UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-SB12G
GENERAL FORM FOR REGISTRATION OF SECURITIES
OF SMALL BUSINESS ISSUERS UNDER SECTION 12(B)
OR 12(G) OF THE SECURITIES EXCHANGE ACT OF 1934
CRYS-TEL TELECOMMUNICATIONS.COM, INC.
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(Name of small business issuer in its charter)
FLORIDA 33-0865003
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(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
12707 High Bluff Drive Suite 200 San Diego, CA 92130
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(Address of Principal Executive Offices) (Zip Code)
858/350-4237
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(Issuer's telephone number, including area code)
Securities to be registered under Section 12(b) of the Exchange Act:
Title of Each Class Name of Each Exchange on Which
to be So Registered Each Class is to be Registered
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None
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Securities to be registered under Section 12(g) of the Exchange Act:
Common Stock, Par Value $0.001 Per Share
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(Title of Class)
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TABLE OF CONTENTS
PART I
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ITEM 1. DESCRIPTION OF BUSINESS. . . . . . . . . . . . . . . . . . . 3
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF
OPERATION. . . . . . . . . . . . . . . . . . . . . . . . . . 16
ITEM 3. DESCRIPTION OF PROPERTY. . . . . . . . . . . . . . . . . . . 19
ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT . . . . . . . . . . . . . . . . . . . . . . . . . 20
ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS 21
ITEM 6. EXECUTIVE COMPENSATION . . . . . . . . . . . . . . . . . . . 23
ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. . . . . . . . 25
ITEM 8. DESCRIPTION OF SECURITIES. . . . . . . . . . . . . . . . . . 26
PART F/S . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
PART II
ITEM 1. MARKET PRICE AND DIVIDENDS ON COMMON EQUITY; OTHER
MATTERS. . . . . . . . . . . . . . . . . . . . . . . . . . . 50
ITEM 2. LEGAL PROCEEDINGS. . . . . . . . . . . . . . . . . . . . . . 51
ITEM 3. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS. . . . . . . . 51
ITEM 4. RECENT SALES OF UNREGISTERED SECURITIES. . . . . . . . . . . 51
ITEM 5. INDEMNIFICAITON OF OFFICERS AND DIRECTORS. . . . . . . . . . 52
PART III
ITEM 1. INDEX TO EXHIBITS. . . . . . . . . . . . . . . . . . . . . . 54
ITEM 2. DESCRIPTION OF EXHIBITS. . . . . . . . . . . . . . . . . . . 54
SIGNATURE. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 54
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PART I
ALTERNATIVE 3
FORWARD-LOOKING STATEMENTS
IN ADDITION TO HISTORICAL INFORMATION, THIS FORM 10-SB CONTAINS CERTAIN
FORWARD-LOOKING STATEMENTS WITHIN THE MEANING OF THE PRIVATE SECURITIES
LITIGATION REFORM ACT OF 1995, AND THE COMPANY DESIRES TO FALL WITHIN THE "SAFE
HARBOR" PROVISIONS THEREOF. THIS STATEMENT IS INCLUDED HEREIN FOR THE EXPRESS
PURPOSE OF AVAILING THE COMPANY OF THE PROTECTIONS OF SUCH SAFE HARBOR WITH
RESPECT TO ALL OF THE FORWARD-LOOKING STATEMENTS CONTAINED HEREIN. SUCH
FORWARD-LOOKING STATEMENTS REFLECT THE CURRENT VIEWS OF THE COMPANY AND ITS
MANAGEMENT WITH RESPECT TO FUTURE EVENTS AND FINANCIAL PERFORMANCE, AND ARE
SUBJECT TO CERTAIN RISKS AND UNCERTAINTIES, WHICH COULD CAUSE ACTUAL RESULTS TO
DIFFER SUBSTANTIALLY FROM HISTORICAL RESULTS OR ANTICIPATED RESULTS. THE WORDS
"ANTICIPATES," "BELIEVES," "EXPECTS," "INTENDS," "FUTURE," "PROJECTED," "PLANS,"
"PLANNED," "OBJECTIVE" AND SIMILAR EXPRESSIONS IDENTIFY FORWARD-LOOKING
STATEMENTS. READERS ARE CAUTIONED TO CONSIDER SPECIFIC RISK FACTORS DESCRIBED
HEREIN AND NOT TO PLACE UNDUE RELIANCE ON THE FORWARD-LOOKING STATEMENTS
CONTAINED HEREIN, WHICH ARE APPLICABLE ONLY AS OF THE DATE HEREOF. THE COMPANY
UNDERTAKES NO OBLIGATION TO PUBLICLY REVISE THESE FORWARD-LOOKING STATEMENTS TO
REFLECT EVENTS OR CIRCUMSTANCES THAT MAY ARISE AFTER THE DATE HEREOF.
ITEM 1.
DESCRIPTION OF BUSINESS
Item 101 of Regulation S-B
BUSINESS DEVELOPMENT
Crys-Tel Telecommunications.com, Inc. ("Crys-Tel" or the "Company") is
establishing itself as an international facilities-based telecommunications
carrier which utilizes the Internet to provide economical international
telecommunications services. The Company currently trades its securities on
the OTC Bulletin Board under the Symbol "CYSS". Prior to December 14, 1998 the
Company traded its securities on the OTC Bulletin Board under the symbol "PSVG".
The Company was incorporated as Progressive General Corporation on January 7
, 1987 in the State of Florida. On August 3, 1998 the Company amended its
articles of incorporation by increasing the number of shares authorized from
300 to 50,000,000 common shares and changed the par value from $25.00 to $0.001.
In November of 1998 management resigned after transferring control of the
Company pursuant to a stock purchase agreement
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whereby the majority owner of the Company's securities, 975,000 common shares,
sold her interest in a single isolated private transaction to a former director
of the Company for $250,000.00.
The shareholders then approved a ten thousand for one split of the issued and
outstanding shares of the Company's common stock. On December 11, 1998 the
Company amended the articles of incorporation to increase the number of
authorized common shares to 100,000,000 and to authorize the issuance of
10,000,000 shares of preferred stock. The shareholders then approved a six for
one split of the issued and outstanding shares of the Company's common stock. On
December 14, 1998 the Company changed its name to Crys-Tel
Telecommunications.com, Inc. The Company is now in the development stage of
operations.
The Company has also entered into an agreement to purchase the after tax
income stream of Crys-Tel International, Inc. wholly owned by Kaiden S.A. and
PacRim Information Systems, Inc. Under the terms of this agreement, 5,625,000
preferred shares were issued to Kaiden S.A. and 1,875,000 preferred shares were
issued to PacRim Information Systems, Inc. These preferred shares are
convertible into the Company's common shares pursuant to a formula in the
agreement. Conversion can occur on a quarterly basis beginning January 1, 1999.
For every $1.00 of net earnings after tax received by the Company from the
worldwide operations of Crys-Tel International, Inc., Kaiden, S.A. and PacRim
Information Systems, Inc. may, at their option, convert one preferred share to
one common share of the Company subject to the restrictions of Securities
Exchange Commission Rule 144. Provided, however, that if net earnings in any
one year are negative, such loss reduces future year's net earnings and no
conversion is permitted until the sum of all years' earnings is positive. There
has been no conversion of preferred stock to common under this agreement as of
this date. Under the same agreement, Kaiden S.A. also received 6,750,00 common
shares (post forward split) and PacRim Information Systems, Inc. received
2,250,000 common shares (post forward split).
On March 3, 1999 the Company offered and issued to a single individual,
Giacomo Luca Di Consolo, 909,000 shares of common stock in exchange for
acquiring a 20 percent interest in an Italian business called Academy Network
Solutions. That transaction was subsequently rescinded by the Company for
nonperformance and the share issuance was cancelled as of the issuance date of
March 3, 1999.
PRINCIPAL PRODUCTS AND SERVICES
The Company is establishing itself as an international facilities-based
telecommunications carrier which routes voice, data and value-added services
over the Internet, giving substantial discounts off standard rates which
translates to savings for the caller. The Company intends to operate both as a
wholesale carrier for international long distance resellers and as a retail
carrier, servicing its own network and marketing the use of its network to
consumers in designated areas.
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Crys-Tel's objective is to develop a low-cost regional and international
telephony network in Europe and Asia with connectivity to North America and
Latin America, and to utilize inherent cost advantages to secure retail and
wholesale customers in all markets the Company operates in. The Company intends
to establish its network in regional markets through international joint venture
direct service agreements, thus bypassing the high costs associated with
traditional country settlement rates. In addition, Crys-Tel intends to
complement its core international retail and wholesale Public Switched
Telecommunication Networks ("PSTN") long distance business with related value
added services to its customers such as fax, data and voice services utilizing
traditional data networks such as frame relay, Internet Protocol ("IP") and the
Internet.
Crys-Tel's 'phone-to-phone' system enables callers to use a standard
telephone without the need for a computer or other additional equipment. Regular
local telephone calls are converted from standard voice to digital format and
seamlessly routed over the public Internet to destination points around the
world. This creates the opportunity to economically bypass large portions of
the PSTN. Crys-Tel plans to take advantage of the convergence of these trends by
developing a worldwide 'state of the art' network that offers significant
advantages to the IP telephony carriers and resellers. Crys-Tel is concentrating
its initial marketing efforts on three core product areas. The planned product
line includes Voice over IP, Fax over IP, and Pre-Paid Virtual Office Calling
Cards.
DISTRIBUTION METHODS
Crys-Tel intends to establish international joint ventures and supplier
relationships which will enable the company to rapidly expand while ensuring
that performance and quality is maintained. Crys-Tel's objective is to develop
a low-cost regional and international telephony network in Europe and Asia with
connectivity to North America and Latin America, and to utilize inherent cost
advantages to secure retail and wholesale customers in all markets the company
operates in. The network will be established in regional markets through direct
service agreements, thus bypassing the high costs associated with traditional
country settlement rates. In addition, Crys-Tel intends to complement its core
international retail and wholesale PSTN long distance business with related
value added services to its customers such as fax, data and voice services
utilizing traditional data networks such as frame relay, IP and the Internet.
Crys-Tel intends to aggressively expand its point of presence (POP) sites
across North America in order to gain a national and international presence.
This will involve installing gateway servers in different locales. Crys-Tel's
clientele may then phone anywhere in North America using Internet telephony
technology. More importantly, the Company believes that other global competitors
will seek to enter into partnerships, alliances or joint ventures with The
Crys-Tel Internet Telephony Network (CITN) to expand their amount of POP sites
into North America. These contracts could be in the form of equity arrangements
or reciprocal alliances.
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Crys-Tel also intends to rapidly build up a large subscriber base and
volume of minutes on a multi-national basis. Crys-Tel intends to acquire telecom
reseller operations and have alliances, partnerships and joint ventures with
facilities-based firms and carriers on several continents adding them to the
Crys-Tel Telephony Network (CTN). Management also plans to offer leadership
models, marketing support services and financial support to acquired telecom
resellers and to service allied facilities-based operating firms and carriers.
With this strategy, Crys-Tel intends to be positioned to transfer clients from
standard telephony networks to its planned Internet Telephony Network.
Crys-Tel plans to pursue joint venture opportunities where that will
support the inclusion of each new firm into an integrated business group of
companies. The Company is currently planning key joint ventures in the following
countries:
- Greece - Germany
- Ireland - Russia
- Former Soviet States - Portugal
- Italy - U.K
- Spain - Balkan Region
Reseller operations will be the Company's focus for building the Company's
clientele base. The Company expects that experience gained from the Company's
domestic telecom operations will dictate that the new Crys-Tel business model
has to incorporate specially trained representatives who will sell local, long
distance voice and data communications capabilities with a view of keeping the
customer once obtained through competitive cost pricing and superior service.
The Company intends do this by first securing the right to re-sell blocks of
numbers and time on a system that belongs to the phone company in the area or
country. Crys-Tel plans to be responsible for overall brand integrity and
ensuring compliance by each reseller. However, each acquired reseller will have
autonomy in their country for local marketing programs and may request support
from Crys-Tel as needed. The Company plans central marketing programs to be
carried out on a European and/or global basis to develop market awareness of the
Crys-Tel value proposition.
The central brand management is planned to include defining promotional
styles and assisting acquired resellers in implementing such styles in their
respective countries including:
- - - Delivery of basic marketing materials such as logo designs, brochures and
core text, for advertising, agent conferences, exhibitions etc.
- - - Support as necessary by attendance of agent conferences, exhibitions etc.
- - - Funding special joint events as agreed on a case basis. All in country
marketing costs are the responsibility of the acquired reseller.
The primary marketing channel is intended to be indirect including
multi-level marketing as agreed. However, at the acquired resellers' discretion
other channels may be used to support the main channel, or to promote specific
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additional service offers. The channels available include telemarketing, direct
sales and direct marketing channels.
The Company also intends to develop a range of telephone calling card
options to cover the private and business needs of customers to make long
distance or International calls. These calls can be made from home or office,
hotels, public phones etc. and depending on the option chosen will cater to
calls made in country, from Europe or from anywhere in the world. The cards can
be customized for organizations enabling series of collectable or promotional
cards to be issued to raise money for charities, institutions etc. or simply to
promote an organization's activities.
The Company also intends to expand into the arena of Internet telephony.
Recently, software was developed to minimize hardware requirements, paving the
way for remote access, linked transcontinental and intercontinental Internet
telephone without the end user needing a computer. This was the birth of
Phone-to-Phone Internet telephony. With this new technology, users can now use a
regular telephone to dial into a local gateway, which digitizes the voice
signal. The resulting stream of numbers is broken down into standard TCP/IP
packets and sent over the Internet to another gateway in another country. The
destination gateway reassembles the information, converts it back to voice and
sends it over local telephone lines to the destination number.
Crys-Tel is concentrating its initial marketing efforts on three core
product areas. The product line is planned to include Voice over IP, Fax over
IP, and Pre-Paid Virtual Office Calling Cards. Voice over IP falls into three
different categories, which includes Phone-to-Phone, PC-to-Phone, and PC-to-PC.
The user dials the number of the nearest Crys-Tel Gateway that is connected to a
regular telephone PSTN line. The gateway acts as a bridge between the PSTN and
the CITN. Once connected, the user is prompted to dial the destination phone
number. When connected, the call is then converted from an analog signal to a
digital signal which in turn is reduced into packets so that it can transverse
the Internet. When it reaches the Crys-Tel Gateway on the other end of the
connection, the call is converted back to analog mode and sent over the phone
network to complete the connection. This allows international telephone calls to
be made without incurring expensive international rates. To the caller, calls
are routed in the traditional manner. Users are able to speak straight into a
telephone and be connected directly to another telephone, rendering obsolete the
need for computers.
Crys-Tel also intends to provide software and service that offers users the
ability to call anyone, anywhere on any standard telephone, from their personal
computer by using an Internet dial-up account and a microphone. The user will
require an Internet connection as well as a multimedia computer. To those users
who do not have a multimedia PC, Crys-Tel also offers a device called a serial
set which replaces the sound card, microphone, and speaker. The sound quality
is better with the use of the serial set since it is made specifically for this
scenario. Crys-Tel also plans to provide software and service that offers users
the ability to call anyone, anywhere on any standard telephone, from their
Personal Computer, using an Internet dial-up account and a microphone to another
Personal Computer.
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Fax Services from Crys-Tel are intended to enable real-time, reliable fax
transmission over private or public IP networks. In most environments today,
fax is sent over the public telephone network. Crys-Tel intends to allow any
user, regardless of whether they have Internet access or not to use the Internet
for long distance fax calls. Instead of accessing a long distance carrier
network, IP users are routed to the closest Crys-Tel Gateway, then across the
Internet to the closest local central office. From there, faxes are routed over
the public telephone network to the called number. The result is that the entire
call is free of long distance charges. Users not attached to an IP network can
dial a local number to reach the Crys-Tel Gateway. Once dial tone is achieved
they can enter a long distance number. The call is then transported across the
IP network to its destination.
Crys-Tel is targeting the Asian and Italian communities in Vancouver and
San Jose due to the proximity of the two cities and the high concentration of
these groups. Gateways are currently being installed in Hong Kong and in Italy.
The Company is also finalizing agreements with the only Italian newspaper in
western North America to advertise weekly in order to promote the substantial
savings to their community. In addition, the Company is negotiating an incentive
program with the Italian Community Center in Vancouver to market its services to
their members. Management also plans to be advertising on numerous Chinese
newspaper and to allocate funds for advertisement airtime on the two Chinese
radio networks. The corporate goal for the next year is to deploy and service
twenty gateways in North America and twenty-five more internationally. The
Company will also be focusing on the Asian countries and aggressively targeting
nations in the European Union.
Crys-Tel plans to utilize the abilities of independent distributors to
introduce its products to target clients. In order to effectively reach the
target clients in a managed and timely fashion, the Company plans to employ
resources to train and grow a professional group of 'authorized agents.' Agents
would be managed by an internal 'Agent Support Group,' led by the Vice president
of Sales and Marketing. An experienced team is being assembled to provide
constant support and training programs to enable the agents to be successful and
focused. The agent network is intended to be built with direct promotion; trade
shows exhibits and advertising in trade magazines. Crys-Tel plans to provide
point of sale advertising materials and selling tools to ensure success.
Crys-Tel also plans to support sales by participating as much as possible in
agents' and retailers' advertising and sales promotions.
Although agents will be responsible for bringing sales to a close, Crys-Tel
plans to employ account managers to facilitate the implementation and ongoing
support for new programs. The account managers will work from head office and
have the authority to react and respond to changing client needs. The planned
'Client Service Group' will concentrate solely on the client needs. The Company
plans to set up a direct administration group to handle all customer inquiries
and ongoing needs. The 'Customer Care Group' would be responsible for all
customer service needs and order fulfillment. Management also intends to provide
I-800 operators.
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Crys-Tel's pricing strategy has two components. The first is to attract a
large loyal customer base to the Company utilizing attractively priced long
distance rates. The short-term goal is to build a loyal customer base to which
other products may be 'bundled' and marketed. The second goal is to offer high
quality value-added products at competitive prices. The Company believes that
future price sensitivity will be removed by utilizing loyalty ties and the
existing distribution channel (long distance).
The Company is currently implementing commercial operations of the business.
There can be no assurance that the Company will achieve a significant degree of
market acceptance, and that acceptance, if achieved, will be sustained for any
significant period or that product life cycles will be sufficient (or substitute
products developed) to permit the Company to recover start-up and other
associated costs. Failure to achieve or sustain market acceptance could have a
material adverse effect on the business, financial conditions, and results of
operations of the Company.
Although the Company intends to pursue a strategy of aggressive product
marketing and distribution, implementation of this strategy will depend in large
part on its ability to (i) establish a significant customer base and maintain
favorable relationships with those customers; (ii) effectively introduce
acceptable products to its customers; (iii) obtain adequate financing on
favorable terms to fund its business strategy; (iv) maintain appropriate
procedures, policies, and systems; (v) hire, train, and retain skilled
employees; and (vi) continue to operate in the face of increasing competition.
The inability of the Company to obtain or maintain any or all of these factors
could impair its ability to successfully implement its business strategy, which
could have a material adverse effect on the results of operations and financial
condition of the Company.
The Company will be responsible for product performance and liabilities of
itself and possibly, its joint ventures. The Company does not currently have
product liability insurance, and there can be no assurance that the Company will
be able to obtain or maintain such insurance on acceptable terms or, if
obtained, that such insurance will provide adequate coverage against potential
liabilities. The Company faces a business risk of exposure to product liability
and other claims in the event that the use of the Company's products or services
is alleged to result in adverse effects. While the Company has taken, and will
continue to take, what it believes are appropriate precautions, there can be no
assurance that it will avoid significant liability exposure.
STATUS OF PUBLICLY ANNOUNCED PRODUCTS AND SERVICES
On January 27, 1999 the Company announced that it had entered into a joint
venture agreement with Crys*Tel Italia S.P.A. to provide its Internet telephony
services in Italy. The Company is presently negotiating with Crys*Tel Italia
for the purposes of restructuring the joint venture agreement. Particulars
include the ownership of Crys*Tel increasing from 30 percent to 51 percent.
The Company has completed Beta testing between Milan, Italy and Vancouver and
the system is now ready for commercial use. Crys*Tel Italia has given the
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company a verbal commitment for the ordering of an additional 13 gateways by
October 12, 1999. Crys*Tel Italia's initial plan for the installation of 100
gateways throughout Italy is still on line but due to unforeseen technical
difficulties and a change of office venue, timelines have been extended.
On February 2, 1999 Nokia Corporation (formerly Vienna Systems), a leading
Internet Protocol Telephony solutions provider, announced that the Company had
chosen the Nokia Corporation platform to build an international multimedia
network that will ultimately connect more than 200 points-of-presence (POPs)
worldwide. The Company is still actively working with Nokia in order to
complete its' international network. Nokia is providing Crys-Tel with a turn-key
IP Telephony solution as well as complete technical support for the network.
Through a strategic interconnect with Telematrix of Japan the Company can
increase its capacity to connect to over 105 POP's worldwide.
On February 8, 1999 the Company announced that it had signed a letter of
intent to purchase 20% of Italian based Academy Network Solutions. The letter
of intent, however, has been cancelled due to a lack of disclosure from Academy
Network Solutions.
On March 25, 1999 the Company announced that it had finalized the purchase
of 20 percent of Italian-based Academy Network Solutions for 909,000 restricted
shares of Crys*Tel. This transaction has been cancelled due to a lack of
disclosure from Academy Network Solutions.
March 26, 1999 the Company announced that it had entered into an agreement
with Telematrix USA, a division of Chiyoda Corporation, located in Tokyo, Japan
to interconnect and share traffic between their Internet Telephony networks.
This interconnect agreement is still in place. Both networks were connected in
June of 1999. To date no traffic has passed through the connected network. Price
points have been accepted and traffic is scheduled to commence around the end of
October, 1999.
On March 30, 1999 the Company announced that it had placed an order for an
additional 21 new gateways with Nokia Corporation for IP Telephony valued at
over $1,000,000.00 U.S. to expand its global network. This order was cancelled
due to a withdrawn commitment from Academy Network Solutions. Recently the
Company placed an order for 2 gateways with plans for another 10 by mid October,
1999.
On July 12, 1999 the Company announced that negotiations have been
completed to lead in the redevelopment and reconstruction efforts for the
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war-torn region of the Balkans by providing IP Telephony services to meet the
needs of the displaced ethnic Albanians and the other people effected by the
aftermath of the crisis in Kosovo. Negotiations have been completed and the
company is waiting for a signed copy of the Joint Venture contract. Management
believes that this agreement will be consummated by the first week of October,
1999.
On July 22, 1999 the Company announced it plans to expand its IP Telephony
services to support unified messaging, video conferencing, on-demand multimedia,
and the wireless transmission of data and telephony. With the continuing
development of the Nokia IP Solution the Company believes that it will be able
to offer the public complete integration of all of its services within the next
8 months. Crys-Tel and Nokia Corporation are currently working together as
"user" and "producer" to develop these services.
On August 26, 1999 the Company's new management team, under the leadership
of CEO Dr. Lorenzo Musa announced that two very important targets have been
achieved by the Company in the recently troubled area of the Balkans in the
spirit of telecommunications development for all of the countries involved. The
Government of Albania has awarded the company a 1300sq. meter facility from
which it can operate its' VOIP services. The Company also announced that it has
entered into a Letter of Intent with Pegasus Telekom of Austria to offer VOIP
and GSM services in Kosovo.
COMPETITION
Although Management believes that competition is in the IP telephony
business is minimal, competition in cellular telephone and personal computer and
Internet business is intense. The name and number of competitors in this arena
are too numerous to mention. The Company, however, is aware of only a handful of
Internet telephony providers located mainly on the West Coast of the United
States that service niche markets. The hardware of these competitors is limited
to twelve port gateways which is not flexible or scaleable architecture.
Crys-Tel utilizes hardware equipped with forty eight to sixty ports and can be
switched on according to the traffic flow. The Company intends to position
itself to be a next generation telecom provider and therefore its hardware
should not suffer bottlenecks which could plague its competitors. The Company
is planning to model itself like Quest as the largest Internet telephony
provider in North America by installing the most gateways and thereon
controlling the most point of presence sites.
The Internet, telecommunication and cellular telephone industries,
meanwhile, continue to undergo rapid change, and competition is intense and is
expected to increase. The Company is aware that other companies and businesses
market, promote and develop technologies and products which could be competitive
with the Company. There may exist other technologies and products that are
functionally equivalent or similar to the Company's products. The Company
expects that companies or businesses which may have developed or are developing
such technologies and products, as well as other companies and businesses which
have the expertise which could encourage them to develop and market competitive
products and technology, may attempt to develop technology and products directly
competitive with the Company. Many of these competitors have greater financial
and other resources than the Company.
There can be no assurance that competitors have not or will not succeed in
developing technologies and products that are more effective than any which the
Company is developing or which would render the Company's services obsolete and
noncompetitive. Many of the competitors of the Company have substantially
greater experience, financial resources and marketing capabilities than the
Company.
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Further, the market for the Company's telecommunications products is
characterized by rapidly changing technology which could result in product
obsolescence or short product life cycles. Similarly, the industry is
characterized by continuous development and introduction of new products and
technology to replace outdated products and technology. There can be no
assurance that competitors will not develop technologies or products that render
the Company's systems obsolete or less marketable. The Company may be required
to satisfy evolving industry or customer requirements, which could require the
expenditure of significant funds and resources, and the Company does not have a
source or commitment for any such funds and resources.
PRINCIPAL SUPPLIERS
The Company's exclusive gateway vendor is Nokia Corporation (formerly
Vienna Systems). The Company has entered into a Reseller Agreement with Nokia
Corporation for an initial one year term commencing on September 1, 1999 for a
non-exclusive, non-transferable right to distribute certain products worldwide
including call processing servers, VS2000 gateways, CPUs, and all interface
software and billing software. The Company has also entered into a contract with
Starcom-Accesspoint, a Division of Starcom Services Corporation of British
Columbia, Canada. The Starcom contract is for a month to month term and is for
the installation of Internet cable access service as required by the Company.
There can be no assurance that these vendors will renew their contracts with the
Company at the expiration of any given term. Loss of services by these vendors
would seriously impact the Company's operations and would require the Company to
locate replacement services from other vendors. The Company does not currently
have any contingency plans in place if either of these were to terminate their
relationship with the Company.
DEPENDENCE ON A FEW MAJOR CUSTOMERS
As the date hereof, the Company has formally entered into only one
international joint venture agreement with Crys-Tel Telecommunications-Australia
Pty Ltd. to provide the Company's products and services on the continent of
Australia. The Company is in the midst of finalizing a second joint venture
agreement in Italy. Crys-Tel has entered into only two colocation agreements, a
Colocation Support Services Agreement with the Vancouver Telephone Company
Limited to deliver products and services in Vancouver, British Columbia and an
Internet Services and Colocation Agreement with AboveNet Communications, Inc. to
deliver services and products in the area of San Jose, California. The Company
has also entered into a Network Administration Agreement with Telematrix USA, a
division of Chiyoda Corporation, located in Tokyo, Japan to interconnect their
independent voice over IP networks and to operate Company gateways on the
TeleMatrix network.
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PATENTS, TRADEMARKS AND LICENSES
The Company owns no patents or trademarks. Management has considered
registering certain trademarks under the name "Crys-Tel" but has made no
absolute commitment as of yet to do so. The Company will be required to obtain
an international carriers' license under Section 214 of the Communications Act
of 1934 as discussed below but has not yet filed the application. The Company
has no current plans to apply for patents of any kind.
NEED FOR GOVERNMENTAL APPROVAL AND EFFECT OF REGULATIONS
The Company will be required to obtain an International carriers' license
under Section 214 of the Communications Act of 1934. The Company has not yet
applied for this license but intends to do so prior to the end of this calendar
year. Failure to obtain this license may seriously impact the Company's ability
to execute its business plan. International carriers authorized under Section
214 of the Communications Act of 1934, as amended, must comply with the
following requirements and prohibitions:
(a) Each carrier is responsible for the continuing accuracy of the
certifications made in its application. Whenever the substance of any such
certification is no longer accurate, the carrier shall as promptly as possible
and in any event within thirty days file with the Secretary in duplicate a
corrected certification referencing the FCC file number under which the original
certification was provided. The information may be used by the Federal
Communications Commission (hereinafter the "Commission") to determine whether a
change in regulatory status may be warranted.
(b) Carriers must file copies of operating agreements entered into with
their foreign correspondents within 30 days of their execution, and shall
otherwise comply with the filing requirements of the Commission.
(c) Carriers must file tariffs pursuant to Section 203 of the
Communications Act, 47 U.S.C. 203 and certain federal regulations.
(d) Carriers must file annual reports of overseas telecommunications
traffic as required by the Commission.
(e) Authorized carriers may not access or make use of specific U.S.
customer proprietary network information that is derived from a foreign net-work
unless the carrier obtains approval from that U.S. customer. In seeking to
obtain approval, the carrier must notify the U.S. customer that the customer may
require the carrier to disclose the information to unaffiliated third parties
upon written request by the customer.
(f) Authorized carriers may not receive from a foreign carrier any
proprietary or confidential information pertaining to a competing U.S. carrier,
obtained by the foreign carrier in the course of its normal business dealings,
unless the competing U.S. carrier provides its permission in writing.
13
<PAGE>
(g) The Commission reserves the right to review a carrier's authorization,
and, if warranted, impose additional requirements on U.S. international carriers
in circumstances where it appears that harm to competition is occurring on one
or more U.S. international routes.
(h) Carriers regulated as dominant must provide the Commission with the
following information within 30 days after conveyance of transmission capacity
on submarine cables to other U.S. carriers:
(1) The name of the party to whom the capacity was conveyed;
(2) The name of the facility in which capacity was conveyed;
(3) The amount of capacity that was conveyed; and
(4) The price of the capacity conveyed.
(i) Subject to the requirement of the Commission that a carrier regulated
as dominant along a route must provide service as an entity that is separate
from its foreign carrier affiliate, and subject to any other
structural-separation requirement in Commission regulations, an authorized
carrier may provide service through any wholly owned direct or indirect
subsidiaries. The carrier shall, within 30 days after the subsidiary begins
providing service, file a letter with the Commission in duplicate referencing
the authorized carrier's name and the FCC file numbers under which the carrier's
authorizations were granted and identifying the subsidiary's name and place of
legal organization. This provision shall not be construed to authorize the
provision of service by any entity barred by statute or regulation from itself
holding an authorization or providing service.
(j) An authorized carrier, or a subsidiary operating pursuant to paragraph
(i), that changes its name (including the name under which it is doing business)
shall notify the Commission by letter filed with the Secretary in duplicate
within 30 days of the name change. Such letter must reference the FCC file
numbers under which the carrier's authorizations were granted.
