEND POLICY
ASM has not declared or paid cash dividends or made distributions in the
past, and ASM does not anticipate that it will pay cash dividends or make
distributions in the foreseeable future. ASM currently intends to retain and
reinvest future earnings, if any, to finance its operations.
PUBLIC QUOTATION OF STOCK
ASM has as of this date requested a broker-dealer, Public Securities, 300
North Argonne Road, Suite 202
Spokane, WA 99212, to act as a market maker for ASM's securities. ASM
anticipates that other market makers may be requested to participate at a later
date. ASM will not use consultants to obtain market makers. There have been no
preliminary discussions between ASM, or anyone acting on its behalf, and any
market maker regarding the future trading market for ASM.
TRANSFER AGENT
The Company selected Interwest Transfer Co. 1981 E. Murray Holladay Road,
Suite 100, Salt Lake City, Utah 84117 to serve as its transfer agent.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ASM is considered a development stage company with limited assets or
capital, and with no operations or income since approximately 1996. The costs
and expenses associated with the preparation and filing of this registration
statement and other operations of ASM have been paid for by a shareholder,
specifically James Donald Brock, Jr. (see Item 4, Security Ownership of Certain
Beneficial Owners and Management James Donald Brock, Jr. is the controlling
shareholder). Mr. Brock has agreed to pay future costs associated with filing
future reports under Exchange Act of 1934 if ASM is unable to do so. It is
anticipated that ASM will require only nominal capital to maintain the corporate
viability of ASM and any additional needed funds will most likely be provided by
ASM's existing shareholders or its sole officer and director in the immediate
future. Current shareholders have not agreed upon the terms and conditions of
future financing and such undertaking will be subject to future negotiations,
except for the express commitment of Mr. Brock to fund required 34 Act filings.
Repayment of any such funding will also be subject to such negotiations. The
ability of ASM to continue as a going concern long term (beyond 12-24 months) is
contingent upon the successful completion of a business combination.
Since its inception, the Company has conducted minimal business operations
except for organizational and capital raising activities. The Company has not
realized any revenues since its inception due to the fact that its executive,
---
Mr. Brock has been primarily engaged in organizational and promotional
activities on behalf of the Company. As a result, from inception (June 2, 1995)
through September 30, 1999, the Company had $0.00 revenue. Total Company
operations and operating expenses as of September 30, 1999 were $42,289.00.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
At September 30, 1999, the Company had assets totaling $2,711.00 and an
accumulated deficit of $43,289.00 attributable to accrued legal expenses,
organization expenses and professional fees. Since the Company's inception, it
has received $46,000.00 in cash contributed as consideration for the issuance
of shares of Common Stock.
NET OPERATING LOSSES
The Company has net operating loss carry-forwards of $42,289.00 expiring in
2014. The company has a $8,400.00 deferred tax asset resulting from the loss
carry-forwards, for which it has established a 100% valuation allowance. The
Company may not be able to utilize such carry-forwardsas the Company has no
history of profitable operations.
In the opinion of management, inflation has not and will not have a
material effect on the operations of ASM until such time as ASM successfully
completes an acquisition or merger. At that time, management will evaluate the
possible effects of inflation on ASM as it relates to its business and
operations following a successful acquisition or merger.
Management plans may but do not currently provide for experts to secure a
successful acquisition or merger partner so that it will be able to continue as
a going concern. In the event such efforts are unsuccessful, contingent plans
have been arranged to provide that the current Director of ASM is to fund
required future filings under the 34 Act without reimbursement, and existing
shareholders have expressed an interest in additional funding if necessary to
continue ASM as a going concern.
PLAN OF OPERATION
During the next twelve months, ASM will actively seek out and investigate
possible business opportunities with the intent to acquire or merge with one or
more business ventures. In its search for business opportunities, management
will follow the procedures outlined in Item 1 above. Because the Company has
limited funds, it may be necessary for the sole officer and director to either
advance funds to ASM or to accrue expenses until such time as a successful
business consolidation can be made. ASM will not make it a condition that the
target company must repay funds advanced by its officers and directors.
Management intends to hold expenses to a minimum and to obtain services on a
contingency basis when possible. Further, ASM's directors will defer any
compensation until such time as an acquisition or merger can be accomplished and
will strive to have the business opportunity provide their remuneration.
However, if ASM engages outside advisors or consultants in its search for
business opportunities, it may be necessary for ASM to attempt to raise
additional funds. As of the date hereof, ASM has not made any arrangements or
definitive agreements to use outside advisors or consultants or to raise any
capital. In the event ASM does need to raise capital most likely the only
method available to ASM would be the private sale of its securities. Because of
the nature of ASM as a development stage company, it is unlikely that it could
make a public sale of securities or be able to borrow any significant sum from
either a commercial or private lender. There can be no assurance that ASM will
able to obtain additional funding when and if needed, or that such funding, if
available, can be obtained on terms acceptable to ASM.
ASM does not intend to use any employees, with the possible exception of
part-time clerical assistance on an as-needed basis. Outside advisors or
consultants will be used only if they can be obtained for minimal cost or on a
deferred payment basis. Management is convinced that it will be able to operate
in this manner and to continue its search for business opportunities during the
next twelve months.
YEAR 2000 COMPLIANCE
The Company is currently in the process of evaluating its information
Technology for Year 2000 compliance. The Company does not expect that the cost
to modify its information Technology infrastructure to be Year 2000 compliant
will be material to its financial condition or results of operations. The
Company does not anticipate any material disruption in its operations as a
result of any failure by the Company to be in compliance.
FORWARD-LOOKING STATEMENTS
This Form 10-KSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-KSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), business
strategy, expansion and growth of the Company's business and operations, and
other such matters are forward-looking statements. These statements are based
on certain assumptions and analyses made by the Company in light of its
experience and its perception of historical trends, current conditions and
expected future developments as well as other factors it believes are
appropriate in the circumstances. However, whether actual results or
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-KSB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements have been examined to the extent
indicated in their reports by Dorra, Shaw, & Dugan, independent certified
accountants, and have been prepared in accordance with generally accepted
accounting principles and pursuant to Regulation S-B as promulgated by the
Securities and Exchange Commission and are included herein, on Page F-1 hereof
in response to Part F/S of this Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Because the Company has been generally inactive since its inception, it has
had no independent accountant until the retention in November 1998 of Dorra,
Shaw & Dugan, CPA's, 270 South County Road, Palm Beach, Florida 33480. There has
been no change in the Company's independent accountant during the period
commencing with the Company's retention of Dorra, Shaw & Dugan, CPA's, through
the date hereof.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITORS' REPORT F-1
- ------------------------------ ---
BALANCE SHEET F-2
- -------------- ---
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT F-3
- ---------------------------------------------------- ---
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY F-4
- ------------------------------------------------- ---
STATEMENT OF CASH FLOWS F-5
- -------------------------- ---
NOTES TO FINANCIAL STATEMENTS F-6
- -------------------------------- ---
<PAGE>
DORRA SHAW & DUGAN
Certified Public Accountants
----------------------------
INDEPENDENT AUDITORS' REPORT
AUDITORS' REPORT
To the Board of Directors and Stockholders
The American Sports Machine, Inc.
Palm Beach, Florida
We have audited the accompanying balance sheet of The American Sports Machine,
Inc. (a Florida corporation) and (a development stage company) as of May 31,
1999, and the related statements of operations, accumulated deficit, cash flows
and changes in stockholders' equity for the period October 1, 1998 to May 31,
1999 and June 2, 1995 (date of inception) to May 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The American Sports Machine,
Inc. as of May 31, 1999 and the results of its operations and its cash flows and
changes in stockholders' equity for the period from October 1, 1998 to May 31,
1999 and June 2, 1995 (date of inception) to May 31, 1999 in conformity with
generally accepted accounting principles.
Audited balance sheets for prior periods and the statements of operations, cash
flows and stockholders' equity for the two years ended September 30, 1998 as
required by item 310 of regulation S-B are not provided because the company was
dormant.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses since its inception. The Company's financial
position and operating results raise substantial doubt about its ability to
continue as a going concern. Management's plan regarding those matters also are
described in Note D. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
The June 30, 1999 financial statements were compiled by the company; and we did
not audit or review those financial statements and, accordingly, expressed no
opinion or other form of assurance on them.
/s/Dorra Shaw & Dugan
- ------------------------
Certified Public Accountants
June 4, 1999 and August 30, 1999
270 South County Road * Palm Beach, FL 33480
Telephone (561) 822-9955 * Fax (561) 822-9955
Website: dsd-cpa.com
F-1
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The director and executive officer of ASM and his respective age is as
follows:
Name Age Position
- ---- --- --------
James Donald Brock, Jr. 31 Director, President, Secretary
and Treasurer
All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. There are no
agreements with respect to the election of directors. ASM has not compensated
its directors for service on the Board of Directors or any committee thereof.
As of the date hereof, no director has accrued any expenses or compensation.
Officers are appointed annually by the Board of Directors and each executive
officer serves at the discretion of the Board of Directors. ASM does not have
any standing committees at this time.
No director, or officer, or promoter of ASM has, within the past five
years, filed any bankruptcy petition, been convicted in or been the subject of
any pending criminal proceedings, or is any such person the subject or any
order, judgment or decree involving the violation of any state or federal
securities laws.
The business experience of the person listed above during the past five
years is as follows:
Mr. James Donald Brock, Jr., 31 years of age, is an Arts and Science Degree
graduate of Santa Fe Community College and Emory University, Atlanta, Georgia.
Mr. Brock was a student in the education programs from 1993 to 1997. In 1997,
he received his B.S. Degree in Mathematics from Georgia State University,
Atlanta, Georgia. From 1992 to 1997, Mr. Brock was employed at Savage Pizza,
Atlanta, Georgia. In 1997-98, Mr. Brock served as a student-teacher at North
Atlanta High School, Atlanta, Georgia. In 1998, Mr. Brock was employed and
continues to be employed as a mathematics teacher at Decatur High School,
Decatur, Georgia.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
ASM's executive officers and directors and persons who own more than 10% of a
registered class of ASM's equity securities, to file with the Securities and
Exchange Commission (hereinafter referred to as the "commission") initial
statements of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership, of Common Stock and other equity securities
of ASM on Forms 3, 4, and 5, respectively. Executive officers, directors and
greater than 10% shareholders are required by Commission regulations to furnish
ASM with copies of all Section 16(a) reports they file. Mr Brock comprises all
of ASM's executive officers, directors and greater than 10% beneficial owners of
its common Stock, and has complied with Section 16(a) filing requirements
applicable to them during ASM's most recent fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
ASM has not had a bonus, profit sharing, or deferred compensation plan for
the benefit of its employees, officers or directors. ASM has not paid any
salaries or other compensation to its officers, directors or employees for the
years ended 1997 and 1998, nor at any time during 1999. Further, ASM has not
entered into an employment agreement with any of its officers, directors or any
other persons and no such agreements are anticipated in the immediate future.
ASM's officer and director will forego any compensation until such time as an
acquisition or merger can be accomplished and the new business opportunity
provide any remuneration. As of the date hereof, no person has accrued any
---
compensation from ASM. No compensation will accrue in the interim period.
COMPENSATION OF DIRECTORS
The Company does not provide officers with pension, stock appreciation
rights, long-term incentive or other plans but has the intention of implementing
such plans in the future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of December 15, 1999, with
-
respect to each person known by ASM to own beneficially more than 5% of ASM's
outstanding common stock, each director of ASM and all directors and officers of
ASM as a group.
Name of Address of Amount and Nature of Percent of
- --------------------- ----------------------- -----------
Beneficial Owner Beneficial Ownership Class
- ----------------- --------------------- -----
James Donald Brock, Jr. 500,000 35.7%
1933 Radar Rd Ne
Atlanta, GA 30345
All Executive Officers and Directors
as a Group (one person) 500,000 35.7%
_____________
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 1, 1998 the Company issued 500,000 shares of its Common Stock
to Ms. Angela M. Bartolotta, the sole officer and director of the Company in
consideration and in exchange for services valued at 25,000 in connection with
the reorganization of ASM. On March 12, 1999, Ms. Bartolotta resigned her
position due to personal conflicts and other personal reasons and tendered her
500,000 shares of stock to the company for cancellation such shares were in fact
canceled.
On March 2, 1999, ASM issued and sold 500,000 shares of the Common Stock to
Mr. Brock, the President, Secretary and Treasurer of ASM and record and
beneficial owner of approximately 35.7% of ASM's outstanding Common Stock, in
consideration and exchange therefore for services valued at $25,000 in
connection with the reorganization of ASM. Services rendered and to be
rendered by Mr. Brock include the restructuring of ASM, obtaining requisite
financial assistance, searching for merger and acquisition candidates, and a
commitment on the part of Mr. Brock to fund, if necessary, future filings of 34
Act requirements without reimbursement
In addition Mr. Brock has paid for the cost and expenses associated with
the filing of this Form 10-SB and other operations of ASM.
At the current time, ASM has no provision to issue any additional
securities to management, promoters or their respective affiliates or
associates. At such time as the Board of Directors adopts an employee stock
option or pension plan, any issuance would be in accordance with the terms
thereof and proper approval. Although ASM has a very large amount of authorized
but unissued Common Stock and Preferred Stock which may be issued without
further shareholder approval or notice, ASM intends to reserve such stock for
the Rule 506 offerings for acquisitions.
During ASM's last two fiscal years, there have not been any other
transactions between ASM and any officer, director, nominee for election as
director, or any shareholder owning greater than five percent (5%) of ASM's
outstanding shares, nor any member of the above referenced individuals'
immediate family.
James Donald Brock, Jr., may be deemed to be a "promoter" of ASM as that
term is defined under the Rules and Regulations promulgated under the Act.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
(a) The exhibits required to be filed herewith by Item 601 of Regulation S-B,
as described in the following index of exhibits, are incorporated herein by
reference, as follows:
Exhibit No. Exhibit Name
- ------------ --------------
3(i).1 Articles of Incorporation filed June 2, 1995 (1)
3(i).2 Articles of Amendment filed March 10, 1999 (1)
3(ii).1 By-laws (1)
27 * Financial Data Schedule
(1) Incorporated herein by reference to the Registration Statement on
Form 10-SB of TECH Creations, Inc.(File No. 0-26901), filed with the U.S.
Securities and Exchange Commission.
(b) No Reports on Form 8-K were filed during the last quarter of the
fiscal year ended September 30, 1999, covered by this Annual Report on Form
10-KSB.
* Filed herein
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, there unto
duly authorized.
The American Sports Machine, Inc.
(Registrant)
Date: December _____, 1999 BY: /s/ James Donald Brock, Jr.
-------------------------------
James Donald Brock, Jr., President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date Signature Title
- ---- --------- -----
December _____, 1999 BY:/s/ JAMES DONALD BROCK JR. Director, President,
--------------------------
James Donald Brock, Jr. Secretary, Treasurer
<PAGE>
EXHIBIT E
CURRENT REPORT ON FORM 8-K
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15 (D)
of the
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of Earliest Event Reported) March 1, 2000
THE AMERICAN SPORTS MACHINE, INC.
(Exact name of registrant as specified in its charter)
<TABLE>
<CAPTION>
FLORIDA
(State or other jurisdiction of incorporation or organization)
<S> <C>
0-26327. . . . . . . . . 65-0877744
(Commission File Number) (IRS Employer Identification Number)
</TABLE>
222 LAKEVIEW AVENUE, SUITE 160-146
WEST PALM BEACH, FLORIDA 33401
(Address of principal executive offices)
(561) 832-5698
(Registrant's telephone number, including area code)
ITEM 5. OTHER EVENTS
- -----------------------
On March 1, 2000 the Company executed an Plan and Agreement of Merger among
the Company and SoftQuad Software, Ltd., a Delaware corporation.
On March 1, 2000 the Company executed an Agreement and Plan of
Reorganization among the Company SoftQuad Software, Ltd., a Delaware corporation
and the Stockholders of SoftQuad Software, Ltd.
On March 1, 2000 the Company filed a Certificate of Merger of SoftQuad
Software, Ltd. into the Company with the Secretary of State of Delaware.
On March 1, 2000 the Company filed an Articles of Merger of SoftQuad
Software, Ltd. into the Company with the Secretary of State of Florida.
Under the terms of the Agreement and Plan of Reorganization, the Company's
was the surviving corporation.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
- ----------------------------------------------
Financial Statements
None
Exhibits
Exhibit A - Plan and Agreement of Merger
Exhibit B - Agreement and Plan of Reorganization
Exhibit C - Press Release
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
THE AMERICAN SPORTS MACHINE, INC.
By:/s/James D. Brock, Jr.
-------------------------
James D. Brock, Jr., President
Date: March 9, 2000
<PAGE>
EXHIBIT A
PLAN AND AGREEMENT OF MERGER
THIS PLAN AND AGREEMENT OF MERGER (hereinafter referred to as this
"Agreement") dated as of March 1, 2000, is made and entered into by and between
The American Sports Machine, Inc., a Florida corporation (the "Company") and
SoftQuad Software, Ltd., a Delaware corporation ("SoftQuad USA").
W-I-T-N-E-S-S-E-T-H:
WHEREAS, the Company is a corporation organized and existing under the laws
of the State of Florida; and
WHEREAS, SoftQuad USA was incorporated in Delaware on December 1, 1999; and
NOW THEREFORE, in consideration of the premises, the mutual covenants
herein contained and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto agree that the
SoftQuad USA shall be merged into Company (the "merger") upon the terms and
conditions hereinafter set forth.
ARTICLE I
Merger
On March 1, 2000 as soon as practicable thereafter (the "Effective Date");
SoftQuad USA shall be merged into the Company, the separate existence of
SoftQuad USA shall cease and the Company (following the Merger referred to as
the "Combined Company") shall continue to exist under the name of "The American
Sports Machine, Inc.," by virtue of, and shall be governed by, the laws of the
State of Florida. The street address of the registered office of the Combined
Company shall be 222 Lakeview Avenue, Suite 160-146, West Palm Beach, Florida
33401, and the name of the registered agent of the corporation at that address
is Donald F. Mintmire.
ARTICLE II
Certificate of Incorporation of Combined Company
The Articles of Incorporation of the Company shall be the Articles of
Incorporation of the Combined Company as in effect on the date hereof without
change unless and until amended in accordance with applicable law.
ARTICLE III
By-Laws of Combined Company
The By-Laws of the Combined Company shall be the By-Laws of the Company as
in effect on the date hereof without change unless and until amended or repealed
in accordance with applicable law.
ARTICLE IV
Effect of Merger on Stock of Constituent Corporations
4.01 On the Effective Date, (i) each outstanding share of the Company
common stock, $.001 par value ("Company Common Stock") shall remain outstanding
and be converted into one who share of Combined Company common stock, $.001 par
value, ("Combined Company Common Stock") and (ii) each outstanding share of
Company Common Stock shall be retired and canceled.
4.02 All options and rights to acquire SoftQuad USA Common Stock under or
pursuant to any options or warrants which are outstanding on the Effective Date
of the Merger will automatically be converted into equivalent options and rights
to purchase that whole number of Combined Company Common Stock into which the
number of SoftQuad USA Common Stock subject to such options or warrants
immediately prior to the Effective Date would have been converted in the merger
had such rights been exercised immediately prior thereto (with any fractional
Combined Company Common Stock interest resulting from the exercise being settled
in cash in the amount such holder would have received for any such fraction in
the merger had he exercised such warrants or options immediately prior to the
Merger). The option price per share of Combined Company Common Stock shall be
the option price per share of SoftQuad Common Stock in effect prior to the
Effective Date. All plans or agreements of SoftQuad USA under which such
options and rights are granted or issued shall be continued and assumed by the
Combined Company unless and until amended or terminated in accordance with their
respective terms.
4.03 (a) Atlas Stock Transfer Company, 5899 South State Street, Salt Lake City,
UT 84107-8103. Attention: Pam Gray, shall act as exchange agent in the Merger.
(b) Prior to, or as soon as practicable, after the Effective Date, the
Company shall mail to each person who was, at the time of mailing or at the
Effective Date, a holder of record of issued and outstanding Company Common
Stock (i) a form letter of transmittal and (ii) instructions for effecting the
surrender of the certificate or certificates, which immediately prior the
Effective Date represented issued and outstanding shares of Company Common Stock
("Company Certificates"), in exchange for certificates representing Combined
Company Common Stock. Upon surrender of a Company Certificate for cancellation
to the exchange agent, together with a duly executed letter of transmittal, the
holder of such Company Certificate shall subject to paragraph (f) of this
section 4.03 be entitled to receive in exchange therefor a certificate
representing that number of Combined Company Common Stock into which the Company
Common Stock theretofore represented by the Company Certificate so surrendered
shall have been converted pursuant to the provisions of this Article IV; and the
Company Certificate so surrendered shall forthwith be canceled.
(c) No dividends or other distributions declared after the Effective Date
with respect to Company Common Stock and payable to holders of record thereof
after the Effective Date shall be paid to the holder of any unsurrendered
Company Certificate with respect to Company Common Stock which by virtue of the
Merger are represented thereby, nor shall such holder be entitled to exercise
any right as a holder of Company Common Stock; until such holder shall surrender
such Company Certificate. Subject to the effect, if any, of applicable law and
except as otherwise provided in paragraph (f) of this Section 4.03, after the
subsequent surrender and exchange of a Company Certificate, the holder thereof
shall be entitled to receive any such dividends or other distributions, without
any interest thereon, which became payable prior to such surrender and exchange
with respect to Company Common Stock represented by such Company Certificate.
(d) If any stock certificate representing Combined Company Common Stock is
to be issued in a name other than that in which the Company Certificate
surrendered with respect thereto is registered, it shall be a condition of such
issuance that the Company Certificate so surrendered shall be properly endorsed
or otherwise in proper form for transfer and that the person requesting such
issuance shall pay any transfer or other taxes required by reason of the
issuance to a person other than the registered holder of the Company Certificate
surrendered or shall establish to the satisfaction of the exchange agent that
such tax has been paid or is not applicable.
(e) After the Effective Date, there shall be no further registration of
transfers on the stock transfer books of the Company of the Shares of Company
Common Stock, or of any other shares of stock of the Company, which were
outstanding immediately prior to the Effective Date. If after the Effective
Date certificates representing such shares are presented to the transfer agent
they shall be canceled and, in the case of Company Certificates, exchanged for
certificates representing Combined Company Common Stock and, as provided in this
Article IV.
(f) No certificates or scrip representing fractional Combined Company
Common Stock shall be issued upon the surrender for exchange of Company
Certificates, no dividend or distribution of the Combined Company shall relate
to any fractional Company Common Stock interest, and no such fractional share
interest will entitle the owner thereof to vote or to any right of a stockholder
of the Combined Company. In lieu thereof, the Combined Company shall issue to
each holder of Company Common Stock convertible into a fractional interest in
Combined Company Common Stock the next highest whole number of Combined Company
Common Stock.