ESTIMATE OF THE AMOUNT TIME SPENT ON RESEARCH AND DEVELOPMENT
The Company's business is not necessarily propriety. Rather, the Company
provides products and a network developed by others which are licensed to the
Company. The Company's license for these services is being principally provided
by the Nokia Corporation. Thus, the Company does not engage in research and
development per se. The Company's business plan is primarily focused on the
marketing and use of products developed by its vendors.
COSTS AND EFFECTS OF COMPLIANCE WITH ENVIRONMENTAL LAWS
It is not anticipated that any the Company will develop any issues with
compliance with environmental laws.
14
<PAGE>
EMPLOYEES
The Company is a development stage company and currently has only four
employees in addition to executive officers who are compensated for their time
contributed to the Company. At such time as the Company enters into active
contracts with additional joint ventures, the number of employees is expected to
increase to at least 14 full-time employees as is the compensation of executive
officers. Management of the Company expects to use consultants, attorneys, and
accountants as necessary. The need for employees and their availability will be
addressed in connection with a decision whether or not to participate in a joint
venture.
The Company is therefore dependent on the efforts and abilities of its
senior management. Senior management is composed of Dr. Lorenzo Musa Chairman of
the Board of Directors, President and Chief Executive Officer, Anthony Papalia,
Director and Executive Vice President, Edward Nixon, Director, and Randall A.
Jones, Chief Financial Officer. The loss of any of these key employees could
have a material adverse effect on the business and prospects of the Company. The
members of the Board of Directors of the Company believe that all commercially
reasonable efforts have been made to minimize the risks attendant with the
departure of any key personnel from the service of the Company. There can be no
assurance, however, that upon the departure of any key personnel from the
service of the Company that replacement personnel will cause the Company to
operate profitably. The Company has no key man life insurance with respect to
any of its executive employees.
YEAR 2000 ISSUES.
Many computer systems experience problems handling dates beyond the year
1999. Therefore, some computer hardware and software will need to be modified
prior to the year 2000 in order to remain functional. The Company has assessed
its exposure to Year 2000 issues in terms of its products, internally used
operating systems, software, and other technology, and third party vendors and
suppliers. While the Company believes that it has substantially identified and
resolved all potential Year 2000 problems with any of the products that it
markets, it is not possible to determine with complete certainty that all Year
2000 problems affecting the Company's products and services have been identified
or corrected because these products and services interact with other third party
vendor systems not under the Company's control. It should be noted that the
operation of office and facilities equipment, such as fax machines,
photocopiers, telephone systems, security systems, elevators, and other common
devices may be affected by the Year 2000 problem.
The Company has identified major suppliers and other third party vendors
integral to the operations of the Company's business. The Company will initiate
communications with those suppliers and third party vendors to assess their
readiness to handle Year 2000 problems. However, the Company has no control over
and cannot predict the corrective actions of these third party vendors and
15
<PAGE>
suppliers. The Company intends to arrange, to the extent available, alternate
supplier arrangements in the event that it considers a third party
vender to have material Year 2000 issues. Although the Company expects that it
will be able to resolve any significant Year 2000 problems related to third
party products and services, there can be no assurance that it will be
successful in resolving any such problems. Any failure of these third party
vendors and suppliers to resolve Year 2000 problems with their systems in a
timely manner could have a material adverse effect on the Company's business,
financial condition, and results of operations.
The discussions of the Company's efforts relating to Year 2000 compliance
are forward-looking statements. The Company's ability to achieve Year 2000
compliance and the associated level of incremental costs could be adversely
affected by, among other things, the availability and cost of programming and
testing resources, vendors' ability to modify proprietary software and other
unanticipated problems. The failure to correct a material Year 2000 problem
could result in an interruption of certain normal business activities or
operations. Such failures could materially affect the Company's results of
operations, liquidity and financial condition. Because of the general
uncertainty inherent in the Year 2000 problem, the Company is unable at this
time to determine those consequences.
ITEM 2
MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION, LIQUIDITY AND CAPITAL
RESOURCES, RECENT EVENTS.
Item 303 of Regulation S-B
Crys*tel Telecommunications.com is a development stage company with a
limited operating history upon which an evaluation of the company's prospects
can be made. Except for the historical information contained herein, the
following discussion may contain forward-looking statements that involve risks
and uncertainties. The company's future could differ materially from those
discussed here. Factors that could cause or contribute to such differences
include, but are not specially limited to, failure to satisfy performance
obligations, timely product manufacturing and installation, changes in various
markets the company serves, as well as the other risks detailed in this section.
The Company does not undertake to update the results discussed herein as a
result of changes in risks or operating results.
The Company has limited operating history upon which an evaluation of the
Company's prospects can be made. The Company has had only limited revenue from
its operations through June 30, 1999 and there can be no assurances as to when
the Company will commence generating substantial revenues, or that it will be
profitable once substantial revenues are generated. The Company's prospects must
be considered keeping in mind the risks, expenses, and difficulties frequently
encountered in the establishment of a new business in an ever changing industry
and the research, development, manufacture, commercialization, distribution, and
commercialization of technology, procedures, and products and related
16
<PAGE>
technologies. There can be no assurance that unanticipated technical or other
problems will not occur which would result in material delays in product
commercialization or that the Company's efforts will result in successful
product commercialization. There can be no assurance that the Company will be
able to achieve profitable operations.
RESULTS OF OPERATIONS
The financial statements and notes thereto which appear in Part F/S should
be read in conjunction with this review. After a change in ownership and
undertaking a new business plan, the Company elected to change its fiscal year
from December 31 to June 30 effective July 1, 1998. There was no activity
during the resulting short period from January 1 to June 30, 1999. The change
in ownership took place on November 11, 1999.
Sales were $128,900 for the fiscal year ended June 30, 1999 were from
sales of two Gateways and resulted in gross profit of $41,213. Operating
expense totaled $321,873 and consisted primarily of general and administrative
expense. Promotion and advertising expense totaled $36,802. Product
development expense of $13,698 included $9,000 attributable to stock issued to
Crys-Tel International, Inc. a Barbados Corporation in an agreement to acquire
the future revenues of that corporation. Management subsequently decided to
undertake the business plan directly; therefore, the shares were recorded at
their par value and charged to expense because of the change in the operating
entity.
LIQUIDITY AND CAPITAL RESOURCES
At June 30, 1999 the Company's current liabilities exceeded current assets,
resulting in a working capital deficit of $118,175. Crys-Tel has financed its
operations through an issue of convertible debentures and with demand loans
advanced from certain stockholders. The convertible debentures sold totaled
$333,200 and were all converted to common stock prior to June 30, 1999.
Syndication cost related to the offering totaled $63,800. Stockholder loans
as of June 30, 1999 totaled $130,147, are due on demand and bear interest at 10
percent per annum. Stockholders have committed to loan up to an additional
$835,000 to carry out the first stage of the business plan.
Based on the Company's current operating plan, capital and working capital
expenditures necessary to support the on-going development and commercialization
of its worldwide network are expected to substantially exceed cash projected to
be generated from operations. However, management believes the anticipated
loans from stockholders are sufficient to support its operating needs through
March 31, 2000 based upon the Company's current business plan. The realization
of this plan is dependent upon the Company's ability to negotiate agreements to
establish a substantial network and to direct traffic over that network. There
can be no assurance that sufficient numbers of joint venture agreements will be
negotiated or gateways installed worldwide in the current highly competitive
market to realize the current business plan. If these agreements and sales are
not achieved as planned, the Company's available funds and cash flows from
17
<PAGE>
operations may not be sufficient to meet operating needs through June 2000. In
either case the Company will likely seek additional financing in fiscal 2000, or
prior thereto, to continue to fund operating needs. There can be no assurance
that such financing will be available on terms acceptable to the Company, if at
all.
The Company will require additional funds to implement its business
strategies, including cash for (i) payment of increased operating expenses; and
(ii) further implementation of its business strategies. Such additional capital
may be raised through additional public or private financing, as well as
borrowings and other resources. The Company anticipates that it will need to
raise capital prior to the end of calendar 1999. To the extent that additional
capital is raised through the sale of equity or equity-related securities, the
issuance of such securities could result in dilution to the Company's
stockholders. No assurance can be given, however, that the Company will have
access to the capital markets in the future, or that financing will be available
on acceptable terms to satisfy the cash requirements of the Company to implement
its business strategies. The inability of the Company to access the capital
markets or obtain acceptable financing could have a material adverse effect on
the results of operations and financial condition of the Company. The Company
may be required to raise substantial funds. If adequate funds are not available,
the Company may be required to curtail operations significantly or to obtain
funds through entering into arrangements with collaborative partners or others
that may require the Company to relinquish rights to certain of its technologies
or product candidates that the Company would not otherwise relinquish. The
Company's forecast of the period of time through which its financial resources
will be adequate to support its operations is a forward-looking statement that
involves risks and uncertainties, and actual results could vary as a result of a
number of factors.
YEAR 2000 ASSESSMENT
The Company has been working on a due diligence testing of its year 2000
compliance. The year 2000 issue is grounded in that many computer systems
process transactions based on storing two digits for the year of a transaction
(for example, "96" for 1996), rater than a full four digits. Systems that
process year 2000 transactions with the year "00" may encounter significant
processing inaccuracies and even inoperability. Many companies will incur
significant costs to make the needed software changes.
The Company has completed a due diligence testing of its year 2000
compliance and has not found any problems to date. The testing included
information technology and non-information technology systems, as well as
inquiries to third parties with which the Company have material relationships
(vendors and customers), regarding their state of readiness. The cost of any
further year 2000 initiatives is not expected to be material to the Company's
results of operation or financial position.
INTERNATIONAL JOINT VENTURES
Because certain customers of the Company will be located in other
countries, the Company anticipates that international sales will account for a
significant portion of its revenues. There can be no assurance that the Company
will be able to compete successfully in international markets or to satisfy the
18
<PAGE>
service and support requirements of its customers. Additionally, the Company's
sales and operations could be subject to certain risks, including tariffs, and
other barriers, difficulties in staffing and managing foreign subsidiary, joint
venture and branch operations, currency exchange risks and exchange controls,
potentially adverse tax consequences and the possibly of difficulty in accounts
receivable collection. There can be no assurance that any of these factors will
not have a material adverse effect on the Company's business, financial
condition and results of operations.
The Company will sell its products and services in currencies other than
the U.S. Dollar, which would make the management of currency fluctuations
difficult and expose the Company to risks in this regard. The Company's results
of operations are subject to fluctuations in the value of various currencies
against the U.S. dollar. Although Management intends to monitor the Company's
exposure to currency fluctuations, there can be no assurance that exchange rate
fluctuations will not have a material adverse effect on the Company's results of
operations or financial condition.
The products marketed and distributed by the Company may be subject to
foreign government standards and regulations that are continually being amended.
Although the Company will endeavor to satisfy foreign technical and regulatory
standards, there can be no assurance that the Company's products and services
will comply with government standards and regulations, or changes thereto, or
that it will be cost effective for the Company to redesign its products to
comply with such standards or regulations. The inability of the Company to
design or redesign products to comply with foreign standards could have a
material adverse effect on the Company's business, financial condition and
results of operations.
Certain statements concerning the Company's plans and intentions included
herein constitute forward-looking statements for purposes of the Securities
Litigation Reform Act of 1995 for which the Company claims a safe harbor under
that Act. There are a number of factors that may affect the future results of
the Company, including, but not limited to, (a) interest rates, (b) general
economic conditions and (c) specific economic conditions within the areas where
the Company operates. This registration statement contains both historical facts
and forward-looking statements. Any forward-looking statements involve risks
and uncertainties, including, but not limited to, those mentioned above.
Moreover, future revenue and margin trends cannot be reliably predicted.
ITEM 3
DESCRIPTION OF PROPERTY
Item 102 of Regulation S-B
The Corporate offices are located at 18 Halfmoon, Irvine, California, 92614
on a month to month lease agreement with the Company's Chief Financial Officer.
All equipment at this site is new. The Company has two Nokia gateways on line
through licensing agreement with Nokia Corporation in the form of a Colocaton
Agreement with Vancouver Telephone Company Limited in British Columbia, Canada
and an Internet Services and Colocation Agreement with AboveNet Communications,
19
<PAGE>
Inc. to deliver the Company's services and products in the area of San Jose,
California. The Company has also entered into a Network Administration Agreement
with Telematrix USA, a division of Chiyoda Corporation, located in Tokyo, Japan
to interconnect their independent voice over IP networks and to operate Company
gateways on the TeleMatrix network. The Company houses the gateways for
accepting long distance Internet telephone calls that have been routed through
Internet Protocol (IP) and the Internet fiber optic lines from overseas joint
venture gateways. To date, the Company has entered into only one international
joint venture gateway with Crys-Tel Telecommunications-Australia Pty Ltd.
located in Sydney, Australia but is close to finalizing a second joint venture
in Italy. The Company has no policy of investing in real estate, real estate
mortgages, or securities or interests in persons primarily engaged in real
estate activities.
ITEM 4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Item 403 of Regulation S-B
As of September 22, 1999, the Company had issued and outstanding 17,705,666
shares of Common Stock. Approximately 1,224,217 of these issued and outstanding
shares had been placed in escrow pursuant to a Regulation D, Rule 504 offering
that was not fully subscribed and will be returned to the Company. Company
stockholder Kaiden S.A. owns 6,750,000 shares of the Company's Common Stock and
Company stockholder PacRim Information Systems, Inc. owns 2,250,000 of the
issued and outstanding shares of the Company's Common Stock. Because of such
ownership, these stockholders will effectively control the election of all
members of the Board of Directors of the Company and determine all corporate
actions. The officers and directors of Crys-Tel do not own any equity interest
in the Company. Stockholders are not entitled to accumulate their votes for the
election of directors or otherwise.
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Title Of Class Name And Address Amount And Nature Percent Of Class
Of Beneficial Of Beneficial
Owner Ownership
Common PacRim Information Systems, Inc. 2,250,000 Shares 12%
1390 Ottawa Avenue
West Vancouver
British Columbia, Canada V7T 2H5
Common Kaiden SA 6,750,000 Shares 38%
Galerie St.
Francois 8
P.O. Box 2224
CH 1002
Lausanne, Switzerland
20
<PAGE>
Preferred Kaiden SA 5,625,000 Shares 75%
Series A Galerie St.
Francois 8
P.O. Box 2224
CH 1002
Lausanne, Switzerland
Preferred PacRim Information 1,875,000 Shares 25%
Series A Systems, Inc.
1390 Ottawa Avenue
West Vancouver
British Columbia, Canada V7T 2H5
</TABLE>
ITEM 5
DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS
Item 401 of Regulation S-B
The Company's Board of Directors is responsible for the management of the
Company, and directors are elected to serve until the next regular meeting of
shareholders or until their successors are elected and shall qualify. Executive
officers of the Company are elected by, and serve at the discretion of the Board
of Directors. Currently, there are no formal committees of the Board of
Directors. The Company anticipates forming an audit committee during the
current fiscal year.
EXECUTIVE OFFICERS AND DIRECTORS
The current executive officers and directors of Crys-Tel are as follows:
NAME AGE POSITION(S)
Dr. Lorenzo Musa 58 Chairman, President, CEO
Anthony Papalia 24 Director, Vice President
Edward Nixon 69 Director
Randall A. Jones 45 Chief Financial Officer
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<PAGE>
Dr. Lorenzo Musa, age 58, is Chairman of the Board of Directors, President
and Chief Executive Officer of the Company. He graduated "Magna Cum Laude" from
Bologna University with Ph.D. in Theoretical and Applied Physics, including
extensive research and development in superconductivity and superfluidity
applications. Dr. Musa also spent several years as a researcher and teacher at
Ferrara University for the HartFree-Fock mathematical approximation method in
semiconductor device projects and has been a consultant of T.E.M.A. (Technologie
Matematiche Avanzate), a subsidiary of the ENI Group in Italy. Dr. Musa was
C.E.O. of SINTECO S.A. Geneva, Switzerland, with signature at Geneva Chambre of
Commerce, and has recently been a consultant to several European countries on
the development of international telephone networks. He is also the owner of
patents in high-technology with emphasis in electronics, superconductivity and
smart-cards.
Anthony Papalia, age 24, is a Director and Executive Vice President Mr.
Papalia holds a degree in Marketing and Business Development. He has served for
the last three years as a Director of the Metals Research Group Corp, a publicly
listed company in the United States. Mr. Papalia has over 6 years of experience
in international finance, specializing in natural resources, technology,
marketing and management. For the past several years he has concentrated on the
development of capital pools for small publicly traded companies. Mr. Papalia
has an extensive background in corporate finance and venture capital with
experience in deal assessment, negotiation and raising of capital
Edward Nixon, age 69, is a Director. He is president of Nixon World
Enterprises, Inc., based in the State of Washington. He specializes in
international commercial trade, investigating a wide range of prospects. As a
geologist he is presently concentrating on the technical evaluation of mining
prospects and new techniques in metallurgy and hazardous waste disposal. His
long term personal interest has been focused on innovative methods for clean
extraction of earth resources. He is also actively pursuing development of
innovations in thermo-voltaic and photo-voltaic electric power generators, and
the development of hybrid electric power plants combining conventional and
alternative energy resources. He has worked on projects in mining, refining, and
manufacturing, assisting startup companies in the U.S. and development of
original equipment manufacturers overseas, expansion of international satellite
communications, marketing of agricultural products, improvement of
transportation--including pollution abatement, and support of cultural exchange
programs. Following incorporation in May of 1980, he has engaged in projects for
clients in more than twenty countries on five continents. His 20th visit to
China one year ago was dedicated to the opening of a new International Shoppers
Network and the development of regional shopping malls in fifty cities.
Randall A. Jones, age 45, is the Chief Financial Officer. Subsequent to
receiving his degree in accounting from California State University, Fullerton,
Mr. Jones has dedicated the last 22 years to advising in the field of financial
and accounting management, including audit experience with Deloitte Touche &
Company, (formerly Touche Ross & Co,). He has extensive knowledge in preparing
corporations for the entry into the public marketplace. From 1996 to present Mr.
Jones served as Chief Financial Officer for American Boardsports Company, Inc.,
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from 1994 to 1996 as corporate controller for World Interactive Network and from
1979 to 1994 Mr. Jones was a Consultant for Corporate Development Consultants
where he specialized in corporate reorganizations, systems conversions, etc.
There are no family relationships among directors or officers.
No officer or director of Crys-Tel currently, or during the last five years
have:
(a) had any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of the
bankruptcy or within two years prior to that time.
(b) had any conviction in a criminal proceeding or is being subject to a pending
criminal proceeding.
(c) is being subject to any order, judgment or decree, not subsequently
reversed, suspended or vacated, of any court of competent jurisdiction,
permanently or temporarily limiting involvement in any type of business,
securities or banking activities.
(d) has been found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended or vacated.
The officers and directors of the Company will engage in other activities.
The persons serving as officers and directors of the Company will have conflicts
of interests in allocating time, services, and functions between the other
business ventures in which those persons may be or become involved. The officers
and directors of the Company, however, believe that the Company will have
sufficient staff, consultants, employees, agents, contractors, and managers to
adequately conduct the business of the Company.
ITEM 6
Item 402 of Regulation S-B
EXECUTIVE COMPENSATION
Executives of the Company are paid an annual salary and no other
compensation. The following table illustrates salary agreements with the
Company's executives for the fiscal year ending June 30, 2000:
<TABLE>
<CAPTION>
Name Age Title Fiscal Year Annual Salary
- - --------------- --- ----------------------- ----------- --------------
<S> <C> <C> <C> <C>
Lorenzo Musa 58 Chairman, President Fiscal Year $ 144,000.00
and CEO 2000
Edward Nixon 69 Director Fiscal Year $ 60,000.00
2000
Anthony Papalia 24 Director, Executive Fiscal Year $ 84,000.00
Vice President 2000
Randall Jones 45 Chief Financial Officer Fiscal Year $ 75,000.00
2000
</TABLE>
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<PAGE>
The following table illustrates salary compensation received to date during
fiscal year ending June 30, 2000.
<TABLE>
<CAPTION>
Name Age Title Fiscal Year Amount Paid
To Date
- - ---------------- --- ------------------- -------------------- ------------
<S> <C> <C> <C> <C>
Lorenzo Musa 58 Chairman, President Fiscal Year $ 18,000.00
and CEO 2000
Edward Nixon 69 Director Fiscal Year $ 5,000.00
Ending June 30, 2000
Anthony Papalia 24 Executive Vice Fiscal Year $ 11,844.00
President Ending June 30, 2000
Randall A. Jones 45 Chief Financial Fiscal Year $ 6,250.00
Officer Ending June 30, 1999
</TABLE>
The following table illustrates compensation paid to executives for the
fiscal year ending June 30, 1999:
<TABLE>
<CAPTION>
Name Age Title Fiscal Year Amount
- - --------------- --- --------------- --------------- ----------
<S> <C> <C> <C> <C>
Edward Nixon 69 Director Fiscal Year $ 2,250.00
Ending June 30,
1999
Anthony Papalia 24 Executive Vice Fiscal Year $16,156.00
President Ending June 30,
1999
Randall Jones 45 Chief Financial Fiscal Year $ 9,375.00
Officer Ending June 30,
1999
</TABLE>
The Company has not adopted any incentive compensation plans or
arrangements or stock purchase, profit sharing or other similar plans of equity
compensation as part of the executive compensation that is offered. In
addition, no officer or director has been issued any type of equity distribution
24
<PAGE>
in connection with the Company. Similarly, no officer or director receives
special compensation or payment from the Company or any third party as a result
of being affiliated with the Company.
ITEM 7
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Item 404 of Regulation S-B
The Company has entered into an agreement to purchase the after tax income
stream from Crys-Tel International, Inc. from Kaiden S.A. and PacRim Information
Systems, Inc. Crys-Tel International, Inc. is wholly owned by Kaiden S.A. and
PacRim Information Systems, Inc. Under this agreement, 5,625,000 preferred
shares were issued to Kaiden S.A. and 1,875,000 preferred shares were issued to
PacRim Information Systems, Inc. These preferred shares are convertible into the
Company's common shares pursuant to a formula in the agreement. Conversion can
occur on a quarterly basis beginning January 1, 1999. For every $1.00 of net
earnings after tax received by the Company from the worldwide operations of
Crys-Tel International, Inc., Kaiden, S.A. and PacRim Information Systems, Inc.
may, at their option, convert one preferred share to one common share (post
forward split) subject to the restrictions of Securities Exchange Commission
Rule 144. Provided, however, that if net earnings in any one year is negative,
such loss reduces future year's net earnings and no conversion is permitted
until the sum of all years' earnings is positive. There has been no conversion
of preferred stock to common under this agreement as of this date because the
Company has not realized positive earnings. Under the same agreement, Kaiden
S.A. also received 6,750,00 common shares (post forward split) and PacRim
Information Systems, Inc. received 2,250,000 common shares (post forward split).
Kaiden S.A. is a financial investment management company based in
Switzerland. The company has been actively involved in the raising of capital
for start-up companies in several different fields, especially high technology.
Kaiden S.A. has also had a long history of being involved in the financing and
management of construction projects for multinationals in the Middle East, Italy
and the Balkans.
PacRim Information Systems, Inc. is a mining and technology company. The
company has a large mining concession on Texada Island in British Columbia.
PacRim Information Systems, Inc. has acquired 160 mineral leases and a gold
plant on Texada Island, which is comprised of a 4 stage crushing circuit and
4-stage gravity concentration circuit. This plant has the capacity to process
300 tons per day. The company has also been actively involved with several
different technology companies, including video conferencing equipment, smart
cards and telephony.
The Company is currently sustaining operations with loans from a
shareholder, D.M. Investments, Ltd. This shareholder has incurred expenses on
behalf of the Company and has agreed to defer payment pursuant to the terms of a
demand promissory note that includes interest which accrues at an annual rate of
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<PAGE>
10 percent. As of June 30, 1999, the date of the Company's most recent audited
financial statement, the amount owed was $130,329.00. As of October 1, 1999, the
amount owed was $253,849.69.
ITEM 8
DESCRIPTION OF SECURITIES
Item 202 of Regulation S-B
On August 3, 1998 the Company amended its articles of incorporation by
increasing the number of shares authorized from 300 to 50,000,000 common shares
and changed the par value from $25.00 to $0.001. The shareholders then approved
a ten thousand for one split of the issued and outstanding shares of the
Company's common stock. On December 11, 1998 the Company amended the articles
of incorporation to increase the number of authorized common shares to
100,000,000 and to authorize the issuance of 10,000,000 shares of preferred
stock. The shareholders then approved a six for one split of the issued and
outstanding shares of the Company's common stock.
Common Stock
Each holder of Common Stock is entitled to share pro-rata in such dividends
or other distributions to shareholders as may be declared by the Board of
Directors out of the funds legally available therefore and, in the event of
liquidation, to share pro-rata in the distribution after payment in full of all
creditors. The Company has never paid a dividend on its Common Stock and
currently the Company intends to retain all earnings for use in connection with
its business. Accordingly, it is anticipated that dividends will not be paid to
holders of Common Stock for at least the next five years of the Company's
existence. Further, borrowing arrangements which the Company may have with
banks and financial institutions in the future may limit or otherwise restrict
the ability of the Company to pay dividends to holders of its Common Stock or
other classes of securities. All holders of Common Stock of the Company have
full voting rights and have the right to cast one vote for each share held of
record on any matter coming before the shareholders for vote. With respect only
to the election of directors, holders of Common Stock do not have the right to
elect directors by cumulative voting.
Preferred Stock
The Company is also authorized to issue 10,000,000 shares of Preferred
Stock, par value $.001 per share. Series of the Preferred Stock may be created
and issued from time to time, with such designations, preferences, conversion
rights, cumulative, relative, participating, optional or other rights, including
voting rights, qualifications, limitations or restrictions thereof as shall be
stated and expressed in the resolution or resolutions providing for the creation
and issuance of such series of Preferred Stock as adopted by the Board of
Directors pursuant to the authority given in the articles of incorporation.
26
<PAGE>
At the same time, the Company approved the creation of Series A Preferred
Stock with the following attributes. In the event of any liquidation,
dissolution, or winding up of the affairs of the Corporation, whether voluntary
or involuntary, the holders of the Series A Convertible Preferred Stock shall be
entitled, before any assets of the Corporation shall be distributed among or
paid over to the holders of the Common Stock, to be paid $.001 per share. After
payment to the holders of the Series A Convertible Preferred Stock, any
additional amount available for distribution to the shareholders of the
Corporation shall, be shared by the holders of the Series A Convertible
Preferred Stock and the Common Stock on a share-for-share basis (with each share
of Series A Convertible Preferred Stock being deemed to be equal to the number
of shares of Common Stock (including fractions of a share) into which such
Series A Convertible Preferred Stock is convertible immediately prior to the
close of business on the business day fixed for such distribution. The amounts
distributable to the holders of Series A Convertible Preferred Stock under upon
liquidation are to be adjusted appropriately for subdivisions (by stock splits,
stock dividends or otherwise), combinations (by reverse stock splits or
otherwise) or other recapitalizations of the Series A Convertible Preferred
Stock.
27
<PAGE>
PART F/S
Crys-Tel Telecommunications.Com, Inc.
(a development stage company)
Financial Statements
Year ended June 30, 1999
and the six months ended June 30, 1998
Table of Contents
-----------------
Page
----
Independent Auditors' Report 29
Financial Statements:
Balance Sheet 30
Statements of Operations 31
Statements of Stockholders' Equity 32
Statements of Cash Flows 33
Notes to Financial Statements 34
28
<PAGE>
Independent Auditors' Report
----------------------------
To the Board of Directors and Stockholders
Crys-Tel Telecommunications.Com, Inc.
Irvine, California
We have audited the accompanying balance sheet of Crys-Tel
Telecommunica-tions.Com, Inc. (a development stage company) as of June 30, 1999
and 1998, and the related statements of operations, stockholders' equity and
cash flows for the year and six months then ended. These financial statements
are the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
We conducted our audits 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 audits of the financial statements provide 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 Crys-Tel
Telecommunications.Com, Inc. as of June 30, 1999 and 1998, and the results of
its operations and cash flows for the year and six months then ended in
conformity with generally accepted accounting principles.
Logan Throop & Lo., LLP
September 30, 1999
29
<PAGE>
<TABLE>
<CAPTION>
Crys-Tel Telecommunications.com, Inc.
(a development stage company)
Balance Sheets
June 30, 1999 1998
- - ----------------------------------------------------------------- ---------- --------
<S> <C> <C>
ASSETS
Current assets
Cash $ 956 $ -
Cash held in trust 14,198 -
- - ----------------------------------------------------------------- ---------- --------
Total current assets 15,154 -
Property and equipment, net 108,408 -
Trademarks 57 -
- - ----------------------------------------------------------------- ---------- --------
Total assets $ 123,619 $ -
- - ----------------------------------------------------------------- ---------- --------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable $ 3,182 $ -
Demand loans payable to Stockholders 130,147 -
- - ----------------------------------------------------------------- ---------- --------
Total liabilities 133,329 -
- - ----------------------------------------------------------------- ---------- --------
Stockholders' equity
Convertibel preferred stock, $.001 par value, 10,000,000 and
0 shares authorized, 7,500,000 and 0 shares issued and
outstanding at June 30, 1999 and 1998, respectively. 7,500 -
Common stock, $.001 and $25.00 par value, 100,000,000
and 300 shares authorized, 15,309,117 and 100 shares issued
and outstanding at June 30, 1999 and 1998, respectively. 15,309 2,500
Additional paid in capital 258,091 -
Deficit accumulated during the development stage (290,610) (2,500)
- - ----------------------------------------------------------------- ---------- --------
Total stockholders' equity (9,710) -
- - ----------------------------------------------------------------- ---------- --------
Total liabilities and stockholders' equity $ 123,619 $ -
- - ----------------------------------------------------------------- ---------- --------
</TABLE>
See accompanying notes and Independent Auditor's report
30
<PAGE>
<TABLE>
<CAPTION>
Crys-Tel Telecommunications.com, Inc.
(a development stage company)
Statements of Operations
Period from
Six months January 2, 1987
YEAR ENDED ended (inception)
JUNE 30, June 30, to June 30, 1999
1999 1998 (unaudited)
- - ------------------------------------- ------------ ---------- ------------------
<S> <C> <C> <C>
Sales $ 128,900 $ - $ 128,900
Cost of sales 87,687 - 87,687
- - ------------------------------------- ------------ ---------- ------------------
Gross profit 41,213 - 41,213
- - ------------------------------------- ------------ ---------- ------------------
Operating expenses
General and administrative 241,871 - 244,371
Office occupancy 29,604 - 29,604
Product development 13,696 - 13,696
Promotion and advertising 36,802 - 36,802
- - ------------------------------------- ------------ ---------- ------------------
Total operating expenses 321,973 - 324,473
- - ------------------------------------- ------------ ---------- ------------------
Loss from operations (280,760) - (283,260)
- - ------------------------------------- ------------ ---------- ------------------
Other income (expense)
Foreign currency exchange gain 2,824 - 2,824
Interest expense (10,174) - (10,174)
- - ------------------------------------- ------------ ---------- ------------------
Total other income (expense) (7,350) - (7,350)
- - ------------------------------------- ------------ ---------- ------------------
Net loss $ (288,110) $ - $ (290,610)
- - ------------------------------------- ------------ ---------- ------------------
Loss per share (0.02) - (0.02)
Average number of shares outstanding 12,827,279 6,000,000 12,827,279
</TABLE>
See accompanying notes and Independent Auditor's report
31
<PAGE>
<TABLE>
<CAPTION>
Crys-Tel Telecommunications.com, Inc.