ARTICLE V
Corporate Existence, SoftQuad USA and Liabilities of SoftQuad USA
5.01 On the Effective Date, the separate existence of SoftQuad USA shall
cease. SoftQuad USA shall be merged with and into the Company, in accordance
with the provisions of this Agreement. Thereafter, the Combined Company shall
possess all the rights, privileges, powers and franchises as well of a public as
of a private nature, and shall be subject to all the restrictions, disabilities
and duties of each of the parties to this Agreement and all and singular; the
rights, privileges, powers and franchises of the Company and SoftQuad USA, and
all property, real, personal and mixed, and all debts due to each of them on
whatever account, shall be vested in the Combined Company; and all property,
rights, privileges, powers and franchises, and all and every other interest
shall be thereafter an effectually the property of the Combined Company, as they
were of the respective constituent entities, and the title to any real estate
whether by deed or otherwise vested in the Company and SoftQuad USA or either of
them, shall not revert to be in any way impaired by reason of the Merger; but
all rights of creditors and all liens upon any property of the parties hereto,
shall be preserved unimpaired, and all debts, liabilities and duties of the
respective constituent entities, shall thenceforth attach to the Combined
Company, and may be enforced against it to the same extent as if said debts,
liabilities and duties had been incurred or contracted by it.
5.02 The SoftQuad USA agrees that it will execute and deliver, or cause to
be executed and delivered, all such deeds, assignments and other instruments,
and will take or cause to be taken such further or other action as the Company
may deem necessary or desirable in order to vest in and confirm to the Combined
Company title to and possession of all the property, rights, privileges,
immunities, powers, purposes and franchises, and all and every other interest,
of SoftQuad USA and otherwise to carry out the intent and purposes of this
Agreement.
ARTICLE VI
Officers and Directors of Combined Company
6.01 Upon the Effective Date, the officers and directors of the Combined
Company shall be officers and directors of the Company in office at such date,
and such persons shall hold office in accordance with the By-Laws of the Company
or until their respective successors shall have been appointed or elected.
6.02 If, upon the Effective Date, a vacancy shall exist in the Board of
Directors of the Company, such vacancy shall be filled in the manner provided by
its By-Laws.
ARTICLE VII
Approval by Directors; Amendment; Effective Date
7.01 This Agreement and the Merger contemplated hereby have been approved
by the requisite vote of directors of the Company in accordance with applicable
Florida law. As promptly as practicable after execution of this Agreement by
the duly authorized officers of the respective parties, the parties shall make
and execute Articles of Merger and a Certificate of Merger and shall cause such
documents to be filed with the Secretary of State of Florida and the Secretary
of State of Delaware, respectively, in accordance with the laws of the States of
Florida and Delaware. The Effective Date of the Merger shall be the date on
which the Merger becomes effective under the laws of Florida or the date on
which the Merger becomes effective under the laws of Delaware, whichever occurs
later.
7.02 The Board of Directors of the Company and SoftQuad USA may amend this
Agreement at any time prior to the Effective Date, provided that an amendment
made subsequent to the approval of the merger by the shareholder of Company
shall not (1) alter or change the amount or kind of shares to be received in
exchange for or on conversion of all or any of the Company Common Stock (2)
alter or change any term of the Certificate of Incorporation of the Company, or
(3) alter or change any of the terms and conditions of this Agreement if such
alteration or change would adversely affect the holders of Company Common Stock.
ARTICLE VIII
Termination of Merger
This Agreement may be terminated and the Merger abandoned at any time prior
to the filing of this Agreement with the Secretary of State of Florida and the
Secretary of State of Delaware by the consent of the Board of Directors of the
Company and SoftQuad USA.
ARTICLE IX
Miscellaneous
In order to facilitate the filing and recording of this Agreement, this
Agreement may be executed in counterparts, each of which when so executed shall
be deemed to be an original and all such counterparts shall together constitute
one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their respective officers, all as of the day and year first above
written.
THE AMERICAN SPORTS MACHINE, INC.
a Florida corporation
By: /s/James D. Brock, Jr.
---------------------------
James D. Brock, Jr., President
SOFTQUAD SOFTWARE, LTD.
a Delaware corporation
By: Cameron Chell
----------------
Cameron Chell, President
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
This Agreement and Plan of Reorganization (the "Agreement") is made and
entered into as of this 1st day of March, 2000, by and among The American Sports
Machine, Inc., a Florida corporation (hereinafter referred to as "ASM"),
SoftQuad Software, Ltd., a Delaware corporation (hereinafter referred to as
"SoftQuad USA"), and the undersigned stockholders ("Stockholders") of SoftQuad
USA.
R E C I T A L S:
---------------
The Stockholders own all of the issued and outstanding shares of SoftQuad
USA's capital stock. ASM desires to acquire all of the issued and outstanding
capital stock of SoftQuad USA, making SoftQuad USA a wholly-owned subsidiary of
ASM, and Stockholders desire to exchange all of the shares of SoftQuad USA's
capital stock, for designated shares of ASM's capital stock to be issued. It is
the intention of the parties hereto that: (i) ASM shall acquire all of the
issued and outstanding capital stock of SoftQuad USA in exchange solely for the
number of designated shares of ASM's authorized but unissued capital stock set
forth below (the "Exchange"); (ii) the Exchange shall qualify as a tax-free
reorganization under Section 368(a)(1)(B) of the Internal Revenue Code of 1986,
as amended, and related sections thereunder; and (iii) the Exchange shall
qualify as a transaction in securities exempt from registration or qualification
under the Securities Act of 1933, as amended, and under the applicable
securities laws of each state or jurisdiction where Stockholders reside.
NOW, THEREFORE, for the mutual consideration set out herein, the parties
hereto agree as follows:
1. EXCHANGE OF SHARES. ASM and Stockholders agree that on the Closing
Date (as hereinafter defined) Stockholders will exchange all of the issued and
outstanding shares of the capital stock of SoftQuad USA for shares (the
"Shares") of ASM's capital stock all as set out in Exhibit "A."
2. DELIVERY OF SHARES. On the Closing Date, Stockholders will deliver
to ASM the certificates representing all of the outstanding shares of SoftQuad
USA's capital stock, duly endorsed (or with duly executed stock powers) so as to
make ASM the sole owner thereof free and clear of all claims and encumbrances
except as specifically assumed by ASM. Simultaneously, on the Closing Date, ASM
will deliver the certificates representing the Shares to the Stockholders.
After delivery to ASM of certificates representing all outstanding shares of
SoftQuad USA and delivery of the Shares, the issued and outstanding shares of
ASM's capital stock will be held of record by the persons and in the amounts
described in Exhibit "A-1."
3. REPRESENTATIONS AND WARRANTIES OF SOFTQUAD USA. Subject as set out
in Section 10, the Stockholders severally, as a material inducement to ASM to
enter into this Agreement and consummate the transactions contemplated hereby,
make the following representations and warranties to ASM, which representations
and warranties are true and correct in all material respects on the Closing
Date, that to their actual knowledge:
3(a) Securities Holders. The Stockholders are the only owners, of
------------------
record, of all of the issued and outstanding shares of SoftQuad USA's capital
stock.
3(b) Financial Condition. Except as set forth in Exhibit "B",
--------------------
SoftQuad USA has no material assets or liabilities except a US$3 million
receivable from SoftQuad Software, Inc., an Ontario corporation.
3(c) Undisclosed Liabilities. Except as set forth in Schedule 1,
------------------------
at the Closing Date, SoftQuad USA: (i) will have no liabilities or obligations
of any nature, fixed or contingent, matured or unmatured, which are not shown or
otherwise provided for in Exhibit "B" except for liabilities and obligations
specifically assumed by ASM or arising in the ordinary course of business, none
of which is materially adverse; and (ii) all reserves established by SoftQuad
USA and set forth in Exhibit "B" will be adequate and there will be no material
loss contingencies (as such term is used in Statement of Financial Accounting
Standard No. 5 of the Financial Accounting Standards Board) which are not
adequately provided for.
3(d) Absence of Changes. Except as set forth in Schedule 2, since
------------------
the date of Exhibit "B", SoftQuad USA's business has been operated in the
ordinary course and there has not been:
(i) Any material adverse change in the condition (financial
or otherwise), assets, liabilities, earnings, net worth, business or prospects
of SoftQuad USA for such period, in the aggregate, or at any time during such
period;
(ii) Any damage, destruction or loss (whether or not covered
by insurance) materially adversely affecting SoftQuad USA, or its businesses;
(iii) Any declaration, setting aside, or payment of any
dividend or other distribution in respect of any shares of capital stock of
SoftQuad USA, or any direct or indirect redemption, purchase or other
acquisition of any such stock;
(iv) Any issuance or sale by SoftQuad USA or agreement to
sell any of its securities; or
(v) Any statute, rule, regulation or order adopted (including
orders of regulatory authorities with jurisdiction over SoftQuad USA or its
business) which materially adversely affects SoftQuad USA or its business.
3(e) Litigation, Etc. Except as set forth in Schedule 3, or in
----------------
Exhibit "B"; there are no actions, suits, claims, investigations or legal or
administrative or arbitration proceedings current or so far as the stockholders
are aware threatened against SoftQuad USA, its assets or business, whether at
law or in equity, or before or by any Federal, state, municipal, local, foreign
or other governmental department, commission, board, bureau, agency or
instrumentality.
3(f) Compliance; Governmental Authorizations. Except as set forth
---------------------------------------
in Schedule 4, SoftQuad USA has complied with all Federal, state, local or
foreign laws, ordinances, regulations and orders applicable to its business,
including without limitation, federal and state securities laws which, if not
complied with, would materially and adversely affect the business of SoftQuad
USA. SoftQuad USA has all Federal, state, local and foreign governmental
licenses and permits necessary in the conduct of its business, and such licenses
and permits are in full force and effect.
3(g) Due Organization, Etc. SoftQuad USA is a corporation duly
-----------------------
organized, validly existing and in good standing under the laws of Delaware.
SoftQuad USA has the power to own its properties and assets and to carry on its
business as now presently conducted.
3(h) Tax Matters. SoftQuad USA has filed all federal, state and
------------
local tax or related returns and reports due or required to be filed, which
reports accurately reflect in all material respects the amount of taxes due.
SoftQuad USA has paid all amounts of taxes or assessments which would be
delinquent if not paid as of the date of this Agreement, other than taxes or
charges being contested in good faith or not yet finally determined.
3(i) Agreements, Etc. Schedule 5 contains a true and complete
----------------
list and brief description of all material written or oral contracts,
agreements, mortgages, obligations, understandings, arrangements, restrictions,
and other instruments to which SoftQuad USA is a party or by which SoftQuad USA
or its assets may be bound. True and correct copies of all written agreements
set forth on Schedule 5 are appended in Exhibit "H." No event has occurred
which (whether with or without notice, lapse of time or the happening or
occurrence of any other event) would constitute a default under any of the
agreements set forth in Schedule 5.
3(j) Title to Property and Related Matters. SoftQuad USA has good
-------------------------------------
and marketable title to all the properties, interests in properties and assets,
real and personal, reflected as being owned by it on the Financial Statements or
acquired by it after the date of the Financial Statements as itemized in
Schedule B, of any kind or character, free and clear of any liens or
encumbrances, except (i) those referred to in the notes to the Financial
Statements, (ii) those set forth in Schedule 6, and (iii) liens for current
taxes not yet delinquent. Schedule 6 contains a general description of all real
property of SoftQuad USA. Except as set forth in said Schedule 6 and except for
matters which may arise in the ordinary course of business, SoftQuad USA's
assets are in good operating condition and repair. To the best of knowledge of
Stockholders, there does not exist any condition which materially interferes
with the use thereof in the ordinary course of SoftQuad USA's business.
3(k) Corporate Records. The corporate records, minute books, and
------------------
other documents and records of SoftQuad USA are complete and correct. ASM shall
have the right to review all corporate records of SoftQuad USA prior to the
Closing Date.
3(l) Licenses; Trademarks; Trade Names; Etc. Schedule 7 contains
---------------------------------------
a true and complete list of all licenses and all trademarks, trade names,
service marks, copyrights, know-how, patents and applications for any of the
foregoing owned by or registered in the name of SoftQuad USA. There is no
current or so far as the stockholders threatened claim or litigation against
SoftQuad USA contesting the right to use any of the trademarks, trade names and
know-how or the validity of any of the licenses, copyrights and patents listed
on Schedule 7, or asserting the misuse of any thereof, nor has there ever been
any such claim or litigation.
3(m) Authorization by SoftQuad USA. This Agreement constitutes a
------------------------------
valid and binding agreement of Stockholders, enforceable in accordance with its
terms except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium, and other similar laws relating to, limiting or
affecting the enforcement of creditors rights generally; and neither the
execution and delivery of this Agreement nor the consummation by Stockholders of
the transactions contemplated hereby, nor compliance with any of the provisions
hereof, will violate any statute, law, rule or regulation or any order, writ,
injunction or decree of any court or governmental authority enforceable against
Stockholders, or violate or conflict with or constitute a default under (or give
rise to any right of termination, cancellation or acceleration under) the terms
or conditions or provisions of any note, bond, lease, mortgage, obligation,
agreement, understanding, arrangement or restriction of any kind to which
SoftQuad USA or Stockholders is a party or by which SoftQuad USA, Stockholders
or their respective properties may be bound. No consent or approval by any
governmental authority is required in connection with the consummation of the
transactions contemplated hereby.
3(n) Capitalization. The authorized capitalization of SoftQuad
--------------
USA is as set forth in Schedule 8. Except as set forth in said Schedule 8,
there are no outstanding or presently authorized securities, warrants,
preemptive rights, subscription rights, options or related commitments of any
nature to issue any of SoftQuad USA's securities which are not reflected in the
Financial Statements or in Schedule 8.
3(o) Full Disclosure. The Stockholders have, and at the Closing
----------------
Date will have, disclosed to ASM all events, conditions and facts materially
affecting the business and prospects of SoftQuad USA; and that Stockholders have
not and will not have, at the Closing Date, withheld disclosure of any events,
conditions, and facts which it may have knowledge of, or have reasonable grounds
to know, may materially, adversely affect the business and prospects of SoftQuad
USA.
3(p) Brokerage or Finder's Fees. SoftQuad USA has not incurred,
----------------------------
nor will it incur, any liability for brokerage or finder's fees or similar
charges in connection with this Agreement or any of the transactions
contemplated hereby.
3(q) Share Ownership. The shares of SoftQuad USA's capital stock
----------------
to be exchanged for the Shares in the Exchange are owned, of record, by
Stockholders, free and clear of all liens and encumbrances of any kind and
nature.
3(r) Approvals Required. No approval, authorization, consent,
-------------------
order or other action of, or filing with, any person, firm or corporation or any
court, administrative agency or other governmental authority is required in
connection with the execution and delivery by Stockholders of this Agreement or
the consummation of the transactions described herein, except as disclosed
herein and, except to the extent that the parties are required to file reports
in accordance with relevant regulations under Federal and state securities laws.
4. REPRESENTATIONS AND WARRANTIES OF ASM. Subject as set out in
Section 10 ASM, as a material inducement to Stockholders to enter into this
Agreement and consummate the transactions contemplated hereby, make the
following representations and warranties to Stockholders, which representations
are true and correct at this date, and will be true and correct on the Closing
Date as though made on and as of such date:
4(a) Shares of Capital Stock. The Shares to be delivered to
--------------------------
Stockholders at Closing will be valid and legally issued shares of capital
stock, free and clear of all liens, encumbrances, and preemptive rights, and
will be fully-paid and non-assessable shares.
4(b) Due Authorization, Etc. This Agreement has been duly
------------------------
authorized, executed, and delivered by ASM, and constitutes a legal, valid, and
binding obligation of ASM, enforceable in accordance with its terms; no consent
of any federal, state, municipal or other governmental authority is required by
ASM for the execution, delivery or performance of this Agreement by ASM; no
consent of any party to any contract or agreement to which ASM is a party or by
which any of its property or assets are subject is required for the execution,
delivery or performance of this Agreement by ASM.
4(c) Financial Statements. Exhibit "E" is a copy of ASM's audited
--------------------
financial statements at September 30, 1999, including balance sheets, income
statements and changes in financial position and its audited financial
statements at May 31, 1999 (collectively the "Statements"). The Statements
fairly and accurately reflect the financial condition of ASM as of the dates
thereof and the results of operations for the periods reflected therein. The
Statements have been prepared in accordance with generally accepted accounting
principles, consistently applied, except as otherwise stated therein; and the
books and records, financial and others, of ASM are in all material respects
complete and correct and have been maintained in accordance with good business
and accounting practices.
4(d) Undisclosed Liabilities. Except as set forth in Schedule 9,
------------------------
ASM: (i) has no material liabilities or obligations of any nature, fixed or
contingent, matured or unmatured, which are not shown or otherwise provided for
in the Statements; and (ii) all reserves established by ASM and set forth in
the Statements are adequate and there are no material loss contingencies (as
such term is used in Statement of Financial Accounting Standard No. 5 of the
Financial Accounting Standards Board) which are not adequately provided for.
4(e) Material Adverse Change. Except as set forth in Schedule 10,
-----------------------
since the date of the Statements, there has not been, and as of the Closing Date
there shall not have been, any material changes in ASM's condition (financial or
otherwise), or liabilities (absolute, contingent or otherwise), whether or not
arising from transactions in the ordinary course of business; provided, however,
that the parties have agreed that the financial position of ASM will change to
the extent that ASM incurs costs in connection with the transactions
contemplated by this Agreement.
4(f) Litigation, Etc. Except as set forth in Schedule 11, or in
----------------
the Statements; there are no actions, suits, claims, investigations or legal or
administrative or arbitration proceedings pending or threatened against ASM, its
assets or business, whether at law or in equity, or before or by any Federal,
state, municipal, local, foreign or other governmental department, commission,
board, bureau, agency or instrumentality; nor does ASM know or have any reason
to know of a threat of such litigation or any basis for any such action, suit,
claim, investigation or proceeding.
4(g) Due Organization, Etc. ASM is a corporation duly organized,
----------------------
validly existing and in good standing under the laws of the State of Florida, is
qualified to business and in good standing in each state where it is required to
be qualified and such qualification is material and has the corporate power to
own its property and to carry on its business as now being conducted. The
Certificate of Incorporation and By-Laws of ASM, as will be in effect on the
Closing Date, are attached hereto as Exhibit "C" and are made a part hereof.
4(h) Tax Matters. By closing, ASM will have filed all Federal,
------------
state and local, tax or related returns and reports due or required to be filed,
which reports accurately reflect in all material respects the amount of taxes
due. By closing, ASM will have paid all taxes or assessments which have become
due, other than taxes or charges being contested in good faith or not finally
determined.
4(i) Agreements, Etc. ASM has not breached, nor is there any
----------------
pending or threatened claims or any legal basis for a claim that ASM has
breached, nor has an event occurred which with the passing of time would
constitute a breach of any of the terms or conditions of any agreements,
contracts or commitments to which ASM is a party or by which ASM or its assets
are bound. A list of all of ASM's material contracts, agreements or commitments
(whether oral or written) is set forth on Schedule 12 and true and correct
copies of all such contracts and agreements are appended as Exhibit "I." The
execution, delivery and performance of this Agreement by ASM will not be in
conflict with or constitute a default under any provisions of applicable law,
ASM's Certificate of Incorporation or By-Laws, or any agreement or instrument to
which ASM is a party or by which it or its assets are bound.
4(j) Capitalization. As of the date of this Agreement, the
--------------
capitalization of ASM consists of authorized common stock of 50,000,000 shares,
$.0001 par value per share, of which 5,600,000 are outstanding and 10,000,000
shares of preferred stock, without par value, of which 1,473,405 have been
designated as Class A Convertible Preferred Stock and 1,722,222 have been
designated as Class B Convertible Preferred Stock and of which are outstanding.
All outstanding shares of the Common Stock have been duly authorized, validly
issued, and are fully-paid and non-assessable, and all such shares were issued
in compliance with all applicable federal and state securities laws. Except for
the issuances of securities referred to in this Agreement, there are no
outstanding or presently authorized securities, warrants, preemptive rights,
subscription rights, options or related commitments of any nature to issue any
of ASM's securities.
4(k) Disclosure of Material Facts. ASM has, and at the Closing
-------------------------------
Date will have, disclosed to SoftQuad USA all events, conditions and facts
materially affecting the business and prospects of ASM; and ASM has not and will
not have, at the Closing Date, withheld disclosure of any events, conditions,
and facts which it may have knowledge of, or have reasonable grounds to know may
materially, adversely affect the business and prospects of ASM.
4(l) Corporate Records. The corporate financial records, minute
------------------
books, and other documents and records of ASM are to be available to SoftQuad
USA at the time of the Closing Date and turned over to new management in their
entirety at Closing. Such records are complete and correct and have been
maintained in accordance with good business and accounting practices.
4(m) Stockholders List. Exhibit "D" is a true, correct and
------------------
complete statement, dated not more than 10 days prior to the Closing Date,
setting forth the names and addresses of ASM's stockholders.
4(n) Title to Assets. Except as set forth in Schedule 13, ASM has
---------------
good and marketable title to all of its assets, free of any liens and
encumbrances.
4(o) Compliance; Governmental Authorizations. Except as set forth
---------------------------------------
in Schedule 14, ASM has complied in all respects with all Federal, state, local,
or foreign laws, ordinances, regulations, and orders applicable to its business,
including without limitation federal and state securities laws applicable to all
offerings prior to the Closing Date. ASM has all Federal, state, local and
foreign governmental licenses and permits material to and necessary in the
conduct of its business, and such licenses and permits are in full force and
effect, and no violations are or have been recorded in respect of any such
licenses of permits, and no proceedings are pending or threatened to revoke or
limit the use of such permits.
4(p) Brokerage Fees. ASM has not incurred, nor will it incur, any
--------------
liability for brokerage or finder's fees or similar charges in connection with
this Agreement or any of the transactions contemplated hereby.
4(q) SEC Filings. Exhibit "F" contains true, correct and complete
-----------
copies of Form 10-KSB filed by ASM in respect of the fiscal year ended September
30, 1999, such form was true and accurate when filed and remains true and
accurate except as set out in later filings and Schedule 10 contains a brief
summary of all material changes in ASM's financial position and prospects since
the date of the filing of Form 10-KSB. All required filings are current as of
the date of this Agreement.
5. AFFIRMATIVE COVENANTS OF ASM, SOFTQUAD USA AND STOCKHOLDERS. ASM,
SoftQuad USA and Stockholders, severally covenant to each other that:
5(a) Filing of Form 8-K. Immediately after the Closing Date, ASM will
---------------------
procure the prompt preparation and file with the Securities and Exchange
Commission appropriate notice describing this transaction on Form 8-K or other
applicable form, and otherwise comply with the provisions of the Securities
Exchange Act of 1934.
5(b) Preparation of Disclosure Statement. Immediately after the
--------------------------------------
Closing Date, the ASM will procure the preparation of a disclosure statement
containing the necessary information to comply with Rule 15(c)2(11) promulgated
by the Securities and Exchange Commission pursuant to the Securities Exchange
Act of 1934 and file such forms with one or more firms who are members of the
National Association of Securities Dealers, Inc. ("NASD") and with NASD as are
necessary to continue the quotation of ASM's securities in the NASD Electronic
Bulletin Board System.
5(c) Future Stock Distributions. After the Closing Date, ASM will
---------------------------
use its reasonable best efforts to ensure that future issuance of ASM's capital
stock will be completed in conformity with federal and state securities laws and
regulations pertaining to registration; or, pursuant to an exemption from such
registration requirements.
5(d) Reincorporation, Merger and Change of Corporate Name.
-----------------------------------------------------------
Management of SoftQuad USA and ASM will promptly take the appropriate corporate
action to reincorporate ASM from the State of Florida into the State of
Delaware, merge SoftQuad USA with and into ASM and change the name of ASM to
SoftQuad Software, Ltd. or another appropriate name selected by management of
SoftQuad USA.
5(e) Waiver of Preemptive Rights. The Stockholders waive any
------------------------------
rights of preemption they may have in respect of the transfer of the capital
stock of SoftQuad USA whether arising under the Certificate of Incorporation of
SoftQuad USA or otherwise.
6. CLOSING. The Closing (the "Closing") shall take place upon such
date (the "Closing Date") as the parties hereto may mutually agree upon, but
shall be no later than March 1, 2000. The Closing shall take place at the
offices of Sonfield & Sonfield, 770 South Post Oak Lane, Suite 435, Houston,
Texas 77056, or at such place as may be mutually agreed upon by the parties.
7. CONDITIONS PRECEDENT TO OBLIGATIONS OF SOFTQUAD USA AND
STOCKHOLDERS. All obligations of Stockholders under this Agreement are subject
to the fulfillment, prior to or on the Closing Date, of each of the following
conditions:
7(a) Truth of Representations and Warranties. The representations
--------- ------------------------------
and warranties by or on behalf of ASM contained in this Agreement or in any
certificate or document delivered to Stockholders pursuant to the provisions
hereof shall be true in all material respects at and as of the time of Closing
as though such representations and warranties were made at and as of such time.
7(b) Compliance with Covenants. ASM shall have performed and
---------------------------
complied with all covenants, agreements, and conditions required by this
Agreement to be performed or complied with by it prior to or at the Closing.
7(c) Election of New Directors. The present Directors of ASM
----------------------------
shall have caused the appointment of the persons to the Board of Directors of
ASM as directed by SoftQuad USA and will have arranged for the resignation of
existing officers and directors.
7(d) Approval by Legal Counsel. All instruments and documents
----------------------------
delivered to SoftQuad USA and Stockholders pursuant to the provisions hereof
shall be reasonably satisfactory to legal counsel for SoftQuad USA and
Stockholders.
7(e) Opinion of Counsel. ASM shall have delivered to SoftQuad USA
-------------------
and to the Stockholders an opinion of ASM's counsel, dated the Closing Date, to
the effect that:
(i) ASM is a corporation duly organized, validly existing and
in good standing under the laws of the State of Florida;
(ii) ASM has the corporate power to carry on its business as
now being conducted;
(iii) This Agreement has been duly authorized, executed and
delivered by ASM and is a valid and binding obligation of ASM, enforceable in
accordance with its terms, except to the extent that enforcement is limited by
applicable bankruptcy, reorganization, insolvency, moratorium, or similar laws
affecting creditors' rights and remedies generally or by general equity
principles (and excepting specific performance as a remedy);
(iv) ASM has taken all corporate action necessary for its due
performance under this Agreement;
(v) The execution and delivery by ASM of this Agreement and
the consummation of the transactions contemplated hereby will not conflict with
or result in a breach of any provisions of, ASM's Certificate of Incorporation
or By-Laws or, to the best of such counsel's knowledge after inquiry and based
upon information provided by ASM, constitute a default under or give rise to a
right of termination, acceleration, or cancellation under any agreement under
which ASM or any of its properties are bound or violate any court order, writ or
decree of injunction applicable to ASM;
(vi) Such counsel does not know, after inquiry, of (a) any
actions, suits or other legal proceedings or investigations pending or
threatened against or relating to or materially adversely affecting ASM; and (b)
any unsatisfied judgments against ASM.
(vii) The authorized and, to such counsel's best knowledge
after inquiry, outstanding capitalization of ASM is as set forth in Section
4(j), all of the outstanding shares of ASM's capital stock are validly issued,
fully-paid and non-assessable, without preemptive rights, and to the best of
counsel's knowledge after inquiry, there are no outstanding subscriptions,
options, rights, warrants or other transfer agreements (whether oral or
written), other than as set forth in Section 4(j) of this Agreement.
7(f) Officers' Certificate. There shall be delivered to
----------------------
Stockholders an officers' certificate, signed by James D. Brock, Jr., President
to the effect that all of the representations and warranties of ASM set forth
herein are true and complete in all material respects as of the Closing Date,
and that ASM has complied in all material respects with its covenants and
agreements set forth herein required to be complied with by the closing.
8. CONDITIONS PRECEDENT TO OBLIGATIONS OF ASM. All obligations of ASM
under this Agreement are subject to the fulfillment, prior to or on the Closing
Date, of each of the following conditions:
8(a) Truth of Representations and Warranties. The representations
---------------------------------------
and warranties by Stockholders contained in Section 3 this Agreement or in any
certificate or document delivered to ASM pursuant to the provisions hereof shall
be true in all material respects at and as of the time of Closing as though such
representations and warranties were made at and as of such time.
8(b) Compliance with Covenants. The Stockholders shall have
---------------------------
performed and complied with all Covenants, agreements, and conditions required
by this Agreement to be performed or complied with by it prior to or at the
Closing.
8(c) Delivery of Investment Letter Each of Stockholders shall
--------------------------------
have delivered to ASM an "investment letter" in the form attached as Exhibit
"G," setting out that the shares being acquired are restricted shares and are
being acquired for investment purposes only, and not with a view to public
resale or distribution.
8(d) Delivery of Exhibits and Schedules. The Stockholders shall
------------------------------------
have delivered all of the exhibits and schedules required herein to ASM and such
exhibits, schedules and Financial Statements shall have been acceptable to ASM,
in its sole and absolute discretion.
8(e) Opinion of Counsel. SoftQuad USA shall have delivered to ASM
------------------
an opinion of counsel, dated the Closing Date, to the effect that:
(i) SoftQuad USA is a corporation duly organized, validly
existing and in good standing under the laws of Delaware;
(ii) SoftQuad USA has the corporate power to carry on its
business as now being conducted;
(iii) Except as referred to herein, such counsel knows, after
inquiry, of (a) no actions, suit or other legal proceedings or investigations
pending or threatened against or relating to or materially adversely affecting
SoftQuad USA; and (b) no unsatisfied judgments against SoftQuad USA;
(iv) The authorized capitalization of SoftQuad USA is as set
forth in Section 3(n), all of the outstanding shares of capital stock of
SoftQuad USA are validly issued, fully-paid and non-assessable, without
preemptive rights, and to the best of counsel's knowledge, after inquiry, there
are no outstanding subscriptions, options, rights, warrants or other transfer
agreements (whether oral or written) obligating SoftQuad USA to issue or
transfer from treasury any of its securities except as set forth in Section 3(n)
of this Agreement. When duly transferred to ASM as provided herein, to the best
of such counsel's knowledge after inquiry, ASM will own all of the issued and
outstanding capital stock of SoftQuad USA subject to registration of the
transfer of such shares by the transfer agent of SoftQuad USA and due stamping
of the share transfer.
(v) SoftQuad USA is the owner of the intellectual property
described on Schedule 7 hereto free and clear of any claims liens or charges.
9. INDEMNIFICATION. Subject as set out in Section 10, each party to
this Agreement shall indemnify and hold harmless each other party to this
Agreement at all times after the date of this Agreement against and in respect
of any liability, damage or deficiency, all actions, suits, proceedings,
demands, assessments, judgments, costs and expenses including attorney's fees
(through all appeals) incident to any of the foregoing, resulting from any
misrepresentation or breach of warranty contained in Section 3 or 4 as
appropriate on the part of such party under this Agreement. Subject to the
terms of this Agreement, the defaulting party shall reimburse the other party or
parties, on demand, for any reasonable payment made by said parties at any time
after Closing, in respect of any liability or claim to which the foregoing
indemnity relates, if such payment is made after reasonable notice to the other
party to defend or satisfy the same and such party failed to defend or satisfy
same.
10. NATURE OF REPRESENTATIONS AND WARRANTIES. All of the parties
hereto are executing and carrying out the provisions of this Agreement in
reliance on the representations, warranties, covenants and agreements contained
in this Agreement or at the Closing of the transactions herein provided for, and
any investigation which they might have made or any other representations,
warranties, agreements promises or information, written or oral, made by the
other party or any other person shall not be deemed a waiver of any breach of
any such representation, warranty, covenant or agreement.
11. DOCUMENTS AT CLOSING. At the Closing, the following transactions
shall occur, all of such transactions being deemed to occur simultaneously:
11(a) Documents Delivered by the Stockholders. Stockholders will
----------------------------------------
deliver, or cause to be delivered, to ASM the following:
(i) stock certificates for the shares of stock of SoftQuad
USA being exchanged hereunder, duly endorsed or with stock powers attached in
blank but subject to a customary restrictive stock legend.
(ii) stock certificates for the shares of capital stock of
SoftQuad USA being returned for cancellation pursuant to paragraph 5(a) duly
endorsed or with stock powers attached in blank.
(iii) the opinion of counsel for SoftQuad USA as set forth
herein;
(iv) a certificate from the Secretary of State of Florida
dated not more than fifteen (15) days prior to the date of Closing to the effect
that SoftQuad USA is in good standing under the laws of the said state; and
(v) such other instruments, documents and certificates, if
any, as are required to be delivered pursuant to the provisions of this
Agreement or which may be reasonably requested in furtherance of the provisions
of this Agreement;
11(b) Documents Delivered by ASM.ASM will deliver or cause to be
-----------------------------
delivered to Stockholders and SoftQuad USA:
(i) stock certificates for the Shares subject to a customary
restrictive stock legend;
(ii) all corporate records of ASM, including without
limitation corporate minute books (which shall contain copies of the Certificate
of Incorporation and By-Laws, as amended to the Closing), stock books, stock
transfer books, corporate seals, and such other corporate books and records as
may reasonably requested by the Stockholders and their counsel;
(iii) a certificate of ASM's officers to the effect that all
representations and warranties of ASM made under this Agreement are reaffirmed
on the Closing Date, as though originally given to Stockholders and SoftQuad USA
on said date;
(iv) the opinions of ASM's counsel set forth herein;
(v) a Certificate from the Secretary of State of Florida
dated at or about the date of Closing that ASM is in good standing under the
laws of said state; and
(vi) such other instruments and documents, if any, as are
required to be delivered pursuant to the provisions of this Agreement, or which
may be reasonably requested in furtherance of the provisions of this Agreement.
12. MISCELLANEOUS.
12(a) Further Assurances. At any time, and from time to time,
-------------------
after the Closing, each party will execute such additional instruments and take
such action as may be reasonably requested by the other party to confirm or
perfect title to any property transferred hereunder or otherwise to carry out
the intent and purposes of this Agreement;
12(b) Waivers. Any failure on the part of any party hereto to
-------
comply with any of its obligations, agreements or conditions hereunder may be
waived in writing by the party to whom such compliance is owed.
12(c) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed to have been given if delivered in person or sent
by prepaid first class registered or certified mail, return receipt requested to
the following addresses, or such other addresses as are given to other parties
in the manner set forth herein.
ASM: The American Sports Machine, Inc.
222 Lakeview Avenue, Suite 160-146
West Palm Beach, Florida 33401
Attn: James D. Brock, Jr., President
Tel: (561) 832-5697
With a copy to: Mr. Donald F. Mintmire, Esq.
265 Sunrise Ave, Suite 204
Palm Beach, Florida 33480
Tel: (561) 832-5697
SoftQuad USA: SoftQuad Software, Ltd.
161 Eglinton Avenue, Suite 400
Toronto, Ontario M4P 1J5
CANADA
Attn: Cameron Chell, President
With a copy to: Robert L. Sonfield, Jr., Esq.
Sonfield & Sonfield
770 South Post Oak Lane, Suite 435
Houston, Texas 77056-1913
Tel: (713) 877-83333
12(d) Headings. The section and subsection headings in this Agreement
--------
are inserted for convenience and shall not affect in any way the meaning or
interpretation of this Agreement.
12(e) Counterparts. This Agreement may be executed simultaneously
in two or more counterparts, each of which shall be deemed an original, but all
of which together shall constitute one and the same instrument. A facsimile
signature by any party on a counterpart of this Agreement shall be binding and
effective for all purposes. Such party shall, however, subsequently deliver to
the other party an original executed copy of this Agreement.
12(f) Governing Law. This Agreement shall be governed by the laws
--------------
of Delaware.
12(g) Binding Effect. This Agreement shall be binding upon the
---------------
parties hereto and inure to the benefit of the parties, their respective heirs,
administrators, executors, successors and assigns.
12(h) Entire Agreement. This Agreement is the entire agreement of
----------------
the parties covering everything agreed upon or understood in the transaction.
There are no oral promises, conditions, representations, understandings,
interpretations or terms of any kind as conditions or inducements to the
execution hereof.
12(i) Time. Time is of the essence.
----
12(j) Severability. If any part of this Agreement is determined
------------
by a court of competent jurisdiction to be unenforceable, the balance of the
Agreement shall remain in full force and effect.
12(k) Default Costs. In the event any party hereto has to resort
--------------
to legal action to enforce any of the terms hereof, such party shall be entitled
to collect attorneys' fees and other costs from the party in default.
<PAGE>
In order to facilitate the filing and recording of this Agreement, this
Agreement may be executed in counterparts, each of which when so executed shall
be deemed to be an original and all such counterparts shall together constitute
one and the same instrument.
<TABLE>
<CAPTION>
IN WITNESS WHEREOF, the parties have executed this Agreement the day and
year first above written.
<S> <C>
ATTEST:. . . . . . . . . . . . . THE AMERICAN SPORTS MACHINE, INC.
By:/s/James D. Brock, Jr.. . . . By:/s/James D. Brock, Jr.
- -------------------------------- ---------------------------------
James D. Brock, Jr., Secretary James D. Brock, Jr., President
ATTEST:. . . . . . . . . . . . . SOFTQUAD SOFTWARE, LTD.
By:/s/David Bolink . . . . . . . By:/s/Cameron Chell
- -------------------------------- ---------------------------------
David Bolink, Secretary. . . . Cameron Chell, President
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
STOCKHOLDERS OF SOFTQUAD SOFTWARE, LTD.
<S> <C>
VC ADVANTAGE LIMITED PARTNERSHIP
By VCA Management Ltd.
Its General Partner. . . . . . . . . Hammock Group Ltd.
By ________________________________. By: Voyageur Financial Services
Name _____________________________
Title ______________________________ By: _______________________________
Paul Lemmon, Administrator
Ashland Resources Inc.
Aberdeen Avenue LLC
By: Voyageur Financial Services
By ________________________________
David Simms . . . . . . . . . . . . By: ________________________________
Title ______________________________ Paul Lemmon, Administrator
Striker Capital Limited
By: Voyageur Financial Services
By _________________________________
Paul Lemmon, Administrator
</TABLE>
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
SHARES OF SOFTQUAD USA TO BE EXCHANGED FOR SHARES OF ASM
NUMBER AND CLASS OF ASM
----------------------------------
NAME OF SOFQUAD USA NUMBER AND CLASS OF COMMON SHARES TO BE ISSUED IN
- ------------------------------------ ---------------------------------- ---------------------------------
SHAREHOLDER SOFTQUAD USA SHARES HELD EXCHANGE
- ------------------------------------ ---------------------------------- ---------------------------------
<S> <C> <C>
Aberdeen Avenue LLC. . . . . . . . . 491,135 Class A Conv. Preferred 491,135 Class A Conv. Preferred
245,567 Common 245,567 Common
Ashland Resources, Inc.. . . . . . . 491,135 Class A Conv. Preferred 491,135 Class A Conv. Preferred
245,568 Common 245,568 Common
Striker Capital Limited. . . . . . . 491,135 Class A Conv. Preferred 491,135 Class A Conv. Preferred
245,568 Common 245,135 Common
VC Advantage Limited Partnership . . 1,033,333 Class B. Conv. Preferred 1,033,333 Class B Conv. Preferred
Hammock Group Ltd. . . . . . . . . . 688,889 Class B Conv. Preferred 688,889 Class B Conv. Preferred
Thomson Kernaghan & Co. Limited,
as Agent for the Benefit of Others 1,000,000 Common 1,000,000 Common
</TABLE>
<PAGE>
EXHIBIT A-1
ASM SHAREHOLDERS ON CLOSING DATE AFTER EXCHANGE OF SHARES
<TABLE>
<CAPTION>
NAME NUMBER AND CLASS OF SHARES
- ---------------------------------- ---------------------------------
<S> <C>
Stephanie Acierno. . . . . . . . . 80,000 Common
Gretchen Dore. . . . . . . . . . . 80,000 Common
Thomas V. Flynn. . . . . . . . . . 80,000 Common
Gregg Houston. . . . . . . . . . . 80,000 Common
Kimberly Kelley. . . . . . . . . . 80,000 Common
Harold A. Munning. . . . . . . . . 80,000 Common
Kimberly Kelley. . . . . . . . . . 64,000 Common
Gretchen Dore. . . . . . . . . . . 64,000 Common
Thomas V. Flynn. . . . . . . . . . 64,000 Common
Gregg Houston. . . . . . . . . . . 64,000 Common
Harold A. Munning. . . . . . . . . 64,000 Common
Stephanie Acierno. . . . . . . . . 64,000 Common
James Donald Brock, Jr.. . . . . . 2,000,000 Common
Linear Strategies Ltd. . . . . . . 320,000 Common
Linear Strategies Ltd. . . . . . . 280,000 Common
Rodney Ford. . . . . . . . . . . . 80,000 Common
Anne-Marie Fourdan . . . . . . . . 40,000 Common
Kevin Coppe. . . . . . . . . . . . 80,000 Common
Jennifer Froehich. . . . . . . . . 80,000 Common
Mark Gallagher . . . . . . . . . . 80,000 Common
John Marratt . . . . . . . . . . . 80,000 Common
Mary Catherine McGowan . . . . . . 80,000 Common
Jeffrey Merback. . . . . . . . . . 80,000 Common
Douglas Paxton . . . . . . . . . . 80,000 Common
Sammy Peroulas . . . . . . . . . . 80,000 Common
William Ragsdale . . . . . . . . . 80,000 Common
Julie Watson . . . . . . . . . . . 80,000 Common
Rodney Ford. . . . . . . . . . . . 64,000 Common
Anne-Marie Fourdan . . . . . . . . 64,000 Common
Brian Jansma . . . . . . . . . . . 64,000 Common
Kevin Coppe. . . . . . . . . . . . 64,000 Common
Jennifer Froehich. . . . . . . . . 64,000 Common
Paul Safran, Jr. . . . . . . . . . 64,000 Common
Lisa Reisman . . . . . . . . . . . 64,000 Common
Mark Gallagher . . . . . . . . . . 64,000 Common
Amy Melice . . . . . . . . . . . . 64,000 Common
John Marratt . . . . . . . . . . . 64,000 Common
Jeffrey Merback. . . . . . . . . . 64,000 Common
Mary Catherine McGowan . . . . . . 64,000 Common
Felice Melice. . . . . . . . . . . 64,000 Common
Samuel Melice. . . . . . . . . . . 64,000 Common
Brandon Bell . . . . . . . . . . . 64,000 Common
Douglas Paxton . . . . . . . . . . 64,000 Common
Sammy Peroulas . . . . . . . . . . 64,000 Common
William Ragsdale . . . . . . . . . 64,000 Common
Julie Watson . . . . . . . . . . . 64,000 Common
Aberdeen Avenue LLC. . . . . . . . 491,135 Class A Conv. Preferred
245,567 Common
Ashland Resources, Inc.. . . . . . 491,135 Class A Conv. Preferred
245,568 Common
Striker Capital Limited. . . . . . 491,135 Class A. Conv. Preferred
245,135 Common
VC Advantage Limited Partnership . 1,033,333 Class B Conv. Preferred
Hammock Group Ltd. . . . . . . . . 688,889 Class B Conv. Preferred
Thomson Kernaghan & Co. Limited,
as Agent for the Benefit of Others 1,000,000 Common
</TABLE>
<PAGE>
EXHIBIT B
SOFTQUAD USA'S FINANCIAL CONDITION
As of February 28, 2000:
Additional assets:
- ------------------
Right to receive approximately $6.75 million net proceed from sale of Class
B Convertible Preferred and Common stock.
Rights under Soft Quad (Canada) Acquisition Agreement and Share
Purchase/Option Exchange Agreements with each securityholder of SoftQuad
Software, Inc., including the right to acquire all of the issued and outstanding
securities of SoftQuad Software, Inc. as set forth therein.
Rights under TK Engagement Letter dated December ___, 1999 and February
___, 2000.
Additional liabilities:
- -----------------------
Obligations under Common Stock, Class A Convertible Preferred and Class B
Convertible Preferred stock purchase agreements, including the warrants
(aggregate number of warrants being 1,878,368), registration rights agreements
and other documents referred to therein.
Obligations under SoftQuad (Canada) Acquisition Agreement and Share
Purchase/Option Exchange Agreements with each securityholder of SoftQuad
Software, Inc. and related documents.
Obligations under TK Engagement Letter dated December ___, 1999 and February
___, 2000.
Obligations to issue the special voting share in connection with the SoftQuad
Acquisition Agreement and related documents.
Obligations to issued Common Stock pursuant to existing warrants (1,878,368),
options (2,513,500) and rights to acquire Common Stock, including shares
issuable upon exercise of options to be granted under option exchange agreements
with optionholders of SoftQuad Software, Inc. (1,837,000), shares issuable to
certain shareholders of SoftQuad Software, Inc. pursuant to share purchase
agreements (3,435,670), and shares issuable upon exchange of exchangeable shares
of SoftQuad Acquisition Corporation issuable to certain shareholders of SoftQuad
Software, inc. under the share purchase agreements (5,792,605).
Obligations to pay organizational expenses, expenses incurred in the acquisition
of SoftQuad Software, Inc., expenses incurred in the issuance and sale of the
outstanding securities and expenses incurred in connection with this Agreement
and Plan of Reorganization, including accounting and legal expenses.
<PAGE>
EXHIBIT C
ARTICLES OF AMENDMENT TO ARTICLES OF INCORPORATION AND BY LAWS OF ASM
ARTICLES OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
THE AMERICAN SPORTS MACHINE, INC.
Pursuant to the provision of section 607.1006, Florida Statutes, this
corporation adopts the following articles of amendment to its articles of
incorporation:
FIRST: Amendment(s) adopted: (indicate article number(s) being amended,
added or deleted)
ARTICLE III. CAPITAL STOCK
--------------------------
The maximum number of shares of stock that this corporation is authorized
to have outstanding at any one time is 10,000,000 shares of common stock having
a par value of $.0001 per share.
TO BE CHANGED TO READ AS FOLLOWS:
ARTICLE III. CAPITAL STOCK
--------------------------
The maximum number of shares of stock that this corporation is authorized
to have outstanding at any one time is 50,000,000 shares of common stock having
a par value of $.0001 per share; and 10,000,000 shares of preferred stock, with
the specific terms, conditions, limitations, and preferences to be determined by
the Board of Directors without shareholder approval.