(a development stage company)
Statements of Stockholders' Equity
Deficit
Convertible accumulated Total
Common Preferred during the Stockholders'
Shares Shares Amount development stage equity
- - --------------------------------------- ---------- --------- --------- ------------------- ----------
<S> <C> <C> <C> <C> <C>
Initial capitalization at July 1, 1999 100 - $ 2,500 $ - $ 2,500
Net loss through 12/31/97 (unaudited) - - - (2,500) (2,500)
- - --------------------------------------- ---------- --------- --------- ------------------- ----------
100 - 2,500 (2,500) -
Net loss - - - - -
- - --------------------------------------- ---------- --------- --------- ------------------- ----------
100 - 2,500 (2,500) -
Stock split, 10,000 for 1 999,900 - - - -
Stock issued for revenue stream 1,500,000 7,500,000 9,000 - 9,000
Stock split, 6 for 1 12,500,000 - - - -
Debentures converted 309,117 - 333,200 - 333,200
Syndication costs - - (63,800) - (63,800)
Net loss - - - (288,110) (288,110)
- - --------------------------------------- ---------- --------- --------- ------------------- ----------
15,309,117 7,500,000 $280,900 $ (290,610) $ (9,710)
- - --------------------------------------- ---------- --------- --------- ------------------- ----------
</TABLE>
See accompanying notes and Independent Auditor's report
32
<PAGE>
<TABLE>
<CAPTION>
Crys-Tel Telecommunications.com, Inc.
(a development stage company)
Statements of Cash Flows
Period from
Six months January 2, 1987
YEAR ENDED ended (inception)
JUNE 30, June 30, to June 30, 1999
1999 1998 (unaudited)
- - ------------------------------------------- ------------ --------- ------------------
<S> <C> <C> <C>
Net loss $ (288,110) $ - $ (290,610)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 33,634 - 33,634
Revenue stream agreement expensed 9,000 9,000
Issuance of stock for services - 2,500
Increase in accounts payable 3,182 - 3,182
- - ------------------------------------------- ------------ --------- ------------------
Net cash used by operating activities (242,294) - (242,294)
- - ------------------------------------------- ------------ --------- ------------------
Investment in trademarks (57) - (57)
Purchase of property and equipment (142,042) - (142,042)
- - ------------------------------------------- ------------ --------- ------------------
Net cash used by investing activities (142,099) - (142,099)
- - ------------------------------------------- ------------ --------- ------------------
Proceeds from demand loans payable
to stockholders 130,147 - 130,147
Proceeds from convertible debentures, net 269,400 - 269,400
- - ------------------------------------------- ------------ --------- ------------------
Net cash provided by financing activities 399,547 - 399,547
- - ------------------------------------------- ------------ --------- ------------------
15,154 - 15,154
at beginning of period - - -
- - ------------------------------------------- ------------ --------- ------------------
$ 15,154 $ - $ 15,154
- - ------------------------------------------- ------------ --------- ------------------
Stock issued for revenue stream $ 9,000 $ 9,000
Debentures converted $ 333,000 $ 333,000
</TABLE>
33
<PAGE>
Crys-Tel Telecommunications.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
1. ORGANIZATION AND OPERATIONS
ORGANIZATION
Crys-tel Telecommunications.com, Inc., (the "Company), was incorporated on
January 2, 1987 in the state of Florida. Until December 14, 1998, the
company was named Progressive General Corporation.
DEVELOPMENT STAGE OPERATIONS
Since inception, the Company has been in the development stage of
operations. In November 1998 the Company's management resigned after
selling the controlling interest in the Company and new management took
control. Until November 1998 the Company did not have any formal business
plan.
The Company is now working to develop its business as an international
facilities based carrier, which utilizes the internet to provide economical
international telecommunication services. Through its voice over internet
protocol (VOIP) technologies, it plans to route voice, data and value added
services over the internet, giving substantial discounts off standard
rates. The Company plans to operate both as a wholesale carrier for
international long distance resellers and as a retail carrier, servicing
its own network and marketing the use of its network to consumers in
designated areas. Through June 30, 1999, the Company has generated
operating revenues of $128,900 and has incurred losses of $290,610.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
Consists of demand deposit accounts and cash held in trust.
2.. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
INVENTORY
Inventory is stated at the lower of cost or market value. Cost is
determined using the first-in, first-out (FIFO) method.
34
<PAGE>
Crys-Tel Telecommunications.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated over the
estimated useful lives of the assets (three to seven years) using the
straight-line method.
INTANGIBLES
Intangible assets are recorded at cost and amortized over their estimated
useful lives using the straight-line method. Each asset is continually
evaluated by management to determine if its carrying value will be realized
based upon the estimated discounted cash flow expected from the asset.
Additional amortization is recognized in the period a decline in value is
identified.
INCOME TAXES
Deferred income taxes are provided for the estimated tax effects of timing
differences between income for tax and financial reporting. The principal
sources of timing differences are due to minor differences in depreciation
method. A valuation allowance is provided against deferred tax assets,
where realization is uncertain.
NET EARNINGS PER COMMON SHARE
Net earnings per common share are based on the weighted average number of
common shares outstanding during each period.
FISCAL YEAR END
Effective June 30, 1998 the Company elected to change the ending date of
its fiscal year from December 31 to June 30. Accordingly, the attached
financial statements include a short period for the six months ended
June 30, 1998.
35
<PAGE>
Crys-Tel Telecommunications.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
June 30, 1999 1998
- - -------------------------------- ------------- ----
<S> <C> <C>
Gateways $ 131,530 0
Office furniture and equipment 5,203 0
Computers and software 5,309 0
- - -------------------------------- ------------- ----
142,042 0
Less accumulated depreciation (33,634) 0
- - -------------------------------- ------------- ----
108,408 0
- - -------------------------------- ------------- ----
</TABLE>
4. CASH HELD IN TRUST
The cash held in trust represents amounts held in an attorney trust
account, and is available for disbursement at the direction of management.
5. DEMAND LOAN PAYABLE TO STOCKHOLDERS
Certain stockholders of the Company incurred expenses on behalf of the
Company and agreed to defer payment. The amount still owed is included in
the ending balance demand loan payable to stockholders at June 30, 1999.
The balances payable to stockholders are short-term obligations and include
interest accrued at an annual rate of 10 percent.
6. CONVERTIBLE DEBENTURES
In April 1999 the Company issued $333,000 of short-term convertible
debentures, all of which converted to common stock by June 30, 1999. The
debentures had 400,000 warrants attached. In connection with the offering
an additional 200,000 warrants were issued for services. (See note 7)
36
<PAGE>
Crys-Tel Telecommunications.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
7. STOCKHOLDERS' EQUITY
AUTHORIZED SHARES AND STOCK SPLITS
On August 3, 1998 the Company amended its articles of Incorporation by
increasing the number of shares authorized from 300 to 50,000,000 common
shares. At the same time the par value was changed from $25.00 to $0.001.
The shareholders then approved a ten thousand for one split of the issued
and outstanding shares of the Company's common stock.
On December 11, 1998 the Company amended the Articles of Incorporation to
increase the authorized number of common shares from 50,000,000 to
100,000,000. The shareholders then approved a six for one split of the
issued and outstanding shares of the Company's common stock. The earnings
per share have been retroactively restated to reflect the stock splits.
CONVERTIBLE PREFERRED STOCK
In addition to its common shares, the Company has authorized 10,000,000
shares of Preferred Stock at a par value of $.001 per share. The shares
were authorized in the amendment to the articles of incorporation on
December 11, 1998. 7,500,000 Convertible Preferred shares were issued and
outstanding at June 30, 1999.
For every $1.00 of net earnings of the Company at the end of each fiscal
year, one share of Convertible Preferred stock is convertible, at the
option of the holder, into six shares (one share prior to split) of Common
Stock. However, if net earnings in any one year is negative, such loss
shall reduce future year's net earnings and no conversion shall be
permitted until the sum of all year's earnings is positive.
WARRANTS
The Company had 600,000 warrants outstanding at June 30, 1999, with an
exercise price of $1.00 and $2.50 respectively. 66,666 of these warrants
weresubsequently exercised and common shares were issued for a total of
$116,665.50. 333,334 of the warrants expired by the date of this report,
leaving 200,000 warrants outstanding that expire on April 5, 2002.
37
<PAGE>
Crys-Tel Telecommunications.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
8. INCOME TAXES
At June 30, 1999, the Company had federal and state tax net operating loss
carryforwards of approximately $290,000. The federal and state tax loss
carryforwards will expire beginning in 2003, unless previously utilized and
may be significantly limited in use as a result of changes in ownership of
the Company.
The Company's deferred tax assets are shown below. A valuation allowance of
$99,000 has been recognized to offset the deferred tax assets as
realization of such assets is uncertain.
<TABLE>
<CAPTION>
June 30, 1999 1998
- - ------------------------------------------- --------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 99,000 $ 1,000
- - ------------------------------------------- --------- --------
Net deferred tax assets 99,000 1,000
Valuation allowance for deferred tax assets (99,000) (1,000)
- - ------------------------------------------- --------- --------
Total deferred tax assets $ 0 $ 0
- - ------------------------------------------- --------- --------
</TABLE>
9. COMMITMENTS
The Company subleases a facility under an operating lease that expires
January 15, 2000. Rent expense was $27,347 for the year ended June 30, 1999
and $0 for the six months ended June 30, 1998. Future minimum lease
obligations are $34,500 all of which is due within the next fiscal year.
The Company is currently finalizing a lease of space for its offices in San
Diego, California. The San Diego lease is expected to have a five year term
expiring in September 2004 and payments of $6,540 a month. While the new
lease is under negotiation, the Company is on a month-to-month arrangement
with HQ Business Centers.
38
<PAGE>
Crys-Tel Telecommunications.com, Inc.
(a development stage company)
NOTES TO FINANCIAL STATEMENTS
- - --------------------------------------------------------------------------------
10. REVENUE STREAM AGREEMENT
During November of 1998 the Company entered into an agreement with Crys-Tel
International, Inc. a Barbados Corporation (CT). The agreement called for
1,500,000 shares of the Company's common stock and 7,500,000 shares of the
Company's convertible preferred stock to be issued to CT in return for all
future revenue streams of CT. It was subsequently decided that the Company
would undertake the business plan directly rather than operating through
CT. The shares issued in connection with the transaction were recorded at
par value and subsequently charged to expense because of the change in
operating entity.
11. CONTINGENCIES - GOING CONCERN
As reported in the financial statements, the company has incurred a loss in
excess of $ 290,000 from inception through June 30, 1999. As of that date
the Company's current liabilities exceeded its current assets by $118,175.
These factors create uncertainty about the Company's ability to continue as
a going concern. The ability of the Company to continue as a going concern
is dependent on the Company obtaining adequate capital funding to carry out
its business plan.
The Company plans to raise additional capital through its shareholder loans
and through a private placement of its common stock. The Company has
ordered the equipment required to commence the sale of minutes through its
existing network of gateways and is negotiating contracts and joint venture
agreements for such sales. Management believes that, if funding is
available to continue the production of gateways, and joint ventures under
negotiations are finalized, market demand for sale of minutes will be
sufficient to meet all obligations of the Company. The financial statements
do not include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
12. LITIGATION
The Company is the plaintiff in a lawsuit against two individuals for
breach of an agreement concerning funds to be raised for the Company
through the sale of previously issued securities. A settlement has been
negotiated but not concluded with one of the individuals, and calls for the
Company to acquire certain shares of an unrelated company. Management
expects to resolve the matter with no material adverse effect on the
Company's financial position.
13. YEAR 2000 (UNAUDITED)
The Company has been working on a due diligence testing of its year 2000
compliance. The year 2000 issue is grounded in that many computer systems
process transactions based on storing two digits for the year of a
transaction (for example, "96" for 1996), rather than a full four digits.
Systems that process year 2000 transactions with the year "00" may
encounter significant processing inaccuracies and even inoperability. Many
companies will incur significant costs to make the needed software changes.
The Company has completed a due diligence testing of its year 2000
compliance and has not found any problems to date. The testing included
information technology and non-information technology systems, as well as
inquiries to third parties with which the Company have material
relationships (vendors and customers), regarding their state of readiness.
The cost of any further year 2000 initiatives is not expected to be
material to the Company's results of operation or financial position.
39
<PAGE>
Crys-Tel Telecommunications.Com, Inc.
(a development stage company)
Two months ended August 31, 1998
PREPARED INTERNALLY WITHOUT AUDIT
Table of Contents
-----------------
Page
----
Table of Contents 40
Financial Statements:
Balance Sheet 41
Statements of Operations 42
Statements of Stockholders' Equity 43
Statements of Cash Flows 43
Notes to Financial Statements 44
40
<PAGE>
<TABLE>
<CAPTION>
BALANCE SHEET
August 31, 1999
- - ----------------------------------------------------------------- ----------
<S> <C>
ASSETS
Current assets
Cash $ 956
Cash held in trust 3,061
- - ----------------------------------------------------------------- ----------
Total current assets 4,017
Property and equipment, net 146,537
Trademarks 1,020
- - ----------------------------------------------------------------- ----------
Total assets $ 151,574
- - ----------------------------------------------------------------- ----------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Bank Overdraft $ 7,838
Accounts payable 19,471
Demand loans payable to Stockholders 233,969
- - ----------------------------------------------------------------- ----------
Total liabilities 253,440
- - ----------------------------------------------------------------- ----------
Stockholders' equity
Convertibel preferred stock, $.001 par value, 10,000,000 and
0 shares authorized, 7,500,000 and 0 shares issued and
outstanding at June 30, 1999 and 1998, respectively. 7,500
Common stock, $.001 and $25.00 par value, 100,000,000
and 300 shares authorized, 15,309,117 and 100 shares issued
and outstanding at June 30, 1999 and 1998, respectively. 15,309
Additional paid in capital 374,756
Deficit accumulated during the development stage (499,431)
- - ----------------------------------------------------------------- ----------
Total stockholders' equity (101,866)
- - ----------------------------------------------------------------- ----------
Total liabilities and stockholders' equity $ 151,574
- - ----------------------------------------------------------------- ----------
</TABLE>
41
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF OPERATIONS
Period from
Year ended Two Months January 2, 1999
June 30, 1999 Ended (inception)
August 31, To August 31,
1999 1999
(unaudited)
- - ------------------------------------- ------------ ------------ ------------
<S> <C> <C> <C>
Sales $ 128,900 $ - $ 128,900
Cost of sales 87,687 - $ 87,687
- - ------------------------------------- ------------ ------------ ------------
Gross profit 41,213 - $ 41,213
- - ------------------------------------- ------------ ------------ ------------
Operating expenses
General and administrative 241,871 119,583 $ 363,954
Office occupancy 29,604 14,647 $ 44,251
Product development 13,696 420 $ 14,116
Promotion and advertising 36,802 74,201 $ 111,003
- - ------------------------------------- ------------ ------------ ------------
Total operating expenses 321,973 208,851 533,324
- - ------------------------------------- ------------ ------------ ------------
Loss from operations (280,760) (208,851) (492,111)
- - ------------------------------------- ------------ ------------ ------------
Other income (expense)
Foreign currency exchange gain 2,824 30 2,854
Interest expense (10,174) - (10,174)
- - ------------------------------------- ------------ ------------ ------------
Total other income (expense) (7,350) 30 (7,320)
- - ------------------------------------- ------------ ------------ ------------
Net loss $ (288,110) $ (208,821) $ (499,431)
- - ------------------------------------- ------------ ------------ ------------
Loss per share (0.02) (0.01) (0.04)
Average number of shares outstanding 12,827,279 15,375,783 12,827,279
</TABLE>
42
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF STOCKHOLDERS' EQUITY
Deficit
accumulated
Convertible during the Total
Common Preferred Development Stockholders'
Shares Shares Amount stage equity
- - ------------------------------------- ---------- --------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C>
100 - $ 2,500 $ - $ 2,500
Net loss through 12/31/97 (unaudited) - - - (2,500) (2,500)
- - ------------------------------------- ---------- --------- --------- ---------- ----------
100 - 2,500 (2,500) -
Net loss - - - -
- - ------------------------------------- ---------- --------- --------- ---------- ----------
100 - 2,500 (2,500) -
Stock split, 10,000 for 1 999,900 - - - -
Stock split, 6 for 1 12,500,000 - - - -
Stock issued for revenue stream 1,500,000 7,500,000 9,000 - 9,000
Debentures converted 309,117 - 333,200 - 333,200
Syndication costs - - (63,800) - (63,800)
Net loss - - - (288,110) (288,110)
- - ------------------------------------- ---------- --------- --------- ---------- ----------
15,309,117 7,500,000 $280,900 $(290,610) $ (9,710)
Net Loss (208,821) (208,821)
Conversion of warrants 66,666 116,665 116,665
- - ------------------------------------- ---------- --------- --------- ---------- ----------
Balance at August 31, 1999 15,375,783 7,500,000 $397,565 (499,431) $(101,866)
- - ------------------------------------- ---------- --------- --------- ---------- ----------
</TABLE>
<TABLE>
<CAPTION>
STATEMENTS OF CASH FLOWS
Period from
Two months January 2, 1987
YEAR ENDED ended (inception)
JUNE 30, August 31, to August 31, 1999
1999 1999 (unaudited)
- - --------------------------------------------- ------------ ------------ --------------------
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss $ (290,610) $ (148,433) $ (441,543)
Adjustments to reconcile net loss to
net cash used by operating activities:
Depreciation and amortization 33,634 - 33,634
Revenue stream agreement expensed 9,000 9,000
Issuance of stock for services 2,500 5,000
Over draft in bank account (7,838) $ (7,838)
Increase (decrease) accounts payable 3,182 16,289 $ 19,471
- - --------------------------------------------- ------------ ------------ --------------------
43
<PAGE>
Net cash used by operating activities (242,294) (139,982) (382,276)
- - --------------------------------------------- ------------ ------------ --------------------
CASH FLOWS FROM INVESTING ACTIVITIES:
Investment in trademarks (57) (963) $ (1,020)
Purchase of property and equipment (142,042) (38,129) $ (180,171)
- - --------------------------------------------- ------------ ------------ --------------------
Net cash used by investing activities (142,099) (39,092) (181,191)
- - --------------------------------------------- ------------ ------------ --------------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from demand loans payable
to stockholders 130,147 66,426 $ 196,573
Proceeds from convertible debentures, net 269,400 116,665 $ 386,065
- - --------------------------------------------- ------------ ------------ --------------------
Net cash provided by financing activities 399,547 183,091 582,638
- - --------------------------------------------- ------------ ------------ --------------------
Net increase in cash and cash equivalents 15,154 4,017 19,171
Cash and cash equivalents
at beginning of period - - -
- - --------------------------------------------- ------------ ------------ --------------------
Cash and cash equivalents at end of period $ 15,154 $ 4,017 $ 19,171
- - --------------------------------------------- ------------ ------------ --------------------
Supplemental disclosures:
Noncash transactions
Stock issued for revenue stream $ 9,000 $ 9,000
Debentures converted $ 333,000 $ 333,000
Warrants exercised $ 116,665 $ 116,665
</TABLE>
NOTES TO FINANCIAL STATEMENTS AUGUST 31, 1999
1. ORGANIZATION AND OPERATIONS
ORGANIZATION
Crys-tel Telecommunications.com, Inc., (the "Company), was incorporated on
January 2, 1987 in the state of Florida. Until December 14, 1998, the
company was named Progressive General Corporation.
DEVELOPMENT STAGE OPERATIONS
Since inception, the Company has been in the development stage of
operations. In November 1998 the Company's management resigned after
selling the controlling interest in the Company and new management took
control. Until November 1998 the Company did not have any formal business
plan.
44
<PAGE>
The Company is now working to develop its business as an international
facilities based carrier, which utilizes the internet to provide economical
international telecommunication services. Through its voice over internet
protocol (VOIP) technologies, it plans to route voice, data and value added
services over the internet, giving substantial discounts off standard
rates. The Company plans to operate both as a wholesale carrier for
international long distance resellers and as a retail carrier, servicing
its own network and marketing the use of its network to consumers in
designated areas. Through August 31, 1999, the Company has generated
operating revenues of $128,900 and has incurred losses of $499,431.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
USE OF ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the
financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
CASH AND CASH EQUIVALENTS
Consists of demand deposit accounts and cash held in trust.
INVENTORY
Inventory is stated at the lower of cost or market value. Cost is
determined using the first-in, first-out (FIFO) method.
PROPERTY AND EQUIPMENT
Property and equipment are stated at cost and depreciated over the
estimated useful lives of the assets (three to seven years) using the
straight-line method.
INTANGIBLES
Intangible assets are recorded at cost and amortized over their estimated
useful lives using the straight-line method. Each asset is continually
evaluated by management to determine if its carrying value will be realized
based upon the estimated discounted cash flow expected from the asset.
Additional amortization is recognized in the period a decline in value is
identified.
INCOME TAXES
Deferred income taxes are provided for the estimated tax effects of timing
differences between income for tax and financial reporting. The principal
sources of timing differences are due to minor differences in depreciation
method. A valuation allowance is provided against deferred tax assets,
where realization is uncertain.
45
<PAGE>
NET EARNINGS PER COMMON SHARE
Net earnings per common share are based on the weighted average number of
common shares outstanding during each period.
FISCAL YEAR END
Effective June 30, 1998 the Company elected to change the ending date of
its fiscal year from December 31 to June 30. Accordingly, the attached
financial statements include a short period for the six months ended June
30, 1998.
3. PROPERTY AND EQUIPMENT
Property and equipment consist of the following:
<TABLE>
<CAPTION>
June 30, 1999
<S> <C>
Gateways $131,530
Office furniture and equipment 5,203
Computers and software 41,084
- - -------------------------------- ---------
180,175
Less accumulated depreciation (33,634)
- - -------------------------------- ---------
$146,537
</TABLE>
Depreciation for the two months ended August 31, 1999 has not recorded.
4. CASH HELD IN TRUST
The cash held in trust represents amounts held in an attorney trust
account, and is available for disbursement at the direction of management.
5. DEMAND LOAN PAYABLE TO STOCKHOLDERS
Certain stockholders of the Company incurred expenses on behalf of the
Company and agreed to defer payment. The amount still owed is included in
the ending balance demand loan payable to stockholders at August 31, 1999.
The balances payable to stockholders are short-term obligations and include
interest accrued at an annual rate of 10 percent.
6. CONVERTIBLE DEBENTURES
In April 1999 the Company issued $333,000 of short-term convertible
debentures, all of which converted to common stock. The debentures had
400,000 warrants attached. In connection with the offering an additional
200,000 warrants were issued for services. (See note 7)
46
<PAGE>
7. STOCKHOLDERS' EQUITY
AUTHORIZED SHARES AND STOCK SPLITS
On August 3, 1998 the Company amended its articles of Incorporation by
increasing the number of shares authorized from 300 to 50,000,000 common
shares. At the same time the par value was changed from $25.00 to $0.001.
The shareholders then approved a ten thousand for one split of the issued
and outstanding shares of the Company's common stock.
On December 11, 1998 the Company amended the Articles of Incorporation to
increase the authorized number of common shares from 50,000,000 to
100,000,000. The shareholders then approved a six for one split of the
issued and outstanding shares of the Company's common stock. The earnings
per share have been retroactively restated to reflect the stock splits.
CONVERTIBLE PREFERRED STOCK
In addition to its common shares, the Company has authorized 10,000,000
shares of Preferred Stock at a par value of $.001 per share. The shares
were authorized in the amendment to the articles of incorporation on
December 11, 1998. 7,500,000 Convertible Preferred shares were issued and
outstanding at June 30, 1999.
For every $1.00 of net earnings of the Company at the end of each fiscal
year, one share of Convertible Preferred stock is convertible, at the
option of the holder, into six shares (one share prior to split) of Common
Stock. However, if net earnings in any one year is negative, such loss
shall reduce future year's net earnings and no conversion shall be
permitted until the sum of all year's earnings is positive.
WARRANTS
The Company had 600,000 warrants outstanding at June 30, 1999, with an
exercise price of $1.00 and $2.50 respectively. As of August 31, 1999,
66,666 of these warrants were exercised and common shares were issued for a
total of $116,665.50. 333,334 of the warrants expired by the date of this
report, leaving 200,000 warrants outstanding that expire on April 5, 2002.
8. INCOME TAXES
At August 31, 1999, the Company had federal and state tax net operating
loss carryforwards of approximately $499,431. The federal and state tax
loss carryforwards will expire beginning in 2003, unless previously
utilized and may be significantly limited in use as a result of changes in
ownership of the Company.
The Company's deferred tax assets are shown below. A valuation allowance of
$99,000 has been recognized to offset the deferred tax assets as
realization of such assets is uncertain.
47
<PAGE>
<TABLE>
<CAPTION>
August 31, 1999 1998
- - ------------------------------------------- ---------- --------
<S> <C> <C>
Deferred tax assets:
Net operating loss carryforwards $ 169,000 $ 1,000
- - ------------------------------------------- ---------- --------
Net deferred tax assets 169,000 1,000
Valuation allowance for deferred tax assets (169,000) (1,000)
- - ------------------------------------------- ---------- --------
Total deferred tax assets $ 0 $ 0
- - ------------------------------------------- ---------- --------
</TABLE>
9. COMMITMENTS
The Company subleases a facility under an operating lease that expires
January 15, 2000. Rent expense was $13,400 for the two months ended August
31, 1999. Future minimum lease obligations are $34,500 all of which is due
within the fiscal year.
The Company is currently finalizing a lease of space for its offices in San
Diego, California. The San Diego lease is expected to have a five year term
expiring in September 2004 and payments of $6,540 a month. While the new
lease is under negotiation, the Company is on a month-to-month arrangement
with HQ Business Centers.
10. REVENUE STREAM AGREEMENT
During November of 1998 the Company entered into an agreement with Crys-Tel
International, Inc. a Barbados Corporation (CT). The agreement called for
1,500,000 shares of the Company's common stock and 7,500,000 shares of the
Company's convertible preferred stock to be issued to CT in return for all
future revenue streams of CT. It was subsequently decided that the Company
would undertake the business plan directly rather than operating through
CT. The shares issued in connection with the transaction were recorded at
par value and subsequently charged to expense because of the change in
operating entity.
11. CONTINGENCIES - GOING CONCERN
As reported in the financial statements, the company has incurred a loss in
excess of $ 499,000 from inception through August 31, 1999. As of that date
the Company's current liabilities exceeded its current assets by $249,423.
These factors create uncertainty about the Company's ability to continue as
a going concern. The ability of the Company to continue as a going concern
is dependent on the Company obtaining adequate capital funding to carry out
its business plan.
The Company plans to raise additional capital through its shareholder loans
and through a private placement of its common stock. The Company has
ordered the
48
<PAGE>
equipment required to commence the sale of minutes through its existing
network of gateways and is negotiating contracts and joint venture
agreements for such sales. Management believes that, if funding is
available to continue the production of gateways, and joint ventures under
negotiations are finalized, market demand for sale of minutes will be
sufficient to meet all obligations of the Company. The financial statements
do not include any adjustments that might be necessary if the Company is
unable to continue as a going concern.
12. YEAR 2000 (UNAUDITED)
The Company has been working on a due diligence testing of its year 2000
compliance. The year 2000 issue is grounded in that many computer systems
process transactions based on storing two digits for the year of a
transaction (for example, "96" for 1996), rater than a full four digits.
Systems that process year 2000 transactions with the year "00" may
encounter significant processing inaccuracies and even inoperability. Many
companies will incur significant costs to make the needed software changes.
The Company has completed a due diligence testing of its year 2000
compliance and has not found any problems to date. The testing included
information technology and non-information technology systems, as well as
inquiries to third parties with which the Company have material
relationships (vendors and customers), regarding their state of readiness.
The cost of any further year 2000 initiatives is not expected to be
material to the Company's results of operation or financial position.
49
<PAGE>
PART II
ITEM 1
MARKET PRICE AND DIVIDENDS ON COMMON EQUITY; OTHER MATTERS
Item 201 of Regulation S-B
The Company's securities are traded on the National Association of
Securities Dealers (NASD) Over-The-Counter Bulletin Board under the trading
symbol CYSS. The quotations reflect inter-dealer prices, without retail
mark-up, mark-down or commission and may not represent actual transactions. The
Company has approximately 16 common stock holders. The Company has paid no
dividends on its common stock for the past two fiscal years and does not expect
to pay any dividends for at least the next five fiscal years. The high and low
prices by quarter since the inception of trading on December 15, 1998 are as
follows:
<TABLE>
<CAPTION>
Quarter High Low
<S> <C> <C>
October-December 1998 $2.60 $2.50
January-March 1999 $4.00 $1.25
April-June 1999 $2.10 $0.80
July-September 1999 $3.50 $1.25
</TABLE>
The Securities and Exchange Commission has adopted rules that regulate
broker-dealer practices in connection with transactions in "penny stocks."
Penny stocks generally are equity securities with a price of less than $5.00
(other than securities registered on certain national securities exchanges or
quoted on the NASDAQ system, provided that current price and volume information
with respect to transactions in such securities is provided by the exchange or
system). The penny stock rules require a broker-dealer, prior to a transaction
in a penny stock not otherwise exempt from those rules, deliver a standardized
risk disclosure document prepared by the Securities and Exchange Commission,
which specifies information about penny stocks and the nature and significance
of risks of the penny stock market. The broker-dealer also must provide the
customer with bid and offer quotations for the penny stock, the compensation of
the broker-dealer and its salesperson in the transaction, and monthly account
statements showing the market value of each penny stock held in the customer's
account. In addition, the penny stock rules require that prior to a transaction
in a penny stock not otherwise exempt from those rules the broker-dealer must
make a special written determination that the penny stock is a suitable
investment for the purchaser and receive the purchaser's written agreement to
the transaction. These disclosure requirements may have the effect of reducing
the trading activity in the secondary market for a stock that becomes subject to
the penny stock rules. The Company's Common Stock is subject to the penny stock
rules. Consequently, Company stockholders may find it more difficult to sell
their shares.