ADD:
ARTICLE VIII. SPECIAL AUTHORITY OF BOARD OF DIRECTORS AND WAIVER OF DISSENTERS
------------------------------------------------------------------------------
RIGHTS
------
The Board of Directors shall be and are hereby authorized to enter into on
behalf of the corporation and to bind the corporation without shareholder
approval, any and all acts approving (a) the terms and conditions of a merger
and/or a share exchange; and (b) divisions, combinations and/or splits of shares
of any class or series of stock of the corporation, whether issued or unissued,
with or without any change in the number of authorized shares; and shareholders
affected thereby, shall not be entitled to dissenters rights with respect
thereto under any applicable statutory dissenters rights provisions.
ADD:
ARTICLE IX. CONFLICT OF INTEREST
--------------------------------
Any related party contract or transaction must be authorized, approved or
ratified at a meeting of the Board of Directors by sufficient vote thereon by
directors not interested therein or the transaction must be fair and reasonable
to the Corporation.
ADD:
ARTICLE X. INDEMNIFICATION
----------------------------
The Corporation shall indemnify its Officers, Directors, Employees and Agents in
accordance with the following:.
(a) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the Corporation), by reason of the
fact that he is or was a director, officer, employee or agent of the
Corporation, or is or was otherwise serving at the request of the Corporation as
a director, officer, employee or agent of another corporation, partnership joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), judgments, fines and amounts paid in settlement, actually and reasonably
incurred by him in connection with such action, suit or proceeding, if he acted
in good faith and in a manner he reasonably believed to be in, or not opposed to
the best interests of the Corporation, and, with respect to any criminal action
or proceeding, has no reasonable cause to believe his conduct to be unlawful.
The termination of any action, suit or proceeding, by judgment, order,
settlement, conviction upon a plea of nolo contendere or its equivalent, shall
not of itself create a presumption that the person did not act in good faith in
a manner he reasonably believed to be in, or not opposed to, the best interests
of the Corporation and, with respect to any criminal action or proceeding, had
reasonable cause to believe the action was unlawful.
(b) The Corporation shall indemnify any person who was or is a party, or is
threatened to be made a party, to any threatened, pending or completed action or
suit by or in the right of the Corporation, to procure a judgment in its favor
by reason of the fact that he is or was a director, officer, employee or agent
of the Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee or agent of another corporation, partnership, joint
venture, trust or other enterprise, against expenses (including attorneys'
fees), actually and reasonably incurred by him in connection with the defense or
settlement of such action or suit, if he acted in good faith and in a manner he
reasonably believed to be in, or not opposed to, the best interests of the
Corporation, except that no indemnification shall be made in respect of any
claim, issue or matter as to whether such person shall have been adjudged to be
liable for negligence or misconduct in the performance of his duty to the
Corporation, unless, and only to the extent that, the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnification for such expenses
which such court deems proper.
(c) To the extent that a director, officer, employee or agent of the
Corporation has been successful on the merits or otherwise in the defense of any
action, suit or proceeding referred to in Sections (a) and (b) of this Article,
or in defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorney's fees) actually and reasonably incurred by
him in connection therewith.
(d) Any indemnification under Section (a) or (b) of this Article (unless
ordered by a court) shall be made by the Corporation only as authorized in the
specific case upon a determination that indemnification of the officer,
director, employee or agent is proper under the circumstances, because he has
met the applicable standard of conduct set forth in Section (a) or (b) of this
Article. Such determination shall be made (i) by the Board of Directors by a
majority vote of a quorum consisting of directors who were not parties to such
action, suit or proceeding, or (ii) if such quorum is not obtainable or, even if
obtainable, a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion, or (iii) by the affirmative vote of the holders of
a majority of the shares of stock entitled to vote and represented at a meeting
called for that purpose.
(e) Expenses (including attorneys' fees) incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance of
the final disposition of such action, suit or proceeding, as authorized in
Section (d) of this Article, upon receipt of an understanding by or on behalf of
the director, officer, employee or agent to repay such amount, unless it shall
ultimately be determined that he is entitled to be indemnified by the
Corporation as authorized in this Article.
(f) The Board of Directors may exercise the Corporation's power to purchase
and maintain insurance on behalf of any person who is or was a director,
officer, employee, or agent of the Corporation, or is or was serving at the
request of the Corporation as a director, officer, employee, or agent of another
corporation, partnership, joint venture, trust or other enterprise, against any
liability asserted against him and incurred by him in any such capacity, or
arising out of his status as such, whether or not the Corporation would have the
power to indemnify him against such liability under this Article.
(g) The indemnification provided by this Article shall not be deemed
exclusive of any other rights to which those seeking indemnification may be
entitled under these Amended Articles of Incorporation, the Bylaws, agreements,
vote of the shareholders or disinterested directors, or otherwise, both as to
action in his official capacity and as to action in another capacity while
holding such office and shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the benefit of the heirs
and personal representatives of such a person.
ADD:
ARTICLE XI. LAW APPLICABLE TO CONTROL-SHARE VOTING RIGHTS.
----------------------------------------------------------
The provisions set forth in Fl. Stat. 607.0902 do not apply to
control-share acquisitions of shares of the Corporation.
SECOND: If an amendment provides for an exchange, reclassification or
cancellation of issued shares, provisions for implementing the amendment if not
contained in the amendment itself, are as follows:
N/A
THIRD: The date of each amendment's adoption: DECEMBER 15, 1998
FOURTH: Adoption of Amendment(s) check one:
____x____ The amendment(s) was/were approved by the shareholders. The
number of votes cast for the amendment(s) was/were sufficient for approval.
________ The amendment(s) was/were approved by the shareholders through
voting groups.
The following statements must be separately provided for each voting
group entitled to vote separately on the amendment(s):
"The number of votes cast for the amendment(s) was/were sufficient for
approval by __________________________________________________________."
(Voting Group)
________ The amendment(s) was/were adopted by the board of directors without
shareholder action and shareholder action was not required.
________ The amendment(s) was/were adopted by the incorporators without
shareholder action and shareholder action was not required.
Signed this 28th day of January, 1999.
BY: _________________________________________
(By the Chairm and or Vice Chairman of the
Board of Directors, President, or other officer
if adopted by the shareholders)
OR
(By a director if adopted by the directors)
OR
(By an incorporator if adopted by the incorporators)
Angela Michelle Bartolotta
- ----------------------------
Typed or printed Name
President
- ---------
Title
<PAGE>
BY-LAWS
OF
THE AMERICAN SPORTS MACHINE, INC.
ARTICLE I
OFFICES
The principal office of the Corporation in the State of Florida shall be located
in the City of Palm Beach. The Corporation may have such other offices, either
within or without the State of Florida, as the business of the Corporation may
require from time to time.
The Registered Office of the Corporation may be, but need not be, identical with
its principal office in the State of Florida and the address of the Registered
Office may be changed from time to time by the Board of Directors.
ARTICLE II
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The annual meeting of shareholders shall be held at
such time and place each year as the Board of Directors shall determine for the
purpose of electing directors and for the transaction of such other business as
may come before the meeting. If the election of directors shall not be held at
any annual meeting, or at any adjournment thereof, the Board of Directors shall
cause the election to be held at a special meeting of the shareholders to be
held as soon thereafter as may be convenient.
SECTION 2. SPECIAL MEETING. Special meetings of the shareholders may be called
by the President, by the Board of Directors or by the holders of not less than
one-fifth (1/5) of the voting power of all shareholders of the Corporation.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate any place
within or without the State of Florida as the place of meeting for any annual
meeting, or any place either within or without the State of Florida as the place
of meeting for any special meeting called by the Board of Directors.
SECTION 4. NOTICE OF MEETINGS AND WAIVER. Written or printed notice stating
the place, day and hour of the meeting and, in case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not less
than ten (10) nor more than sixty (60) days before the date of the meeting,
either personally or by mail, by or at the direction of the Chairman of the
Board, the President, or the Secretary, or the officer or persons calling the
meeting. If mailed, such notice shall be deemed to be delivered when deposited
in the United States mail in a sealed envelope addressed to the shareholder at
his address as it appears on the records of the Corporation, with postage
thereon prepaid. Notice of any shareholders' meeting may be waived in writing
by any shareholder at any time before or after the meeting.
SECTION 5. MEETING OF ALL SHAREHOLDERS. If all of the shareholders shall meet
at any time and place, either within or without the State of Florida, and
consent to the holding of a meeting, such meeting shall be valid without call or
notice, and at such meeting any corporate action may be taken.
SECTION 6. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. The Board of
Directors of the Corporation may fix in advance a date, not exceeding sixty (60)
and not less than ten (10) days prior to the date of any meeting of
shareholders, or to the date for the payment of any dividend or for the
allotment of rights, or to the date when any exchange or reclassification of
shares shall be effective, as the record date for the determination of
shareholders entitled to receive payment of any such dividend or to receive any
such allotment of rights, or to exercise rights in respect of any exchange or
reclassification of shares; and the shareholders of record on such date shall be
the shareholders entitled to notice of and to vote at, such meeting, or to
receive payment of such dividend or to receive such allotment of rights or to
exercise such rights in the event of an exchange or reclassification of shares,
as the case may be. If no record date is fixed by the Board of Directors, the
date on which notice of the meeting is mailed shall be deemed to be the record
date for the determination of shareholders entitled to vote at such meeting.
Transferees of shares which are transferred after the record date shall not be
entitled to notice of or to vote at such meeting.
SECTION 7. VOTING LISTS. The officer or agent having charge of the transfer
book for shares of the Corporation shall at least ten (10) days before each
meeting of shareholders, make a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order, with the address and the
number of shares held by each shareholder, which list, for a period of ten (10)
days prior to such meeting, shall be kept on file at the office of the
Corporation and shall be subject to inspection by any shareholder at any time
during usual business hours. Such list shall be produced and kept open at the
time and place of the meeting and shall be subject to the inspection of any
shareholder during the meeting. The original share ledger or stock transfer
book, or a duplicate thereof kept in this State, shall be prima facie evidence
as to who are the shareholders entitled to examine such list or share ledger or
stock transfer book or to vote at any meeting of shareholders.
SECTION 8. QUORUM. A majority of the outstanding shares of the Corporation,
represented in person or by proxy, shall constitute a quorum at any meeting of
shareholders; provided, that if less than a majority of the outstanding shares
are represented at said meeting, a majority of the shares so represented may
adjourn the meeting from time to time without further notice.
SECTION 9. PROXIES. At all meetings of shareholders, a shareholder may vote by
proxy executed in writing by the shareholder or by his duly authorized
attorney-in-fact. Such proxy shall be filed with the Secretary of the
Corporation before or at the time of the meeting. No proxy shall be valid after
eleven (11) months from the date of its execution, unless otherwise provided in
the proxy, and such proxy may be withdrawn at any time.
SECTION 10. VOTING OF SHARES. Each outstanding share of Common Stock shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
SECTION 11. VOTING OF SHARES BY CERTAIN HOLDERS. Shares standing in the name
of another corporation, domestic or foreign, may be voted by such officer, agent
or proxy as the By-Laws of such corporation may prescribe, or, in the absence of
such provision, as the Board of Directors of such corporation may determine.
Shares standing in the name of a deceased person may be voted by his
administrator or executor, either in person or by proxy. Shares standing in the
name of a guardian, conservator, or trustee may be voted by such fiduciary,
either in person or by proxy.
Shares standing in the name of a trustee may be voted by him, either in person
or by proxy, but no trustee shall be entitled to vote shares held by him without
a transfer of such shares into his name.
Shares standing in the joint names of four (4) or more fiduciaries shall be
voted in the manner determined by the majority of such fiduciaries, unless the
instrument or order appointing such fiduciaries otherwise directs.
Shares standing in the name of a receiver may be voted by such receiver, and
shares held by or under the control of a receiver may be voted by such receiver
without the transfer thereof into his name if authority to do so is contained in
an appropriate order of the court by which such receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote such shares
(except that if the right to vote be expressly given in writing to the pledgee
and notice thereof delivered to the Corporation in writing by the pledgee, the
shareholder shall not have the right to vote the shares so pledged) until the
shares have been transferred into the name of the pledgee, and thereafter the
pledgee or his nominee shall be entitled to vote the shares so transferred.
SECTION 12. INFORMAL ACTION BY SHAREHOLDERS. Unless prohibited by the Articles
of Incorporation, any action required to be taken at a meeting of the
shareholders may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by the holders of a majority of the
issued and outstanding capital stock of the corporation.
SECTION 13. ADJOURNMENTS. If a meeting is adjourned to another time or place,
notice of the adjourned meeting need not be given if the time and place thereof
are announced at the meeting at which the adjournment is taken. The Corporation
may transact any business which might have been transacted at the original
meeting. If the adjournment is for more than thirty (30) days or a new record
date is fixed for the adjourned meeting, a notice of the adjourned meeting shall
be given to each shareholder of record entitled to vote at the meeting.
ARTICLE III
DIRECTORS
SECTION 1. GENERAL POWERS AND EXECUTIVE COMMITTEE. The business and affairs of
the Corporation shall be managed by its Board of Directors. The Board of
Directors may, by resolution passed by a majority of the whole Board, designate
two (2) or more of its number to constitute an Executive Committee, who, to the
extent provided in the resolution, shall have and exercise the authority of the
Board of Directors in the management of the Corporation. The Board of Directors
may also, by resolution passed by a majority of the whole of the Board,
designate members to constitute other committees, who, to the extent provided in
the resolution, shall have and exercise the designated authority.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors which
shall constitute the whole Board of Directors shall be fixed from time to time
by resolution passed by the Board or by the shareholders (any such resolution of
either the Board of Directors or shareholders being subject to any later
resolution by either of them) but in no event shall such number be less than
one. No resolution shall have the effect of shortening the term of any
incumbent director. Directors shall be elected at the annual meeting of
shareholders and shall continue in office until their successors shall have been
elected and qualified. Directors need not be residents of Florida nor need they
be the holder of any shares of the capital stock of the Corporation.
SECTION 3. REGULAR MEETINGS. Regular meetings of the Board of Directors shall
be held without other notice than this By-Law, immediately after, and at the
same place as, the annual meeting of shareholders. The Board of Directors may
provide, by resolution, the time and place, either within or without the State
of Florida, for holding of additional regular meetings without other notice than
such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of Directors may be
called by or at the request of the Chairman of the Board, the President or any
two (2) directors. The person or persons authorized to call special meetings of
the Board of Directors may fix any place, either within or without the State of
Florida, as the place for holding any special meeting of the Board of Directors
called by them.
SECTION 5. NOTICE. Written notice of any special meeting shall be given to
each director at least two (2) days before the meeting, either by personal
delivery, telegram, cablegram, or facsimile. Any director may waive notice of
any meeting. The attendance of a director at any meeting shall constitute a
waiver of notice of such meeting, and a waiver of any and all objections to the
place of meeting, the time of meeting, or the manner in which it was called or
convened, except where a director attends a meeting for the express purpose of
objecting to the transaction of any business because the meeting is not lawfully
called or convened. The purpose of and the business to be transacted at any
special meeting of the Board of Directors must be specified in the notice or
waiver or notice of such a meeting.
SECTION 6. QUORUM. A majority of the number of directors fixed by or in the
manner prescribed in the By-Laws shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, provided, that if less
than a majority of the directors are present at that meeting, a majority of the
directors present may adjourn the meeting from time to time without further
notice.
SECTION 7. MANNER OF ACTING. The act of a majority of the directors present at
a meeting at which a quorum is present shall be the act of the Board of
Directors.
SECTION 8. INFORMAL ACTION BY DIRECTORS. Any action required to be taken at a
meeting of the Directors of a corporation or any action which may be taken at
such meeting may be taken without a meeting if a consent in writing, setting
forth the action so taken, shall be signed by a majority of all directors and
such consent shall have the same effect as an actual vote.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of Directors or in a
directorship to be filled by reason of an increase in the number of directors,
may be filled by the affirmative vote of a majority of the remaining directors
though less than a quorum of the Board of Directors. A director elected to fill
a vacancy shall be elected for the unexpired term of his predecessor in office
or until the next succeeding annual meeting of shareholders. Any directorship
to be filled by reason of an increase in the number of directors may be filled
by election by the Board of Directors for a term of office continuing until the
next election of the directors by the shareholders.
SECTION 10. COMPENSATION. Directors may by resolution of the Board of
Directors, establish a fixed sum and expenses of attendance, if any, for
attendance at each regular or special meeting of the Board of Directors.
Nothing herein contained shall be construed to preclude any director from
serving the Corporation in any other capacity and receiving compensation
therefor.
SECTION 11. REMOVAL. At a meeting of shareholders called expressly for that
purpose, directors may be removed, with or without cause, by a vote of the
majority of the shares then entitled to vote at an election of directors.
ARTICLE IV
OFFICERS
SECTION 1. CLASSES. The officers of the Corporation shall be a President, a
Treasurer, and a Secretary, and such other officers and assistant officers as
from time to time may be deemed necessary by the Board of Directors and elected
in accordance with the provisions of this Article. Any two (2) or more offices
may be held by the same person. The failure to elect a President, Secretary or
Treasurer shall not affect the existence of this Corporation.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the Corporation shall
be elected annually by the Board of Directors at the first meeting of the Board
of Directors held after each annual meeting of shareholders. If the election of
officers shall not be held at such meeting, such election shall be held as soon
thereafter as convenient. Vacancies may be filled or new offices created and
filled at any meeting of the Board of Directors. Each officer shall hold office
until his successor shall have been duly elected and shall have qualified or
until his death, his resignation or his removal from office in the manner
hereinafter provided.
SECTION 3. REMOVAL. Any officer or agent elected or appointed by the Board of
Directors may be removed by the Board of Directors whenever, in its judgment,
the best interests of the Corporation would be served thereby, but such removal
shall be without prejudice to the contract rights, if any, of the person so
removed.
SECTION 4. VACANCIES. A vacancy in any office because of death, resignation,
removal, disqualification or otherwise may be filled by the Board of Directors
for the unexpired portion of the term.
SECTION 5. PRESIDENT. The President shall be the principal executive officer
of the Corporation and shall in general supervise and control all of the
business and affairs of the Corporation. He shall preside at all meetings of
the shareholders and of the Board of Directors. He may sign, with the Secretary
or any other proper officer of the Corporation thereunto authorized by the Board
of Directors, certificates for shares of the Corporation, any deeds, mortgages,
bonds, contracts, or other instruments which the Board of Directors have
authorized to be executed, except in cases where the signing and execution
thereof shall be expressly delegated by the Board of Directors or by these
By-Laws to some other officer or agent of the Corporation, or shall be required
by law to be otherwise signed or executed; and in general shall perform all
duties incident to the office of President and such other duties as may be
prescribed by the Board of Directors from time to time.
SECTION 6. VICE PRESIDENT. In the absence of the President or in the event of
his inability or refusal to act, the Vice President shall perform the duties of
the President, and when so acting, shall have all the powers of and be subject
to all the restrictions upon the President. The Vice President shall perform
such other duties as from time to time may be assigned to him by the President
or by the Board of Directors.
SECTION 7. TREASURER. If required by the Board of Directors, the Treasurer
shall give a bond for the faithful discharge of his duties in such sum and with
such surety or sureties as the Board of Directors shall determine. He shall:
(a) have charge and custody of and be responsible for all funds and securities
of the Corporation; (b) receive and give receipts for monies due and payable to
the Corporation from any source whatsoever, and deposit all such monies in the
name of the Corporation in such banks, trust companies, or other depositories as
shall be selected in accordance with the provisions of Article V of these
By-Laws; and (c) in general perform all the duties from time to time assigned to
him by the President or the Board of Directors. Nothing herein shall require
the Board of Directors to require a bond.
SECTION 8. SECRETARY. The Secretary shall: (a) keep the minutes of the
shareholders' and of the Board of Directors' meetings in one or more books
provided for that purpose; (b) see that all notices are duly given in accordance
with the provisions of these By-Laws or as required by law; (c) be custodian of
the corporate records and of the seal of the Corporation and see that the seal
of the Corporation is affixed to all certificates for shares prior to the issue
thereof and to all documents, the execution of which on behalf of the
Corporation under this seal is duly authorized in accordance with the provisions
of these By-Laws; (d) keep a register of the post office address of each
shareholder which shall be furnished to the Secretary by such shareholder; (e)
sign with the President, or Vice President, certificates for shares of the
Corporation, the issue of which shall have been authorized by resolution of the
Board of Directors; (f) sign with the President, or Vice President, certificates
for shares for the Corporation, the issue of which shall have been authorized by
resolution of the Board of Directors; (g) have personal charge of the stock
transfer books of the Corporation; and (h) in general perform all duties
incident to the office of Secretary and such other duties as from time to time
may be assigned to him by the President or the Board of Directors.
SECTION 9. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The Assistant
Treasurers shall respectively, if required by the Board of Directors, give bonds
for the faithful discharge of their duties in such sums and with such sureties
as the Board of Directors shall determine. The Assistant Secretaries, as and if
authorized by the Board of Directors, may sign with the President or Vice
President certificates for shares of the Corporation, the issue of which shall
have been authorized by a resolution of the Board of Directors. The Assistant
Treasurers and Assistant Secretaries in general shall perform such duties as
shall be assigned to them by the Treasurer or Secretary, respectively, or by the
President or the Board of Directors.
SECTION 10. SALARIES. The salaries of the officers shall be fixed from time to
time by the Board of Directors and no officer shall be prevented from receiving
such salary by reason of the fact that he or she is also a director of the
Corporation.
ARTICLE V
CONTRACTS, LOANS, CHECK AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any officer or
officers, agent or agents, to enter into any contract or execute and deliver any
instruments in the name of and on behalf of the Corporation and such authority
may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the Corporation
and no evidence of indebtedness shall be issued in its name unless authorized by
a resolution of the Board of Directors. Such authority may be general or
confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for payment
of money, notes or other evidences of indebtedness issued in the name of the
Corporation shall be signed by such officer or officers, agent or agents, of the
Corporation and in such manner as shall from time to time be determined by
resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the Corporation not otherwise employed shall
be deposited from time to time to the credit of the Corporation in such banks,
trust companies or other depositories as the Board of Directors may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares of the
Corporation shall be in such form as may be determined by the Board of
Directors. Such certificates shall be signed by the President and Secretary.
All certificates for shares shall be consecutively numbered. The name of the
persons owning the shares represented thereby with the number of shares and date
of issue shall be entered on the books of the Corporation. All certificates
surrendered to the Corporation for transfer shall be cancelled and no new
certificate shall be issued until the former certificate for a like number of
shares shall have been surrendered and cancelled, except that in the case of a
lost, destroyed or mutilated certificate, a new one may be issued therefor upon
such terms and indemnity to the Corporation as the Board of Directors may
prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the Corporation shall be
made only by the registered holder thereof or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary of
the Corporation, and on surrender for cancellation of the certificate for such
share. The person in whose name shares stand on the books of the Corporation
shall be deemed the owner thereof for all purposes as regards the Corporation.
ARTICLE VII
FISCAL YEAR
The fiscal year of the Corporation shall be determined by the resolution of the
Board of Directors.
ARTICLE VIII
DIVIDENDS
The Board of Directors may from time to time declare, and the Corporation may
pay, dividends on its outstanding shares in the manner and upon the terms and
conditions provided by law and its Articles of Incorporation.
ARTICLE IX
SEAL
The Board of Directors shall if needed provide a corporate seal which shall be
in the form of a circle and shall have inscribed thereon appropriate wording.
ARTICLE X
WAIVER OF NOTICE
Whenever any notice whatever is required to be given under the provisions of
these By-Laws, or under the provisions of the Articles of Incorporation, or
under the provisions of the corporation laws of the State of Florida or other
jurisdiction, waiver thereof in writing signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be deemed
equivalent to the giving of such notice.
ARTICLE XI
AMENDMENTS
The Board of Directors shall have the power and authority to alter, amend or
rescind the By-Laws of the Corporation at any regular or special meeting at
which a quorum is present by a vote of a majority or the whole Board of
Directors, subject to the power of the shareholders to change or repeal such
By-Laws at any annual or special meeting of shareholders at which a quorum is
present, by a vote of a majority of the stock represented at such meeting,
provided, that the notice of such meeting shall have included notice of any
proposed alteration, amendment or rescission.
I certify that these are the By-Laws adopted by the Board of Directors of the
Corporation.
BY: ___________________________________
James Donald Brock, Jr., Secretary
<PAGE>
EXHIBIT D
<TABLE>
<CAPTION>
ASM'S STOCKHOLDERS' LIST
SHAREHOLDER CLASS A CLASS B COMMON TOTAL
<S> <C> <C> <C> <C>
Aberdeen Avenue LLC
Ashland Resources, Inc. 491,135 245,567 736,702
Striker Capital Limited 491,135 245,568 736,703
VC Advantage Ltd. Pshp. 491,135 245,568 736,703
Hammock Group Ltd.. . . 1,033,333 1,033,333
TK as Agent for others. 688,889 688,889
James D. Brock, Jr. . . 1,000,000 1,000,000
Other ASM shareholders. 2,000,000 2,000,000
__________. . . . . __________ 3,600,000 3,600,000
--------- ---------
Totals. . . . . . . . . 1,473,405 1,722,222 7,336,703 10,532,330
</TABLE>
<PAGE>
EXHIBIT E
ASM'S FINANCIAL STATEMENTS AT SEPTEMBER 30, 1999
DORRA SHAW & DUGAN
CERTIFIED PUBLIC ACCOUNTANTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
The American Sports Machine, Inc.
Palm Beach, Florida
We have audited the accompanying balance sheet of The American Sports Machine,
Inc. (a Florida corporation) and (a development stage company) as of September
30, 1999, and the related statements of operations, accumulated deficit, cash
flows and changes in stockholders' equity for the period December 1, 1998 (date
of inception) to September 30, 1999. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The American Sports Machine,
Inc. as of September 30, 1999 and the results of its operations and its cash
flows and changes in stockholders' equity for the period from December 1, 1998
(date of inception) to September 30, 1999 in conformity with generally accepted
accounting principles.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses since its inception. The Company's financial
position and operating results raise substantial doubt about its ability to
continue as a going concern. Management's plan regarding those matters also are
described in Note D. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
/s/ Dorra Shaw & Dugan
- - -------------------------------
Certified Public Accountants
December 17, 1999
270 South County Road * Palm Beach, FL 33480
Telephone (561) 822-9955 * Fax (561) 822-9955
Website: dsd-cpa.com
<PAGE>
THE AMERICAN SPORTS MACHINE, INC.
( A Development Stage Company)
BALANCE SHEET
<TABLE>
<CAPTION>
September 30, 1999
ASSETS
<S> <C>
Current Assets:
Cash $ 2,711
TOTAL CURRENT ASSETS 2,711
$ 2,711
LIABILITIES
Current Liabilities:
Accrued expenses $ -
TOTAL CURRENT LIABILITIES -
-
STOCKHOLDERS' EQUITY
Common stock - $.0001 par value -
50,000,000 shares authorized 1,400,000
shares issued and outstanding 140
Preferred stock - No par value
- 10,000,000 shares authorized
No shares issued or outstanding -
Additional paid-in-capital 45,860
Accumulated deficit (43,289)
TOTAL STOCKHOLDERS' EQUITY 2,711
$ 2,711
</TABLE>
The accompanying notes are an integral part of the financial statements
<PAGE>
THE AMERICAN SPORTS MACHINE, INC.
( A Development Stage Company)
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
For the period October 1, 1998 (date of inception) to Serptember 30, 1999
Revenues $ -
Operating expenses:
Professional fees $ 39,657
Organization costs 2,632 42,289
Loss before income taxes
(42,289)
Income taxes -
Net loss
(42,289)
Accumulated deficit - October 1, 1998
(1,000)
Accumulated deficit - September 30, 1999 $ (43,289)
Net loss per share $ (0.03)
Weighted average shares of common stock $ 1,249,589
The accompanying notes are an integral part of the financial statements
<PAGE>
THE AMERICAN SPORTS MACHINE, INC.
( A Development Stage Company)
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT
For the period October 1, 1998 (date of inception) to Serptember 30, 1999
<S> <C>
Revenues $ -
Operating expenses:
Professional fees $ 39,657
Organization costs 2,632 42,289
Loss before income taxes
(42,289)
Income taxes -
Net loss
(42,289)
Accumulated deficit - October 1, 1998
(1,000)
Accumulated deficit - September 30, 1999 $ (43,289)
Net loss per share $ (0.03)
Weighted average shares of common stock $ 1,249,589
The accompanying notes are an integral part of the financial statements
</TABLE>
<PAGE>
THE AMERICAN SPORTS MACHINE, INC.
(A Development Stage Company)
<TABLE>
<CAPTION>
Statement of Cash Flows
For the period October 1, 1998 (date of inception) to September 30, 1999
- - ---------------------------------------------------------------------------
<S> <C>
Operating Activities:
Net loss $ (42,289)
Adjustments to reconcile net loss to net cash
used by operating activities:
Increase in:
Issuance of common stock for services 25,000
Net cash used by operating activities (17,289)
Financing activities:
Issuance of Common Stock 20,000
Net cash provided by financing activities 20,000
Net increase in cash 2,711
Cash - September 30, 1999 $ 2,711
The accompanying notes are an integral part of the financial statements
<PAGE>
The American Sports Machine, Inc.
Notes to Financial Statements
Note A - Summary of Significant Accounting Policies:
Organization
The American Sports Machine, Inc. (a development stage company) is a Florida
Corporation organized June 2, 1995 to build recreational centers for small
organized sports activities including basketball, handball, racquetball, as well
as video games and other computer board sports activities. The Company failed in
its attempt to implement its initial business plan and during June 1996
abandoned its efforts. The Company had no operations for the period prior to
June 1996. The Company was inactive and there were no transactions from June
1996 to the date of reinstatement by the State of Florida on December 1, 1998
that affect the balances reflected in the financial statements as of December 1,
1998.
The Company has a new business plan, which was adopted on or about December 1,
1998, which is to engage in seeking potential operating businesses and business
opportunities with the intent to acquire or merge with such businesses. The
assets of the Company will be used for its expenses of operation to implement
this plan.
Accounting Method
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a September 30 year end.
Start - Up Costs
Start - up and organization costs are being expensed as incurred.
Loss Per Share
The computation of loss per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
Note B - Stockholders' Equity:
On June 2, 1995, the Company issued 500,000 shares of common stock, in lieu of
cash, for the fair market value of services rendered by its initial officer -
stockholder. On or about December 1, 1998, third parties purchased the shares
from the initial officer - stockholder. On or about December 1, 1998, the
Company issued 500,000 shares of its common stock to its sole officer in
exchange for services valued at $25,000. Subsequently the same third parties
purchased at $0.05 per share, 400,000 shares of the common stock of the Company
in a private placement pursuant to Regulation D of the SEC. The $39,657 in
professional fees includes the costs and expenses (including legal fees)
associated with the preparation and filing of the registration statement.
Included in professional fees are additional legal fees of $34,157 for merger
and acquisition activities unrelated to the registration statement and $5,500
in auditing and accounting fees.
At September 30, 1999, the Company had authorized 50,000,000 shares of $.0001
par value common stock and had 1,400,000 shares of common stock issued and
outstanding. In addition, the Company authorized 10,000,000 shares of preferred
stock with the specific terms; conditions, limitations and preferences to be
determined by the Board of Directors. None of the preferred stock was issued and
outstanding as of September 30, 1999.
Note C - Income Taxes:
The Company has a net operating loss carry forward of $42,289 that may be offset
against future taxable income. If not used, the carry forward will expire in
2014.
The amount recorded as deferred tax assets, cumulative as of September 30,1999
is $8,400, which represents the amounts of tax benefits of loss carry-forwards.
The Company has established a valuation allowance for this deferred tax asset of
$8,400, as the Company has no history of profitable operations.
Note D - Going Concern:
The Company's financial statements are prepared using generally accepted
accounting principles applied to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred losses from its inception through September
30, 1999. It has not established revenues sufficient to cover operating costs
and to allow it to continue as a going concern. Management plans currently
provide for experts to secure a successful acquisition or merger partner so that
it will be able to continue as a going concern. In the event such efforts are
unsuccessful, contingent plans have been arranged to provide that the current
Director of the Company is to fund required future filings under the 34 Act, and
existing shareholders have expressed an interest in additional funding if
necessary to continue the Company as a going concern. The sole director/officer
of the Company has to acquire an additional $20,000 in stock of the Company on
or before February 1, 1999, if such funds are needed to continue the operations
of the Company.
<PAGE>
Exhibit B - Page 57
EXHIBIT F
FORM 10-KSB AND FORM 10-QSB
U.S. Securities and Exchange Commission
Washington, D.C. 20549
Form 10-KSB
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended September 30, 1999
[ ] TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
For the transition period from _______________ to ________________
Commission file no. 0-26327
---------------
American Sports Machine, Inc.
--------------------------------------------
(Name of small business issuer in its charter)
Florida 65-0877744
- ------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
222 Lakeview Avenue, Suite 160-146
West Palm Beach, FL
33401
- - --------------------------------------- ----------
(Address of principal executive offices) (Zip Code)
Issuer's telephone number (561) 832-5698
Securities registered under Section 12(b) of the Exchange Act:
Name of each exchange
Title of each class on which registered
None
- ----------------------------- -------------------------
Securities registered under Section 12(g) of the Exchange Act:
Common Stock, $.0001 par value
(Title of class)
-------------------
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 X No
----- -----
<PAGE>
Check if there is no disclosure of delinquent filers in response to Item
<PAGE>
405 of Regulation S-B 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. [X]
State issuer's revenues for its most recent fiscal year. $0.00.
Of the 1,400,000 shares of voting stock of the registrant issued and
outstanding as of December 15, 1999, 900,000 shares are held by
non-affiliates. Because of the absence of an established trading market for
the voting stock, the registrant is unable to calculate the aggregate market
value of the voting stock held by non-affiliates as of a specified date within
the past 60 days.
PART I
ITEM 1. DESCRIPTION OF BUSINESS
Business Development
The American Sports Machine, Inc. ("ASM") was organized on June 2, 1995,
under the laws of the State of Florida, having the stated purpose of engaging in
any lawful activities. ASM was formed with the contemplated purpose to build
recreational centers for small organized sports activities including basketball,
handball, racquetball, as well as video games and other computer board sports
activities. The business concept and plan was based upon information obtained
by the incorporator several years before while working for an unrelated company
with the same concept and business plan. The incorporator and sole shareholder
was unable to obtain the cooperation and assistance of workers and investors to
implement the proposed plan. The primary area of development was to be in
Florida, but was never brought to the development stage. After development of a
business plan and efforts to develop the business failed, all efforts were
abandoned in 1996. At that time ASM was unable to obtain the necessary
contracts, store locations, other facilities, and was unable to obtain the
necessary financing, therefore was unable to operate.
ASM never engaged in an active trade or business throughout the period from
June 1995 until just recently. The ASM charter was suspended (subject to
reinstatement) by the State of Florida in 1996 for inactivity and failure to pay
annual fees and costs. Its active status was reinstated on December 1, 1998,
upon payment of all past due fees and costs. On December 1, 1998, all of the
issued and outstanding shares of the common stock of ASM were acquired from
Joseph Ashley, its then sole shareholder. The shares were purchased from Mr.
Ashley on behalf of the investor group. Mr. Ashley distributed the shares
directly to each member of the investor group. The original incorporator and
shareholder agreed to exchange the 500,000 issued and outstanding shares held by
such shareholder to the new 25 member investor group in exchange for a
commitment by the new shareholder group to pay the cost of reactivating the
corporation, providing for its reinstatement, and bringing its books and records
up to date. The total of 500,000 shares was distributed 20,000 shares to each
of twenty-five (25) shareholders. In addition, ASM received gross proceeds in
the amount of $20,000 from the sale of a total of 400,000 shares of common
stock, $.0001 par value per share (the "Common Stock"), in an offering conducted
pursuant to Section 3(b) and 4(2) of the Securities Act of 1933, as amended (the
"Act"), and Rules 505 and 506 of Regulation D promulgated thereunder. This
offering was made in the State of Georgia and the State of Florida. ASM
undertook the offering of shares of Common Stock on December 1, 1998. Also on
December 1, 1998, ASM issued 500,000 shares of its Common Stock to Ms. Angela
Michelle Bartolotta, the President, Secretary and Treasurer of ASM in
consideration and in exchange for services valued at $25,000.00 in connection
with the re-organization of ASM. On March 12, 1999, Ms. Bartolotta resigned
her position due to personal conflicts and other personal reasons and tendered
her 500,000 shares of stock to ASM for cancellation. Such shares were in fact
canceled. The company issued 500,000 shares of its common stock to James Donald
Brock, Jr., in consideration and in exchange for services valued at $25,000.00
to complete the reorganization of ASM. James Donald Brock, Jr. was also elected
President, Secretary, Treasurer, and Director of ASM. (See "Recent Sales of
Unregistered Securities")
<PAGE>
ASM then began to consider and investigate potential business
opportunities. ASM is considered a development stage company and, due to its
status as a "shell" corporation, its principal business purpose is to locate and
consummate a merger or acquisition with a private entity. Because of ASM's
current status of having limited assets and no recent operating history, in the
event ASM does successfully acquire or merge with an operating business
opportunity, it is likely that ASM's present shareholders will experience
substantial dilution and there will be a probable change in control of ASM.
On December 1, 1998, ASM also determined it should become active in
seeking potential operating businesses and business opportunities with the
intent to acquire or merge with such businesses.
Any target acquisition or merger candidate of ASM will become subject to
the same reporting requirements as ASM upon consummation of any such business
combination. Thus, in the event that ASM successfully completes an acquisition
or merger with another operating business, the resulting combined business must
provide audited financial statements for at least the two most recent fiscal
years, or in the event that the combined operating business has been in business
less than two years, audited financial statements will be required from the
period of inception of the target acquisition or merger candidate.
ASM's principal executive offices are located at 222 Lakeview Avenue, Suite
160-157, West Palm Beach, FL 33401 and its telephone number is (561) 832-5698.
Business of Issuer
ASM has no recent operating history and no representation is made, nor is
any intended, that ASM will be able to carry on future business activities
successfully. Further, there can be no assurance that ASM will have the ability
to acquire or merge with an operating business, business opportunity or property
that will be of material value to ASM.
Management plans to investigate, research and, if justified, potentially
acquire or merge with one or more businesses or business opportunities. ASM
currently has no commitment or arrangement, written or oral, to participate in
any business opportunity and management cannot predict the nature of any
potential business opportunity it may ultimately consider. Management will have
broad discretion in its search for and negotiations with any potential business
or business opportunity.
SOURCES OF BUSINESS OPPORTUNITIES
ASM intends to use various sources in its search for potential business
opportunities including its officer and director, consultants, special advisors,
securities broker-dealers, venture capitalists, member of the financial
community and others who may present management with unsolicited proposals.
Because of ASM's limited capital, it may not be able to retain on a fee basis
professional firms specializing in business acquisitions and reorganizations.
Rather, ASM will most likely have to rely on outside sources, not otherwise
associated with ASM, that will accept their compensation only after ASM has
finalized a successful acquisition or merger. ASM will rely upon the expertise
and contacts of such persons, will use notices in written publications and
personal contacts to find merger and acquisition candidates, the exact number of
such contacts dependent upon the skill and industriousness of the participants
and the conditions of the marketplace. None of the participants in the process
will have any past business relationship with management. To date, ASM has not
engaged nor entered into any definitive agreements nor understandings regarding
retention of any consultant to assist ASM in its search for business
opportunities, nor is management presently in a position to actively seek or
retain any prospective consultants for these purposes.
<PAGE>
ASM does not intend to restrict its search to any specific kind of industry
or business. ASM may investigate and ultimately acquire a venture that is in
its preliminary or development stage, is already in operation, or in various
stages of its corporate existence and development. Management cannot predict at
this time the status or nature of any venture in which ASM may participate. A
potential venture might need additional capital or merely desire to have its
shares publicly traded. The most likely scenario for a possible business
arrangement would involve the acquisition of, or merger with, an operating
business that does not need additional capital, but which merely desires to
establish a public trading market for its shares. Management believes that ASM
could provide a potential public vehicle for a private entity interested in
becoming a publicly held corporation without the time and expense typically
associated with an initial public offering.
EVALUATION
Once ASM has identified a particular entity as a potential acquisition or
merger candidate, management will seek to determine whether acquisition or
merger is warranted or whether further investigation is necessary. Such
determination will generally be based on management's knowledge and experience,
(limited solely to working history - See "Item 5. Directors, Executive
Officers, etc.") or with the assistance of outside advisors and consultants
evaluating the preliminary information available to them. Management may elect
to engage outside independent consultants to perform preliminary analysis of
potential business opportunities. However, because of ASM's limited capital it
may not have the necessary funds for a complete and exhaustive investigation of
any particular opportunity. Management will not devote full time to finding a
merger candidate, will continue to engage in outside unrelated activities, and
anticipates devoting no more than an average of five (5) hours weekly to such
undertaking.
In evaluating such potential business opportunities, ASM will consider, to
the extent relevant to the specific opportunity, several factors including
potential benefits to ASM and its shareholders; working capital, financial
requirements and availability of additional financing; history of operation, if
any; nature of present and expected competition; quality and experience of
management; need for further research, development or exploration; potential for
growth and expansion; potential for profits; and other factors deemed relevant
to the specific opportunity.
Because ASM has not located or identified any specific business opportunity
as of the date hereof, there are certain unidentified risks that cannot be
adequately expressed prior to the identification of a specific business
opportunity. There can be no assurance following consummation of any
acquisition or merger that the business venture will develop into a going
concern or, if the business is already operating, that it will continue to
operate successfully. Many of the potential business opportunities available to
ASM may involve new and untested products, processes or market strategies which
may not ultimately prove successful.
FORM OF POTENTIAL ACQUISITION OR MERGER
Presently ASM cannot predict the manner in which it might participate in a
prospective business opportunity. Each separate potential opportunity will be
reviewed and, upon the basis of that review, a suitable legal structure or
method of participation will be chosen. The particular manner in which ASM
participates in a specific business opportunity will depend upon the nature of
that opportunity, the respective needs and desires of ASM and management of the
opportunity, and the relative negotiating strength of the parties involved.
Actual participation in a business venture may take the form of an asset
purchase, lease, joint venture, license, partnership, stock purchase,
reorganization, merger or consolidation. ASM may act directly or indirectly
through an interest in a partnership, corporation, or other form of
organization, however, ASM does not intend to participate in opportunities
through the purchase of minority stock positions.
Because of ASM's current status and recent inactive status for the prior
two (2) years, and its concomitant lack of assets and relevant operating
history, it is likely that any potential merger or acquisition with another
operating business will require substantial dilution to ASM's existing
shareholders interests. There will probably be a change in control of ASM, with
the incoming owners of the targeted merger or acquisition candidate taking over
control of ASM. Management has not established any guidelines as to the amount
of control it will offer to prospective business opportunity candidates, since
this issue will depend to a large degree on the economic strength and
desirability of each candidate, and the corresponding relative bargaining power
of the parties. However, management will endeavor to negotiate the best
possible terms for the benefit of ASM's shareholders as the case arises.
Management may actively negotiate or otherwise consent to the purchase of any
portion of their common stock as a condition to, or in connection with, a
proposed merger or acquisition. In such an event, existing shareholders may not
be afforded an opportunity to approve or consent to any particular stock buy-out
transaction. However the terms of the sale of shares held by present management
of ASM will be extended equally to all other current shareholders.
<PAGE>
Management does not have any plans to borrow funds to compensate any
persons, consultants, or promoters in conjunction with its efforts to find and
acquire or merge with another business opportunity. Management does not have
any plans to borrow funds to pay compensation to any prospective business
opportunity, or shareholders, management, creditors, or other potential parties
to the acquisition or merger. In either case, it is unlikely that ASM would be
able to borrow significant funds for such purposes from any conventional lending
sources. In all probability, a public sale of ASM's securities would also be
unfeasible, and management does not contemplate any form of new public offering
at this time. In the event that ASM does need to raise capital, it would most
likely have to rely on the private sale of its securities. Such a private sale
would be limited to persons exempt under the Commissions's Regulation D or other
rule, or provision for exemption, if any applies. However, no private sales are
contemplated by ASM's management at this time. If a private sale of ASM's
securities is deemed appropriate in the future, management will endeavor to
acquire funds on the best terms available to ASM. However, there can be no
assurance that the Company will be able to obtain funding when and if needed, or
that such funding, if available, can be obtained on terms reasonable or
acceptable to them. ASM does not anticipate using Regulation S promulgated
under the Securities Act of 1933 to raise any funds any time within the next
year, subject only to its potential applicability after consummation of a merger
or acquisition.
In the event of a successful acquisition or merger, a finder's fee, in the
form of cash or securities of ASM, may be paid to persons instrumental in
facilitating the transaction. ASM has not established any criteria or limits
for the determination of a finder's fee, although most likely an appropriate
finder's fee will be negotiated between the parties, including the potential
business opportunity candidate, based upon economic considerations and
reasonable value as estimated and mutually agreed upon at that time. A finder's
fee would only be payable upon completion of the proposed acquisition or merger
in the normal case, and management does not contemplate any other arrangement at
this time. Current management has not in the past used any particular
consultants, advisors or finders. Management has not actively undertaken a
search for, nor retention of, any finder's fee arrangement with any person. It
is possible that a potential merger or acquisition candidate would have its own
finder's fee arrangement, or other similar business brokerage or investment
banking arrangement, whereupon the terms may be governed by a pre-existing
contract; in such case, ASM may be limited in its ability to affect the terms of
compensation, but most likely the terms would be disclosed and subject to
approval pursuant to submission of the proposed transaction to a vote of ASM's
shareholders. Management cannot predict any other terms of a finder's fee
arrangement at this time. If such a fee arrangement was proposed, independent
management and directors would negotiate the best terms available to ASM so as
not to compromise the fiduciary duties of the representative in the proposed
transaction, and ASM would require that the proposed arrangement would be
submitted to the shareholders for prior ratification in an appropriate manner.