ITEM 2
50
<PAGE>
LEGAL PROCEEDINGS
Item 103 of Regulation S-B
The Company is named as a plaintiff in a lawsuit filed on February 25, 1999
in the Supreme Court of British Columbia in Vancouver, British Columbia against
two defendants, Hugh Grenfal and Sergei Stetsenko. The Company's Amended
Statement of Claim alleges that the defendants are promoters located in the city
of Vancouver, British Columbia who were retained by the Company to raise
$100,000.00 U.S. as working capital under a certain financing agreement.
Pursuant to this agreement, the Company delivered to the defendants 1,032,000
shares of common stock after which the defendants began short-selling the stock
with the aid of a local brokerage firm jitneyed through four brokerage firms in
the United States and otherwise converting the shares contrary to the financing
agreement. The Company is seeking compensatory damages for breach of the
financing agreement, breach of fiduciary duty and trust obligations, return of
the shares, an accounting, injunctive relief, special damages and punitive
damages.
ITEM 3
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
Item 304 of Regulation S-B
As of September 24, 1999, the Company has retained the following
independent auditing firm to audit its financial statements:
Logan Throop & Co.
1011 Camino Del Rio South
Suite 500
San Diego, CA. 92108
No consultation was held with Logan Throop & Co. concerning the type of
opinion to be rendered, or written or oral advice. At the time of the retention
of this firm, no issues or views were discussed or mentioned. Based upon this,
no contact was initiated by the Company with the prior accountant. The prior
accountant was located in Nevada. For this reason, Management made the decision
to retain a firm closer to its actual operations. The prior accountant was
Barry L. Friedman, CPA. Mr. Friedman issued the previous audited opinion as an
unqualified going concern. This was primarily due to the Company's development
stage status. Logan Throop & Co. has also issued an audit opinion as an
unqualified going concern as of the end of the Company's most recent fiscal
year, June 30, 1999.
ITEM 4
RECENT SALES OF UNREGISTERED SECURITIES
Item 701 of Regulation S-B
The Company had a total of 1,000,000 issued and outstanding shares of
common stock in November of 1998 when management resigned after transferring
51
<PAGE>
control of the Company pursuant to a stock purchase agreement whereby the owner
of 975,000 shares sold her interest in a single isolated private transaction to
a former director of the Company for $250,000.00 in reliance upon the Section
4 1/2 exemption under the Securities Act of 1933.
On December 11, 1998 the Company authorized a 6 for 1 forward split of its
common stock pursuant to a vote of the shareholders and also amended its
articles of incorporation to authorize the issuance of 100,000,000 shares of
common stock and 10,000,000 shares of preferred stock.
On December 17, 1998 the Company conducted an offering of unregistered
securities to two companies to acquire an income stream. In that offering, the
Company issued 1,125,000 (5,625,000 post forward split) shares of restricted
common stock to Kaiden S.A. and 375,000 (1,875,000 post forward split) shares of
restricted common stock to PacRim Information Systems, Inc. in exchange for
acquiring the income stream of Crys*Tel International, Inc. in reliance upon the
exemption from registration provided for by Section 4(2) of the Securities Act
of 1933. Also on December 17, 1998, the Company issued 5,625,000 shares of
Series A preferred stock to Kaiden S.A., and 1,875,000 shares of Series A
preferred stock to PacRim Information Systems, Inc., also in exchange for
acquiring the income stream of Cry*Tel International, Inc. and also in reliance
upon the exemption from registration provided for by Section 4(2) of the
Securities Act of 1933.
On March 3, 1999 the Company offered and issued to a single individual,
Giacomo Luca Di Consolo, 909,000 shares of common stock in exchange for
acquiring a 20 percent interest in an Italian business called Academy Network
Solutions. These shares were issued in reliance upon the exemption from
registration provided for by Section 4(2) of the Securities Act of 1933. That
transaction was subsequently rescinded by the Company for nonperformance and the
share issuance was cancelled as of the issuance date of March 3, 1999.
In a single transaction on April 6, 1999, the Company offered and issued to
one entity, Lampton, Inc., 1,200,000 shares of common stock pursuant to the
exercise of a convertible debenture agreement and 400,000 shares of common stock
pursuant to the exercise of a stock purchase warrant, as well as 200,000 shares
of common stock to a broker, J.P. Carey, Inc,. pursuant to the exercise of an
additional stock purchase warrant, in exchange for a commitment to provide the
Company with up to $1,000,000.00 in equity financing in reliance upon the
exemption from registration provided for by Section 3(b) of the Securities Act
of 1933 and Rule 504 of Regulation D promulgated thereunder. These shares were
placed in escrow contingent upon performance of the financing commitment to
raise $1,000,000.00. Only $334,000.00 in equity financing was actually provided.
Of the shares issued to Lampton, Inc., 890,883 shares of common stock will be
returned from escrow to the Company that were issued under the debenture
agreement. In addition, 333,334 shares of common stock will be returned from
escrow to the Company that were issued under the stock purchase warrant.
52
<PAGE>
ITEM 5
INDEMNIFICATION OF OFFICERS AND DIRECTORS
Item 702 of Regulation S-B
Under the terms of the Company's Bylaws, the Company has the power to
indemnify any person who was or is a party to any proceeding (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 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 liability incurred in connection with such proceeding,
including any appeal thereof, 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, had no
reasonable cause to believe his conduct was unlawful. The termination of any
proceeding by judgment, order, settlement, or conviction or upon a plea of nolo
contendere or its equivalent does not, of itself, create a presumption that the
person did not act in good faith and in a manner which he reasonably believed to
be in, or not opposed to, the best interests of the corporation or, with respect
to any criminal action or proceeding, had reasonable cause to believe that his
conduct was unlawful.
IN THE OPINION OF THE SECURITIES AND EXCHANGE COMMISSION, INDEMNIFICATION
FOR LIABILITIES ARISING PURSUANT TO THE SECURITIES ACT OF 1933 IS CONTRARY TO
PUBLIC POLICY AND, THEREFORE, UNENFORCEABLE.
53
<PAGE>
PART III
ITEM 1 AND 2. INDEX TO EXHIBITS AND DESCRIPTION OF EXHIBITS
EXHIBIT 2. ARTICLES OF INCORPORATION AND BYLAWS
EXHIBIT 3. ACQUISITION AGREEMENT
EXHIBIT 3.1. STOCK PURCHASE AGREEMENT
EXHIBIT 6. MATERIAL CONTRACTS
EXHIBIT 6.1 RESELLER AGREEMENT BETWEEN NOKIA CORPORATION (FORMERLY
VIENNA SYSTEMS) AND THE COMPANY
EXHIBIT 6.2 COLOCATION SUPPORT SERVICES AGREEMENT BETWEEN
VANCOUVER TELEPHONE COMPANY LIMITED AND THE COMPANY
EXHIBIT 6.3. INTERNET SERVICES AGREEMENT BETWEEN
STARCOM-ACCESSPOINT AND THE COMPANY
EXHIBIT 6.4. JOINT VENTURE AGREEMENT BETWEEN CRY-TEL
TELECOMMUNICATIONS AUSTRALIA PTY LTD. AND THE COMPANY
EXHIBIT 6.5. NETWORK ADMINISTRATION AGREEMENT BETWEEN TELEMATRIX
AND THE COMPANY
EXHIBIT 6.6. AGREEMENT BETWEEN KAIDEN S.A., PACRIM INFORMATION
SYSTEMS AND THE COMPANY FOR INCOME STREAM AND ISSUANCE OF
COMMON AND PREFERRED STOCK
EXHIBIT 6.7. PREFERRED SHARE CONSOLIDATION AND CONTROL BLOCK
RESOLUTION BETWEEN KAIDEN S.A., PACRIM INFORMATION SYSTEMS, INC
EXHIBIT 6.8. INTERNET SERVICES AND COLOCATION AGREEMENT WITH ABOVENET
COMMUNICATIONS, INC
EXHIBIT 23. CONSENT OF INDEPENDENT AUDITORS
EXHIBIT 27. FINANCIAL DATA SCHEDULE
COMPANY SIGNATURE
In accordance with Section 12 of the Securities Exchange Act of 1934, the
registrant caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized.
CRYS-TEL TELECOMMUNICATIONS.COM, INC.
By: Randall A. Jones Date: September 30, 1999
/S/ Randall A. Jones
- - -------------------------
Randall A. Jones
Chief Financial Officer
54
<PAGE>
STATE OF FLORIDA
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of
Amendment, filed on December 14, 1998, effective December 21, 1998, to
Articles of Incorporation for PROGRESSIVE GENERAL CORPORATION which changed its
name to CRYS*TEL TELECOMMUNICATIONS.COM, INC., a Florida corporation, as shown
by the records of this office.
I further certify the document was electronically received under FAX audit
number H98000023130. This certificate is issued in accordance with section
15.16, Florida Statutes, and authenticated by the code noted below.
The document number of this corporation is J51673.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Fourteenth day of December, 1998
Authentication Code: 998A00058866-121498-J51673 -1/1
[GREAT SEAL OF THE STATE OF FLORIDA}
/s/Sandra B Mortham
Sandra B Mortham
Secretary of State
55
<PAGE>
ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
PROGRESSIVE GENERAL CORPORATION
-------------------------------
Pursuant to Section 607.1006 of the Business Corporation Act of the State
of Florida, the undersigned, being the President of Progressive General
Corporation, a corporation organized and existing under and by virtue of the
Business Corporation Act of the State of Florida ("Corporation"), bearing
document number J51673, does hereby certify:
FIRST: That pursuant to written consent of all of the Board of
Directors and majority consent of the Shareholders of the Corporation, dated
December11, 1998, the Board of Directors and Shareholders approved the Amendment
to the Corporation's Articles of Incorporation as follows:
Articles I and IV of the Corporation's Articles of Incorporation shall be
deleted in their entirety and replaced with the following:
ARTICLE I
CORPORATE NAME
--------------
The name of the Corporation shall be Crys*TeI Telecommunications.com, Inc.
ARTICLE IV
SHARES
------
The maximum number of shares that this Corporation shall be authorized to
issue and have outstanding at any one time shall be 50,000,000 shares of common
stock, par value $.001 per share and 10,000,000 shares of Preferred Stock, par
value $.001 per share. Series of the Preferred Stock may be created and issued
from time to time, with such designations, preferences, conversion rights,
cumulative, relative, participating, optional or other rights, including voting
rights, qualifications, limitations or restrictions thereof as shall be stated
and expressed in the resolution or resolutions providing for the creation and
issuance of such series of Preferred Stock as adopted by the Board of Directors
pursuant to the authority in this paragraph given.
Matthew W. Miller. Esq., Florida Bar No. 0121398
Atlas, Pearlman, Trop & Borksofl, PA.
200 East Las Olas Blvd., Suite 1900
Fort Lauderdale, Florida 33301
(954) 763-1200
56
<PAGE>
Upon ten (10) days from the date of filing of these Articles of Amendment
with the Secretary of State of the State of Florida, every one issued and
outstanding share of the Corporation's previously outstanding Common Stock, par
value $.0O1 per share (the "Old Common Stock") shall thereby and thereupon be
reclassified and converted into six validly issued, fully paid and
non-assessable shares of Common Stock (the "New Common Stock"). Each certificate
that theretofore represented shares of the Old Common Stock shall thereafter
represent the number of shares of New Common Stock into which the shares of Old
Common Stock represented by such certificate were reclassified and converted
hereby; provided, however, that each person holding of record a stock
certificate or certificates that represented shares of the Old Common Stock
shall receive, upon surrender of stock certificate or certificates, a new
certificate or certificates evidencing and representing the number of shares of
the New Common Stock to which such person is entitled, except that no fractional
shares resulting from the combination shall be issued, any such fractional
shares to be converted to the right of the holder thereof to receive one share
of New Common Stock."
SERIES A CONVERTIBLE PREFERRED STOCK
The Board of Directors of the Corporation desires, pursuant to its
authority as aforesaid, to determine and fix the rights, preferences, privileges
and restrictions relating to a class of said Preferred Stock to be designated as
follows:
1. Designation and Amount. The shares of such series shall be
-------------------------
designated as the Series A Convertible Preferred Stock (the "Series A
Convertible Preferred Stock") and shall have a stated value of $.001 (the
"Stated Value") per share, and the number of shares constituting such series
shall be 7,500,000.
2. Dividends. The holders of the Series A Convertible Preferred Stock
----------
of the Corporation are not entitled to receive dividends.
3. Preference.
-----------
(a) In the event of any liquidation, dissolution, or winding up of
the affairs of the Corporation, whether voluntary or involuntary, except as set
forth in subparagraph (b) below, the holders of the Series A Convertible
Preferred Stock shall be entitled, before any assets of the Corporation shall be
distributed among or paid over to the holders of the Common Stock, to be paid
$.001 per share. After payment to the holders of the Series A Convertible
Preferred Stock as set forth in the previous sentence and as provided in
subparagraph (b) below, any additional amount available for distribution to the
shareholders of the Corporation shall, subject to subparagraph (b) below, be
shared by the holders of the Series A Convertible Preferred Stock and the Common
Stock on a share-for-share basis (with each share of Series A Convertible
Preferred Stock being deemed to be equal to the number of shares of Common Stock
(including fractions of a share) into which such Series A Convertible Preferred
Stock is convertible immediately prior to the close of business on the business
day fixed for such distribution.
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<PAGE>
(b) If, upon such liquidation, dissolution or winding up, the
assets of the Corporation distributable as aforesaid among the holders of the
Series A Convertible Preferred Stock shall be insufficient to permit the payment
to such holders of at least the amounts provided in subparagraph (a) above, the
entire assets shall be distributed pro rata among the holders of the Series A
Convertible Preferred Stock based upon their respective liquidation preferences
as set forth in subparagraph (a) above. The amounts distributable to the holders
of Series A Convertible Preferred Stock under subparagraph (a) above shall be
adjusted appropriately for subdivisions (by stock splits, stock dividends or
otherwise), combinations (by reverse stock splits or otherwise) or other
recapitalizations of the Series A Convertible Preferred Stock.
(c) Written notices of such liquidation, dissolution or winding
up, stating a payment date and the place where said payments shall be made,
shall be given not less than twenty (20) days prior to the payment date stated
therein.
(d) The sale or transfer by the Corporation of all or
substantially all of its assets, shall be deemed to be a liquidation,
dissolution or winding up of the Corporation within the meaning of the
provisions of this paragraph 3, unless the holders of a majority of the shares
of Series A Convertible Preferred Stock shall, prior to the effective date of
such sale or transfer, consent in writing or by vote at a meeting to such
transaction.
4. Voting Rights. Upon issuance, and subject to increase and additional
--------------
rights as provided below, holders of the Series A Convertible Preferred Stock
shall be entitled to vote with the holders of the Common Stock as a single class
on all matters presented for a vote to the shareholders of the Company. The
number of votes per share of the Series A Convertible Preferred Stock which can
be cast shall be adjusted at such time or times as the conversion price is
adjusted so that the number of votes per share of this series of Series A
Convertible Preferred Stock which may be cast shall always be equal to the full
number of shares of Common Stock into which each share of Series A Convertible
Preferred Stock may be converted when voting with the holders of Common Stock as
a single class.
5. Conversion.
-----------
(a) For every $1.00 of net earnings of the Corporation at the end
of each fiscal year, one share of Series A Convertible Preferred Stock shall be
automatically converted (the "Conversion") into one (1) share of Common Stock of
the Company; provided however, in the event net earnings in any one year is
negative, such negative net earnings shall reduce future years net earnings and
no conversion shall be permitted until such time as the sum of all such years is
positive, and only to the extent the sum exceeds $0.
58
<PAGE>
(b) All shares of Common Stock acquired by conversion of Series A
Convertible Preferred Stock ("Conversion Shares"), upon issuance, will be duly
authorized, validly issued, fully paid and nonassessable and free from all
taxes, liens and charges with respect to the issue thereof, provided that the
Corporation shall not be required to pay any tax which may be payable in respect
of any transfer involved in the issuance and delivery of any certificate in a
name other than that of the holder of the Series A Convertible Preferred Stock
which is being converted;
(c) So long as any shares of Series A Convertible Preferred Stock
are outstanding, the Corporation will use its best efforts to have at all times
authorized, and reserved (free from pre-emptive rights) for the purpose of issue
or transfer upon exercise of the rights evidenced by the Series A Convertible
Preferred Stock, a sufficient number of shares of its Common Stock to provide
therefor;
(d) No fractional shares of Common Stock shall be issued upon
conversion of the Series A Convertible Preferred Stock, and the number of shares
of Common Stock to be issued shall be rounded to the nearest whole share.
Whether or not fractional shares are issuable upon such conversion shall be
determined on the basis of the total number of shares of Series A Convertible
Preferred Stock the holder is at the time converting into Common Stock and the
number of shares of Common Stock issuable upon such aggregate conversion.
6. Redemption. The shares of Series A Convertible Preferred Stock will
-----------
not be redeemable for a period of five (5) years from the date hereof, at which
time the Series A Convertible Preferred Stock shall be redeemed by the Company
for $.0Q1 per share.
7. Consolidation. Merger. Exchange. etc. In case the Corporation shall
--------------------------------------
enter into any consolidation, merger, combination, statutory share exchange or
other transaction in which the Common Shares are exchanged for or changed into
other stock or securities, money and/or any other property, then in any such
case the Series A Convertible Preferred Stock shall at the same time be
similarly exchanged or changed into preferred shares of the surviving entity
providing the holders of such preferred shares with (to the extent possible) the
same relative rights and preferences as the Series A Convertible Preferred
Stock.
8. Stock Dividends: Stock Splits, etc. If, prior to the date on which
------------------------------------
all shares of Series A Convertible Preferred Stock are converted, the
Corporation shall (i) pay a dividend in shares of Common Stock, (ii) subdivide
its outstanding Common Stock, or (iii) combine its outstanding Common Stock into
a smaller number of shares of Common Shares, the Conversion Price in effect on
the opening of business on the record date for determining shareholders entitled
to participate in such transaction shall thereupon be adjusted, or, if
necessary, the right to convert shall be amended, such that the number of shares
59
<PAGE>
of Common Stock receivable upon conversion of the shares of Series A Convertible
Preferred Stock immediately prior thereto shall be adjusted so that the holders
of the Series A Convertible Preferred Stock shall be entitled to receive, upon
the conversion of such shares of Series A Convertible Preferred Stock, the kind
and number of shares of Common Stock or other securities of the Corporation
which it would have owned or would have been entitled to receive after the
happening of any of the events described above had the Series A Convertible
Preferred Stock been converted immediately prior to the happening of such event
or any record date with respect thereto. Any adjustment made pursuant to this
Paragraph 8 shall become effective immediately after the effective date of such
event and such adjustment shall be retroactive to the record date, if any, for
such event."
SECOND: The foregoing amendment was adopted by the Board of Directors
of the Corporation pursuant to a Written Consent of All of the Board of
Directors of the Corporation and by a majority of the Shareholders of the Common
Stock of the Corporation dated December 11, 1998, acting by Written Consent
pursuant to Sections 607.0821 and 607.0704 of the Florida Business Corporation
Act. Therefore, the number of votes cast for the amendment to the Corporation's
Articles of Incorporation was sufficient for approval.
THIRD: The Articles of 'Amendment shall be effective as of 7:00 a.m.
E.S.T. on December 21, 1998.
IN WITNESS WHEREOF, the undersigned, being the President of this
Corporation, has executed these Articles of Amendment as of December 11, 1998.
PROGRESSIVE GENERAL CORPORATION
By
/s/James N. Rodgers, President
---------------------------------
James N. Rodgers, President
60
<PAGE>
STATE OF FLORIDA
DEPARTMENT OF STATE
I certify the attached is a true and correct copy of the Articles of Amendment,
filed on January 14, 1999, to of Incorporation for CRYS*TEL
TELECOMMUNICATIONS.COM, INC., a Florida corporation, as shown by the records of
this office.
I further certify the document was electronically received under FAX audit
number H99000001114. This certificate is issued in accordance with section
15.16, Florida Statutes, and authenticated by the code noted below.
The document number of this corporation is J51673.
Given under my hand and the
Great Seal of the State of Florida,
at Tallahassee, the Capital, this the
Fourteenth day of January, 1999
Authentication Code: 899A00002050-011499-J51673 -1/1
[GREAT SEAL OF THE STATE OF FLORIDA}
/s/Katherine Harris
Katherine Harris
Secretary of State
61
<PAGE>
FLORIDA DEPARTMENT OF STATE
Katherine Harris
Secretary of State
January 14, 1999
CRYS*TEL TELECOMMUNICATIONS.COM, INC.
200 E ROBINSON ST
SUITE 450
ORLANDO, FL 32801
Re: Document Number J51673
The Articles of Amendment to the Articles of Incorporation for CRYS*TEL
TELECOMMEJNICATIONS.COM, INC., a Florida corporation, were filed on January 14,
1999.
The certification requested is enclosed. To be official, the certification for
a certified copy must be attached to the original document that was
electronically submitted and filed under FAX audit number E99000001114.
Should you have any question regarding this matter, please telephone (850)
487-6050, the Amendment Filing Section.
Darlene Connell
Corporate Specialist
Division of Corporations Letter Number: 899A00002050
62
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ARTICLES OF AMENDMENT
TO THE
ARTICLES OF INCORPORATION
OF
CRYS*TEL TELECOMMUNICATIONS.COM. INC.
-------------------------------------
Pursuant to Section 607.1006 of the Business Corporation Act of the State
of Florida, the undersigned, being the President of Crys*TeI
Telecommunications.com, Inc., a corporation organized and existing under and by
virtue of the Business Corporation Act of the State of Florida ("Corporation"),
bearing document number J51 673, does hereby certify:
FIRST: That pursuant to written consent of all of the Board of Directors
and majority consent of the Shareholders of the Corporation, dated January j3,
1999, the Board of Directors and Shareholders approved the Amendment to the
Corporation's Articles of Incorporation as follows:
Paragraphs 1 and 5(a) of Article IV of the Corporation's Articles of
Incorporation shall be deleted in their entirety and replaced with the
following:
ARTICLE IV
SHARES
------
The maximum number of shares that this Corporation shall be authorized to
issue and have outstanding at any one time shall be 100,000,000 shares of common
stock, par value $.001 per share and 10,000,000 shares of Preferred Stock, par
value $.001 per share. Series of the Preferred Stock may be created and issued
from time to time, with such designations, preferences, conversion rights,
cumulative, relative, participating, optional or other rights, including voting
rights, qualifications, limitations or restrictions thereof as shall be stated
and expressed in the resolution or resolutions providing for the creation and
issuance of such series of Preferred Stock as adopted by the Board of Directors
pursuant to the authority in this paragraph given.
Matthew W. Miller, Esq., Florida Bar No. 0121398
Atlas, Pearlman, Trop & Borkson, P.A.
200 East Las OIas Blvd., Suite 1900
Fort Lauderdale, Florida 33301
(954) 763-1200
63
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5. Conversion
----------
(a) For every $1.00 of net earnings of the Corporation at the end of
each fiscal year, one share of Series A Convertible Preferred Stock shall be
automatically convertible (the "Conversion"), at the option of the holder, into
one (1) share of Common Stock of the Company; provided however, in the event net
earnings in any one year is negative, such negative net earnings shall reduce
future years net earnings and no conversion shall be permitted until such time
as the sum of all such years is positive, and only to the extent the sum exceeds
$0."
SECOND: The foregoing amendment was adopted by the Board of Directors
of the Corporation pursuant to a Written Consent of All of the Board of
Directors of the Corporation, by a majority of the Shareholders of the Common
Stock and by a majority consent of the shareholders of the Series A Preferred
Stock of the Corporation dated January 13, 1999. acting by Written Consent
pursuant to Sections 607.0821 and 607.0704 of the Florida Business Corporation
Act. Therefore, the number of votes cast for the amendment to the Corporation's
Articles of Incorporation was sufficient for approval.
IN WITNESS WHEREOF, the undersigned, being the President of this
Corporation, has executed these Articles of Amendment as of January 13, 1999
CRYS*TEL TELECOMMUNICATIONS.COM, INC.
By: /s/ James N. Rodgers, President
-----------------------------------
James N. Rodgers, President
Chief Executive Officer
64
<PAGE>
<TABLE>
<CAPTION>
ByLaws
INDEX
ARTICLE I
OFFICES
<S> <C> <C>
Section 1.01 Principal Office 70
Section 1.02 Registered Office 70
Section 1.03 Other Offices 70
ARTICLE II
MEETINGS OF SHAREHOLDERS
Section 2.01 Annual Meeting 70
Section 2.02 Special Meetings 70
Section 2.03 Shareholders' List for Meeting 71
Section 2.04 Record Date 71
Section 2.05 Notice of Meetings and Adjournment 72
Section 2.06 Waiver of Notice 72
ARTICLE III
SHAREHOLDER VOTING
Section 3.01 Voting Group Defined 73
Section 3.02 Quorum and Voting Requirements for
Voting Groups 73
Section 3.03 Action by Single and Multiple Voting
Groups 73
Section 3.04 Shareholder Quorum and Voting; Greater
or Lesser Voting Requirements 74
65
<PAGE>
Section 3.05 Voting for Directors; Cumulative Voting 75
Section 3.06 Voting Entitlement of Shares 75
Section 3.07 Proxies 77
Section 3.08 Shares Held by Nominees 78
Section 3.09 Corporation's Acceptance of Votes 78
Section 3.10 Action by Shareholders Without Meeting 79
ARTICLE IV
BOARD OF DIRECTORS AND OFFICERS
Section 4.01 Qualifications of Directors 79
Section 4.02 Number of Directors 79
Section 4.03 Terms of Directors Generally 80
Section 4.04 Staggered Terms for Directors 80
Section 4.05 Vacancy on Board 80
Section 4.06 Compensation of Directors 80
Section 4.07 Meetings 80
Section 4.08 Action by Directors Without a Meeting 81
Section 4.09 Notice of Meetings 81
Section 4.10 Waiver of Notice 81
Section 4.11 Quorum and Voting 81
Section 4.12 Committees 81
Section 4.13 Loans to Officers, Directors and
Employees; Guaranty of Obligations 82
66
<PAGE>
Section 4.14 Required Officers 82
Section 4.15 Duties of Officers 83
Section 4.16 Resignation and Removal of Officers 83
Section 4.17 Contract Rights of Officers 83
Section 4.18 General Standards for Directors 83
Section 4.19 Director Conflicts of Interest 84
Section 4.20 Resignation of Directors 84
ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
Section 5.01 Directors, Officers, Employees
and Agents 85
ARTICLE VI
OFFICE AND AGENT
Section 6.01 Registered Office and Registered Agent 89
Section 6.02 Change of Registered Office or Registered
Agent; Resignation of Registered Agent 89
ARTICLE VII
SHARES, OPTION, DIVIDENDS AND DISTRIBUTIONS
Section 7.01 Authorized Shares 89
Section 7.02 Terms of Class or Series Determined
by Board of Directors 90
Section 7.03 Issued and Outstanding Shares 90
Section 7.04 Issuance of Shares 91
67
<PAGE>
Section 7.05 Form and Content of Certificates 91
Section 7.06 Shares Without Certificates 92
Section 7.07 Restriction on Transfer of Shares
and Other Securities 92
Section 7.08 Shareholder's Pre-emptive Rights 92
Section 7.09 Corporation's Acquisition of its
Own Shares 92
Section 7.10 Share Options 93
Section 7.11 Terms and Conditions of Stock Rights
and Options 93
Section 7.12 Share Dividends 93
Section 7.13 Distributions to Shareholders 94
ARTICLE VIII
AMENDMENT OF ARTICLES AND BYLAWS
Section 8.01 Authority to Amend the Articles of
Incorporation 95
Section 8.02 Amendment by Board of Directors 95
Section 8.03 Amendment of Bylaws by Board of
Directors 96
Section 8.04 Bylaw Increasing Quorum or Voting
Requirements for Directors 96
ARTICLE IX
RECORDS AND REPORT
Section 9.01 Corporate Records 96
Section 9.02 Financial Statements for Shareholders 97
68
<PAGE>
Section 9.03 Other Reports to Shareholders 98
Section 9.04 Annual Report for Department of State 98
ARTICLE X
MISCELLANEOUS
Section 10.01 Definition of the "Act" 98
Section 10.02 Application of Florida Law 99
Section 10.03 Fiscal Year 99
Section 10.04 Conflicts with Articles of
Incorporation 99
</TABLE>
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<PAGE>
ARTICLE I
OFFICES
SECTION 1.01. PRINCIPAL OFFICE.
The principal office of the corporation in the State of Florida shall be
established at such places as the board of directors from time to time
determine.
SECTION 1.02. REGISTERED OFFICE.
The registered office of the corporation in the State of Florida shall be
at the office of its registered agent as stated in the articles of incorporation
or as the board of directors shall from time to time determine.
SECTION 1.03. OTHER OFFICES.
The corporation may have additional offices at such other places, either
within or without the State of Florida, as the board of directors may from time
to time determine or the business of the corporation may require.
ARTICLE II
MEETINGS OF SHAREHOLDERS
SECTION 2.01. ANNUAL MEETING.
(1) The corporation shall hold a meeting of shareholders annually, for
the election of directors and for the transaction of any proper business, at a
time stated in or fixed in accordance with a resolution of the board of
directors.
(2) Annual shareholders' meeting may be held in or out of the State of
Florida at a place stated in or fixed in accordance with a resolution by the
board of directors or, when not inconsistent with the board of directors'
resolution stated in the notice of the annual meeting. If no place is stated in
or fixed in accordance with these bylaws, or stated in the notice of the annual
meeting, annual meetings shall be held at the corporation's principal office.
(3) The failure to hold the annual meeting at the time stated in or
fixed in accordance with these bylaws or pursuant to the Act does not affect the
validity of any corporate action and shall not work a forfeiture of or
dissolution of the corporation.
SECTION 2.02. SPECIAL MEETING.
(1) The corporation shall hold a special meeting of shareholders:
(a) On call of its board of directors or the person or persons
authorized to do so by the board of directors; or
(b) If the holders of not less than 10% of all votes entitled to
be cast on any issue proposed to be considered at the proposed special meeting
sign, date and deliver to the corporation's secretary one or more written
demands for the meeting describing the purpose or purposes for which it is to be
held.
70
<PAGE>
(2) Special shareholders' meetings may be held in or out of the State
of Florida at a place stated in or fixed in accordance with a resolution of the
board of directors, or, when not inconsistent with the board of directors'
resolution, in the notice of the special meeting. If no place is stated in or
fixed in accordance with these bylaws or in the notice of the special meeting,
special meetings shall be held at the corporation's principal office.
(3) Only business within the purpose or purposes described in the
special meeting notice may be conducted at a special shareholders' meeting.
SECTION 2.03. SHAREHOLDERS' LIST FOR MEETING.