Management does not contemplate that ASM would acquire or merge with a
business entity in which any officer or director of ASM has an interest. Any
such related party transaction, however remote, would be submitted for approval
by an independent quorum of the Board of Directors and the proposed transaction
would be submitted to the shareholders for prior ratification in an appropriate
manner. ASM's management has not had any contact, discussions, or other
understandings regarding any particular business opportunity at this time,
regardless of any potential conflict of interest issues. Accordingly, the
potential conflict of interest is merely a remote theoretical possibility at
this time.
POSSIBLE BLANK CHECK COMPANY STATUS
While ASM may be deemed a "shell" company at this time, it does not
constitute a "blank check" company under pertinent securities law standards. A
"blank check" company under pertinent securities law standards is a company
whose business plan is to primarily pursue a merger or acquisition candidate
(i.e. no specific business plan), and which files a Registration Statement under
the 1933 Act and at such time priced its shares at less than $5.00 per share
while it continued to have no specific business plan. Accordingly, ASM is not
subject to securities regulations imposed upon companies deemed to be "blank
check companies." If ASM were to file a registration statement under Securities
Act of 1933 and, at such time, priced its shares at less than $5.00 per share
and continued to have no specific business plan, it would then be classified as
a blank check company.
<PAGE>
If in the future ASM were to become a blank check company, adverse
consequences could attach to ASM. Such consequences can include, but are not
limited to, time delays of the registration process, significant expenses to be
incurred in such an offering, loss of voting control to public shareholders and
the additional steps required to comply with various federal and state laws
enacted for the protection of investors, including so-called "lock-up"
agreements pending consummation of a merger or acquisition that would take it
out of blank check company status.
Many states (excluding Florida where ASM is incorporated) have statutes,
rules and regulations limiting the sale of securities of "blank check"
companies in their respective jurisdictions. Management does not intend to
undertake any efforts to cause a market to develop in the companies securities
or to undertake any offering of ASM's securities, either debt or equity, until
such time as ASM has successfully implemented its business plan described
herein. In the event ASM undertakes the filing of a registration statement
under circumstances that classifies it as a blank check company the provisions
of Rule 419 and other applicable provisions will be complied with.
RIGHTS OF SHAREHOLDERS
ASM amended its Articles of Incorporation on March 10, 1999, to expressly
provide that the Board of Directors is authorized to enter into on behalf of the
corporation and to bind the corporation without shareholder approval, any and
all acts approving the terms and conditions of a merger and/or a share exchange,
and shareholders affected thereby, shall not be entitled to dissenters rights
with respect thereto under any applicable statutory dissenters rights provision.
This provision expressly eliminates shareholder participation in the merger
and/or share exchange contemplated by ASM and expressly eliminates any
shareholders dissenters rights. ASM does not intend to provide its shareholders
with complete disclosure documentation including audited finance statements
concerning a target company and its business prior to any mergers or
acquisitions.
COMPETITION
Because ASM has not identified any potential acquisition or merger
candidate, it is unable to evaluate the type and extent of its likely
competition. ASM is aware that there are several other public companies with
only nominal assets that are also searching for operating businesses and other
business opportunities as potential acquisition or merger candidates. ASM will
be in direct competition with these other public companies in its search for
business opportunities and, due to ASM's limited funds, it may be difficult to
successfully compete with these other companies.
EMPLOYEES
As of the date hereof, ASM does not have any employees and has no plans for
retaining employees until such time as business warrants the expense, or until
ASM successfully acquires or merges with an operating business. The Company may
find it necessary to periodically hire part-time clerical help on an as-needed
basis.
INDUSTRY SEGMENTS
No information is presented regarding industry segments. ASM is presently
a development stage company seeking a potential acquisition of or merger with a
yet to be identified business opportunity. Reference is made to the statements
of income included herein in response to part F/S of this Form 10-SB for a
report of ASM's operating history for the past two fiscal years.
ITEM 2. DESCRIPTION OF PROPERTY
FACILITIES
<PAGE>
ASM is currently using at no cost to ASM, as its principal place of
business offices of its current management, James Donald Brock, Jr., located in
Atlanta, Georgia. Although ASM has no written agreement and pays no rent for the
use of this facility, it is contemplated that at such future time as an
acquisition or merger transaction may be completed, ASM will secure commercial
office space from which it will conduct its business. Until such an acquisition
or merger, ASM lacks any basis for determining the kinds of office space or
other facilities necessary for its future business. ASM has no current plans to
secure such commercial office space. It is also possible that a merger or
acquisition candidate would have adequate existing facilities upon completion of
such a transaction, and ASM's principal offices may be transferred to such
existing facilities.
ITEM 3. LEGAL PROCEEDINGS
ASM is currently not a party to any pending legal proceedings and no such
action by, or to the best of its knowledge, against ASM has been threatened.
ASM was inactive from 1996 through the date of this Form 10-SB.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matter was submitted to a vote of the Company's shareholders, through
the solicitation of proxies or otherwise from the Company's inception to the
close of the 1999 fiscal year ended September 30, 1999, covered by this report.
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS.
Shares of ASM's common stock have previously been registered with the
Securities and Exchange Commission (the "Commission"). ASM intends to and has
made application to the NASD for ASM's shares to be quoted on the OTC Bulletin
Board. ASM's application to the NASD consists of current corporate information,
financial statements and other documents as required by Rule 15c211 of the
Securities Exchange Act of 1934, as amended. Inclusion on the OTC Bulletin
Board, when approved, permits price quotation for ASM's shares to be published
by such service.
ASM is not aware of any existing trading market for its common stock.
ASM's common stock has never traded in a public market. There are no plans,
proposals, arrangements or understandings with any person(s) with regard to the
development of a trading market in any of ASM's securities.
If and when ASM's common stock is traded in the over-the-counter market,
most likely the shares will be subject to the provisions of Section 15(g) and
Rule 15g-9 of the Securities Exchange Act of 1934, as amended (the "Exchange
Act"), commonly referred to as the "penny stock" rule. Section 15(g) sets forth
certain requirements for transactions in penny stocks and Rule 15g9(d)(1)
incorporates the definition of penny stock as that used in Rule 3a51-1 of the
Exchange Act.
The Commission generally defines penny stock to be any equity security that
has a market price less than $5.00 per share, subject to certain exceptions.
Rule 3a51-1 provides that any equity security is considered to be a penny stock
unless that security is: registered and traded on a national securities exchange
meeting specified criteria set by the Commission; authorized for quotation on
The NASDAQ Stock Market; issued by a registered investment company; excluded
from the definition on the basis of price (at least $5.00 per share) or the
issuer's net tangible assets; or exempted from the definition by the Commission.
If ASM's shares are deemed to be a penny stock, trading in the shares will be
subject to additional sales practice requirements on broker-dealers who sell
penny stocks to persons other than established customers and accredited
investors, generally persons with assets in excess of $1,000,000 or annual
income exceeding $200,000, or $300,000 together with their spouse.
For transactions covered by these rules, broker-dealers must make a special
suitability determination for the purchase of such securities and must have
received the purchaser's written consent to the transaction prior to the
purchase. Additionally, for any transaction involving a penny stock, unless
exempt, the rules require the delivery, prior to the first transaction, of a
risk disclosure document relating to the penny stock market. A broker-dealer
also must disclose the commissions payable to both the broker-dealer and the
registered representative, and current quotations for the securities. Finally,
the monthly statements must be sent disclosing recent price information for the
penny stocks held in the account and information on the limited market in penny
stocks. Consequently, these rules may restrict the ability of broker dealers to
trade and/or maintain a market in ASM's common stock and may affect the ability
of shareholders to sell their shares.
<PAGE>
As of December 15, 1999, there were 26 holders of record of ASM's common
stock.
As of December 15, 1999, ASM has issued and outstanding One Million Four
Hundred Thousand [1,400,000] shares of common stock. Of this total, Five
Hundred Thousand [500,000] shares were originally issued in transactions more
than three (3) years ago. Such shares may be sold or otherwise transferred
without restriction pursuant to the terms of rule 144 ("Rule 144") of the
Securities Act of 1933, as amended (the "Act"), unless held by an affiliate.
------------
The remaining Nine Hundred Thousand [900,000] shares were issued subject to Rule
144 and may not be sold and/or transferred without further registration under
the Act or pursuant to an applicable exemption
DIVIDEND POLICY
ASM has not declared or paid cash dividends or made distributions in the
past, and ASM does not anticipate that it will pay cash dividends or make
distributions in the foreseeable future. ASM currently intends to retain and
reinvest future earnings, if any, to finance its operations.
PUBLIC QUOTATION OF STOCK
ASM has as of this date requested a broker-dealer, Public Securities, 300
North Argonne Road, Suite 202
Spokane, WA 99212, to act as a market maker for ASM's securities. ASM
anticipates that other market makers may be requested to participate at a later
date. ASM will not use consultants to obtain market makers. There have been no
preliminary discussions between ASM, or anyone acting on its behalf, and any
market maker regarding the future trading market for ASM.
TRANSFER AGENT
The Company selected Interwest Transfer Co. 1981 E. Murray Holladay Road,
Suite 100, Salt Lake City, Utah 84117 to serve as its transfer agent.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
ASM is considered a development stage company with limited assets or
capital, and with no operations or income since approximately 1996. The costs
and expenses associated with the preparation and filing of this registration
statement and other operations of ASM have been paid for by a shareholder,
specifically James Donald Brock, Jr. (see Item 4, Security Ownership of Certain
Beneficial Owners and Management James Donald Brock, Jr. is the controlling
shareholder). Mr. Brock has agreed to pay future costs associated with filing
future reports under Exchange Act of 1934 if ASM is unable to do so. It is
anticipated that ASM will require only nominal capital to maintain the corporate
viability of ASM and any additional needed funds will most likely be provided by
ASM's existing shareholders or its sole officer and director in the immediate
future. Current shareholders have not agreed upon the terms and conditions of
future financing and such undertaking will be subject to future negotiations,
except for the express commitment of Mr. Brock to fund required 34 Act filings.
Repayment of any such funding will also be subject to such negotiations. The
ability of ASM to continue as a going concern long term (beyond 12-24 months) is
contingent upon the successful completion of a business combination.
Since its inception, the Company has conducted minimal business operations
except for organizational and capital raising activities. The Company has not
realized any revenues since its inception due to the fact that its executive,
---
Mr. Brock has been primarily engaged in organizational and promotional
activities on behalf of the Company. As a result, from inception (June 2, 1995)
through September 30, 1999, the Company had $0.00 revenue. Total Company
operations and operating expenses as of September 30, 1999 were $42,289.00.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
At September 30, 1999, the Company had assets totaling $2,711.00 and an
accumulated deficit of $43,289.00 attributable to accrued legal expenses,
organization expenses and professional fees. Since the Company's inception, it
has received $46,000.00 in cash contributed as consideration for the issuance
of shares of Common Stock.
NET OPERATING LOSSES
<PAGE>
The Company has net operating loss carry-forwards of $42,289.00 expiring
in 2014. The company has a $8,400.00 deferred tax asset resulting from the loss
carry-forwards, for which it has established a 100% valuation allowance. The
Company may not be able to utilize such carry-forwardsas the Company has no
history of profitable operations.
In the opinion of management, inflation has not and will not have a
material effect on the operations of ASM until such time as ASM successfully
completes an acquisition or merger. At that time, management will evaluate the
possible effects of inflation on ASM as it relates to its business and
operations following a successful acquisition or merger.
Management plans may but do not currently provide for experts to secure a
successful acquisition or merger partner so that it will be able to continue as
a going concern. In the event such efforts are unsuccessful, contingent plans
have been arranged to provide that the current Director of ASM is to fund
required future filings under the 34 Act without reimbursement, and existing
shareholders have expressed an interest in additional funding if necessary to
continue ASM as a going concern.
PLAN OF OPERATION
During the next twelve months, ASM will actively seek out and investigate
possible business opportunities with the intent to acquire or merge with one or
more business ventures. In its search for business opportunities, management
will follow the procedures outlined in Item 1 above. Because the Company has
limited funds, it may be necessary for the sole officer and director to either
advance funds to ASM or to accrue expenses until such time as a successful
business consolidation can be made. ASM will not make it a condition that the
target company must repay funds advanced by its officers and directors.
Management intends to hold expenses to a minimum and to obtain services on a
contingency basis when possible. Further, ASM's directors will defer any
compensation until such time as an acquisition or merger can be accomplished and
will strive to have the business opportunity provide their remuneration.
However, if ASM engages outside advisors or consultants in its search for
business opportunities, it may be necessary for ASM to attempt to raise
additional funds. As of the date hereof, ASM has not made any arrangements or
definitive agreements to use outside advisors or consultants or to raise any
capital. In the event ASM does need to raise capital most likely the only
method available to ASM would be the private sale of its securities. Because of
the nature of ASM as a development stage company, it is unlikely that it could
make a public sale of securities or be able to borrow any significant sum from
either a commercial or private lender. There can be no assurance that ASM will
able to obtain additional funding when and if needed, or that such funding, if
available, can be obtained on terms acceptable to ASM.
ASM does not intend to use any employees, with the possible exception of
part-time clerical assistance on an as-needed basis. Outside advisors or
consultants will be used only if they can be obtained for minimal cost or on a
deferred payment basis. Management is convinced that it will be able to operate
in this manner and to continue its search for business opportunities during the
next twelve months.
YEAR 2000 COMPLIANCE
The Company is currently in the process of evaluating its information
Technology for Year 2000 compliance. The Company does not expect that the cost
to modify its information Technology infrastructure to be Year 2000 compliant
will be material to its financial condition or results of operations. The
Company does not anticipate any material disruption in its operations as a
result of any failure by the Company to be in compliance.
FORWARD-LOOKING STATEMENTS
<PAGE>
This Form 10-KSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-KSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), business
strategy, expansion and growth of the Company's business and operations, and
other such matters are forward-looking statements. These statements are based
on certain assumptions and analyses made by the Company in light of its
experience and its perception of historical trends, current conditions and
expected future developments as well as other factors it believes are
appropriate in the circumstances. However, whether actual results or
developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-KSB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
ITEM 7. FINANCIAL STATEMENTS
The Company's financial statements have been examined to the extent
indicated in their reports by Dorra, Shaw, & Dugan, independent certified
accountants, and have been prepared in accordance with generally accepted
accounting principles and pursuant to Regulation S-B as promulgated by the
Securities and Exchange Commission and are included herein, on Page F-1 hereof
in response to Part F/S of this Form 10-KSB.
ITEM 8. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
Because the Company has been generally inactive since its inception, it has
had no independent accountant until the retention in November 1998 of Dorra,
Shaw & Dugan, CPA's, 270 South County Road, Palm Beach, Florida 33480. There has
been no change in the Company's independent accountant during the period
commencing with the Company's retention of Dorra, Shaw & Dugan, CPA's, through
the date hereof.
<PAGE>
INDEX TO FINANCIAL STATEMENTS
PAGE
INDEPENDENT AUDITORS' REPORT F-1
- ------------------------------ ---
BALANCE SHEET F-2
- -------------- ---
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICIT F-3
- ---------------------------------------------------- ---
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY F-4
- ------------------------------------------------- ---
STATEMENT OF CASH FLOWS F-5
- -------------------------- ---
NOTES TO FINANCIAL STATEMENTS F-6
- -------------------------------- ---
<PAGE>
DORRA SHAW & DUGAN
Certified Public Accountants
----------------------------
INDEPENDENT AUDITORS' REPORT
INDEPENDENT AUDITORS' REPORT
To the Board of Directors and Stockholders
The American Sports Machine, Inc.
Palm Beach, Florida
<PAGE>
We have audited the accompanying balance sheet of The American Sports Machine,
Inc. (a Florida corporation) and (a development stage company) as of May 31,
1999, and the related statements of operations, accumulated deficit, cash flows
and changes in stockholders' equity for the period October 1, 1998 to May 31,
1999 and June 2, 1995 (date of inception) to May 31, 1999. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of The American Sports Machine,
Inc. as of May 31, 1999 and the results of its operations and its cash flows and
changes in stockholders' equity for the period from October 1, 1998 to May 31,
1999 and June 2, 1995 (date of inception) to May 31, 1999 in conformity with
generally accepted accounting principles.
Audited balance sheets for prior periods and the statements of operations, cash
flows and stockholders' equity for the two years ended September 30, 1998 as
required by item 310 of regulation S-B are not provided because the company was
dormant.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As shown in the financial statements,
the Company has incurred net losses since its inception. The Company's financial
position and operating results raise substantial doubt about its ability to
continue as a going concern. Management's plan regarding those matters also are
described in Note D. The financial statements do not include any adjustments
that might result from the outcome of this uncertainty.
The June 30, 1999 financial statements were compiled by the company; and we did
not audit or review those financial statements and, accordingly, expressed no
opinion or other form of assurance on them.
/s/Dorra Shaw & Dugan
- ------------------------
Certified Public Accountants
June 4, 1999 and August 30, 1999
270 South County Road * Palm Beach, FL 33480
Telephone (561) 822-9955 * Fax (561) 822-9955
Website: dsd-cpa.com
F-1
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS,
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT.
The director and executive officer of ASM and his respective age is as
follows:
<PAGE>
Name Age Position
- ---- --- --------
James Donald Brock, Jr. 31 Director, President, Secretary
and Treasurer
All directors hold office until the next annual meeting of stockholders and
until their successors have been duly elected and qualified. There are no
agreements with respect to the election of directors. ASM has not compensated
its directors for service on the Board of Directors or any committee thereof.
As of the date hereof, no director has accrued any expenses or compensation.
Officers are appointed annually by the Board of Directors and each executive
officer serves at the discretion of the Board of Directors. ASM does not have
any standing committees at this time.
No director, or officer, or promoter of ASM has, within the past five
years, filed any bankruptcy petition, been convicted in or been the subject of
any pending criminal proceedings, or is any such person the subject or any
order, judgment or decree involving the violation of any state or federal
securities laws.
The business experience of the person listed above during the past five
years is as follows:
Mr. James Donald Brock, Jr., 31 years of age, is an Arts and Science Degree
graduate of Santa Fe Community College and Emory University, Atlanta, Georgia.
Mr. Brock was a student in the education programs from 1993 to 1997. In 1997,
he received his B.S. Degree in Mathematics from Georgia State University,
Atlanta, Georgia. From 1992 to 1997, Mr. Brock was employed at Savage Pizza,
Atlanta, Georgia. In 1997-98, Mr. Brock served as a student-teacher at North
Atlanta High School, Atlanta, Georgia. In 1998, Mr. Brock was employed and
continues to be employed as a mathematics teacher at Decatur High School,
Decatur, Georgia.
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934, as amended, requires
ASM's executive officers and directors and persons who own more than 10% of a
registered class of ASM's equity securities, to file with the Securities and
Exchange Commission (hereinafter referred to as the "Commission") initial
statements of beneficial ownership, reports of changes in ownership and annual
reports concerning their ownership, of Common Stock and other equity securities
of ASM on Forms 3, 4, and 5, respectively. Executive officers, directors and
greater than 10% shareholders are required by Commission regulations to furnish
ASM with copies of all Section 16(a) reports they file. Mr Brock comprises all
of ASM's executive officers, directors and greater than 10% beneficial owners of
its common Stock, and has complied with Section 16(a) filing requirements
applicable to them during ASM's most recent fiscal year.
ITEM 10. EXECUTIVE COMPENSATION
ASM has not had a bonus, profit sharing, or deferred compensation plan for
the benefit of its employees, officers or directors. ASM has not paid any
salaries or other compensation to its officers, directors or employees for the
years ended 1997 and 1998, nor at any time during 1999. Further, ASM has not
entered into an employment agreement with any of its officers, directors or any
other persons and no such agreements are anticipated in the immediate future.
ASM's officer and director will forego any compensation until such time as an
acquisition or merger can be accomplished and the new business opportunity
provide any remuneration. As of the date hereof, no person has accrued any
---
compensation from ASM. No compensation will accrue in the interim period.
COMPENSATION OF DIRECTORS
<PAGE>
The Company does not provide officers with pension, stock appreciation
rights, long-term incentive or other plans but has the intention of implementing
such plans in the future.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth information, as of December 15, 1999, with
-
respect to each person known by ASM to own beneficially more than 5% of ASM's
outstanding common stock, each director of ASM and all directors and officers of
ASM as a group.
Name of Address of Amount and Nature of Percent of
- --------------------- ----------------------- -----------
Beneficial Owner Beneficial Ownership Class
- ----------------- --------------------- -----
James Donald Brock, Jr. 500,000 35.7%
1933 Radar Rd Ne
Atlanta, GA 30345
All Executive Officers and Directors
as a Group (one person) 500,000 35.7%
_____________
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On December 1, 1998 the Company issued 500,000 shares of its Common Stock
to Ms. Angela M. Bartolotta, the sole officer and director of the Company in
consideration and in exchange for services valued at 25,000 in connection with
the reorganization of ASM. On March 12, 1999, Ms. Bartolotta resigned her
position due to personal conflicts and other personal reasons and tendered her
500,000 shares of stock to the company for cancellation such shares were in fact
canceled.
On March 2, 1999, ASM issued and sold 500,000 shares of the Common Stock to
Mr. Brock, the President, Secretary and Treasurer of ASM and record and
beneficial owner of approximately 35.7% of ASM's outstanding Common Stock, in
consideration and exchange therefore for services valued at $25,000 in
connection with the reorganization of ASM. Services rendered and to be
rendered by Mr. Brock include the restructuring of ASM, obtaining requisite
financial assistance, searching for merger and acquisition candidates, and a
commitment on the part of Mr. Brock to fund, if necessary, future filings of 34
Act requirements without reimbursement
In addition Mr. Brock has paid for the cost and expenses associated with
the filing of this Form 10-SB and other operations of ASM.
At the current time, ASM has no provision to issue any additional
securities to management, promoters or their respective affiliates or
associates. At such time as the Board of Directors adopts an employee stock
option or pension plan, any issuance would be in accordance with the terms
thereof and proper approval. Although ASM has a very large amount of authorized
but unissued Common Stock and Preferred Stock which may be issued without
further shareholder approval or notice, ASM intends to reserve such stock for
the Rule 506 offerings for acquisitions.
During ASM's last two fiscal years, there have not been any other
transactions between ASM and any officer, director, nominee for election as
director, or any shareholder owning greater than five percent (5%) of ASM's
outstanding shares, nor any member of the above referenced individuals'
immediate family.
James Donald Brock, Jr., may be deemed to be a "promoter" of ASM as that
term is defined under the Rules and Regulations promulgated under the Act.
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K.
<PAGE>
(a) The exhibits required to be filed herewith by Item 601 of Regulation S-B,
as described in the following index of exhibits, are incorporated herein by
reference, as follows:
Exhibit No. Exhibit Name
- ------------ --------------
3(i).1 Articles of Incorporation filed June 2, 1995 (1)
3(i).2 Articles of Amendment filed March 10, 1999 (1)
3(ii).1 By-laws (1)
27 * Financial Data Schedule
Incorporated herein by reference to the Registration Statement on Form
10-SB of TECH Creations, Inc.(File No. 0-26901), filed with the U.S.
Securities and Exchange Commission.
(b) No Reports on Form 8-K were filed during the last quarter of the
fiscal year ended September 30, 1999, covered by this Annual Report on Form
10-KSB.
* Filed herein
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, there unto
duly authorized.
The American Sports Machine, Inc.
(Registrant)
Date: December _____, 1999 BY: /s/ James Donald Brock, Jr.
-------------------------------
James Donald Brock, Jr., President
In accordance with the Exchange Act, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
Date Signature Title
- ---- --------- -----
December _____, 1999 BY:/s/ JAMES DONALD BROCK JR. Director, President,
--------------------------
James Donald Brock, Jr. Secretary, Treasurer
<PAGE>
U.S. SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE
ACT OF 1934
FOR THE QUARTER ENDED DECEMBER 31, 1999
COMMISSION FILE NO. 0-26327
---------
THE AMERICAN SPORTS MACHINE, INC.
------------------------------------------------------------
(NAME OF SMALL BUSINESS ISSUER IN ITS CHARTER)
FLORIDA 65-0877744
- ------------------------------------ -----------------------
(STATE OR OTHER JURISDICTION OF (I.R.S.EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
222 LAKEVIEW AVENUE, SUITE 160-146
WEST PALM BEACH, FL 33401
- ------------------------------------------
- -----------------------
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
ISSUER'S TELEPHONE NUMBER: (561) 832-5698
SECURITIES TO BE REGISTERED UNDER SECTION 12(B) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE
ON WHICH REGISTERED
NONE NONE
- -----------------------------------
- -----------------------------
SECURITIES TO BE REGISTERED UNDER SECTION 12(G) OF THE ACT:
COMMON STOCK, $.0001 PAR VALUE PER SHARE
--------------------------------------------------------
(TITLE OF CLASS)
COPIES OF COMMUNICATIONS SENT TO:
DONALD F. MINTMIRE
MINTMIRE & ASSOCIATES
265 SUNRISE AVENUE, SUITE 204
PALM BEACH, FL 33480
TEL: (561) 832-5696 - FAX: (561) 659-5371
<PAGE>
Indicate by 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
X No
--- ---
As of December 31, 1999, there are 1,400,000 shares of voting stock of
the registrant issued and outstanding.
<PAGE>
PART I
Item 1. Financial Statements
THE AMERICAN SPORTS MACHINE, INC.
- -------------------------------------
TABLE OF CONTENTS
- -------------------
PAGE
----
BALANCE SHEETYYYYYYYYYYYYYYYYYYYYYYYYYYYYY. F- 1
------------------------------------------- ----
STATEMENT OF OPERATIONS AND ACCUMULATED DEFICITYYYY F-2
---------------------------------------------------- ---
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITYYYYYYYYY F- 3
---------------------------------------------------- ----
STATEMENT OF CASH FLOWSYYYYYYYYYYYYYYYYYYYYYYY F- 4
---------------------------------------------- ----
NOTES TO FINANCIAL STATEMENTSYYYYYYYYYYYYYYYYYYY F-5-6
------------------------------------------------ -----
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
THE AMERICAN SPORTS MACHINE, INC.
<S> <C>
( A Development Stage Company)
- -----------------------------------------------------------------
BALANCE SHEET
- -----------------------------------------------------------------
December 31,. . . . . . . . . . . . . . . . . . . . . . . . . . . 1999
- ----------------------------------------------------------------- ---------
ASSETS
- -----------------------------------------------------------------
CURRENT ASSETS:
- -----------------------------------------------------------------
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,081
- ----------------------------------------------------------------- ---------
TOTAL CURRENT ASSETS. . . . . . . . . . . . . . . . . . . . . . . 1,081
- ----------------------------------------------------------------- ---------
$ 1,081
---------
LIABILITIES
- -----------------------------------------------------------------
CURRENT LIABILITIES:
- -----------------------------------------------------------------
Accrued expenses. . . . . . . . . . . . . . . . . . . . . . . . $ -
- ----------------------------------------------------------------- ---------
TOTAL CURRENT LIABILITIES . . . . . . . . . . . . . . . . . . . . $ -
- ----------------------------------------------------------------- ---------
$ -
---------
STOCKHOLDERS' EQUITY
- -----------------------------------------------------------------
Common stock - $.0001 par value - 50,000,000 shares authorized
- -----------------------------------------------------------------
1,400,000 shares issued and outstanding . . . . . . . . . 140
- ----------------------------------------------------------------- ---------
Preferred stock - No par value - 10,000,000 shares authorized
- -----------------------------------------------------------------
No shares issued or outstanding . . . . . . . . . . . . . -
- ----------------------------------------------------------------- ---------
Additional paid-in-capital. . . . . . . . . . . . . . . . . . . 45,860
- ----------------------------------------------------------------- ---------
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . (44,919)
- ----------------------------------------------------------------- ---------
TOTAL STOCKHOLDERS' EQUITY. . . . . . . . . . . . . . . . . . . . 1,081
- ----------------------------------------------------------------- ---------
$ 1,081
---------
</TABLE>
See accompanying notes to Financial Statements
1
<PAGE>
<TABLE>
<CAPTION>
THE AMERICAN SPORTS MACHINE, INC.
<S> <C>
( A Development Stage Company)
- -----------------------------------------------
STATEMENT OF OPERATIONS AND
- -----------------------------------------------
ACCUMULATED DEFICIT
---------------------
For the period October 1, 1999 to December 31.. 1999
- ----------------------------------------------- ---------------------
REVENUES. . . . . . . . . . . . . . . . . . . . $ -
- ----------------------------------------------- ---------------------
OPERATING EXPENSES:
- -----------------------------------------------
Professional fees . . . . . . . . . . . . . . $ 1,630
- ----------------------------------------------- ---------------------
$ 1,630
---------------------
LOSS BEFORE INCOME TAXES. . . . . . . . . . . . ($1,630)
- ----------------------------------------------- ---------------------
Income taxes . . . . . . . . . . . . . . . . . -
- ----------------------------------------------- ---------------------
NET LOSS. . . . . . . . . . . . . . . . . . . . $ (1,630)
- ----------------------------------------------- ---------------------
ACCUMULATED DEFICIT - OCTOBER 1, 1998 . . . . . $ (43,289)
- ----------------------------------------------- ---------------------
ACCUMULATED DEFICIT - DECEMBER 31, 1999 . . . . $ (44,919)
- ----------------------------------------------- ---------------------
NET LOSS PER SHARE. . . . . . . . . . . . . . . $ (0.03)
- ----------------------------------------------- ---------------------
WEIGHTED AVERAGE SHARES OF COMMON STOCK . . . . 1,400,000
- ----------------------------------------------- ---------------------
</TABLE>
See Accompanying Notes to Financial Statements
F-2
<PAGE>
<TABLE>
<CAPTION>
THE AMERICAN SPORTS MACHINE, INC.
<S> <C> <C> <C> <C> <C> <C>
( A Development Stage Company)
- -----------------------------------------------
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
- -----------------------------------------------
For the period October 1, 1999 to December 31,. 1999
- ----------------------------------------------- ---------
Additional
- -----------------------------------------------
Number of . . . . . . . . . . . . . . . . . Preferred Common Paid - In Accumulated
- ----------------------------------------------- --------- ------- ---------- ------------
Shares. . . . . . . . . . . . . . . . . . . Stock Stock Capital Deficit Total
- ----------------------------------------------- --------- ------- ---------- ------------ ---------
BEGINNING BALANCE:
- -----------------------------------------------
June 2, 1995 - Services . . . . . . . . . . . 500,000 $ - $ 50 $ 950 $ - $ 1,000
- ----------------------------------------------- --------- ------- ---------- ------------ --------- ---------
ISSUANCE OF COMMON STOCK:
- -----------------------------------------------
December 1, 1998 - Services . . . . . . . . . 500,000 - 50 24,950 - 25,000
- ----------------------------------------------- --------- ------- ---------- ------------ --------- ---------
December 1, 1998. . . . . . . . . . . . . . . 400,000 - 40 19,960 - 20,000
- ----------------------------------------------- --------- ------- ---------- ------------ --------- ---------
ACCUMULATED DEFICIT . . . . . . . . . . . . . . - - - - (44,919) (44,919)
- ----------------------------------------------- --------- ------- ---------- ------------ --------- ---------
1,400,000 $ - $ 140 $ 45,860 $(44,919) $ 1,081
--------- ------- ---------- ------------ --------- ---------
</TABLE>
See Accompanying Notes to Financial Statements
F-3
<PAGE>
<TABLE>
<CAPTION>
THE AMERICAN SPORTS MACHINE, INC.
<S> <C>
(A Development Stage Company)
- -----------------------------------------------
STATEMENT OF CASH FLOWS
- -----------------------------------------------
For the period October 1, 1999 to December 31,. 1999
- ----------------------------------------------- --------
OPERATING ACTIVITIES:
- -----------------------------------------------
Net loss. . . . . . . . . . . . . . . . . . . $(1,630)
- ----------------------------------------------- --------
Net cash provided by operating activities . . . $(1,630)
- ----------------------------------------------- --------
Net decrease in cash. . . . . . . . . . . . . . $(1,630)
- ----------------------------------------------- --------
Cash - October 1, 1999. . . . . . . . . . . . . $ 2,711
- ----------------------------------------------- --------
Cash - December 31, 1999. . . . . . . . . . . . $ 1,081
- ----------------------------------------------- --------
</TABLE>
See Accompanying Notes to Financial Statements
F-4
<PAGE>
THE AMERICAN SPORTS MACHINE, INC.
NOTES TO FINANCIAL STATEMENTS
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
- -----------------------------------------------------------
ORGANIZATION
- ------------
The American Sports Machine, Inc. (a development stage company) is a Florida
Corporation organized June 2, 1995 to build recreational centers for small
organized sports activities including basketball, handball, racquetball, as well
as video games and other computer board sports activities. The Company failed in
its attempt to implement its initial business plan and during June 1996
abandoned its efforts. The Company had no operations for the period prior to
June 1996. The Company was inactive and there were no transactions from June
1996 to the date of reinstatement by the State of Florida on December 1, 1998
that affect the balances reflected in the financial statements as of December 1,
1998.
The Company has a new business plan, which was adopted on or about December 1,
1998, which is to engage in seeking potential operating businesses and business
opportunities with the intent to acquire or merge with such businesses. The
assets of the Company will be used for its expenses of operation to implement
this plan.
ACCOUNTING METHOD
ACCOUNTING METHOD
The Company's financial statements are prepared using the accrual method of
accounting. The Company has elected a September 30 year end.
START B UP COSTS
START B UP COSTS
Start B up and organization costs are being expensed as incurred.
Loss Per Share
LOSS PER SHARE
- ----------------
The computation of loss per share of common stock is based on the weighted
average number of shares outstanding at the date of the financial statements.
USE OF ESTIMATES
USE OF ESTIMATES
- ------------------
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results
could differ from those estimates.
INTERIM FINANCIAL STATEMENTS
- ------------------------------
The December 31, 1999 interim financial statements include all adjustments,
which in the opinion of management are necessary in order to make the financial
statements not misleading.
NOTE B STOCKHOLDERS' EQUITY:
- -------------------------------
On June 2, 1995, the Company issued 500,000 shares of common stock, in lieu of
cash, for the fair market value of services rendered by its initial officer B
stockholder. On or about December 1, 1998, third parties purchased the shares
from the initial officer B stockholder. On or about December 1, 1998, the
Company issued 500,000 shares of its common stock to its sole officer in
exchange for services valued at $25,000. Subsequently the same third parties
purchased at $0.05 per share, 400,000 shares
F-5
<PAGE>
of the common stock of the Company in a private placement pursuant to Regulation
D of the SEC. Included in professional fees are $1,500 in auditing and
accounting fees.
At December 31, 1999, the Company had authorized 50,000,000 shares of $.0001 par
value common stock and had 1,400,000 shares of common stock issued and
outstanding. In addition, the Company authorized 10,000,000 shares of preferred
stock with the specific terms; conditions, limitations and preferences to be
determined by the Board of Directors. None of the preferred stock was issued and
outstanding as of December 31, 1999.
NOTE C B INCOME TAXES:
- --------------------------
The Company has a net operating loss carry forward of $44,919 that may be offset
against future taxable income. If not used, the carry forward will expire in
2019.
The amount recorded as deferred tax assets, cumulative as of June 30,1999 is
$9,000, which represents the amounts of tax benefits of loss carry-forwards. The
Company has established a valuation allowance for this deferred tax asset of
$9,000, as the Company has no history of profitable operations.
NOTE D B GOING CONCERN:
- ---------------------------
The Company's financial statements are prepared using generally accepted
accounting principles applied to a going concern which contemplates the
realization of assets and liquidation of liabilities in the normal course of
business. The Company has incurred losses from its inception through December
31, 1999. It has not established revenues sufficient to cover operating costs
and to allow it to continue as a going concern. Management plans currently
provide for experts to secure a successful acquisition or merger partner so that
it will be able to continue as a going concern. In the event such efforts are
unsuccessful, contingent plans have been arranged to provide that the current
Director of the Company is to fund required future filings under the 34 Act, and
existing shareholders have expressed an interest in additional funding if
necessary to continue the Company as a going concern.
F-6
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
GENERAL
The Company is considered a development stage company with limited assets or
capital, and with no operations or income since approximately 1995. The costs
and expenses associated with the preparation and filing of the Company's
registration statement and other operations of the Company have been paid for by
a shareholder, specifically Mr. James Donald Brock, Jr. It is anticipated that
the Company will require only nominal capital to maintain the corporate
viability of the Company and any additional needed funds will most likely be
provided by the Company's existing shareholders or its officers and directors in
the immediate future. However, unless the Company is able to facilitate an
acquisition of or merger with an operating business or is able to obtain
significant outside financing, there is substantial doubt about its ability to
continue as a going concern.
In the opinion of management, inflation has not and will not have a
material effect on the operations of the Company until such time as the Company
successfully completes an acquisition or merger. At that time, management will
evaluate the possible effects of inflation on the Company as it relates to its
business and operations following a successful acquisition or merger.
PLAN OF OPERATION
During the next twelve months, the Company will actively seek out and
investigate possible business opportunities with the intent to acquire or merge
with one or more business ventures. In its search for business opportunities,
management will follow the procedures outlined in Item 1 to its Registration
Statement on Form 10SB. Because the Company has limited funds, it may be
necessary for the officers and directors to either advance funds to the Company
or to accrue expenses until such time as a successful business consolidation can
be made. Management intends to hold expenses to a minimum and to obtain
services on a contingency basis when possible. Further, the Company's directors
will defer any compensation until such time as an acquisition or merger can be
accomplished and will strive to have the business opportunity provide their
remuneration. However, if the Company engages outside advisors or consultants
in its search for business opportunities, it may be necessary for the Company to
attempt to raise additional funds. As of the date hereof, the Company has not
made any arrangements or definitive agreements to use outside advisors or
consultants or to raise any capital. In the event the Company does need to
raise capital most likely the only method available to the Company would be the
private sale of its securities. Because of the nature of the Company as a
development stage company, it is unlikely that it could make a public sale of
securities or be able to borrow any significant sum from either a commercial or
private lender. There can be no assurance that the Company will able to obtain
additional funding when and if needed, or that such funding, if available, can
be obtained on terms acceptable to the Company.
The Company does not intend to use any employees, with the possible
exception of part-time clerical assistance on an as-needed basis. Outside
advisors or consultants will be used only if they can be obtained for minimal
cost or on a deferred payment basis. Management is convinced that it will be
able to operate in this manner and to continue its search for business
opportunities during the next twelve months.
<PAGE>
For the period from October 1, 1999 through December 31, 1999, the Company
had no income from operations and operating expenses aggregating $1,630.
FINANCIAL CONDITION, CAPITAL RESOURCES AND LIQUIDITY
At December 31, 1999, the Company had assets totaling $1,081 and no
liabilities. James Donald Brock, Jr. is the President, Secretary, Treasurer,
and Director of the Company and the record and beneficial owner of
approximately 35.7% of the Company's outstanding Common Stock.
The Company has no potential capital resources from any outside sources at
the current time.
It is anticipated that the Company will require only nominal capital to maintain
the corporate viability of the Company. Any additional capital needed will most
likely be provided by the Company's existing shareholders or its officers and
directors.
The ability of the Company to continue as a going concern is dependent upon
the availability of obtaining additional capital and financing from such
shareholders and directors.
NET OPERATING LOSSES
The Company has net operating loss carryforwards of $44,919 which expire
in 2019. Until the Company's current operations begin to produce earnings, it
is unclear whether the Company can utilize such carryforwards.
YEAR 2000 COMPLIANCE
The Company did not experience any material negative impact to its
operations as a result of the Year 2000 calendar change. The Company did not
experience any material impact to its financial condition as a result of
becoming Year 2000 compliant. The Company does not anticipate any material
disruption in its operations in the future as a result of the Year 2000 calendar
change.
FORWARD-LOOKING STATEMENTS
<PAGE>
This Form 10-QSB includes "forward-looking statements" within the meaning
of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the
Securities Exchange Act of 1934, as amended. All statements, other than
statements of historical facts, included or incorporated by reference in this
Form 10-QSB which address activities, events or developments which the Company
expects or anticipates will or may occur in the future, including such things as
future capital expenditures (including the amount and nature thereof), finding
suitable merger or acquisition candidates, expansion and growth of the Company's
business and operations, and other such matters are forward-looking statements.
These statements are based on certain assumptions and analyses made by the
Company in light of its experience and its perception of historical trends,
current conditions and expected future developments as well as other factors it
believes are appropriate in the circumstances. However, whether actual results
or developments will conform with the Company's expectations and predictions is
subject to a number of risks and uncertainties, general economic market and
business conditions; the business opportunities (or lack thereof) that may be
presented to and pursued by the Company; changes in laws or regulation; and
other factors, most of which are beyond the control of the Company.
Consequently, all of the forward-looking statements made in this Form 10-QSB are
qualified by these cautionary statements and there can be no assurance that the
actual results or developments anticipated by the Company will be realized or,
even if substantially realized, that they will have the expected consequence to
or effects on the Company or its business or operations. The Company assumes no
obligations to update any such forward-looking statements.
PART II
Item 1. Legal Proceedings.
The Company knows of no legal proceedings to which it is a party or to
which any of its property is the subject which are pending, threatened or
contemplated or any unsatisfied judgments against the Company.
Item 2. Changes in Securities and Use of Proceeds
None
Item 3. Defaults in Senior Securities
None
Item 4. Submission of Matters to a Vote of Security Holders.
No matter was submitted during the quarter ending December 31, 1999,
covered by this report to a vote of the Company's shareholders, through
the solicitation of proxies or otherwise.
Item 5. Other Information
None
Item 6. Exhibits and Reports on Form 8-K
(a) The exhibits required to be filed herewith by Item 601 of Regulation
S-B, as described in the following index of exhibits, are incorporated herein by
reference, as follows:
Exhibit No. Description
- ----------------------------------------------------------------------
3(i).1 Articles of Incorporation filed June 2, 1995(1)
3(i).2 Articles of Amendment filed March 10, 1999(1)
3(ii).1 By-laws (1)
27 * Financial Data Schedule
________________
<PAGE>
Exhibit B - Page 57
Incorporated herein by reference to the Company's Registration Statement
on Form 10-SB.
* Filed herewith
(b) No Reports on Form 8-K were filed during the quarter ended December
31, 1999.
SIGNATURES
----------
In accordance with Section 13 or 15(d) of the Exchange Act, the registrant
caused this report to be signed on its behalf by the undersigned, thereunto duly
authorized.
The American Sports Machine, Inc.
Date: February ___, 2000 BY: /s/ James Donald Brock,
Jr.
---------------------------
James Donald Brock, Jr., President
[sign page The American Sports Machine, Inc. 10Q 12.31.99]
<PAGE>
Exhibit G - Page 15
Exhibit B - Page 59
EXHIBIT G
FORM OF INVESTMENT LETTER
<PAGE>
Exhibit B - Page 60
EXHIBIT H
SOFTQUAD USA MATERIAL CONTRACTS
1. Thomson Kernaghan Engagement Letter dated December ___, 1999
2. Common Stock Purchase Agreement (VC Advantage Limited Partnership)
dated December 9, 1999
3. Purchaser's Warrant (VC Advantage Limited Partnership) dated
December 9, 1999
4. Agent's Warrant (Thomson Kernaghan & Co. Ltd.) dated December 9,
1999
5. Registration Rights Agreement dated December 9, 1999
6. Class A Convertible Preferred Stock Purchase Agreement (VC Advantage
Limited Partnership) dated December 16, 1999
7. Purchaser's Warrant (VC Advantage Limited Partnership) dated
December 16, 1999
8. Agent's Warrant (VC Advantage Limited Partnership) dated December
16, 1999
9. Registration Rights Agreement dated December 16, 1999
10. Acquisition Agreement dated December __, 1999, among SoftQuad
Software, Ltd., SoftQuad Acquisition Corp. and SoftQuad Software, Inc., and
related documents referred to therein.
11. Share Purchase and Option Exchange Agreements with each
securityholder of SoftQuad Software, Inc. dated as of February 25, 2000.
12. Loan Agreement between SoftQuad Acquisition Corp. and SoftQuad
Software, Inc. dated December __, 1999.
13. Thomson Kernaghan Engagement Letter dated February __, 2000
14. Class B Convertible Preferred Stock Purchase Agreement (VC
Advantage) dated February 28, 2000
15. Purchaser's Warrant (VC Advantage) dated February 28, 2000
16. Agent's Warrant (VC Advantage) dated February 28, 2000
17. Registration Rights Agreement (VC Advantage) dated February 28,
2000
18. Class B Convertible Preferred Stock Purchase Agreement (Hammock)
dated February 28, 2000
19. Purchaser's Warrant (Hammock) dated February 28, 2000
20. Agent's Warrant (Hammock) dated February 28, 2000
21. Registration Rights Agreement (Hammock) dated February 28, 2000
22. Common Stock Purchase Agreement dated February 29, 2000
23. Agent's Warrant dated February 29, 2000
24. Registration Rights Agreement dated February 29, 2000
<PAGE>
Exhibit B - Page 61
EXHIBIT I
ASM MATERIAL CONTRACTS
NONE
<PAGE>
Exhibit B - Page 74
SCHEDULE 1
LIABILITIES OF SOFTQUAD USA NOT DISCLOSED IN FINANCIAL STATEMENTS
<PAGE>
SCHEDULE 2
ADVERSE CHANGES SINCE THE DATE OF THE FINANCIAL STATEMENTS
NONE
<PAGE>
SCHEDULE 3
LITIGATION
NONE
<PAGE>
SCHEDULE 4
EXCEPTIONS TO COMPLIANCE WITH LAWS AND REGULATIONS
NONE
<PAGE>
SCHEDULE 5
MATERIAL AGREEMENTS
25. Thomson Kernaghan Engagement Letter dated December ___, 1999
26. Common Stock Purchase Agreement (VC Advantage Limited Partnership)
dated December 9, 1999
27. Purchaser's Warrant (VC Advantage Limited Partnership) dated
December 9, 1999
28. Agent's Warrant (Thomson Kernaghan & Co. Ltd.) dated December 9,
1999
29. Registration Rights Agreement dated December 9, 1999
30. Class A Convertible Preferred Stock Purchase Agreement (VC
Advantage Limited Partnership) dated December 16, 1999
31. Purchaser's Warrant (VC Advantage Limited Partnership) dated
December 16, 1999
32. Agent's Warrant (VC Advantage Limited Partnership) dated December
16, 1999
33. Registration Rights Agreement dated December 16, 1999
34. Acquisition Agreement dated December __, 1999, among SoftQuad
Software, Ltd., SoftQuad Acquisition Corp. and SoftQuad Software, Inc., and
related documents referred to therein.