(1) After fixing a record date for a meeting, a corporation shall
prepare a list of the names of all its shareholders who are entitled to notice
of a shareholders' meeting, in accordance with the Florida Business Corporation
Act (the "Act"), or arranged by voting group, with the address of, and the
number and class and series, if any, of shares held by, each.
(2) The shareholders' list must be available for inspection by any
shareholder for a period of ten days prior to the meeting or such shorter time
as exists between the record date and the meeting and continuing through the
meeting at the corporation's principal office, at a place identified in the
meeting notice in the city where the meeting will be held, or at the office of
the corporation's transfer agent or registrar. A shareholder or his agent or
attorney is entitled on written demand to inspect the list (subject to the
requirements of Section 607.1602(3) of the Act), during regular business hours
and at his expense, during the period it is available for inspection.
(3) The corporation shall make the shareholders' list available at the
meeting, and any shareholder or his agent or attorney is entitled to inspect the
list at any time during the meeting or any adjournment.
SECTION 2.04. RECORD DATE.
(1) The board of directors may set a record date for purposes of
determining the shareholders entitled to notice of and to vote at a
shareholders' meeting; however, in no event may a record date fixed by the board
of directors be a date preceding the date upon which the resolution fixing the
record date is adopted.
(2) Unless otherwise fixed by the board of directors, the record date
for determining shareholders entitled to demand a special meeting is the date
the first shareholder delivers his demand to the corporation. In the event that
the board of directors sets the record date for a special meeting of
shareholders, it shall not be a date preceding the date upon which the
corporation receives the first demand from a shareholder requesting a special
meeting.
(3) If no prior action is required by the board of directors pursuant
to the Act, and, unless otherwise fixed by the board of directors, the record
date for determining shareholders entitled to take action without a meeting is
the date the first signed written consent is delivered to the corporation under
Section 607.0704 of the Act. If prior action is required by the board of
directors pursuant to the Act, the record date for determining shareholders
entitled to take action without a meeting is at the close of business on the day
on which the board of directors adopts the resolution taking such prior action.
(4) Unless otherwise fixed by the board of directors, the record date
for determining shareholders entitled to notice of and to vote at an annual or
special shareholders' meeting is the close of business on the day before the
first notice is delivered to shareholders.
(5) A record date may not be more than 70 days before the meeting or
action requiring a determination of shareholders.
71
<PAGE>
(6) A determination of shareholders entitled to notice of or to vote at
a shareholders' meeting is effective for any adjournment of the meeting unless
the board of directors fixes a new record date, which it must do if the meeting
is adjourned to a date more than one 120 days after the date fixed for the
original meeting.
SECTION 2.05. NOTICE OF MEETINGS AND ADJOURNMENT.
(1) The corporation shall notify shareholders of the date, time and
place of each annual and special shareholders' meeting no fewer than 10 or more
than 60 days before the meeting date. Unless the Act requires otherwise, the
corporation is required to give notice only to shareholders entitled to vote at
the meeting. Notice shall be given in the manner provided in Section 607.0141
of the Act, by or at the direction of the president, the secretary, of the
officer or persons calling the meeting. If the notice is mailed at least 30
days before the date of the meeting, it may be done by a class of United States
mail other than first class. Notwithstanding Section 607.0141, if mailed, such
notice shall be deemed to be delivered when deposited in the United Statement
mail addressed to the shareholder at his address as it appears on the stock
transfer books of the corporation, with postage thereon prepaid.
(2) Unless the Act or the articles of incorporation requires otherwise,
notice of an annual meeting need not include a description of the purpose or
purposes for which the meeting is called.
(3) Notice of a special meeting must include a description of the
purpose or purposes for which the meeting is called.
(4) If an annual or special shareholders meeting is adjourned to a
different date, time, or place, notice need not be given of the new date, time,
or place if the new date, time or place is announced at the meeting before
adjournment is taken, and any business may be transacted at the adjourned
meeting that might have been transacted on the original date of the meeting. If
a new record date is or must be fixed under Section 607.0707 of the Act,
however, notice of the adjourned meeting must be given under this section to
persons who are shareholders as of the new record date who are entitled to
notice of the meeting.
(5) Notwithstanding the foregoing, no notice of a shareholders' meeting
need be given if: (a) an annual report and proxy statements for two consecutive
annual meetings of shareholders, or (b) all, and at least two checks in payment
of dividends or interest on securities during a 12-month period, have been sent
by first-class United States mail, addressed to the shareholder at his address
as it appears on the share transfer books of the corpora-tion, and returned
undeliverable. The obligation of the corpora-tion to give notice of a
shareholders' meeting to any such shareholder shall be reinstated once the
corporation has received a new address for such shareholder for entry on its
share transfer books.
SECTION 2.06. WAIVER OF NOTICE.
(1) A shareholder may waive any notice required by the Act, the
articles of incorporation, or bylaws before or after the date and time stated in
the notice. The waiver must be in writing, be signed by the shareholder
entitled to the notice, and be delivered to the corporation for inclusion in the
minutes or filing with the corporate records. Neither the business to be
transacted at nor the purpose of any regular or special meeting of the
shareholders need be specified in any written waiver of notice.
(2) A shareholder's attendance at a meeting: (a) Waives objection to
lack of notice or defective notice of the meeting, unless the shareholder at the
beginning of the meeting objects to holding the meeting or transacting business
at the meeting; or (b) waives objection to consideration of a particular matter
at the meeting that is not within the purpose or purposes described in the
meeting notice, unless the shareholder objects to considering the matter when it
is presented.
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<PAGE>
ARTICLE III
SHAREHOLDER VOTING
SECTION 3.01. VOTING GROUP DEFINED.
A "voting group" means all shares of one or more classes or series that
under the articles of incorporation or the Act are entitled to vote and be
counted together collectively on a matter at a meeting of shareholders. All
shares entitled by the articles of incorporation or the Act to vote generally on
the matter are for that purpose a single voting group.
SECTION 3.02. QUORUM AND VOTING REQUIREMENTS FOR VOTING GROUPS.
(1) Shares entitled to vote as a separate voting group may take action
on a matter at a meeting only if a quorum of those shares exists with respect to
that matter. Unless the articles of incorporation or the Act provides
otherwise, a majority of the votes entitled to be cast on the matter by the
voting group constitutes a quorum of that voting group for action on that
matter.
(2) Once a share is represented for any purpose at a meeting, it is
deemed present for quorum purposes for the remainder of the meeting and for any
adjournment of that meeting unless a new record date is or must be set for that
adjourned meeting.
(3) If a quorum exists, action on a matter (other than the election of
directors) by a voting group is approved if the votes cast within the voting
group favoring the action exceed the votes cast opposing the action, unless the
articles of incorporation or the Act requires a greater number of affirmative
votes.
SECTION 3.03. ACTION BY SINGLE AND MULTIPLE VOTING GROUPS.
(1) If the articles of incorporation or the Act provides for voting by
a single voting group on a matter, action on that matter is taken when voted
upon by that voting group as provided in Section 3.02 of these bylaws.
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<PAGE>
(2) If the articles of incorporation or the Act provides for voting by
two or more voting groups on a matter, action on that matter is taken only when
voted upon by each of those voting groups counted separately as provided in
Section 3.02 of these bylaws. Action may be taken by one voting group on a
matter even though no action is taken by another voting group entitled to vote
on the matter.
SECTION 3.04. SHAREHOLDER QUORUM AND VOTING; GREATER OR LESSER VOTING
REQUIREMENTS.
(1) A majority of the shares entitled to vote, represented in person or
by proxy, shall constitute a quorum at a meeting of shareholders, but in no
event shall a quorum consist of less than one-third of the shares entitled to
vote. When a specified item of business is required to be voted on by a class
or series of stock, a majority of the shares of such class or series shall
constitute a quorum for the transaction of such item of business by that class
or series.
(2) An amendment to the articles of incorporation that adds, changes or
deletes a greater or lesser quorum or voting requirement must meet the same
quorum requirement and be adopted by the same vote and voting groups required to
take action under the quorum and voting requirements then in effect or proposed
to be adopted, whichever is greater.
(3) If a quorum exists, action on a matter, other than the election of
directors, is approved if the votes cast by the holders of the shares
represented at the meeting and entitled to vote on the subject matter favoring
the action exceed the votes cast opposing the action, unless a greater number of
affirmative votes or voting by classes is required by the Act or the articles of
incorporation.
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(4) After a quorum has been established at a shareholders' meeting, the
subsequent withdrawal of shareholders, so as to reduce the number of shares
entitled to vote at the meeting below the number required for a quorum, shall
not affect the validity of any action taken at the meeting or any adjournment
thereof.
(5) The articles of incorporation may provide for a greater voting
requirement or a greater or lesser quorum requirement for shareholders (or
voting groups of shareholders) than is provided by the Act, but in no event
shall a quorum consist of less than one-third of the shares entitled to vote.
SECTION 3.05. VOTING FOR DIRECTORS; CUMULATIVE VOTING.
(1) Directors are elected by a plurality of the votes cast by the
shares entitled to vote in the election at a meeting at which a quorum is
present.
(2) Each shareholder who is entitled to vote at an election of
directors has the right to vote the number of shares owned by him for as many
persons as there are directors to be elected and for whose election he has a
right to vote. Shareholders do not have a right to cumulate their votes for
directors unless the articles of incorporation so provide.
SECTION 3.06. VOTING ENTITLEMENT OF SHARES.
(1) Unless the articles of incorporation or the Act provides otherwise,
each outstanding share, regardless of class, is entitled to one vote on each
matter submitted to a vote at a meeting of shareholders. Only shares are
entitled to vote.
(2) The shares of the corporation are not entitled to vote if they are
owned, directly or indirectly, by a second corporation, domestic or foreign, and
the first corporation owns, directly or indirectly, a majority of shares
entitled to vote for directors of the second corporation.
(3) This section does not limit the power of the corporation to vote
any shares, including its own shares, held by it in a fiduciary capacity.
(4) Redeemable shares are not entitled to vote on any matter, and shall
not be deemed to be outstanding, after notice of redemption is mailed to the
holders thereof and a sum sufficient to redeem such shares has been deposited
with a bank, trust company, or other financial institution upon an irrevocable
obligation to pay the holders the redemption price upon surrender of the shares.
(5) Shares standing in the name of another corporation, domestic or
foreign, may be voted by such officer, agent, or proxy as the bylaws of the
corporate shareholder may prescribe or, in the absence of any applicable
provision, by such person as the board of directors of the corporate shareholder
may designate. In the absence of any such designation or in case of conflicting
designation by the corporate shareholder, the chairman of the board, the
president, any vice president, the secretary, and the treasurer of the corporate
shareholder, in that order, shall be presumed to be fully authorized to vote
such shares.
(6) Shares held by an administrator, executor, guardian, personal
representative, or conservator may be voted by him, either in person or by
proxy, without a transfer of such shares into his name. 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 or the name of his nominee.
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(7) Shares held by or under the control of a receiver, a trustee in
bankruptcy proceedings, or an assignee for the benefit of creditors may be voted
by him without the transfer thereof into his name.
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(8) If a share or shares stand of record in the names of two or more
persons, whether fiduciaries, members of a partnership, joint tenants, tenants
in common, tenants by the entirety, or otherwise, or if two or more persons have
the same fiduciary relationship respecting the same shares, unless the secretary
of the corporation is given notice to the contrary and is furnished with a copy
of the instrument or order appointing them or creating the relationship wherein
it is so provided, then acts with respect to voting have the following effect:
(a) If only one votes, in person or in proxy, his act binds all;
(b) If more than one vote, in person or by proxy, the act of the
majority so voting binds all;
(c) If more than one vote, in person or by proxy, but the vote is
evenly split on any particular matter, each faction is entitled to vote the
share or shares in question proportionally;
(d) If the instrument or order so filed shows that any such
tenancy is held in unequal interest, a majority or a vote evenly split for
purposes of this subsection shall be a majority or a vote evenly split in
interest;
(e) The principles of this subsection shall apply, insofar as
possible, to execution of proxies, waivers, consents, or objections and for the
purpose of ascertaining the presence of a quorum;
(f) Subject to Section 3.08 of these bylaws, nothing herein
contained shall prevent trustees or other fiduciaries holding shares registered
in the name of a nominee from causing such shares to be voted by such nominee as
the trustee or other fiduciary may direct. Such nominee may vote shares as
directed by a trustee or their fiduciary without the necessity of transferring
the shares to the name of the trustee or other fiduciary.
SECTION 3.07. PROXIES.
(1) A shareholder, other person entitled to vote on behalf of a
shareholder pursuant to Section 3.06 of these bylaws, or attorney in fact may
vote the shareholder's shares in person or by proxy.
(2) A shareholder may appoint a proxy to vote or otherwise act for him
by signing an appointment form, either personally or by his attorney in fact.
An executed telegram or cablegram appearing to have been transmitted by such
person, or a photographic, photostatic, or equivalent reproduction of an
appointment form, is a sufficient appointment form.
(3) An appointment of a proxy is effective when received by the
secretary or other officer or agent authorized to tabulate votes. An
appointment is valid for up to 11 months unless a longer period is expressly
provided in the appointment form.
(4) The death or incapacity of the shareholder appointing a proxy does
not affect the right of the corporation to accept the proxy's authority unless
notice of the death or incapacity is received by the secretary or other officer
or agent authorized to tabulate votes before the proxy exercises his authority
under the appointment.
(5) An appointment of a proxy is revocable by the shareholder unless
the appointment form conspicuously states that it is irrevocable and the
appointment is coupled with an interest. Appointments coupled with an interest
include the appointment of: (a) a pledgee; (b) a person who purchased or agreed
to purchase the shares; (c) a creditor of the corporation who extended credit to
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the corporation under terms requiring the appointment; (d) an employee of the
corporation whose employment contract requires the appointment; or (e) a party
to a voting agreement created in accordance with the Act.
(6) An appointment made irrevocable under this section becomes
revocable when the interest with which it is coupled is extinguished and, in a
case provided for in Subsection 5(c) or 5(d), the proxy becomes revocable three
years after the date of the proxy or at the end of the period, if any, specified
herein, whichever is less, unless the period of irrevocability is renewed from
time to time by the execution of a new irrevocable proxy as provided in this
section. This does not affect the duration of a proxy under subsection (3).
(7) A transferee for value of shares subject to an irrevocable
appointment may revoke the appointment if he did not know of its existence when
he acquired the shares and the existence of the irrevocable appointment was not
noted conspicuously on the certificate representing the shares or on the
information statement for shares without certificates.
(8) Subject to Section 3.09 of these bylaws and to any express
limitation on the proxy's authority appearing on the face of the appointment
form, a corporation is entitled to accept the proxy's vote or other action as
that of the shareholder making the appointment.
(9) If an appointment form expressly provides, any proxy holder may
appoint, in writing, a substitute to act in his place.
SECTION 3.08. SHARES HELD BY NOMINEES.
(1) The corporation may establish a procedure by which the beneficial
owner of shares that are registered in the name of a nominee is recognized by
the corporation as the shareholder. The extent of this recognition may be
determined in the procedure.
(2) The procedure may set forth (a) the types of nominees to which it
applies; (b) the rights or privileges that the corporation recognizes in a
beneficial owner; (c) the manner in which the procedure is selected by the
nominee; (d) the information that must be provided when the procedure is
selected; (e) the period for which selection of the procedure is effective; and
(f) other aspects of the rights and duties created.
SECTION 3.09. CORPORATION'S ACCEPTANCE OF VOTES.
(1) If the name signed on a vote, consent, waiver, or proxy appointment
corresponds to the name of a shareholder, the corporation if acting in good
faith is entitled to accept the vote, consent waiver, or proxy appointment and
give it effect as the act of the shareholder.
(2) If the name signed on a vote, consent, waiver, or proxy appointment
does not correspond to the name of its shareholder, the corporation if acting in
good faith is nevertheless entitled to accept the vote, consent, waiver, or
proxy appointment and give it effect as the act of the shareholder if: (a) the
shareholder is an entity and the name signed purports to be that of an officer
or agent of the entity; (b) the name signed purports to be that of an
administrator, executor, guardian, personal representative, or conservator
representing the shareholder and, if the corporation requests, evidence of
fiduciary status acceptable to the corporation has been presented with respect
to the vote, consent, waiver, or proxy appointment; (c) the name signed purports
to be that of a receiver, trustee in bankruptcy, or assignee for the benefit of
creditors of the shareholder and, if the corporation requests, evidence of this
status acceptable to the corporation has been presented with respect to the
vote, consent, waiver, or proxy appointment; (d) the name signed purports to be
that of a pledgee, beneficial owner, or attorney in fact of the shareholder and,
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if the corporation requests, evidence acceptable to the corporation of the
signatory's authority to sign for the shareholder has been presented with
respect to the vote, consent, waiver, or proxy appointment; or (e) two or more
persons are the shareholder as covenants or fiduciaries and the name signed
purports to be the name of at least one of the co-owners and the person signing
appears to be acting on behalf of all the co-owners.
(3) The corporation is entitled to reject a vote, consent, waiver, or
proxy appointment if the secretary or other officer or agent authorized to
tabulate votes, acting in good faith, has reasonable basis for doubt about the
validity of the signature on it or about the signatory's authority to sign for
the shareholder.
(4) The corporation and its officer or agent who accepts or rejects a
vote, consent, waiver, or proxy appointment in good faith and in accordance with
the standards of this section are not liable in damages to the shareholder for
the consequences of the acceptance or rejection.
(5) Corporate action based on the acceptance or rejection of a vote,
consent, waiver, or proxy appointment under this section is valid unless a court
of competent jurisdiction determines otherwise.
SECTION 3.10. ACTION BY SHAREHOLDERS WITHOUT MEETING.
(1) Any action required or permitted by the Act to be taken at any
annual or special meeting of shareholders of the corporation may be taken
without a meeting, without prior notice and without a vote, if the action is
taken by the holders of outstanding stock of each voting group entitled to vote
thereon having not less than the minimum number of votes with respect to each
voting group that would be necessary to authorize or take such action at a
meeting at which all voting groups and shares entitled to vote thereon were
present and voted. In order to be effective, the action must by evidenced by
one or more written consents describing the action taken, dated and signed by
approving shareholders having the requisite number of votes of each voting group
entitled to vote thereon, and delivered to the corporation by delivery to its
principal office in this state, its principal place of business, the corporate
secretary, or another office or agent of the corporation having custody of the
book in which proceedings of meetings of shareholders are recorded. No written
consent shall be effective to take the corporate action referred to therein
unless, within 60 days of the date of the earliest dated consent is delivered in
the manner required by this section, written consent signed by the number of
holders required to take action is delivered to the corporation by delivery as
set forth in this section.
(2) Within 10 days after obtaining such authorization by written
consent, notice in accordance with Section 607.0704(3) of the Act must be given
to those shareholders who have not consented in writing.
ARTICLE IV
BOARD OF DIRECTORS AND OFFICERS
SECTION 4.01. QUALIFICATIONS OF DIRECTORS.
Directors must be natural persons who are 18 years of age or older but need
not be residents of the State of Florida or shareholders of the corporation.
SECTION 4.02. NUMBER OF DIRECTORS.
(1) The board of directors shall consist of not less than one nor more
than nine individuals.
(2) The number of directors may be increased or decreased from time to
time by amendment to these bylaws.
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(3) Directors are elected at the first annual shareholders' meeting and
at each annual meeting thereafter unless their terms are staggered under Section
4.04 of these bylaws.
SECTION 4.03. TERMS OF DIRECTORS GENERALLY.
(1) The terms of the initial directors of the corporation expire at the
first shareholders' meeting at which directors are elected.
(2) The terms of all other directors expire at the next annual
shareholders' meeting following their election unless their terms are staggered
under Section 4.04 of these bylaws.
(3) A decrease in the number of directors does not shorten an incumbent
director's term.
(4) The term of a director elected to fill a vacancy expires at the
next shareholders' meeting at which directors are elected.
(5) Despite the expiration of a director's term, he continues to serve
until his successor is elected and qualifies or until there is a decrease in the
number of directors.
SECTION 4.04. STAGGERED TERMS FOR DIRECTORS.
The directors of any corporation organized under the Act may, by the
articles of incorporation, or by amendment to these bylaws adopted by a vote of
the shareholders, be divided into one, two or three classes with the number of
directors in each class being as nearly equal as possible; the term of office of
those of the first class to expire at the annual meeting next ensuing; of the
second class one year thereafter; at the third class two years thereafter; and
at each annual election held after such classification and election, directors
shall be chosen for a full term, as the case may be, to succeed those whose
terms expire. If the directors have staggered terms, then any increase or
decrease in the number of directors shall be so apportioned among the classes as
to make all classes as nearly equal in number as possible.
SECTION 4.05. VACANCY ON BOARD.
(1) Whenever a vacancy occurs on a board of directors, including a
vacancy resulting from an increase in the number of directors, it may be filled
by the affirmative vote of a majority of the remaining directors.
(2) A vacancy that will occur at a specific later date (by reason of a
resignation effective at a later date may be filled before the vacancy occurs
but the new director may not take office until the vacancy occurs.
SECTION 4.06. COMPENSATION OF DIRECTORS.
The board of directors may fix the compensation of directors.
SECTION 4.07. MEETINGS.
(1) The board of directors may hold regular or special meetings in or
out of the State of Florida.
(2) A majority of the directors present, whether or not a quorum
exists, may adjourn any meeting of the board of directors to another time and
place. Notice of any such adjourned meeting shall be given to the directors who
were not present at the time of the adjournment and, unless the time and place
of the adjourned meeting are announced at the time of the adjournment, to the
other directors.
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(3) Meetings of the board of directors may be called by the chairman of
the board or by the president.
(4) The board of directors may permit any or all directors to
participate in a regular or special meeting by, or conduct the meeting through
the use of, any means of communication by which all directors participating may
simultaneously hear each other during the meeting. A director participating in
a meeting by this means is deemed to be present in person at the meeting.
SECTION 4.08. ACTION BY DIRECTORS WITHOUT A MEETING.
(1) Action required or permitted by the Act to be taken at a board of
directors' meeting or committee meeting may be taken without a meeting if the
action is taken by all members of the board or of the committee. The action
must be evidenced by one or more written consents describing the action taken
and signed by each director or committee member.
(2) Action taken under this section is effective when the last director
signs the consent, unless the consent specifies a different effective date.
(3) A consent signed under this section has the effect of a meeting
vote and may be described as such in any document.
SECTION 4.09. NOTICE OF MEETINGS.
Regular and special meetings of the board of directors may be held without
notice of the date, time, place, or purpose of the meeting.
SECTION 4.10. WAIVER OF NOTICE.
Notice of a meeting of the board of directors need not be given to any
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting shall constitute a waiver of notice of
such meeting and a waiver of any and all objections to the place of the meeting,
the time of the meeting, or the manner in which it has been called or convened,
except when a director states, at the beginning of the meeting or promptly upon
arrival at the meeting, any objection to the transaction of business because the
meeting is not lawfully called or convened.
SECTION 4.11. QUORUM AND VOTING.
(1) A quorum of a board of directors consists of a majority of the
number of directors prescribed by the articles of incorporation or these bylaws.
(2) If a quorum is present when a vote is taken, the affirmative vote
of a majority of directors present is the act of the board of directors.
(3) A director of a corporation who is present at a meeting of the
board of directors or a committee of the board of directors when corporate
action is taken is deemed to have assented to the action taken unless:
(a) He objects at the beginning of the meeting (or promptly upon
his arrival) to holding it or transacting specified business at the meeting; or
(b) He votes against or abstains from the action taken.
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SECTION 4.12. COMMITTEES.
(1) The board of directors, by resolution adopted by a majority of the
full board of directors, may designate from among its members an executive
committee and one or more other committees each of which, to the extent provided
in such resolution, shall have and may exercise all the authority of the board
of directors, except that no such committee shall have the authority to:
(a) Approve or recommend to shareholders actions or proposals
required by the Act to be approved by shareholders.
(b) Fill vacancies on the board of directors or any committee
thereof.
(c) Adopt, amend, or repeal these bylaws.
(d) Authorize or approve the reacquisition of shares unless
pursuant to a general formula or method specified by the board of directors.
(e) Authorize or approve the issuance or sale or contract for the
sale of shares, or determine the designation and relative rights, preferences,
and limitations of a voting group except that the board of directors may
authorize a committee (or a senior executive officer of the corporation) to do
so within limits specifically prescribed by the board of directors.
(2) The sections of these bylaws which govern meetings, notice and
waiver of notice, and quorum and voting requirements of the board of directors
apply to committees and their members as well.
(3) Each committee must have two or more members who serve at the
pleasure of the board of directors. The board, by resolution adopted in
accordance herewith, may designate one or more directors as alternate members of
any such committee who may act in the place and stead of any absent member or
members at any meeting of such committee.
(4) Neither the designation of any such committee, the delegation
thereto of authority, nor action by such committee pursuant to such authority
shall alone constitute compliance by any member of the board of directors not a
member of the committee in question with his responsibility to act in good
faith, in a manner he reasonably believes to be in the best interests of the
corporation, and with such care as an ordinarily prudent person in a like
position would use under similar circumstances.
SECTION 4.13. LOANS TO OFFICERS, DIRECTORS, AND EMPLOYEES; GUARANTY OF
OBLIGATIONS.
The corporation may lend money to, guaranty any obligation of, or otherwise
assist any officer, director, or employee of the corporation or of a subsidiary,
whenever, in the judgment of the board of directors, such loan, guaranty, or
assistance may reasonably be expected to benefit the corporation. The loan,
guaranty, or other assistance may be with or without interest and may be
unsecured or secured in such manner as the board of directors shall approve,
including, without limitation, a pledge of shares of stock of the corporation.
Nothing in this section shall be deemed to deny, limit, or restrict the powers
of guaranty or warranty of any corporation at common law or under any statute.
Loans, guaranties, or other types of assistance are subject to section 4.19.
SECTION 4.14. REQUIRED OFFICERS.
(1) The corporation shall have such officers as the board of directors
may appoint from time to time.
(2) A duly appointed officer may appoint one or more assistant
officers.
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(3) The board of directors shall delegate to one of the officers
responsibility for preparing minutes of the directors' and shareholders'
meetings and for authenticating records of the corporation.
(4) The same individual may simultaneously hold more than one office in
the corporation.
SECTION 4.15. DUTIES OF OFFICERS.
Each officer has the authority and shall perform the duties set forth in a
resolution or resolutions of the board of directors or by direction of any
officer authorized by the board of directors to prescribe the duties of other
officers.
SECTION 4.16. RESIGNATION AND REMOVAL OF OFFICERS.
(1) An officer may resign at any time by delivering notice to the
corporation. A resignation is effective when the notice is delivered unless the
notice specifies a later effective date. If a resignation is made effective at
a later date and the corporation accepts the future effective date, the board of
directors may fill the pending vacancy before the effective date if the board of
directors provides that the successor does not take office until the effective
date.
(2) The board of directors may remove any officer at any time with or
without cause. Any assistant officer, if appointed by another officer, may
likewise be removed by the board of directors or by the officer which appointed
him in accordance with these bylaws.
SECTION 4.17. CONTRACT RIGHTS OF OFFICERS.
The appointment of an officer does not itself create contract rights.
SECTION 4.18. GENERAL STANDARDS FOR DIRECTORS.
(1) A director shall discharge his duties as a director, including his
duties as a member of a committee:
(a) In good faith;
(b) With the care an ordinarily prudent person in a like position
would exercise under similar circumstances; and
(c) In a manner he reasonably believes to be in the best interests
of the corporation.
(2) In discharging his duties, a director is entitled to rely on
information, opinions, reports or statements, including financial statements and
other financial data, if prepared or presented by:
(a) One or more officers or employees of the corporation whom the
director reasonably believes to be reliable and competent in the matters
presented;
(b) Legal counsel, public accountants, or other persons as to
matters the director reasonably believes are within the persons' professional or
expert competence; or
(c) A committee of the board of directors of which he is not a
member if the director reasonably believes the committee merits confidence.
(3) In discharging his duties, a director may consider such factors as
the director deems relevant, including the long-term prospects and interests of
the corporation and its shareholders, and the social, economic, legal, or other
effects of any action on the employees, suppliers, customers of the corporation
or its subsidiaries, the communities and society in which the corporation or its
subsidiaries operate, and the economy of the state and the nation.
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(4) A director is not acting in good faith if he has knowledge
concerning the matter in question that makes reliance otherwise permitted by
subsection (2) unwarranted.
(5) A director is not liable for any action taken as a director, or any
failure to take any action, if he performed the duties of his office in
compliance with this section.
SECTION 4.19. DIRECTOR CONFLICTS OF INTEREST.
No contract or other transaction between a corporation and one or more
interested directors shall be either void or voidable because of such
relationship or interest, because such director or directors are present at the
meeting of the board of directors or a committee thereof which authorizes,
approves or ratifies such contract or transaction, or because his or their votes
are counted for such purpose, if:
(1) The fact of such relationship or interest is disclosed or known to
the board of directors or committee which authorizes, approves or ratifies the
contract or transactions by a vote or consent sufficient for the purpose without
counting the votes or consents of such interested directors;
(2) The fact of such relationship or interest is disclosed or known to
the shareholders entitled to vote and they authorize, approve or ratify such
contract or transaction by vote or written consent; or
(3) The contract or transaction is fair and reasonable as to the
corporation at the time it is authorized by the board, a committee or the
shareholders.
Common or interested directors may be counted in determining the presence
of a quorum at the meeting of the board of directors or a committee thereof
which authorizes, approves or ratifies such contract or transaction.
For the purpose of paragraph (2) above, a conflict of interest transaction
is authorized, approved or ratified if it receives the vote of a majority of the
shares entitled to be counted under this subsection. Shares owned by or voted
under the control of a director who has a relationship or interest in the
conflict of interest transaction may not be counted in a vote of shareholders to
determine whether to authorize, approve or ratify a conflict of interest
transaction under paragraph (2). The vote of those shares, however, is counted
in determining whether the transaction is approved under other sections of the
Act. A majority of the shares, whether or not present, that are entitled to be
counted in a vote on the transaction under this subsection constitutes a quorum
for the purpose of taking action under this section.
SECTION 4.20. RESIGNATION OF DIRECTORS.
A director may resign at any time by delivering written notice to the board
of directors or its chairman or to the corporation.
A resignation is effective when the notice is delivered unless the notice
specifies a later effective date. If a resignation is made effective at a later
date, the board of directors may fill the pending vacancy before the effective
date if the board of directors provides that the successor does not take office
until the effective date.
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ARTICLE V
INDEMNIFICATION OF DIRECTORS, OFFICERS,
EMPLOYEES AND AGENTS
SECTION 5.01. DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS.
(1) The corporation shall have power to indemnify any person who was or
is a party to any proceeding (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 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 liability
incurred in connection with such proceeding, including any appeal thereof, 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, had no reasonable cause to believe his conduct
was unlawful. The termination of any proceeding by judgment, order, settlement,
or conviction or upon a plea of nolo contendere or its equivalent shall not, of
itself, create a presumption that the person did not act in good faith and in a
manner which he reasonably believed to be in, or not opposed to, the best
interests of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his conduct was unlawful.
(2) The corporation shall have power to indemnify any person, who was
or is a party to any proceeding 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 and amounts paid in settlement not exceeding, in the judgment of the
board of directors, the estimated expense of litigating the proceeding to
conclusion, actually and reasonably incurred in connection with the defense or
settlement of such proceeding, including any appeal thereof. Such
indemnification shall be authorized if such person 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 under this
subsection in respect of any claim, issue, or matter as to which such person
shall have been adjudged to be liable unless, and only to the extent that, the
court in which such proceeding was brought, or any other court of competent
jurisdiction, 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 indemnity for such expenses which such court shall
deem proper.
(3) To the extent that a director, officer, employee, or agent of the
corporation has been successful on the merits or otherwise in defense of any
proceeding referred to in subsections (1) or (2), or in defense of any claim,
issue, or matter therein, he shall be indemnified against expenses actually and
reasonably incurred by him in connection therewith.
(4) Any indemnification under subsections (1) or (2), unless pursuant
to a determination by a court, shall be made by the corporation only as
authorized in the specific case upon a determination that indemnification of the
director, officer, employee, or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in subsections (1) or (2).
Such determination shall be made:
(a) By the board of directors by a majority vote of a quorum
consisting of directors who were not parties to such proceeding;
(b) If such a quorum is not obtainable or, even if obtainable, by
majority vote of a committee duly designated by the board of directors (in which
directors who are parties may participate) consisting solely of two or more
directors not at the time parties to the proceeding;
(c) By independent legal counsel:
(i) Selected by the board of directors prescribed in
paragraph (a) or the committee prescribed in paragraph (b); or
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(ii) If a quorum of the directors cannot be obtained for
paragraph (a) and the committee cannot be designed under paragraph (b), selected
by majority vote of the full board of directors (in which directors who are
parties may participate); or
(d) By the shareholders by a majority vote of a quorum consisting
of shareholders who were not parties to such proceeding or, if no such quorum is
obtainable, by a majority vote of shareholders who were not parties to such
proceeding.
(5) Evaluation of the reasonableness of expenses and authorization of
indemnification shall be made in the same manner as the determination that
indemnification is permissible. However, if the determination of permissibility
is made by independent legal counsel, persons specified by paragraph (4)(c)
shall evaluate the reasonableness of expenses and may authorize indemnification.
(6) Expenses incurred by an officer or director in defending a civil or
criminal proceeding may be paid by the corporation in advance of the final
disposition of such proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount if he is ultimately found not to
be entitled to indemnification by the corporation pursuant to this section.
Expenses incurred by other employees and agents may be paid in advance upon such
terms or conditions that the board of directors deems appropriate.
(7) The indemnification and advancement of expenses provided pursuant
to this section are not exclusive, and the corporation may make any other or
further indemnification or advancement of expenses of any of its directors,
officers, employees, or agents, under any bylaw, agreement, vote of 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.
However, indemnification or advancement of expenses shall not be made to or on
behalf of any director, officer, employee, or agent if a judgment or other final
adjudication establishes that his actions, or omissions to act, were material to
the cause of action so adjudicated and constitute:
(a) A violation of the criminal law, unless the director, officer,
employee, or agent had reasonable cause to believe his conduct was lawful or had
no reasonable cause to believe his conduct was unlawful;
(b) A transaction from which the director, officer, employee, or
agent derived an improper personal benefit;
(c) In the case of a director, a circumstance under which the
liability provisions of Section 607.0834 under the Act are applicable; or
(d) Willful misconduct or a conscious disregard for the best
interests of the corporation in a proceeding by or in the right of the
corporation to procure a judgment in its favor or in a proceeding by or in the
right of a shareholder.
(8) Indemnification and advancement of expenses as provided in this
section shall continue as, unless otherwise provided when authorized or
ratified, to a person who has ceased to be a director, officer, employee, or
agent and shall inure to the benefit of the heirs, executors, and administrators
of such a person, unless otherwise provided when authorized or ratified.
(9) Notwithstanding the failure of the corporation to provide
indemnification, and despite any contrary determination of the board or of the
shareholders in the specific case, a director, officer, employee, or agent of
the corporation who is or was a party to a proceeding may apply for
indemnification or advancement of expenses, or both, to the court conducting the
proceeding, to the circuit court, or to another court of competent jurisdiction.
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On receipt of an application, the court, after giving any notice that it
considers necessary, may order indemnification and advancement of expenses,
including expenses incurred in seeking court-ordered indemnification or
advancement of expenses, if it determines that:
(a) The director, officer, employee, or agent if entitled to
mandatory indemnification under subsection (3), in which case the court shall
also order the corporation to pay the director reasonable expenses incurred in
obtaining court-ordered indemnification or advancement of expenses;
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(b) The director, officer, employee, or agent is entitled to
indemnification or advancement of expenses, or both, by virtue of the exercise
by the corporation of its power pursuant to subsection (7); or
(c) The director, officer, employee, or agent is fairly and
reasonably entitled to indemnification or advancement of expenses, or both, in
view of all the relevant circumstances, regardless of whether such person met
the standard of conduct set forth in subsection (1), subsection (2) or
subsection (7).
(10) For purposes of this section, the term "corporation" includes, in
addition to the resulting corporation, any constituent corporation (including
any constituent of a constituent) absorbed in a consolidation or merger, so that
any person who is or was a director, officer, employee, or agent of a
constituent corporation, or is or was serving at the request of a constituent
corporation as a director, officer, employee, or agent of another corporation,
partnership, joint venture, trust or other enterprise, is in the same position
under this section with respect to the resulting or surviving corporation as he
would have with respect to such constituent corporation if its separate
existence had continued.
(11) For purposes of this section:
(a) The term "other enterprises" includes employee benefit plans;
(b) The term "expenses" includes counsel fees, including those for
appeal;
(c) The term "liability" includes obligations to pay a judgment,
settlement, penalty, fine (including an excise tax assessed with respect to any
employee benefit plan), and expenses actually and reasonably incurred with
respect to a proceeding;
(d) The term "proceeding" includes any threatened, pending, or
completed action, suit or other type of proceeding, whether civil, criminal,
administrative, or investigative and whether formal or informal;
(e) The term "agent" includes a volunteer;
(f) The term "serving at the request of the corporation" includes
any service as a director, officer, employee, or agent of the corporation that
imposes duties on such persons, including duties relating to an employee benefit
plan and its participants or beneficiaries; and
(g) The term "not opposed to the best interest of the corporation"
describes the actions of a person who acts in good faith and in a manner he
reasonably believes to be in the best interests of the participants and
beneficiaries of an employee benefit plan.
(12) The corporation shall have 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 the provisions of this section.
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ARTICLE VI
OFFICE AND AGENT
SECTION 6.01. REGISTERED OFFICE AND REGISTERED AGENT.
(1) The corporation shall have and continuously maintain in the State
of Florida:
(a) A registered office which may be the same as its place of
business; and
(b) A registered agent, who, may be either:
(i) An individual who resides in the State of Florida whose
business office is identical with such registered office; or
(ii) Another corporation or not-for-profit corporation as
defined in Chapter 617 of the Act, authorized to transact business or conduct
its affairs in the State of Florida, having a business office identical with the
registered office; or
(iii) A foreign corporation or not-for-profit foreign
corporation authorized pursuant to chapter 607 or chapter 617 of the Act to
transact business or conduct its affairs in the State of Florida, having a
business office identical with the registered office.
SECTION 6.02. CHANGE OF REGISTERED OFFICE OR REGISTERED AGENT; RESIGNATION
OF REGISTERED AGENT.
(1) The corporation may change its registered office or its registered
agent upon filing with the Department of State of the State of Florida a
statement of change setting forth:
(a) The name of the corporation;
(b) The street address of its current registered office;
(c) If the current registered office is to be changed, the street
address of the new registered office;
(d) The name of its current registered agent;
(e) If its current registered agent is to be changed, the name of
the new registered agent and the new agent's written consent (either on the
statement or attached to it) to the appointment;
(f) That the street address of its registered office and the
street address of the business office of its registered agent, as changed, will
be identical;
(g) That such change was authorized by resolution duly adopted by
its board of directors or by an officer of the corporation so authorized by the
board of directors.
ARTICLE VII
SHARES, OPTIONS, DIVIDENDS AND DISTRIBUTIONS
SECTION 7.01. AUTHORIZED SHARES.
(1) The articles of incorporation prescribe the classes of shares and
the number of shares of each class that the corporation is authorized to issue,
as well as a distinguishing designation for each class, and prior to the
issuance of shares of a class the preferences, limitations, and relative rights
of that class must be described in the articles of incorporation.
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(2) The articles of incorporation must authorize:
(a) One or more classes of shares that together have unlimited
voting rights, and
(b) One or more classes of shares (which may be the same class or
classes as those with voting rights) that together are entitled to receive the
net assets of the corporation upon dissolution.
(3) The articles of incorporation may authorize one or more classes of
shares that have special, conditional, or limited voting rights, or no rights,
or no right to vote, except to the extent prohibited by the Act;
(a) Are redeemable or convertible as specified in the articles of
incorporation;
(b) Entitle the holders to distributions calculated in any manner,
including dividends that may be cumulative, non-cumulative, or partially
cumulative;
(c) Have preference over any other class of shares with respect to
distributions, including dividends and distributions upon the dissolution of the
corporation.
(4) Shares which are entitled to preference in the distribution of
dividends or assets shall not be designated as common shares. Shares which are
not entitled to preference in the distribution of dividends or assets shall be
common shares and shall not be designated as preferred shares.
SECTION 7.02. TERMS OF CLASS OR SERIES DETERMINED BY BOARD OF DIRECTORS.
(1) If the articles of incorporation so provide, the board of directors
may determine, in whole or part, the preferences, limitations, and relative
rights (within the limits set forth in Section 7.01) of:
(a) Any class of shares before the issuance of any shares of
that class, or
(b) One or more series within a class before the issuance of any
shares of that series.
(2) Each series of a class must be given a distinguishing designation.
(3) All shares of a series must have preferences, limitations, and
relative rights identical with those of other shares of the same series and,
except to the extent otherwise provided in the description of the series, of
those of other series of the same class.
(4) Before issuing any shares of a class or series created under this
section, the corporation must deliver to the Department of State of the State of
Florida for filing articles of amendment, which are effective without
shareholder action, in accordance with Section 607.0602 of the Act.
SECTION 7.03. ISSUED AND OUTSTANDING SHARES.
(1) A corporation may issue the number of shares of each class or
series authorized by the articles of incorporation. Shares that are issued are
outstanding shares until they are reacquired, redeemed, converted, or canceled.
(2) The reacquisition, redemption, or conversion of outstanding shares
is subject to the limitations of subsection (3) and to Section 607.06401 of the
Act.
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(3) At all times that shares of the corporation are outstanding, one or
more shares that together have unlimited voting rights and one or more shares
that together are entitled to receive the net assets of the corporation upon
dissolution must be outstanding.
SECTION 7.04. ISSUANCE OF SHARES.
(1) The board of directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including cash, promissory notes, services performed, promises
to perform services evidenced by a written contract, or other securities of the
corporation.
(2) Before the corporation issues shares, the board of directors must
determine that the consideration received or to be received for shares to be
issued is adequate. That determination by the board of directors is conclusive
insofar as the adequacy of consideration for the issuance of shares relates to
whether the shares are validly issued, fully paid, and non-assessable. When it
cannot be determined that outstanding shares are fully paid and non-assessable,
there shall be a conclusive presumption that such shares are fully paid and
non-assessable if the board of directors makes a good faith determination that
there is no substantial evidence that the full consideration for such shares has
not been paid.
(3) When the corporation receives the consideration for which the board
of directors authorized the issuance of shares, the shares issued therefor are
fully paid and non-assessable. Consideration in the form of a promise to pay
money or a promise to perform services is received by the corporation at the
time of the making of the promise, unless the agreement specifically provides
otherwise.
(4) The corporation may place in escrow shares issued for a contract
for future services or benefits or a promissory note, or make other arrangements
to restrict the transfer of the shares, and may credit distributions in respect
of the shares against their purchase price, until the services are performed,
the note is paid, or the benefits received. If the services are not performed,
the shares escrowed or restricted and the distributions credited may be canceled
in whole or part.
SECTION 7.05. FORM AND CONTENT OF CERTIFICATES.
(1) Shares may but need not be represented by certificates. Unless the
Act or another statute expressly provides otherwise, the rights and obligations
of shareholders are identical whether or not their shares are represented by
certificates.
(2) At a minimum, each share certificate must state on its face:
(a) The name of the issuing corporation and that the corporation
is organized under the laws of the State of Florida;
(b) The name of the person to whom issued; and
(c) The number and class of shares and the designation of the
series, if any, the certificate represents.
(3) If the shares being issued are of different classes of shares or
different series within a class, the designations, relative rights, preferences,
and limitations applicable to each class and the variations in rights,
preferences, and limitations determined for each series (and the authority of
the board of directors to determine variations for future series) must be
summarized on the front or back of each certificate. Alternatively, each
certificate may state conspicuously on its front or back that the corporation
will furnish the shareholder a full statement of this information on request and
without charge.
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(4) Each share certificate:
(a) Must be signed (either manually or in facsimile) by an officer
or officers designated by the board of directors, and
(b) May bear the corporate seal or its facsimile.
(5) If the person who signed (either manually or in facsimile) a share
certificate no longer holds office when the certificate is issued, the
certificate is nevertheless valid.
(6) Nothing in this section may be construed to invalidate any share
certificate validly issued and outstanding under the Act on July 1, 1990.
SECTION 7.06. SHARES WITHOUT CERTIFICATES.
(1) The board of directors of the corporation may authorize the issue
of some or all of the shares of any or all of its classes or series without
certificates. The authorization does not affect shares already represented by
certificates until they are surrendered to the corporation.
(2) Within a reasonable time after the issue or transfer of shares
without certificates, the corporation shall send the shareholder a written
statement of the information required on certificates by the Act.
SECTION 7.07. RESTRICTION ON TRANSFER OF SHARES AND OTHER SECURITIES.
(1) The articles of incorporation, these bylaws, an agreement among
shareholders, or an agreement between shareholders and the corporation may
impose restrictions on the transfer or registration of transfer of shares of the
corporation. A restriction does not affect shares issued before the restriction
was adopted unless the holders of such shares are parties to the restriction
agreement or voted in favor of the restriction.
(2) A restriction on the transfer or registration of transfer of shares
is valid and enforceable against the holder or a transferee of the holder if the
restriction is authorized by this section, and effected in compliance with the
provisions of the Act, including having a proper purpose as referred to in the
Act.
SECTION 7.08. SHAREHOLDER'S PRE-EMPTIVE RIGHTS.
The shareholders of the corporation do not have a pre-emptive right to
acquire the corporation's unissued shares.
SECTION 7.09. CORPORATION'S ACQUISITION OF ITS OWN SHARES.
(1) The corporation may acquire its own shares, and, unless otherwise
provided in the articles of incorporation or except as provided in subsection
(4), shares so acquired constitute authorized but unissued shares of the same
class but undesignated as to series.
(2) If the articles of incorporation prohibit the reissue of acquired
shares, the number of authorized shares is reduced by the number of shares
acquired, effective upon amendment of the articles of incorporation.
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(3) Articles of amendment may be adopted by the board of directors
without shareholder action, shall be delivered to the Department of State of the
State of Florida for filing, and shall set forth the information required by
Section 607.0631 of the Act.
(4) Shares of the corporation in existence on June 30, 1990, which are
treasury shares under Section 607.004(18), Florida Statutes (1987), shall be
issued, but not outstanding, until canceled or disposed of by the corporation.
SECTION 7.10. SHARE OPTIONS.
(1) Unless the articles of incorporation provide otherwise, the
corporation may issue rights, options, or warrants for the purchase of shares of
the corporation. The board of directors shall determine the terms upon which
the rights, options, or warrants are issued, their form and content, and the
consideration for which the shares are to be issued.
(2) The terms and conditions of stock rights and options which are
created and issued by the corporation, or its successor, and which entitle the
holders thereof to purchase from the corporation shares of any class or classes,
whether authorized by unissued shares, treasury shares, or shares to be
purchased or acquired by the corporation, may include, without limitation,
restrictions, or conditions that preclude or limit the exercise, transfer,
receipt, or holding of such rights or options by any person or persons,
including any person or persons owning or offering to acquire a specified number
or percentage of the outstanding common shares or other securities of the
corporation, or any transferee or transferees of any such person or persons, or
that invalidate or void such rights or options held by any such person or
persons or any such transferee or transferees.
SECTION 7.11. TERMS AND CONDITIONS OF STOCK RIGHTS AND OPTIONS.
The terms and conditions of the stock rights and options which are created
and issued by the corporation [or its successor], and which entitle the holders
thereof to purchase from the corporation shares of any class or classes, whether
authorized but unissued shares, treasury shares, or shares to be purchased or
acquired by the corporation, may include, without limitation, restrictions or
conditions that preclude or limit the exercise, transfer, receipt or holding of
such rights or options by any person or persons, including any person or persons
owning or offering to acquire a specified number or percentage of the
outstanding common shares or other securities of the corporation, or any
transferee or transferees of any such person or persons, or that invalidate or
void such rights or options held by any such person or persons or any such
transferee or transferees.
SECTION 7.12. SHARE DIVIDENDS.
(1) Shares may be issued pro rata and without consideration to the
corporation's shareholders or to the shareholders of one or more classes or
series. An issuance of shares under this subsection is a share dividend.
(2) Shares of one class or series may not be issued as a share dividend
in respect of shares of another class or series unless:
(a) The articles of incorporation so authorize,
(b) A majority of the votes entitled to be cast by the class or
series to be issued approves the issue, or
(c) There are no outstanding shares of the class or series to be
issued.
(3) If the board of directors does not fix the record date for
determining shareholders entitled to a share dividend, it is the date of the
board of directors authorizes the share dividend.
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SECTION 7.13. DISTRIBUTIONS TO SHAREHOLDERS.
(1) The board of directors may authorize and the corporation may make
distributions to its shareholders subject to restriction by the articles of
incorporation and the limitations in subsection (3).
(2) If the board of directors does not fix the record date for
determining shareholders entitled to a distribution (other than one involving a
purchase, redemption, or other acquisition of the corporation's shares), it is
the date the board of directors authorizes the distribution.
(3) No distribution may be made if, after giving it effect:
(a) The corporation would not be able to pay its debts as they
become due in the usual course of business; or
(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.
(4) The board of directors may base a determination that a distribution
is not prohibited under subsection (3) either on financial statements prepared
on the basis of accounting practices and principles that are reasonable in the
circumstances or on a fair valuation or other method that is reasonable in the
circumstances. In the case of any distribution based upon such a valuation,
each such distribution shall be identified as a distribution based upon a
current valuation of assets, and the amount per share paid on the basis of such
valuation shall be disclosed to the shareholders concurrent with their receipt
of the distribution.
(5) Except as provided in subsection (7), the effect of a distribution
under subsection (3) is measured;
(a) In the case of distribution by purchase, redemption, or other
acquisition of the corporation's shares, as of the earlier of:
(i) The date money or other property is transferred or debt
incurred by the corporation, or
(ii) The date the shareholder ceases to be a shareholder with
respect to the acquired shares;
(b) In the case of any other distribution of indebtedness, as of
the date the indebtedness is distributed;
(c) In all other cases, as of:
(i) The date the distribution is authorized if the payment
occurs within 120 days after the date of authorization, or
(ii) The date the payment is made if it occurs more than 120
days after the date of authorization.
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(6) A corporation's indebtedness to a shareholder incurred by reason of
a distribution made in accordance with this section is at parity with the
corporation's indebtedness to its general, unsecured creditors except to the
extent subordinated by agreement.
(7) Indebtedness of the corporation, including indebtedness issued as a
distribution, is not considered a liability for purposes of determinations under
subsection (3) if its terms provide that payment of principal and interest are
made only if and to the extent that payment of a distribution to shareholders
could then be made under this section. If the indebtedness is issued as a
distribution, each payment of principal or interest is treated as a
distribution, the effect of which is measured on the date the payment is
actually made.
ARTICLE VIII
AMENDMENT OF ARTICLES AND BYLAWS
SECTION 8.01. AUTHORITY TO AMEND THE ARTICLES OF INCORPORATION.
(1) The corporation may amend its articles of incorporation at any time
to add or change a provision that is required or permitted in the articles of
incorporation or to delete a provision not required in the articles of
incorporation. Whether a provision is required or permitted in the articles of
incorporation is determined as of the effective date of the amendment.
(2) A shareholder of the corporation does not have a vested property
right resulting from any provision in the articles of incorporation, including
provisions relating to management, control, capital structure, dividend
entitlement, or purpose or duration of the corporation.
SECTION 8.02. AMENDMENT BY BOARD OF DIRECTORS.
The corporation's board of directors may adopt one or more amendments to
the corporation's articles of incorporation without shareholder action:
(1) To extend the duration of the corporation if it was incorporated at
a time when limited duration was required by law;
(2) To delete the names and addresses of the initial directors;
(3) To delete the name and address of the initial registered agent or
registered office, if a statement of change is on file with the Department of
State of the State of Florida;
(4) To delete any other information contained in the articles of
incorporation that is solely of historical interest;
(5) To change each issued and unissued authorized share of an
outstanding class into a greater number of whole shares if the corporation has
only shares of that class outstanding;
(6) To delete the authorization for a class or series of shares
authorized pursuant to Section 607.0602 of the Act, if no shares of such class
or series have been issued;
(7) To change the corporate name by substituting the word
"corporation," "incorporated," or "company," or the abbreviation "corp.," Inc.,"
or Co.," for a similar word or abbreviation in the name, or by adding, deleting,
or changing a geographical attribution for the name; or
(8) To make any other change expressly permitted by the Act to be made
without shareholder action.
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SECTION 8.03. AMENDMENT OF BYLAWS BY BOARD OF DIRECTORS.
The corporation's board of directors may amend or repeal the corporation's
bylaws unless the Act reserves the power to amend a particular bylaw provision
exclusively to the shareholders.
SECTION 8.04. BYLAW INCREASING QUORUM OR VOTING REQUIREMENTS FOR DIRECTORS.
(1) A bylaw that fixes a greater quorum or voting requirement for the
board of directors may be amended or repealed:
(a) If originally adopted by the shareholders, only by the
shareholders;
(b) If originally adopted by the board of directors, either by the
shareholders or by the board of directors.
(2) A bylaw adopted or amended by the shareholders that fixes a greater
quorum or voting requirement for the board of directors may provide that it may
be amended or repealed only by a specified vote of either the shareholders or
the board of directors.
(3) Action by the board of directors under paragraph (1)(b) to adopt or
amend a bylaw that changes the quorum or voting requirement for the board of
directors must meet the same quorum requirement and be adopted by the same vote
required to take action under the quorum and voting requirement then in effect
or proposed to be adopted, whichever is greater.
ARTICLE IX
RECORDS AND REPORTS
SECTION 9.01. CORPORATE RECORDS.
(1) The corporation shall keep as permanent records minutes of al
meetings of its shareholders and board of directors, a record of all actions
taken by the shareholders or board of directors without a meeting, and a record
of all actions taken by a committee of the board of directors in place of the
board of directors on behalf of the corporation.
(2) The corporation shall maintain accurate accounting records.
(3) The corporation or its agent shall maintain a record of its
shareholders in a form that permits preparation of a list of the names and
addresses of all shareholders in alphabetical order by class of shares showing
the number and series of shares held by each.
(4) The corporation shall maintain its records in written form or in
another form capable of conversion into written form within a reasonable time.
(5) The corporation shall keep a copy of the following records:
(a) Its articles or restated articles of incorporation and all
amendments to them currently in effect;
(b) Its bylaws or restated bylaws and all amendments to them
currently in effect;
(c) Resolutions adopted by the board of directors creating one or
more classes or series of shares and finding their relative rights, preferences,
and limitations, if shares issued pursuant to those resolutions are outstanding;
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(d) The minutes of all shareholders' meetings and records of all
action taken by shareholders without a meeting for the past three years;
(e) Written communications to all shareholders generally or all
shareholders of a class or series within the past three years, including the
financial statements furnished for the past three years;
(f) A list of the names and business street addresses of its
current directors and officers; and
(g) Its most recent annual report delivered to the Department of
State of the State of Florida.
SECTION 9.02. FINANCIAL STATEMENTS FOR SHAREHOLDERS.
(1) Unless modified by resolution of the shareholders within 120 days
of the close of each fiscal year, the corporation shall furnish its shareholders
annual financial statements which may be consolidated or combined statements of
the corporation and one or more of its subsidiaries, as appropriate, that
include a balance sheet as of the end of the fiscal year, an income statement
for that year, and a statement of cash flows for that year. If financial
statements are prepared for the corporation on the basis of generally-accepted
accounting principles, the annual financial statements must also be prepared on
that basis.
(2) If the annual financial statements are reported upon by a public
accountant, his report must accompany them. If not, the statements must be
accompanied by a statement of the president or the person responsible for the
corporation's accounting records:
(a) Stating his reasonable belief whether the statements were
prepared on the basis of generally-accepted accounting principles and, if not,
describing the basis of preparation; and
(b) Describing any respects in which the statements were not
prepared on a basis of accounting consistent with the statements prepared for
the preceding year.
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(3) The corporation shall mail the annual financial statements to each
shareholder within 120 days after the close of each fiscal year or within such
additional time thereafter as is reasonably necessary to enable the corporation
to prepare its financial statements, if for reasons beyond the corporation's
control, it is unable to prepare its financial statements within the prescribed
period. Thereafter, on written request from a shareholder who was not mailed
the statements, the corporation shall mail him the latest annual financial
statements.
SECTION 9.03. OTHER REPORTS TO SHAREHOLDERS.
(1) If the corporation indemnifies or advances expenses to any
director, officer, employee or agent otherwise than by court order or action by
the shareholders or by an insurance carrier pursuant to insurance maintained by
the corporation, the corporation shall report the indemnification or advance in
writing to the shareholders with or before the notice of the next shareholders'
meeting, or prior to such meeting if the indemnification or advance occurs after
the giving of such notice but prior to the time such meeting is held, which
report shall include a statement specifying the persons paid, the amounts paid,
and the nature and status at the time of such payment of the litigation or
threatened litigation.
(2) If the corporation issues or authorizes the issuance of shares for
promises to render services in the future, the corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the next
shareholders' meeting.
SECTION 9.04. ANNUAL REPORT FOR DEPARTMENT OF STATE.
(1) The corporation shall deliver to the Department of State of the
State of Florida for filing a sworn annual report on such forms as the
Department of State of the State of Florida prescribes that sets forth the
information prescribed by Section 607.1622 of the Act.
(2) Proof to the satisfaction of the Department of State of the State
of Florida on or before July 1 of each calendar year that such report was
deposited in the United States mail in a sealed envelope, properly addressed
with postage prepaid, shall be deemed in compliance with this requirement.
(3) Each report shall be executed by the corporation by an officer or
director or, if the corporation is in the hands of a receiver or trustee, shall
be executed on behalf of the corporation by such receiver or trustee, and the
signing thereof shall have the same legal effect as if made under oath, without
the necessity of appending such oath thereto.
(4) Information in the annual report must be current as of the date the
annual report is executed on behalf of the corporation.
(5) Any corporation failing to file an annual report which complies
with the requirements of this section shall not be permitted to maintain or
defend any action in any court of this state until such report is filed and all
fees and taxes due under the Act are paid and shall be subject to dissolution or
cancellation of its certificate of authority to do business as provided in the
Act.
ARTICLE X
MISCELLANEOUS
SECTION 10.01. DEFINITION OF THE "ACT".
All references contained herein to the "Act" or to sections of the "Act"
shall be deemed to be in reference to the Florida Business Corporation Act.
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SECTION 10.02. APPLICATION OF FLORIDA LAW.
Whenever any provision of these bylaws is inconsistent with any provision
of the Florida Business Corporation Act, Statutes 607, as they may be amended
from time to time, then in such instance Florida law shall prevail.
SECTION 10.03. FISCAL YEAR.
The fiscal year of the corporation shall be determined by resolution of the
board of directors.
SECTION 10.04. CONFLICTS WITH ARTICLES OF INCORPORATION.
In the event that any provision contained in these bylaws conflicts with
any provision of the corporation's articles of incorporation, as amended from
time to time, the provisions of the articles of incorporation shall prevail and
be given full force and effect, to the full extent permissible under the Act.
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THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE "1933 ACT"), NOR REGISTERED UNDER ANY
STATE SECURITIES LAW, AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN
RULE 144 UNDER THE 1933 ACT.THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISETRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933
ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY.
STOCK PURCHASE AGREEMENT
AGREEMENT made this 1 1~' day of November, 1998, by and among Progressive
General Corporation, a Florida corporation, (the "ISSUER"), Pamela Wilkinson, as
the Selling Shareholder, and James Rodgers ("PURCHASER").
In consideration of the mutual promises, covenants, and representations
contained herein, and
other good and valuable consideration,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. EXCHANGE OF SECURITIES. Subject to the terms and conditions of
-------------------------
this Agreement, SELLER agrees to sell PURCHASER, 975,000 shares of the common
stock of ISSUER, $0.00l par value (the "Shares"), in exchange for
$250,000.
2 REPRESENTATIONS AND WARRANTIES. ISSUER represents and warrants to
-------------------------------
PURCHASER the following:
i. Organization. ISSUER is a corporation duly organized,
-------------
validly existing, and in good standing under the laws of Florida, and has all
necessary corporate powers to own properties and carry on a business, and is
duly qualified to do business and is in good standing in Florida. All actions
taken by the Incorporators, directors and shareholders of ISSUER have been valid
and in accordance with the laws of the State of Florida.
ii. Capital. The authorized capital stock of ISSUER consists
--------
of 50,000,000 shares of common stock, $0.00 I par value, of which 1,000,000
shares are issued and outstanding. Of these 1,000,000 shares, the Selling
Shareholder owns 975,000 shares. All outstanding shares are filly paid and non
assessable, free of liens, encumbrances, options, restrictions and legal or
equitable rights of others not a party to this Agreement. At closing, there
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will be no outstanding subscriptions, options, rights, warrants, convertible
securities, or other agreements or commitments obligating ISSUER to issue or to
transfer from treasury any additional shares of its capital stock. None of the
outstanding shares of ISSUER are subject to any stock restriction agreements.
All of the shareholders of ISSUER have valid title to such shares and acquired
their shares in a lawful transaction and in accordance with the laws of Florida.
iii. OTC Bulletin Board Listing. The Company is currently
listed on the OTC Electronic Bulletin Board with the following trading symbol:
PSVG. iv. Financial Statements. Annexed hereto as Exhibit B to this Agreement
are the audited Financial Statements of the ISSUER as of August 3, 1998, and the
related statements of income and retained earnings for the period then ended.