35. Share Purchase and Option Exchange Agreements with each
securityholder of SoftQuad Software, Inc. dated as of February 25, 2000.
36. Loan Agreement between SoftQuad Acquisition Corp. and SoftQuad
Software, Inc. dated December __, 1999.
37. Thomson Kernaghan Engagement Letter dated February __, 2000
38. Class B Convertible Preferred Stock Purchase Agreement (VC
Advantage) dated February 28, 2000
39. Purchaser's Warrant (VC Advantage) dated February 28, 2000
40. Agent's Warrant (VC Advantage) dated February 28, 2000
41. Registration Rights Agreement (VC Advantage) dated February 28,
2000
42. Class B Convertible Preferred Stock Purchase Agreement (Hammock)
dated February 28, 2000
43. Purchaser's Warrant (Hammock) dated February 28, 2000
44. Agent's Warrant (Hammock) dated February 28, 2000
45. Registration Rights Agreement (Hammock) dated February 28, 2000
46. Common Stock Purchase Agreement dated February 29, 2000
47. Agent's Warrant dated February 29, 2000
48. Registration Rights Agreement dated February 29, 2000
<PAGE>
SCHEDULE 6
EXCEPTIONS TO TITLE TO PROPERTIES AND LIST OF REAL PROPERTY
NONE
<PAGE>
SCHEDULE 7
LICENSES, TRADEMARKS, TRADENAMES, ETC.
NONE
<PAGE>
SCHEDULE 8
SOFTQUAD USA'S CAPITALIZATION
<TABLE>
<CAPTION>
SHARES
- ------
<S> <C>
Authorized . . . . . . . . . . . . . . . . . . . . . . . . . . . Issued
- ---------------------------------------------------------------- --------------------------------
25,000,00 shares of Common Stock . . . . . . . . . . . . . . . . 1,706,703 shares of Common Stock
25,00,000 shares of Preferred Stock, of which 1,473,405. . . . . 1,473,405 Class A Shares
shares have been designated as Class A Convertible. . . . . . 1,722,222 Class B Shares
Preferred Stock ("Class A Shares") and 1,722,222 shares
have been designated as Class B Convertible Preferred Shares
("Class B Shares")
</TABLE>
WARRANTS AND OPTIONS
--------------------
- --Warrants outstanding exercisable for an aggregate of 1,878,368 shares of
Common Stock.
- --Options outstanding exercisable (subject to vesting) for an aggregate of
2,513,500 shares of Common Stock.
OTHER
-----
- --Obligation to issue 3,435,670 shares of Common Stock to certain shareholders
of SoftQuad Software, Inc. pursuant to share purchase agreements.
- --Obligation to issue 1,837,000 shares of Common Stock on exercise of options
issuable under option exchange agreements.
- --Obligation to issue 5,792,605 shares of Common Stock or exchange of equivalent
number of exchangeable shares of SoftQuad Acquisition Corporation issuable to
certain shareholders of SoftQuad Software, Inc. under share purchase agreements.
<PAGE>
SCHEDULE 9
LIABILITIES OF ASM NOT DISCLOSED IN FINANCIAL STATEMENTS
NONE
<PAGE>
SCHEDULE 10
ADVERSE CHANGES SINCE THE DATE OF THE FINANCIAL STATEMENTS AND FORM 10-QSB
None
<PAGE>
SCHEDULE 11
LITIGATION
NONE
<PAGE>
SCHEDULE 12
MATERIAL AGREEMENTS
NONE
<PAGE>
SCHEDULE 13
EXCEPTIONS TO TITLE TO PROPERTIES
NONE
<PAGE>
Exhibit B - Page 3
Exhibit B - Page 75
SCHEDULE 14
EXCEPTIONS TO COMPLIANCE WITH LAWS AND REGULATIONS
NONE
<PAGE>
Exhibit C - Page 1
EXHIBIT C
PRESS RELEASE
SOFTQUAD MERGES WITH THE AMERICAN SPORTS MACHINE, INC.
(NASD: AMRR.BB)
Toronto, Ontario (March 2, 2000) - SoftQuad Software Limited (SoftQuad) today
announced that it has entered into a 1-for-1 share exchange to merge with The
American Sports Machine, Inc. (ASM), a Florida-based shell corporation listed on
the NASD Electronic Bulletin Board under the symbol AMRR.BB.
Under the terms of the transactions related to the merger, SoftQuad is now a
wholly-owned subsidiary of ASM. However, shareholder approval will be sought in
the near future to rename the merged company SoftQuad Software Ltd. and
redomicile it to Delaware.
"SoftQuad is extremely enthusiastic about merging with an NASD-listed company
and the opportunity to share our company's success with public investors," said
Roberto Drassinower, President and CEO of SoftQuad. "We view this transaction
with The American Sports Machine as a very important first step toward achieving
full public status."
As a consequence of the transactions related to the share exchange, ASM's
outstanding share capital now consists of 3,936,703 shares of common stock;
1,473,405 shares of Class A convertible preferred stock; and 1,722,222 shares of
Class B convertible preferred stock, on an undiluted basis. There is also a
total of 1,704,699 share purchase warrants outstanding. ASM has also agreed to
assume SoftQuad's obligation - pursuant to SoftQuad certain agreements to
acquire all the outstanding shares of its Canadian operating subsidiary,
SoftQuad Software Inc. from the shareholders thereof- to issue an additional
11,065,275 shares of common stock (on a fully diluted basis).
SoftQuad also announced it has entered into an agreement with Thomson Kernaghan
& Co. Ltd., pursuant to which Thomas Kernaghan has agreed to act as agent, on a
best efforts basis, to raise up to US$15 million in additional common equity for
SoftQuad.
About SoftQuad
SoftQuad Software Ltd. is a Delaware corporation whose sole asset is its
wholly-owned subsidiary, SoftQuad Software Inc. (SSI). SSI is an
internationally-recognized developer and marketer of enabling technologies and
commerce solutions for e-business. XMetaL, the world's first advanced, yet easy
to use XML content creation solution, has already become the premier enabling
technology for XML-based content applications in e-publishing, e-commerce, and
knowledge management. Leveraging its technological and market leadership, SSI
is targeting the growing business-to-business (B2B) marketplace with Global
OnRamp, a comprehensive supply-side content solution that allows companies to
effectively join and compete in B2B e-markets.
Headquartered in Toronto, Canada, and with European operations based in London,
SSI is a founding member of, and active participant in, the World Wide Web
Consortium (W3C), the Organization for the Advancement of Structured Information
Standards (OASIS), and XML.org.
About American Sports Machine
American Sports Machine is a Florida-based corporation listed on the NASD
Electronic Bulletin Board under the symbol ASMR. Subsequent to its merger with
SoftQuad, it is a holding company whose only subsidiaries are the subsidiaries
of SoftQuad.
For further information contact:
Roberto Drassinower
President and CEO
SoftQuad Software Inc.
(416)544-9000
or click on Investor Relations at www.softquad.com
----------------
Forward-looking statements in this news release are made pursuant to the "safe
harbor" provisions of the United States Private Securities Litigation Reform Act
of 1995. Investors are cautioned that such forward-looking statements involve
risks and uncertainties, including, without limitation, risks relating to
possible product defects and product liability, risks related to international
sales and potential foreign currency exchange fluctuations, risks related to the
year 2000 issue, continued produce acceptance, increased levels of competition,
technological change, dependence on intellectual property rights and other risks
detailed from time to time in SoftQuad's or The American Sports Machine's
periodic reports filed with the United States Securities and Exchange Commission
and other regulatory authorities.
-30-
<PAGE>
EXHIBIT F
LETTER OF TRANSMITTAL
---------------------
TO ACCOMPANY CERTIFICATES REPRESENTING
SHARES OF STOCK OF
THE AMERICAN SPORTS MACHINE, INC.
(A FLORIDA CORPORATION)
CONVERTED INTO A RIGHT TO RECEIVE SHARES OF STOCK OF
SOFTQUAD SOFTWARE, LTD.
(A DELAWARE CORPORATION)
PURSUANT TO THE REINCORPORATION AND NAME CHANGE
OF THE AMERICAN SPORTS MACHINE, INC.
SURRENDER CERTIFICATES FOR SHARES OF STOCK
OF THE AMERICAN SPORTS MACHINE, INC. TO:
ATLAS STOCK TRANSFER CORPORATION
<TABLE>
<CAPTION>
By Mail: By Hand:
<S> <C>
5899 South State Street. . 5899 South State Street
Salt Lake City, Utah 84107 Salt Lake City, Utah 84107
Attention: Pam Gray. . . . Attention: Pam Gray
</TABLE>
For information call:
(801) 266-7151
The instructions accompanying this Letter of Transmittal should be read
carefully before this Letter of Transmittal is completed. If Company
Certificates are registered in different names, a separate Letter of Transmittal
must be submitted for each different registered owner.
<TABLE>
<CAPTION>
DESCRIPTION OF COMPANY CERTIFICATES SURRENDERED
- ------------------------------------------------
Name(s) and Address(es) of Company Certificate(s) Enclosed
Registered Owner(s) (Attach additional
(Please fill in, if blank) list if necessary)
- ------------------------------------------------
<S> <C>
Total Number
Company. . . . . . . . . . . . . . . . . . of Shares
Certificate. . . . . . . . . . . . . . . . Represented by
Number(s). . . . . . . . . . . . . . . . . Company
Certificate(s)
Total Shares:____________________
</TABLE>
SIGNATURES MUST BE PROVIDED AND GUARANTEED BELOW
PLEASE READ THE ACCOMPANYING INSTRUCTIONS CAREFULLY
<PAGE>
Gentlemen:
The undersigned hereby surrenders the certificate(s) listed above (the
"Company Certificates") representing shares of common stock, Class A Convertible
Preferred Stock, Class B Convertible Preferred Stock or Special Voting Stock of
The American Sports Machine, Inc. (collectivley the "Company Stock"), for
cancellation in exchange for one share of common stock, Class A Convertible
Preferred Stock, Class B Convertible Preferred Stock or Special Voting Stock
(collectively, "SoftQuad Stock"), of SoftQuad Software, Ltd. ("SoftQuad") at the
exchange ratio of one share of SoftQuad Stock for each share of Company Stock
surrendered hereby, pursuant to a merger of the Company into SoftQuad (the
"Merger") effective April 9, 2000 (the "Effective Date"). The terms and
conditions of the Merger are set forth in a Agreement and Plan of Merger dated
March 7, 2000 by and between the Company and SoftQuad (the "Plan of Merger"),
which Plan of Merger has been approved by a majority of the holders of the
Company Stock. The undersigned understands that the exchange of Company Stock
is subject to the terms and conditions set forth in the accompanying
Instruction. The undersigned hereby waives any right to demand appraisal of the
fair value of the Company Stock surrendered hereby.
The undersigned understands that a certificate representing SoftQuad Stock
will be sent by mail as soon as practicable following the receipt of the Company
Stock and this Letter of Transmittal or delivered by other reasonable procedure
requested by the undersigned and agreed to by SoftQuad.
Please issue and deliver the certificate representing the number of shares
of SoftQuad Stock to which the undersigned is entitled in exchange for the
Company Stock surrendered pursuant to this Letter of Transmittal to the
undersigned at the address specified under "Description of Company Certificates
Surrendered" above unless otherwise indicated under "Special Registration
Instructions" or "Special Delivery Instructions" below.
<PAGE>
SPECIAL REGISTRATION
INSTRUCTIONS (See Instruction 2 below)
COMPLETE ONLY if the SoftQuad Certificates are to be registered in the name of,
and are to be sent to, a person OTHER than the name(s) of the registered
holder(s) appearing under "DESCRIPTION OF COMPANY CERTIFICATES SUBMITTED."
Issue and mail certificate to:
Name ______________________________
(Please Print)
Address ___________________________
___________________________________
(Include Zip Code)
___________________________________
(Signature)
___________________________________
(Tax Identification or Social
Security Number)
(See Substitute Form W-9)
SPECIAL DELIVERY INSTRUCTIONS
(See Instruction 2 below)
COMPLETE ONLY if the SoftQuad Certificates are to be issued in the name of the
undersigned, but are to be sent OTHER than to the address of the registered
holder(s) appearing under "DESCRIPTION OF COMPANY CERTIFICATES SUBMITTED" or, if
the box immediately to the left is filled in, OTHER THAN to the address
appearing therein.
Mail or deliver to:
Name _____________________________
(Please Print)
Address __________________________
__________________________________
(Include Zip Code)
__________________________________
(Tax Identification or Social
Security Number)
(See Substitute Form W-9)
<PAGE>
F - 3 EXHIBIT F
The undersigned hereby warrants to SoftQuad that the undersigned has full
power and authority to submit, sell, assign and transfer the Company
Certificates described above, free and clear of all liens, charges and
encumbrances and not subject to any adverse claim. The undersigned will, upon
request, execute any additional documents necessary or desirable to complete the
transfer of the Company Certificates.
All authority herein conferred or agreed to be conferred shall survive the
death or incapacity of the undersigned, and all obligations of the undersigned
hereunder shall be binding upon the heirs, personal representatives, successors
and assigns of the undersigned.
<PAGE>
SIGN HERE AND, IF REQUIRED, HAVE SIGNATURES GUARANTEED (If Special
Registration Instructions are given, or if signature is by other than the
registered holder, signature(s) must be guaranteed. See Instruction 2.)
(Signature(s) of Shareholder(s)
Dated: ,2000
(Must be signed by the registered holder(s) exactly as name(s) appear(s) on the
Company Certificates or on a security position listing or by person(s)
authorized to become registered holder(s) by certificates and documents
transmitted herewith. If signature is by trustees, executors, administrators,
guardians, attorneys-in-fact, officers of corporations or others acting in a
fiduciary or representative capacity, please set forth full title and see
Instructions 2 and 3)
Name(s):
(Please Type or Print)
Capacity (Full Title)
Address
(include Zip Code)
Area Code and Tel. No.
Tax Identification or
Social Security No.
GUARANTEE OF SIGNATURE(S)
(SEE INSTRUCTION 2)
Authorized Signature
Name
(Please Type or Print)
Name of Firm
Address
(Include Zip Code)
Area Code and Tel. No.
Dated: , 2000
IMPORTANT: Failure to complete the Substitute Form W-9 on the back page of this
Letter of Transmittal may result in backup withholding of 31% of any cash
payments made pursuant to the Merger. Please review the Instructions and the
information provided under "Important Tax Information" in this Letter of
Transmittal.
<PAGE>
INSTRUCTIONS
1. DELIVERY OF LETTER OF TRANSMITTAL AND COMPANY CERTIFICATES. Company
Certificates, together with a signed and completed Letter of Transmittal and any
required supporting documents, should be sent or delivered to the Exchange Agent
at the address shown on the face of this Letter of Transmittal. If any of the
Company Certificates are registered in different names, it will be necessary to
complete, sign and submit as many separate Letters of Transmittal as there are
different registrations of Company Certificates. The method of delivery of this
Letter of Transmittal, the Company Certificates and all other required documents
is at the option and risk of the shareholder(s) and the delivery will be deemed
made only when actually received by the Exchange Agent. A Letter of
Transmittal, the Company Certificates and any other required documents must be
properly received by the Company, in form satisfactory to it, in order for the
delivery and surrender to be effective and the risk of loss of the Company
Certificates to pass to SoftQuad. If delivery is by mail, registered or
certified mail with return receipt requested, properly insured, is recommended.
2. GUARANTEE OF SIGNATURES. Signatures on this Letter of Transmittal must
be guaranteed by a member firm of a registered national securities exchange or
of the National Association of Securities Dealers, Inc. or by a commercial bank
or trust company having an office or correspondent in the United States (an
"Eligible Institution"), unless the Company Certificate(s) are surrendered (i)
by the registered holder of Company Stock who has not completed the box entitled
"Special Delivery Instructions" on this Letter of Transmittal or (ii) for the
account of an Eligible Institution.
3. SIGNATURES. If this Letter of Transmittal is signed by the registered
holder(s) of the Company Certificates, the signature(s) must correspond exactly
with the name(s) as written on the face of the Company Certificates without
alteration, enlargement or any change whatsoever.
If any Company Certificate is held of record by two or more joint owners,
all such owners must sign this Letter of Transmittal.
If this Letter of Transmittal or any Company Certificates or stock powers
are signed by a trustee, executor, administrator, guardian, attorney-in-fact,
officer of a corporation or other person acting in a fiduciary or representative
capacity, such person should so indicate when signing, and submit evidence
satisfactory to SoftQuad of such person's authority so to act.
4. VALIDITY OF SURRENDER; IRREGULARITIES. All questions as to validity,
form and eligibility of any surrender of Company Certificates hereunder will be
determined by SoftQuad as the successor to the Company. SoftQuad reserves the
right to waive any irregularities or defects in the surrender of any Company
Certificates, and its interpretations of the terms and conditions of the
reclassification and of this Letter of Transmittal (including these
Instructions) with respect to such irregularities or defects shall be final and
binding on all parties. A surrender will not be deemed to have been made until
all irregularities have been cured or waived.
5. SPECIAL DELIVERY INSTRUCTIONS. Indicate the name and address of the
person(s) to which SoftQuad Certificates are to be issued or sent if different
from the name and address of the person(s) signing this Letter of Transmittal.
6. ADDITIONAL COPIES. Additional copies of this Letter of Transmittal and
of the Information Statement may be obtained from Pam Gray at Atlas Stock
Transfer Corporation located at: 5899 South State Street, Salt Lake City, Utah
84107.
7. INADEQUATE SPACE. If the space provided on this Letter of Transmittal
is inadequate, the Company Certificate numbers and numbers of Company Stock
should be listed on a separate signed schedule affixed hereto.
8. LETTER OF TRANSMITTAL REQUIRED; SURRENDER OF COMPANY CERTIFICATES; LOST
COMPANY CERTIFICATES. A shareholder will not receive any SoftQuad Stock unless
and until this Letter of Transmittal or a facsimile hereof, duly completed and
signed, is delivered to the Exchange Agent, together with the Company
Certificates representing such Company Stock and any required accompanying
evidences of authority in form satisfactory to the Exchange Agent. If the
Company Certificates have been lost or destroyed, such should be indicated on
the face of this Letter of Transmittal. In such event, the Exchange Agent will
forward additional documentation necessary to be completed in order to
effectively surrender such lost or destroyed Company Certificates.
9. SUBSTITUTE FORM W-9. Each shareholder is required to provide SoftQuad
with a correct Taxpayer Identification Number ("TIN") on Substitute Form W-9,
which is provided under "Important Tax Information" below, and to indicate that
he is not subject to backup withholding by checking the box in Part 2 of the
Substitute Form W-9. Failure to provide the information on the Substitute Form
W-9 may subject the shareholder to 31% federal income tax withholding on the
payment. The box in Part 3 of the Substitute Form W-9 may be checked if the
shareholder has not been issued a TIN and has applied for a number or intends to
apply for a number in the near future. If the box in Part 3 is checked and
SoftQuad is not provided with a TIN within 60 days, SoftQuad will, withhold 31%
of all payments of such cash thereafter until a TIN is provided to SoftQuad.
<PAGE>
F - 1 EXHIBIT F
IMPORTANT TAX INFORMATION
Under United States federal income tax law, a shareholder is required to
provide SoftQuad with his correct TIN on Substitute Form W-9 below. If such
shareholder is an individual, the TIN is his Social Security number. If
SoftQuad is not provided with the correct TIN, the shareholder may be subject to
a $50 penalty imposed by the Internal Revenue Service. In addition, payments
that are made to such shareholder may be subject to backup withholding.
Certain shareholders (including, among others, all corporations and certain
foreign individuals) are not subject to backup withholding and reporting
requirements and should indicate their exempt status on Substitute Form W-9.
If backup withholding applies, SoftQuad is required to withhold 31% of any
payments made to the shareholder. Backup withholding is not an additional tax.
Rather, the tax liability of persons subject to backup withholding will be
reduced by the amount of tax withheld. If withholding results in an overpayment
of taxes, a refund may be obtained
PURPOSE OF SUBSTITUTE FORM W-9
To prevent backup withholding on payments that are made to a shareholder,
the shareholder is required to notify SoftQuad of his correct TIN by completing
the form below certifying that the TIN provided on the Substitute Form W-9 is
correct (or that such shareholder is awaiting a TIN) and that (1) the
shareholder has not been notified by the Internal Revenue Service that he is
subject to backup withholding as a result of failure to report all interest or
dividends or (2) the Internal Revenue Service has notified the shareholder that
he is no longer subject to backup withholding.
WHAT NUMBER TO GIVE SOFTQUAD
The shareholder is required to give SoftQuad the Social Security number or
employer identification number of the record owner of the Company Certificates.
If the Company Certificates are in more than one name or are not in the name of
the actual owner, consult the enclosed Guidelines for Certification of Taxpayer
Identification Number on Substitute Form W-9 for additional guidelines on which
number to report.
PAYER'S NAME: SOFTQUAD SOFTWARE, LTD.
SUBSTITUTE FORM W-9 PART 1 PLEASE PROVIDE YOUR TIN IN THE SPACE BELOW
AND CERTIFY BY SIGNING AND DATING PART 3.
Social Security Number--------------------------
OR
Employer Identification Number--------------------
DEPARTMENT OF THE PART 2 Check the box if you are NOT subject to
TREASURY INTERNAL back up withholding under the provisions of
REVENUE SERVICE Section 3406(a)(1)(C) of the Internal Revenue Code
because (1) you have not been notified that you
are subject to backup withholding as a result of
failure to report all interest or dividends or (2)
the Internal Revenue Service has notified you that
you are no longer subject to backup withholding.
PAYERS REQUEST FOR PART 3 CERTIFICATION - Under penalties of perjury,
TAXPAYER IDENTIFICATION I certify that the information provided on this
NUMBER ("TIN") form is true, correct and complete.
Signature:----------------------------------------
Date:---------------------------------------------
Awaiting TIN? ----
<PAGE>
NOTE: FAILURE TO COMPLETE THIS FORM MAY RESULT IN BACKUP WITHHOLDING OF 31%
OF ANY PAYMENTS MADE TO YOU PURSUANT TO THE AMENDMENT. PLEASE REVIEW ENCLOSED
GUIDELINES FOR CERTIFICATION OF TAXPAYER IDENTIFICATION NUMBER ON SUBSTITUTE
FORM W-9 FOR ADDITIONAL DETAILS.
The word "or" was substituted by the division of statutory revision for the
word "of" to correct an apparent typographical error.