The financial statements have been prepared in accordance with generally
accepted accounting principles consistently followed by ISSUER throughout the
periods indicated, and fairly present the financial position of ISSUER as of the
date of the financial statements.
v. Absence of Changes. Since the date of the financial
--------------------
statements, there has not been any change in the financial condition or
operations of ISSUER, except changes in the ordinary course of business, which
changes have not in the aggregate been materially adverse.
vi. Liabilities. ISSUER does not have any debt, liability, or
------------
obligation of any nature, whether accrued, absolute, contingent, or otherwise,
and whether due or to become due, that is not reflected on the ISSUERS'
financial statement. ISSUER is not aware of any pending, threatened or asserted
claims, lawsuits or contingencies involving ISSUER or its common stock. There
is no dispute of any kind between IS SUER and any third party, and no such
dispute will exist at the closing of this Agreement. At closing, IS SUER will
be free from any and all liabilities, liens, claims and/or commitments.
vii. Ability to Carry Out Obligations. ISSUER has the right,
----------------------------------
power, and authority to enter into and perform its obligations under this
Agreement. The execution and delivery of this Agreement by ISSUER and the
performance by ISSUER of its obligations hereunder will not cause, constitute,
or conflict with or result in (a) any breach or violation or any of the
provisions of or constitute a default under any license, indenture, mortgage,
charter, instrument, articles of incorporation, bylaw, or other agreement or
instrument to which ISSUER or its shareholders are a party, or by which they may
be bound, nor will any consents or authorizations of any party other than those
hereto be required, (b) an event that would cause ISSUER to be liable to any
party, or (c) an event that would result in the creation or imposition or any
lien, charge or encumbrance on any asset of ISSUER or upon the securities of
ISSUER to be acquired by SHAREHOLDERS.
viii. Full Disclosure. None of representations and warranties
-----------------
made by the ISSUER, or in any certificate or memorandum furnished or to be
furnished by the ISSUER, contains or will contain any untrue statement of a
material fact, or omit any material fact the omission of which would be
misleading.
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<PAGE>
ix. Contract and Leases. ISSUER is not currently carrying on
----------------------
any business and is not a party to any contract, agreement or lease. No person
holds a power of attorney from ISSUER
x. Compliance with Laws. To the best of its knowledge, IS SUER
---------------------
has complied with, and is not in violation of any federal, state, or local
statute, law, and/or regulation.
xi. Litigation. ISSUER is not (and has not been) a party to
-----------
any suit, action, arbitration, or legal, administrative, or other proceeding, or
pending governmental investigation. To the best knowledge of the ISSUER, there
is no basis for any such action or proceeding and no such action or proceeding
is threatened against ISSUER and ISSUER is not subject to or in default with
respect to any order, writ, injunction, or decree of any federal, state, local,
or foreign court, department, agency, or instrumentality.
xii. Conduct of Business. Prior to the closing, ISSUER shall
----------------------
conduct its business in the normal course, and shall not (1) sell, pledge, or
assign any assets (2) amend its Articles of Incorporation or Bylaws, (3) declare
dividends, redeem or sell stock or other securities, (4) incur any liabilities,
(5) acquire or dispose of any assets, enter into any contract, guarantee
obligations of any third party, or (6) enter into any other transaction.
xiii. Title. The Shares sold pursuant to this Agreement will
------
be, at closing, free and clear of all liens, security interests, pledges,
charges, claims, encumbrances and restrictions of any kind. None of such Shares
are or will be subject to any voting trust or agreement. No person holds or has
the right to receive any proxy or similar instrument with respect to such
shares, except as provided in this Agreement, the IS SUER is not a party to any
agreement which offers or grants to any person the right to purchase or acquire
any of the securities to be issued pursuant to this Agreement. There is no
applicable local, state or federal law, rule, regulation, or decree which would,
as a result of the issuance of the Shares, impair, restrict or delay any voting
rights with respect to the Shares.
3. PURCI-IASER represents and warrants to ISSUER and the Selling
Shareholder that it has been represented by independent counsel.
4. INVESTMENT INTENT. PURCHASER is acquiring the Shares for its own
------------------
account for purposes of investment and without expectation, desire, or need for
resale and not with the view toward distribution, resale, subdivision, or
fractionalization of the Shares.
5. CLOSING. The closing of this transaction shall take place at the
--------
law offices of Eric P. Littman, 7695 S.W. 104h Street, Suite 210, Miami,
Florida. 33156. Unless the closing of this transaction takes place on or
before November 17, 1998, then either party may terminate this Agreement.
6. DOCUMENTS TO BE DELIVERED AT CLOSING.
------------------------------------------
102
<PAGE>
i. By the ISSUER and Selling Shareholder
------------------------------------------
(1) Instructions to ISSUER'S Transfer Agent, Interwest
Transfer Co. Inc. along with Seller's Stock certificate executed with a
signature medallion guaranteed instructing the Transfer Agent to transfer to
PURCHASER 975,000 SHARES registered in the name of the Selling Shareholder.
(2) The resignation of the current officers and directors of
ISSUER.
(3) A Board of Directors resolution appointing such person as
PURCHASER designate as a director(s) of ISSUER.
(4) Audited financial statements of ISSUER for the period
ending August 3, 1998.
(5) All of the business and corporate records of ISSUER,
including but not limited to correspondence files, bank statements, checkbooks,
savings account books, minutes of shareholder and directors meetings, financial
statements, shareholder listings, stock transfer records, agreements and
contracts.
ii. PURCHASER
---------
(1) Wire transfer or Attorney's Trust Account check in the
amount of $250,000 payable to Eric P. Littman, Trust Account in accordance with
Section 1.
7. MISCELLANEOUS.
--------------
i. Captions and Headings. The Article and paragraph headings
------------------------
throughout this Agreement are for convenience and reference only, and shall in
no way be deemed to define, limit, or add to the meaning of any provision of
this Agreement.
ii. No oral Change. This Agreement and any provision hereof,
-----------------
may not be waived, changed, modified, or discharged orally, but only by an
agreement in writing signed by the party against whom enforcement of any waiver,
change, modification, or discharge is sought.
iii. Non Waiver. Except as otherwise expressly provided
------------
herein, no waiver of any covenant, condition, or provision of this Agreement
shall be deemed to have been made unless expressly in writing and signed by the
party against whom such waiver is charged; and (I) the failure of any party to
insist in any one or more cases upon the performance of any of the provisions,
covenants, or conditions of this Agreement or to exercise any option herein
contained shall not be construed as a waiver or relinquishment for the future of
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<PAGE>
any such provisions, covenants, or conditions, (ii) the acceptance of
performance of anything required by this Agreement to be performed with
knowledge of the breach or failure of a covenant, condition, or provision hereof
shall not be deemed a waiver of such breach or failure and (iii) no waiver by
any party of one breach by another pasty shall be construed as a waiver with
respect to any other or subsequent breach.
iv. Time of Essence. and every provision hereof. Time is of
------------------
the essence of this Agreement and of each
v. Entire Agreement. This Agreement contains the entire
------------------
Agreement and understanding between the parties hereto, and supersedes all prior
agreements and understandings.
vi. Counterparts. This Agreement may be executed
-------------
simultaneously in one or more counterparts, each of which shall be deemed an
original, but all of which together shall constitute one and the same
instrument.
vii. Notices. All notices, requests, demands, and other
--------
communications under this Agreement shall be in writing and shal1 be deemed to
have been duly given on the date of service if served personally on the party to
whom notice is to be given, or on the third day after mailing if mailed to the
party to whom notice is to be given, by fist class mail, registered or
certified, postage prepaid, and properly addressed, and by fax, as follows:
ISSUER. C/O Eric P. Littman, Esquire
7695 SW, 104th Street
Suite 210
Miami, Florida, 33156
PURCHASER: Mr. James Rodgers
#321965 49th Avenue
Langley, B.C. V3A8J7
IN WITNESS WHEREOF. the undersigned has executed this Agreement this 11th
day of November, 1998
Progressive General Corporation James Rodgers
By: /s/ Pamela Wilkinson, President By: /s/ James Rodgers
------------------------------------ -------------------
Pamela Wilkinson, President James Rodgers
/s/ Pamela Wilkinson,
- - -----------------------------------------
Pamela Wilkinson, Selling Shareholder
104
<PAGE>
RESIGNATION OF PAMELA WILKINSON AS
AN OFFICER AND DIRECTOR
OF PROGRESSIVE GENERAL CORPORATION
I, Pamela Wilkinson, hereby resign as an officer and director of Progressive
General Corporation effective as of 2:00 P.M., November 19, 1998.
/s/ Pamela Wilkinson
- - ----------------------
Pamela Wilkinson
105
<PAGE>
VIENNA
SYSTEMS
BY COURIER
- - -----------
Crys-Tel Telecommunications, Inc.
1390 Ottawa Avenue
West Vancouver, British Columbia
V7T 2H5
Attention: Mr. Edward Yau
President
Dear Mr. Yau:
RE: EXECUTED RESELLER AGREEMENT BETWEEN CRYS-TEL
TELECOMMUNICATIONS AND VIENNA SYSTEMS
Enclosed herewith please find a fully executed copy of the Reseller
Agreement between Vienna and Crys-Tel.
We trust this is to your satisfaction and look forward to a mutually
beneficial business relationship.
Yours very truly,
/S/ Lori L. O'Brien
- - -----------------------
Lori L. O'Brien
Legal Counsel
400 - 555 Legget Drive
Kanata, Ontario, Canada 1(2K 2X3
Tel [613] 591 3219 Fax. [613] 591 9973
www.viennasys.com
106
<PAGE>
RESELLER AGREEMENT
This agreement is made this 10th day of .June,1998 , by and between VIENNA
----
SYSTEMS CORPORATION., having its principal place of business at Suite 400 - 555
Leggett Drive, Kanata, Ontario, K2K 2X3
(hereinafter called "VIENNA SYSTEMS")
and Crys-Tel Telecommunications Inc , having its principal place of business at
1390 Ottawa Ave. West Vancouver, British Columbia, V7T 2H5
(hereinafter called "RESELLER").
VIENNA SYSTEMS and RESELLER agree to the following terms and conditions that
shall govern the sale of VIENNA SYSTEMS products to RESELLER.
1.0 TERM OF AGREEMENT
The initial term of this Agreement shall commence on June10, 1998 and shall,
unless otherwise terminated in accordance with the terms hereof, continue in
effect for a period of one (1) year ("Initial Term"). This Agreement shall not
be automatically renewed at the end of the Initial Term.
2.0 APPOINTMENT OF RESELLER
2.1 Grant
VIENNA SYSTEMS grants to RESELLER, and RESELLER accepts, a non-exclusive,
non-transfe~ab1e right to distribute the VIENNA SYSTEMS products described in
Schedule "A" (the Products") in the Territory set out in Schedule "D".
2.2 Reseller Representations
RESELLER represents and warrants that: (i) RESELLER is a duly incorporated
business corporation under the laws of Canada, and that it is fully empowered to
enter into, and to carry out its obligations under, this Agreement; (ii)
RESELLER and its affiliates are not involved in any litigation which would
materially affect RESELLER's performance under this Agreement, excepting those
matters previously disclosed to VIENNA SYSTEMS in writing; and (iii) RESELLER
shall maintain a high degree of financial integrity, service excellence and
ethical conduct in its relations with purchasers of the Products.
3.0 PRODUCTS COVERED
3.1 Products
This Agreement shall cover only the Products listed in Schedule "A", as amended
from time to time. This Agreement does not convey or imply any rights or
obligations between the parties with respect to any other products sold,
licensed or distributed by VIENNA SYSTEMS from time to time.
3.2 Addition of New Products
New products may be added to Schedule "A" only upon the prior written agreement
of the parties.
3.3 Changes to Products Covered
VIENNA SYSTEMS shall have the right to change, modify or discontinue production
and/or sale of any Product at any time during the term of this Agreement. For a
period of three (3) years from the effective date of discontinuance of any
Product, VIENNA SYSTEMS shall provide parts and/or service for Products
purchased by RESELLER.
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<PAGE>
4.0 PRICES AND DISCOUNTS
4.1 Price Lists
The prices shown in Schedule "A" (RESELLER Price List) are subject to change by
VIENNA SYSTEMS. VIENNA SYSTEMS shall provide RESELLER with no less than thirty
days prior written notice of any price changes arid the effective date of such
changes. Orders submitted (i) prior to the effective date of a price increase,
or (ii) prior to the effective date of a price decrease, but after receipt of
notice of the decrease, shall be invoiced to RESELLER at the lower price.
4.2 Volume Commitments
The RESELLER agrees to purchase a minimum at FIVE HUNDRED THOUSAND U.S. DOLLARS
($500,000.00 U.S. ) of Product based on the RESELLER's discounted price during
the lnitial term of this Agreement ("Volume Commitment"). The Reseller agrees to
purchase the Volume Commitment as follows:
<TABLE>
<CAPTION>
Percentage of Volume Amount Shipped
At the end of Commitment (Cumulative Percent)
- - ------------- --------------------- --------------------
<S> <C> <C>
1st Quarter 15% 15%
2nd Quarter 20% 35%
3rd Quarter 30% 65%
4th Quarter 35% 100%
</TABLE>
4.3 Discount Levels
The discounts to be applied to the purchase of Products by RESELLER are set out
in Schedule "B", as amended from time to time. RESELLER acknowledges and agrees
that the discounts extended to RESELLER are based upon RESELLER's ability to
provide service and support to its customers for the Products, as well as the
likelihood of the RESELLER achieving the Volume Commitment identified in article
4.2 of this Agreement. The discount level will be reviewed by VIENNA SYSTEMS on
an annual basis in accordance with RESELLER's overall performance. If, in VIENNA
SYSTEMS' reasonable estimation RESELLER has not made satisfactory progress
towards the Volume Commitment, VIENNA SYSTEMS may elect, at its option, to: a)
modify the discount, b) extend the time periods during which the RESELLER shall
achieve the Volume Commitment, or c) terminate this Agreement upon thirty days'
written notice to RESELLER.
4.4 Demonstration Equipment
RESELLER shall place an order for a minimum of one (1) and a maximum of two (2)
demonstration systems as described in Schedule "C" within thirty days of
execution of this Agreement. Orders for demonstration systems should clearly
indicate 'FOR DEMONSTRATION'. RESELLER agrees that any demonstration systems
purchased at the special demonstration prices will not be sold within one year
of the date of purchase and cannot be returned pursuant to article 8.3 and
purchase orders for demonstration units may not be cancelled pursuant to article
9.0 of this Agreement.
4.5 Sales Taxes
The prices in Attachment "A" are exclusive of any sales, use, value added,
import, export or other applicable taxes, duties or levies of any kind, other
than taxes on the income of VIENNA SYSTEMS ('Taxes'). VIENNA SYSTEMS will
invoice RESELLER and RESELLER agrees to pay any Taxes that VIENNA SYSTEMS is
required to collect in respect of any Products or Services purchased pursuant to
this Agreement, unless RESELLER has submitted to VIENNA SYSTEMS a properly
executed exemption certificate.
4.6 Transportation Charges
The prices in Schedule "A" are FCA VIENNA SYSTEMS' shipping point in Kanata,
Ontario (lncoterms: 1990). RESELLER shall be solely liable for insurance and
transportation costs for the Products between VIENNA SYSTEMS and RESELLER'S
destination point. In the absence of RESELLER's specific instructions, to be
received no later than ten (10) working days prior to the requested ship date
for the Products, VIENNA SYSTEMS shall solely determine how to ship Product.
Transportation charges prepaid by VIENNA SYSTEMS will be billed as a separate
line item on invoices to RESELLER.
4.7 Reports
RESELLER shall provide VIENNA SYSTEMS with quarterly reports, which reports
shall include the following information: (i) the number of Products sold by
Reseller during the previous quarter by part number and (ii) the Products held
by RESELLER in inventory as of the end of the previous quarter by part number.
The first such report shall be due three months following the signing of this
Agreement and will address the first three months of the Initial Term. The
reports will be forwarded to VIENNA SYSTEMS, at the address set out in Clause
21, below, by the fifteenth business day following the end of the RESELLER
quarter to which they relate.
5.0 TRAINING
5.1 Initial Training Courses VIENNA SYSTEMS will provide initial training to
RESELLER'S sales and support staff at no charge, in order to ensure that
RESELLER's staff have the necessary information. and knowledge to sell and
support the Products. This one-time training will be provided at the RESELLER's
premises at a time to be agreed by the parties, and will be provided for a
maximum of live (5) sales staff and one(1) support staff. Training course
information will be provided to the RESELLER in the Sales Distribution Binder to
be provided by VIENNA SYSTEMS to RESELLER upon the execution of this Agreement
5.2 Additional Training Requirements
Any additional training may be purchased at VIENNA SYSTEMS' then-current per
diem rates, and shall be provided at VIENNA SYSTEMS' premises, or such other
location as the parties may agree.
5.3 RESELLER Employee Expenses
All travel and living expenses for RESELLER personnel during training will be
the sole responsibility of the RESELLER
5.4 Training Materials and Updates
VIENNA SYSTEMS will provide training materials and any updates as appropriate
from time to time, in order to ensure that RESELLER has all current Product
information. Charges for such materials will be at VIENNA SYSTEMS' then current
prices.
6.0 SUPPORT
6.1 Technical Support
VIENNA SYSTEMS And RESELLER shall enter into a separate agreement governing the
terms and conditions for technical support.
6.2 Sales Support
VIENNA SYSTEMS is actively involved in developing qualified leads and may pass
leads generated in the Territory to the RESELLER. The RESELLER agrees to use its
best efforts to follow-up with the potential customer and to advise VIENNA
SYSTEMS, on a monthly basis, of the status of such leads.
6.4 Marketing Support
VIENNA SYSTEMS agrees to provide up to 100 brochures to the RESELLER upon the
execution of this Agreement. These brochures will be designed such that a
RESELLER may affix a label indicating RESELLER's name and address, and that the
RESELLER is an authorized distributor of the Products.
108
<PAGE>
7.0 TITLE
7.1 Vienna Systems Warranty
VIENNA SYSTEMS warrants and represents that it has all necessary rights to
transfer the Products purchased or licensed by RESELLER under this Agreement,
and that, as of the date of payment for same by Reseller, there are no liens,
claims or encumbrances of any kind against such Products, other than those
previously disclosed in writing to RESELLER
7.2 Passage of Risk and Title
All risk and title to the Products shall pass from VIENNA SYSTEMS to RESELLER
upon delivery of the Products by VIENNA SYSTEMS to the designated carrier, in
accordance with FCA (Incoterms: 1990).
7.3 Software
Notwithstanding any other provision of this Agreement, RESELLER understands and
agrees that it is granted only a license to use and sublicense any software
which is, or which is included as part of, a Product (Software). Title to all
Software shall remain vested in VIENNA SYSTEMS or its third party suppliers.
RESELLER agrees and acknowledges that the Software contains valuable VIENNA
SYSTEMS information, and shall not, and shall prevent others from copying,
translating, modifying, creating derivative works, reverse engineering,
decompiling, encumbering, or otherwise using the Software except as expressly
permitted under this Agreement. RESELLER is granted a license to use the
Software in object code form only, and only in conjunction with the exercise of
its rights and obligations under this Agreement RESELLER is also granted a
non-exclusive, non-transferable right and license to sublicense the Software to
its customers, solely in conjunction with the sale of the Products. RESELLER
shall ensure that all sublicensees execute and agree to be bound by an end user
license agreement which is substantially similar to VIENNA SYSTEMS Standard End
User License Agreement.
8.0 ORDERING AND ORDER FULFILLMENT
8.1 Purchase Orders
RESELLER agrees to send to VIENNA SYSTEMS, within 30 days of executing this
Agreement, an initial purchase order for RESELLER's demonstration equipment as
outlined in article 4.4 of this agreement, specifying requested ship dates for
the Products covered by this Agreement. Ship dates must be at least eight weeks
after the order date.
8.2 Delivery Terms
RESELLER agrees that any purchase order to VIENNA SYSTEMS for the purchase of
any Product under this Agreement will require delivery no sooner than VIENNA
SYSTEMS quoted delivery schedule for that Product in effect at the time of
receipt of the order and, in any event, no less than eight weeks from date of
Purchase Order.
8.3 Product Returns
Product returns must be authorized by VIENNA SYSTEMS in writing, and will be
accepted only within six months of initial ship date. Returns will be subject to
the restocking charges set out below, although no restocking charges will be
payable if the RESELLER places an order for twice the amount of the returned
products within five (5) business days.
<TABLE>
<CAPTION>
Elapsed time from Initial ship date Restocking Charge
- - ------------------------------------------- -------------------------------
<S> <C>
4 weeks 5% of the equipment list price
8 weeks 10% of the equipment list price
greater than 8 weeks and less than 24 weeks 15% of the equipment list price
</TABLE>
109
<PAGE>
9.0 CANCELLATION CHARGES
Orders placed for shipment of Product and may be cancelled by the RESELLER up to
sixteen (16) days prior to the shipment date agreed upon by the Parties upon
payment of a cancellation charge as follows:
<TABLE>
<CAPTION>
Cancellation Date Cancellation Charge-
- - ------------------------------------ ----------------------------
<C> <S>
60 days or more prior to shipment no charge
45-59 days or more prior to shipment 5% of list price of Product
31-44 days prior to shipment date 10% of list price of Product
16-30 days prior to shipment date 15% of list price of Product
</TABLE>
10.0 TERMS OF PAYMENT
All Product shipped under this Agreement shall be invoiced upon shipment, and
payment shall be due within thirty (30) days of the invoice date, provided
however that VIENNA may, in its sole discretion, require payment of all or part
of the Purchase Price be remitted with the Purchase Order. The RESELLER agrees
to pay VIENNA SYSTEMS interest on any overdue amounts at a rate equal to the
lesser of 1.5% per month (19.6% per annum, effective rate) or the maximum amount
allowed by law.
11.0 TERMINATION
11.1 Vienna Systems Termination
Either party (the 'Terminating Party") may terminate this Agreement if (i) the
other party materially breaches any of its obligations under this Agreement, and
fails to remedy such breach within thirty (30) days of receipt of notice to do
so from the Terminating Party; (ii) the other party attempts to assign its
rights or delegate its obligations under this Agreement to a third party without
the express prior written consent of the Terminating Party; (iii) there is a
change, directly or indirectly, in the control or material ownership of the
other party, other than by reason of a "going-public" transaction or an internal
employee stock option or other incentive program; (iv) the other party makes a
general assignment for the benefit of its creditors, is not generally paying its
debts as they become due, files a petition in bankruptcy, is adjudicated
bankrupt or insolvent, files a petition seeking any reorganization, arrangement,
liquidation or similar relief under any present or future statute, law or
regulation, or files an answer admitting to or fails to contest the material
allegations of a petition flied against it in any such proceeding, or seeks,
consents to, or acquiesces in the appointment of any trustee, receiver,
custodian or liquidator for all or any material part of its assets.
11.2 Effect of Termination
In the event that this Agreement is terminated for any reason other than
unremedied breach by RESELLER, VIENNA SYSTEMS shall be obliged to fill only
those orders received from RESELLER and accepted prior to the effective date of
termination, provided that such orders correspond to Products which RESELLER is
under an obligation to sell or deliver to customers as of the date of the notice
of termination. Prior to making any such shipments, VIENNA SYSTEMS may require
RESELLER to furnish satisfactory proof of RESELLER's obligations to sell or
deliver to its customers as described above. In the event that this Agreement is
terminated by VIENNA SYSTEMS by reason of unremedied breach by RESELLER, VIENNA
SYSTEMS shall have no further supply obligations to RESELLER. Upon termination
of this Agreement for any reason, an outstanding invoices shall, at VIENNA
SYSTEMS' option, become immediately due and payable. Neither party shall, by
reason of the termination of this Agreement, be liable to the other for
compensation, reimbursement or damages on account of the loss of prospective
profits on anticipated sales, or on account of expenditures, investments, leases
or commitments entered into or made in connection with the business or goodwill
of the other.
12.0 SURVIVAL
Clauses 7, 11.2, 13, 14, 16, 18, 19 and 28 shall survive any termination or
expiry of this Agreement.
13.0 LIMITED WARRANTY
VIENNA SYSTEMS warrants that the hardware Products will be tree from defects in
materials and workmanship for a period of one (1) year from the date of
shipment. VIENNA SYSTEMS further warrants that any Software will function
substantially in accordance with specifications provided by VIENNA SYSTEMS for a
period of ninety (90) days from the date of shipment. In the
110
<PAGE>
event that a breach of the foregoing warranties is reported to VIENNA SYSTEMS in
writing during the relevant warranty period, VIENNA SYSTEMS will, at its own
expense and option, use all reasonable efforts to either repair the defect or
replace the defective Product. If, after reasonable efforts, VIENNA SYSTEMS is
unable to repair or replace the defective Product, VIENNA SYSTEMS may accept
return of the defective Product and refund to RESELLER the purchase price paid
by RESELLER in respect of such Product. This shall be VIENNA SYSTEMS' sole
liability and RESELLER'S sole and exclusive remedy in respect of any breach of
the warranties provided under this Clause 13. RESELLER shall be solely liable
for any warranties which it extends to its customers in excess of those provided
by VIENNA SYSTEMS hereunder. THESE WARRANTIES SHALL BE VOID IF RESELLER
DISTRIBUTES THE PRODUCTS OUTSIDE OF THE TERRITORY SET FORTH IN SCHEDULE 1Y
WITHOUT THE EXPRESS PRIOR CONSENT OF VIENNA SYSTEMS.
14.0 DISCLAIMER OF OTHER WARRANTIES
THE FOREGOING WARRANTIES ARE IN LIEU OF ALL OTHER WARRANTIES, EXPRESS OR
IMPLIED, INCLUDING, BUT NOT LIMITED TO EXPRESS OR IMPLIED WARRANTIES OF QUALITY,
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
15.0 FORCE MAJEURE
Neither of the parties shall be held responsible for any delay or failure in
performance under this Agreement, other than the payment of any amounts due,
when such delay or failure results from causes beyond that party's reasonable
control including, but not limited to, tires, strikes, embargoes, requirements
imposed by government regulation, civil or military authorities, acts of God or
nature, or by the public enemy or other similar causes.
16.0 INTELLECTUAL PROPERTY
16.1 Ownership
RESELLER acknowledges and agrees that VIENNA SYSTEMS and its suppliers have
developed and use valuable technical and non-technical information, patents,
trade secrets and the like in the development, design and manufacture of the
Products. RESELLER warrants that neither it, nor any of its employees,
contractors or agents will convert to their own use, or to the use of any other
party, any industrial secrets, trade secrets, patented and non-patented
information, manufacturing or other process, copyrighted materials or the like
owned or licensed by VIENNA SYSTEMS, and obtained by RESELLER by reason of this
Agreement or otherwise.
16.2 Trademarks
RESELLER recognizes and acknowledges the great value of the goodwill associated
with the name and trademarks of VIENNA SYSTEMS, and the identification of the
Products therewith. RESELLER shall not obscure, affect or permit the removal or
alteration of any patent numbers, trade names or marks, warning labels, serial
numbers, or the like affixed to any Product or package.
If so requested by RESELLER, VIENNA SYSTEMS shall not unreasonably withhold its
consent to RESELLER's use of VIENNA SYSTEMS' trademarks in conjunction with the
distribution of the Products in accordance with this Agreement; provided,
however. that VIENNA SYSTEMS shall have the right to approve or require changes
to any RESELLER material s containing VIENNA SYSTEMS trademarks and the RESELLER
shall use VIENNA SYSTEMS' trademarks in accordance with guidelines issued by
VIENNA SYSTEMS from time to time.
17.0 PATENT AND COPYRIGHT INDEMNIFICATION
VIENNA SYSTEMS shall defend, indemnify and hold harmless RESELLER from and
against all costs and damages, resulting from any claim that the Products
supplied under this Agreement infringe any third party's copyright or patent
rights in Canada, provided that: a) RESELLER promptly notifies VIENNA SYSTEMS in
writing of any such claims, b) VIENNA SYSTEMS has sole control of the defense
and all related settlement negotiations, and c) RESELLER has not made any
admissions in respect of the claim. Notwithstanding the foregoing, VIENNA
SYSTEMS shall have no liability to the extent to which the infringement results
from: (i) VIENNA SYSTEMS' adherence to RESELLER's or its customers' instructions
or specifications; (ii) use of the Products in conjunction with any other
products not supplied or approved by VIENNA SYSTEMS; or (iii) unauthorized use,
modification or distribution of the Products. In the event that RESELLER's or
its customers' use of the Products is enjoined as a result of any such
infringement, VIENNA SYSTEMS shall, at is option, either a) obtain for RESELLER
and its customers the right to continue using the infringing Products; b)
replace same with non-infringing, but functionally equivalent products; or c)
accept return-of the Product and refund to the RESELLER the amount paid to
VIENNA SYSTEMS by the RESELLER for the Product: less a reasonable amount for
depreciation.
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<PAGE>
THE FOREGOING CONSTITUTES THE ENTIRE LIABILITY OF VIENNA SYSTEMS AND THE ENTIRE
REMEDY OF RESELLER WITH RESPECT TO THE INFRINGEMENT BY THE PRODUCTS OF ANY
PATENTS, COPYRIGHTS OR OTHER INTELLECTUAL PROPERTY RIGHTS. UNDER NO
CIRCUMSTANCES SHALL VIENNA SYSTEMS BE LIABLE FOR ANY INDIRECT, CONSEQUENTIAL,
INCIDENTAL OR PUNITIVE DAMAGES.
18.0 LIMITATION OF LIABILITY
NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT, IN NO EVENT SHALL
TOTAL CUMULATIVE LIABILITY OF VIENNA SYSTEMS, ITS OFFICERS, DIRECTORS AND
EMPLOYEES UNDER THIS AGREEMENT EXCEED THE TOTAL AMOUNT PAID BY RESELLER TO
VIENNA SYSTEMS IN THE TWELVE (12) MONTHS IMMEDIATELY PRECEDING THE EVENT GIVING
RISE TO THE LIABILITY. IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY
INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES ARISING OUT OF OR RESULTING FROM THIS
AGREEMENT, FOR ANY REASON WHATSOEVER, DIRECTLY OR INDIRECTLY CAUSED.
The foregoing provision limiting the liability of VIENNA SYSTEMS' officers,
directors and employees shall be deemed to be a trust provision, and shall be
enforceable by such officers, directors and employees as trust beneficiaries.
19.0 PROPRIETARY AND CONFIDENTIAL INFORMATION
RESELLER shall keep confidential all information, drawings, specifications and
data submitted by VIENNA SYSTEMS to RESELLER under or pursuant to this Agreement
that is not in the public domain or that is designated by VIENNA SYSTEMS to be
proprietary and/or confidential and shall, upon request, return all documents
furnished to it by VIENNA SYSTEMS. RESELLER shall not disclose or use such
information, drawings, specifications or data of any third party. Except as
required for the efficient performance of this Agreement, RESELLER shall not
make any copies of any documents provided by VIENNA SYSTEMS, and upon completion
of this Agreement, at VIENNA SYSTEMS option, all copies shall be destroyed or
returned to VIENNA SYSTEMS. RESELLER shall reproduce VIENNA SYSTEMS' copyright
and other proprietary rights notices on any full or partial copies made by it.
20.0 ASSIGNMENT
This Agreement shall not be assigned by either party without the prior written
consent of the other, which consent shall not be unreasonably withheld. No
assignment by either party shall release that party from its obligations to the
other party, or in any way diminish either party's rights under this Agreement.
21.0 NOTICES
Any notice required or permitted under this Agreement shall be in writing and
shall be sent certified or registered mail as follows:
TO VIENNA SYSTEMS: TO: Crys-Tel Telecommunications
Vienna Systems Corporation 1390 Ottawa Ave.
Suite 400 West Vancouver,
555 Leggett Drive British Columbia
Kanata, Ontario
K2K2X3
Attn.: Contracts Manager Attn.: Mr. Edward Yau
President
Telephone: (613) 591-3219 Telephone: (604) 926-5352
Facsimile: (613) 599-9681 Facsimile: (604) 926-5371
112
<PAGE>
Each party agrees to notify the other upon change of address by giving notice at
least ten (10) days prior to any change.
22.0 TITLES FOR CONVENIENCE ONLY
The section numbers and titles used in this Agreement are for convenience only.
VIENNA SYSTEMS and RESELLER agree that any numbering and titles used shall not
alter or restrict the content and intention of the text of this Agreement.
23.0 TERRITORY
The RESELLER will restrict its sale of the Products to the territory outlined in
Schedule "D".
24.0 ENTIRE AGREEMENT
This Agreement, which includes Schedules "A", "B", "C" and "D" attached hereto,
expresses the entire understanding and agreement of VIENNA SYSTEMS and RESELLER,
and supersedes any and all previous agreements, except existing non disclosure
agreements between both parties, with reference to the subject matter contained
in this Agreement. No amendments to this Agreement shall be valid unless in
writing and signed by the authorized representatives of both parties.
It is further understood and agreed that any terms, including but not limited to
terms contained on RESELLER's or a customers purchase order or contract, which
deviate from the terms and conditions of this Agreement and which are expressly
accepted by VIENNA SYSTEMS in writing, shall be valid and effective only in
respect of that specific customer purchase order or contract, and shall not
otherwise be binding on VIENNA SYSTEMS in any way.
25.0 NON WAIVER
Either party's failure at any time to enforce any of the provisions of this
Agreement, or any right or remedy available under this Agreement, or at law or
equity, will in no preclude or prejudice the exercising thereafter of the same
or any other rights, remedies, or options.
26.0 SEVERABILITY
If any one or more of the provisions of this Agreement is be held to be invalid
or unenforceable in any respect, such provision or provisions shall be severed
to the extent of such invalidity or unenforceability, and the remainder of this
Agreement shall continue in full force and effect.
27.0 INDEPENDENT CONTRACTOR
Neither VIENNA SYSTEMS' nor RESELLER's officers, employees or agents shall be
deemed officers, employees or agents of the other, and neither VIENNA SYSTEMS
nor RESELLER shall represent that its relationship with respect to the other
party is other than as an independent contractor. Nothing in this Agreement
shall create in either party any right or authority to incur any obligations on
behalf of, or to bind in any respect, the other party.
28.0 GOVERNING LAW
The terms of this Agreement shall be governed by the domestic laws of the
Province of Ontario, Canada. The courts of the Province of Ontario shall have
exclusive jurisdiction over all matters arising hereunder, although this shall
not be construed so as to prevent either party from (i) seeking injunctive
relief in any court of competent jurisdiction in order to prevent serious and
irreparable harm, or (ii) seeking enforcement of any order of an Ontario court,
in any other court of competent jurisdiction. The application of the United
Nations Convention on Contracts for the International Sale of Goods (the Vienna
Convention) is hereby expressly excluded.
IN WITNESS WHEREOF, VIENNA SYSTEMS and RESELLER, intending to be bound, have
caused this Agreement to be executed in duplicate originals by their duly
authorized representatives.
FOR: VIENNA SYSTEMS CORPORATION FOR: CRYS-TAL TLECOMMINICATIONS INC.
BY: /S/ BY: /S/ R. Papalia
---------------- -----------------
TITLE: CFO TITLE: President
------------- --------------
DATE: 26/6/98 DATE: June 11, 1998
-------------- ---------------
113
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<TABLE>
<CAPTION>
SCHEDULE A - VIENNA PRICE AND PRODUCT LIST
Vienna Systems North American Price List - Release 2.0
List Prices
- - ----------------------- ------ ----------------------------------- ----------------------------------------------------
Vienna Order Code Suffix Software Description
- - ----------------------- ------ ----------------------------------- ----------------------------------------------------
<S> <C> <C> <C>
Call Processing Server
VS 104 S Vienna Server S/W License CP Server Software, VC Tool - Solaris X.86
VS 104 N Vienna Server S/W License CP Server Software, VC Tool - Windows NT
- - ----------------------- ------ ----------------------------------- ----------------------------------------------------
- - ----------------------- ------ ----------------------------------- ----------------------------------------------------
VS2000 Gateway Series
Gateway Software
VS 106 S Vienna Server S/W License CP Server Software, VC Tool - Solaris X.86
VS 106 N Vienna Server S/W License CP Server Software, VC Tool - Windows NT
Chassis - note
all chassis include
keyboard but not
monitor
VS 4806 S Vienna 4806 Entry level - 24/30 port-desktop - Solaris X.86
VS 4806 N Vienna 4806 Entry level - 24/30 port-desktop - Windows NT
VS 4820 S Vienna 4820 Full Capacity - Solaris X.86
VS 4820 N Vienna 4820 Full Capacity - Windows NT
VS 5000 S Vienna 5000 Full Capacity - Rackmount, High avail. Solaris X.86
VS 5000 N Vienna 5000 Full Capacity - Rackmount, High avail. Windows NT
Network Interface Cards
VS 201 BRI Card and RJ-45 Cable Each supports 8 BRI - 16 B channels
VS 202 T1 Card Each supports 2 T1 spans
VS 203 PRI Card (Japan & North America) Each supports 2 PRI (23 ch ea)
VS 204 PRI Card (Europe) Each supports 2 PRI (30 ch ea)
DSP Cards
VS 205 DSP mother Board (Add VS 107) Requires Lucent licenses below (8)
VS 107 Lucent S/W License (per codec) Voice compression software
VS 206 DSP Daughter Card (add VS 107) Requires DSP Mother Board, Lucent licenses (8)
Fax Cards
VS 208 Fax Card (4 port) Provides G3 fax transport - NT only
VS 209 Fax Card (12 port) Provides G3 fax transport - NT only
- - ----------------------- ------ ----------------------------------- ----------------------------------------------------
- - ----------------------- ------ ----------------------------------- ----------------------------------------------------
Service Control Node
NT Version
VC 100 Trial/Entry Level SCN S/W License Trial SCN - Windows NT (250 users/routes)
VC 101 Enterprise SCN S/W License Enterprise SCN - Windows NT (250 users/routes)
VC 102 SP1 SCN S/W License SP1 SCN - Windows NT (10,000 users/routes)
VC 103 SP2 SCN S/W License SP2 SCN - Windows NT (100,000 users/routes)
VC 104 SP3 SCN S/W License SP3 SCN - Windows NT (250,000 users/routes)
Solaris Version
VC 200 Trial/Entry Level SCN S/W License Trial SCN - Solaris X.86 (250 users/routes)
VC 201 Enterprise SCN S/W License Enterprise SCN - Solaris X.86 (250 users/routes)
VC 202 SP1 SCN S/W License SP1 SCN - Solaris X.86 (10,000 users/routes)
VC 203 SP2 SCN S/W License SP2 SCN - Solaris X.86 (100,000 users/routes)
VC 204 SP3 SCN S/W License SP3 SCN - Solaris X.86 (250,000 users/routes)
- - ----------------------- ------ ----------------------------------- ----------------------------------------------------
- - ----------------------- ------ ----------------------------------- ----------------------------------------------------
Client Products
VS 109 my.way client software release 1.1 User Interface for Windows 95 PC or NT
VS 210 phone.way (serial phone edapter) Connects analog phone to PC, Includes my.way
VS 215 SerialSet (Includes my.way) Handset connects directly to PC includes my.way
- - ----------------------- ------ ----------------------------------- ----------------------------------------------------
Vienna Order Code $US
- - ----------------------- -------------
<S> <C>
Call Processing Server
VS 104 $ 5,000.00
VS 104 $ 5,000.00
- - ----------------------- -------------
VS2000 Gateway Series
Gateway Software
VS 106 $ 500.00
VS 106 $ 500.00
Chassis - note
all chassis include
keyboard but not
monitor
VS 4806 $ 6,000.00
VS 4806 $ 6,000.00
VS 4820 $ 9,000.00
VS 4820 $ 9,000.00
VS 5000 $ 14,000.00
VS 5000 $ 14,000.00
Network Interface Cards
VS 201 2,500.00
VS 202 4,000.00
VS 203 $ 4,000.00
VS 204 $ 4,000.00
DSP Cards
VS 205 $ 4,500.00
VS 107 $ 100.00
VS 206 $ 3,000.00
Fax Cards
VS 208 $ 4,000.00
VS 209 $ 9,600.00
- - ----------------------- -------------
Service Control Node
NT Version
VC 100 $ 1,500.00
VC 101 $ 7,500.00
VC 102 `$17,500.00
VC 103 $ 50,000.00
VC 104 $ 100,000.00
Solaris Version
VC 200 `$1,500.00
VC 201 `$7,500.00
VC 202 `$17,500.00
VC 203 `$50,000.00
VC 204 `$100,000.00
- - ----------------------- -------------
Client Products
VS 109 $ 40.00
VS 210 $ 220.00
VS 215 $ 180.00
- - ----------------------- -------------
</TABLE>
Vienna Confidential Revised May 27, 1998
114
<PAGE>
<TABLE>
<CAPTION>
Vienna Systems North American Price List - Release 2.0
List Prices
- - -------------------- ------ ---------------------------------- ----------------------------------------- ----------
Vienna Order Code Suffix Software Description $US
- - -------------------- ------ ---------------------------------- ----------------------------------------- ----------
<S> <C> <C> <C> <C>
New Software Release
Upgrade Packages
Release 1.09 to 1.1
SU 101 1.0 to 1.1 Upgrade - CPServer No Charge
SU 102 1.0 to 1.1 Upgrade - Gateway No Charge
SU 103 1.0 to 1.1 Upgrade - my.way client No Charge
- - -------------------- ---------------------------------- ----------
Release 1.09 to 1.1
SU 111 1.0 to 2.0 Upgrade - CPServer No Charge
SU 112 1.0 to 2.0 Upgrade - Gateway NT, Modem, PC Anywhere $ 1,500.00
SU 113 1.0 to 2.0 Upgrade - my.way client No Charge
- - -------------------- ---------------------------------- ----------
SCN Upgrades
SU200 SCN Upgrades S/W License 250 to 2500 entries (Solaris X.86) $ 6,500.00
SU201 SCN Upgrades S/W License 2500 to 10000 entries (Solaris X.86) $10,500.00
SU202 SCN Upgrades S/W License 10,000 to 100,000 entries (Solaris X.86) $33,000.00
SU203 SCN Upgrades S/W License 100,000 to 250,000 entries (Solaris X.86) $50,000.00
SU210 SCN Upgrades S/W License 250 to 2500 entries (Windows NT) $ 6,500.00
SU211 SCN Upgrades S/W License 2500 to 10000 entries (Windows NT) $10,500.00
SU212 SCN Upgrades S/W License 10,000 to 100,000 entries (Windows NT) $33,000.00
SU213 SCN Upgrades S/W License 100,000 to 250,000 entries (Windows NT) $50,000.00
- - -------------------- ---------------------------------- ----------------------------------------- ----------
Support
VS 310 ATS Support - hourly rate OEM Third Level Support by Vienna $ 150.00
VS 315 Installation/Support per diem On-Site Installation/support $ 1,250.00
VS 320 Training per diem Person-Days Training $ 1,500.00
- - -------------------- ---------------------------------- ----------------------------------------- ----------
Documentation
VS 500 97-2413 Kit Folder $ 1.25
VS 9000 97-2785 IP Shuttle Datasheet $ 0.25
VS 9001 97-2786 IP Courier Datasheet $ 0.25
VS 9002 97-2792 CP Server Datasheet $ 0.25
VS 9003 97-2793 Gateway Datasheet $ 0.25
VS 9004 97-2794 Desktop Application Datasheet $ 0.25
VS 9005 97-2795 Services Control Node Datasheet $ 0.25
VS 9006 97-2790 Product Line Overview $ 0.25
VS 9007 Vienna small brochure $ 0.25
VS 9008 IP Telephony Industry Overview $ 0.25
VS 9009 97-2791 Vienna Systems Corporate Overview $ 0.25
VS 9010 NBO - Cable Opportunity $ 0.25
VS 9011 NBO - ISP Opportunity $ 0.25
VS 9012 NBO - Callback Opportunity $ 0.25
VS 9013 NBO - CLEC $ 0.25
VS 9014 NBO - Start Up $ 0.25
VS 9015 NBO - Traditional Service Providers $ 0.25
VS 9016 Profile - VIP Calling $ 0.25
VS 9017 Profile - TeleMatrix $ 0.25
VS 9018 Profile - Tella $ 0.25
VS 9019 Profile - Rocky Mountain Internet $ 0.25
VS 9020 Profile - ICN Digital $ 0.25
VS 9021 Service and Support $ 0.25
- - -------------------- ----------------------------------------- ----------
</TABLE>
115
<PAGE>
SCHEDULE B
DISCOUNT SCHEDULE
A discount of 42% will be provided to RESELLER given they provide adequate firs!
level support as determined by VIENNA SYSTEMS and have met the revenue
commitments in this agreement In the event Vienna Systems believes that adequate
support is not being supplied to RESELLER'S customers then the discount will be
reduced to 37% on 30 days notice.
Chassis are not discountable.
Phone.way Serial Telephone Adapter (VS-210) has a maximum discount of 25%.
116
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE C
DEMONSTRATION EQUIPMENT
SCHEDULE C
DEMONSTRATION EQUIPMENT
RESELLER is required to purchase a minimum of one and a maximum of two of the
following demonstration system at the special demonstration price:
PRODUCT NAME PRODUCT NUMBER QUANTITY
- - ------------------------------------------------------------------- -------------- --------
<S> <C> <C>
Vienna Server Software (Reseller to select NT or Solaris version) VS-104 1
- - ------------------------------------------------------------------- -------------- --------
Vienna. Gateway Software (Reseller to select NT or Solaris version) VS-106 1
- - ------------------------------------------------------------------- -------------- --------
Lucent License (per codec) VS-107 2
- - ------------------------------------------------------------------- -------------- --------
Client License (per codec) VS-109 5
- - ------------------------------------------------------------------- -------------- --------
DSP Card (4DSP chips) VS-205 1
- - ------------------------------------------------------------------- -------------- --------
BRI Card (supports 16B channels) VS-201 1
- - ------------------------------------------------------------------- -------------- --------
SerialSet (serial telephone) VS-215 5
- - ------------------------------------------------------------------- -------------- --------
Services Control Node (Reseller to Select NT or Solaris version) VC100 or VC200 1
- - ------------------------------------------------------------------- -------------- --------
Vienna 4806 Chassis (monitor not included) VS-4806 1
- - ------------------------------------------------------------------- -------------- --------
</TABLE>
SPECIAL DEMONSTRATION PRICE $11,408.00 US dollars (exclusive of taxes)
117
<PAGE>
SCHEDULE D
Territory
Worldwide
118
<PAGE>
COLOCATION SUPPORT SERVICES AGREEMENT
-------------------------------------
THIS AGREEMENT entered into as of the 17th day of September 1998, by and between
Vancouver Telephone Company Limited ("VTC"), a British Columbia corporation,
and Crys*tel Telecommunications, Inc(insert full legal name) ("Customer"), a
Alberta corporation.
WHEREAS, Customer desires to place certain equipment in certain premises leased
by VTC located at Suite 940 - 555 West Hastings Street, Vancouver, B.C., and
desires to have certain support services provided for said equipment; and
WHEREAS, VTC is willing and able to provide such location and support services;
NOW, THEREFORE, in consideration of the mutual covenants herein and other good
and valuable consideration, the sufficiency of which is hereby acknowledged, the
parties agree as follows:
1. VTC will provide Customer with access to its premises and to adequate
space within the premises as may be necessary for the installation of Customer's
equipment as set forth on Schedule "A" which is attached hereto and made part
hereof (hereinafter "Equipment").
2. Additional support services which will be provided by VTC in connection
with the Equipment shall be as set forth on Schedule "B". Schedule "B" shall
also set forth the rates to be charged by VTC for any support services.
3. The initial term of this Agreement shall commence on October 1, 1998 and
shall continue for a period of one (1) from that date.
4. Either party may terminate this Agreement at any time during the Term by
giving written notice to the other party at least ninety (90) calendar days
prior to the effective termination date. In consideration of term discounts and
the fact that certain of VTC's expenses are amortized over the term of this
Agreement, in the event Customer elects to terminate the Agreement without cause
under this paragraph, Customer shall pay, in addition to all other charges
accrued through the date of termination, an amount equal to twenty-five percent
(25%) of the remaining Fees, set forth on Schedule "B" which would otherwise
have been paid through the end of the term by way of liquidated damages.
5. Customer shall also pay a one-time Coordination Fee for the initial
access lines, power and installation of rack(s) in connection with the
Equipment. Such fees shall be set forth on Schedule "B,'.
6. Customer shall be responsible for all taxes, duties and some other
liabilities which may result from this Agreement or any activities hereunder.
7.1 All invoices shall be due and payable in Canadian dollars upon receipt
without setoff or counterclaim.
7.2 For value received and as a general and continuing collateral security
for the payment of all amounts due hereunder by the Customer, including any
unpaid balance thereof, owed to VTC and to secure the performance of the
obligations under this Agreement or any related documents, the Customer hereby
grants to VTC a security interest in all the Customer's personal property as
defined in the Personal Property Security Act, R.S.O. 1990, c.P.l0 listed in
Schedule "A" attached hereto and referred to herein as the Equipment, and in the
undertaking of the Customer.
119
<PAGE>
8. Customer shall be responsible for the following:
a) Arrangement for inside delivery of each unit of equipment at
Customer's expense.
b) Installation of the Equipment at VTC's premises and connection of
said Equipment to such telecommunication lines and service as
Customer elects, at Customer's expense.
c) Providing one week prior notice of actual delivery and installation
dates for Equipment.
d) Maintenance of its Equipment, except as otherwise provided for
herein.
e) Notifying VTC of any space, power or environmental requirements
associated with the installation or operation of its Equipment.
9. In the event Customer is contracting with VTC for support services, VTC
shall be responsible only for those services specifically listed on Schedule
"B". Further VTC's responsibilities shall be contingent upon Customer's
fulfillment of its responsibilities to provide information, Equipment, Parts,
Personnel, etc. as may be required.
10. Except as specifically agreed, Customer retains all responsibility for
maintenance, repair and monitoring of its Equipment as well as for assuring that
the operation of said Equipment and its connections complies with all laws, rues
and regulations imposed by any competent authority.
11. Except as otherwise set forth herein, neither party shall be deemed
negligent, at fault or liable with respect to the other for any delay,
interruption or failure in performance hereunder resulting from fire, flood,
water, the elements, explosions, act of God, war, labour disputes or other cause
beyond its reasonable control.
12. Except to the extent it may be caused solely by the gross negligence or
intentional act of VTC, its agents or employees, Customer shall indemnify VTC,
its agents, contractors and employees and shall hold them harmless from and
against any and all claims, liability, damage, loss, or expense which may arise
as a result of:
a) The presence of the Equipment or Customer's employees, contractors
or agents on VTC's premises;
b) The installation, operation, maintenance or removal of Equipment;
c) Any inherent defects in the Equipment;
d) Any acts or omissions of Customer, its agents, employees or
contractors.
13.1 VTC shall not be liable for damages to Customer's Equipment except to
the extent the damage is caused solely by the gross negligence or intentional
acts of VTC, its agents or employees. In no event shall VTC's liability exceed
the lesser of the replacement value of the Equipment or the cost of repair.
13.2 Without limiting the foregoing, VTC shall not be responsible to the
Customer for any damages caused or related to distress levied for rent in
arrears, whether lawful or otherwise, over the goods and chattels of the
Customer.
13.3 VTC shall in no event whatsoever be liable or responsible in any way
for personal injury or death of any employee of the Customer, or any person who
may be upon the premises, or for any loss or damage or injury to any property
belonging to the Customer or its employees or to any other person while such
property is on the premises.
120
<PAGE>
14. In no event shall either party be liable to the other for any indirect,
incidental, special or consequential damages, including loss of revenue or
profits.
15.1 For purposes of facilitating the delivery and installation of
Customer's Equipment, VTC shall permit access to its premises to the Customer,
its agents, employees and contractors who, in VTC's discretion, do not pose a
security risk to the personnel or property of VTC or its other customers. Any
persons provided such access shall be accompanied at all times by a
representative of VTC. Access shall be provided during normal business hours
and upon reasonable advance notice to VTC for after hour access.
15.2 Reasonable notice shall be deemed to be a minimum of the following:
a) For installation or removal of equipment or connections, no less
than seven (7) days;
b) For routine/preventive maintenance, twenty-four (24) hours;
c) In the event of a malfunction causing of loss of service or degraded
conditions, VTC shall attempt to provide access as soon after
it receives notice as may be practical. Customer will be provided
with appropriate telephone numbers for making contact with VTC
personnel in the event of such an emergency.
16.1 Throughout the term of this Agreement, Customer shall maintain, at its
expense:
a) All risk property insurance covering the Equipment;
b) Comprehensive general liability (including products and completed
operations liability and broad form property damage), insurance
sufficient in type and amount to fulfill its responsibilities
hereunder especially with regard to the indemnification of VTC, its
employees and agents. The Customer further agrees that it will pay
as additional fees the amount of any increase in insurance premium
of any insurance policies held by VTC or any related corporation
on the premises if such increase is caused by any additional risk or
hazard caused or related to the Equipment.
16.2 Certification of such insurance and proof of payment of current
premiums thereon shall be delivered to VTC prior to the delivery of Customer's
Equipment hereunder and at any subsequent time upon ten (10) days' written
demand by VTC.
17. In the event Customer fails to pay any amount due under this Agreement
or fails to provide or maintain the insurance required hereunder, VTC may cancel
the Agreement upon ten (10) days' written notice. Upon the delivery of such
notice, the Agreement shall terminate upon the date specified unless the default
or breach is cured within that time.
18. Upon any other breach of this Agreement by a party, the other party may
terminate this Agreement by thirty (30) days' written notice if the breach is
not cured within the thirty (30) day period.
19. Upon the termination of this Agreement, Customer shall immediately, at
its expense, remove its Equipment from VTC's premises. If Customer fails to do
so within ten (10) days of the termination date, VTC may remove the Equipment
and store the same at Customer's expense. Any amount owing to VTC due to the
expenditures for such removal and storage and any amounts owing hereunder by the
Customer at such time including all legal fees or other related costs incurred
by VTC to collect same shall bear interest at a rate equal to the lesser of
fifteen percent (15%) per annum or the maximum rate permitted by law.
20. This Agreement sets forth the entire understanding between the parties
with regard to the subject matter hereof and supersedes any prior discussions or
representations between them with respect thereto. All amendments to this
Agreement shall be in writing and executed by both parties.
121
<PAGE>
21. Customer may not assign this Agreement or any of its rights hereunder.
The Customer shall not register this Agreement without the written consent of
VTC.
22. Any notice required by this Agreement shall be in writing and delivered
personally or by confirmed fax message, or by regular or certified mail or
express delivery to the address indicated herein for such purpose or at such
other address as a party may later advise in writing. All notice shall be
deemed effective upon personal delivery or on the date following the regular
mail postmark or when received if sent by certified mail or express delivery.
23. The parties designate the following addresses as for the delivery of any
notice required hereunder:
To VTC:
Vancouver Telephone Company Limited, attention: President
1035 Cambie Street, Vancouver, BC V68 5L7
Telephone: (604) 664-0998 Facsimile: (604) 664-0997
To Customer:
Crys*tel Telecommunications, Inc. attention Edward
Address: 1390 Ottawa Ave. Postal Code V7T 2145
Telephone: (604) 926-5352 Facsimile: (604) 926-5371
24. This Agreement shall be construed and interpreted in accordance with the
laws of the' Province of British Columbia in which this Agreement is executed
and the federal laws of Canada applicable therein. The parties attorn to the
exclusive jurisdiction of the Province of British Columbia and agree that any
action or pr9ceeding brought by either party to enforce this Agreement shall be
commenced in that province.
25. Arbitration. Any dispute, controversy or claim arising out of or
------------
relating to this Agreement or the breach or termination thereof or any dealings
between the Representative, on one hand, and VTC and/or VTC officers, directors,
employees or agents, on the other hand, shall be resolved by final and binding
arbitration before a single arbitrator under the rules of the British Columbia
Arbitration and Mediation Institute (BCAMI) under the provisions of the
Commercial Arbitration Act of British Columbia. The arbitrator may not limit,
expand or otherwise modify the terms of this Agreement and shall not have
authority to award punitive or other non-compensatory damages to either party.
In order to provide an expeditious resolution of any dispute, the parties agree
that: (i) if the parties have not agreed on an arbitrator within ten (10) days
after the date of commencement of the arbitration, the parties hereto agree that
the BCAMI shall designate a single arbitrator and that designation shall be
final and binding; and (ii) absent extraordinary circumstances, the arbitration
hearing shall begin within ninety (90) days from the date of commencement of
arbitration, and shall continue each business day thereafter until completed.
The award in such arbitration proceeding may be entered in any court specified
in Section 20.1. 26. The headings appearing in this Agreement have been
used for convenience and reference only and in no way define, limit or enlarge
the scope or meaning of this Agreement or of any provision thereof.
27. Any provision in this Agreement which is prohibited or unenforceable in
any jurisdiction shall, as to such jurisdiction be ineffective to the extent of
such prohibition or unenforceability without invalidating the remaining
provisions hereof or affecting the validity or enforceability of such provision
in any other jurisdiction.'
122
<PAGE>
28. The parties hereto have requested and agreed that this Agreement be
drafted and executed in the English language. Les parties aux presentes ont
demande que le present contrat soit redige dans Ia langue Anglaise.
29. This Agreement shall ensure to the benefit of and be binding upon the
Successors and permitted assigns of the parties hereto provided that the
Customer shall not assign or transfer this Agreement in whole or in part without
the prior written consent of VTC. If consent is given, the assigns will be
required to sign a non-disclosure/non-competition agreement.
30. This Agreement together with all referenced attachments constitutes the
entire agreement between the parties pertaining to the subject matter hereof and
supersedes any prior agreements, negotiations or proposals, whether written or
oral, between the parties. There are no other representations, conditions or
warranties, expressed, implied, statutory or otherwise between the parties
applicable to the subject matter hereof, except as specifically set forth
herein.
IN WITNESS WHEREOF the parties hereto have executed this Agreement on the day
and year written below, through and by their duly authorized representatives.
VANCOUVER TELEPHONE COMPANY LIMITED
)
)
- - ---------------------------------------- )
Authorized Signatory Date ) S E A L
)
)
- - ---------------------------------------- )
Authorized Signatory Date )
CUSTOMER
)
)
- - ---------------------------------------- )
Authorized Signatory Date ) S E A L
)
)
- - ---------------------------------------- )
Authorized Signatory Date )
123
<PAGE>
SCHEDULE "A"
EQUIPMENT
EFFECTIVE DATE ___________________ TERMINATION DATE ___________________
EQUIPMENT SPECIFICATIONS:
Equipment Unit Quantity Height Width Depth Weight Power
-------------- -------- ------ ----- ----- ------ ------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
- - --------------------------------------------------------------------------------
124
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE "B"
VTC PRICING SHEET
SERVICES FEES FREQUENCY
<S> <C> <C>
COORDINATION I INSTALLATION $750 - $2,000 One-Time
CARRIER ACCESS -
T-1 Access $100 (first) Monthly
T-1 Access $75 (each, 2-5) Monthly
T-l Access $50 (each, 6+) Monthly
T-1 Installation $ 200 (each) One-Time
T-1 Installation 125 (each, multiple) One-Time
DSX-DISTRIBUTION
T-l Access $200 (first) Monthly
T-1 Access $150 (each, 2-5) Monthly
T-1 Access $100 (each, 6+) Monthly
T-1 Installation $200 (each) One-Time
T-1 Installation 125 (each, multiple) One-Time
SPACE OPTIONS -
Space for 19" or 23" Rack or Cabinet $300 Monthly
Space for 19" or 23" Secured Cabinet $500 Monthly
Dedicated Space - 50 sq.ft. $800 Monthly
Each additional 50 sq.ft. 600 (per addt'l SOft2) Monthly
POWER AND UPS BACKUP -
A/C or D/C Power $20 per Amp Monthly
Hourly Backup Charge $2 per Amp Monthly
MISCELLANEOUS SERVICES -
24-hour Technical Service and Support $75 per hour (Normal
Business Hours) $125
per hour (After Hours,
minimum 3 hours
charged) Frequency
</TABLE>
This quotation is valid for thirty (30) days from the signing of the Agreement.
If service does not commence within that time period, revised pricing may be
implemented by VTC.
125
<PAGE>
SERVICES AGREEMENT
This Agreement made effective the 18th day of September, 1998 (the "EFFECTIVE
DATE")
BETWEEN:
CRYS-TEL TELECOMMUNICATION INCof 1390 Ottawa Street , West Vancouver, BC V7T
2H5 (the "CUSTOMER")
AND:
STARCOM-ACCESSPOINT, a Division of Starcom Services Corporation, a British
Columbia company, of Suite 2770 - 555 West Hastings St., Vancouver, B.C. V6B
4N5 (the "SUPPLIER")
WHEREAS:
A. The Supplier provides and is licensed to provide communications services;
B. The Customer wishes to utilize certain of these services offered by the
Supplier;
C. The Supplier has agreed to provide certain facilities and services to the
Customer subject to and in accordance with the terms to this
Agreement;
NOW THEREFORE, the parties agree to be bound by the attached General Terms and
Conditions and the exhibits thereto which form part of this Agreement.
IN WITNESS WHEREOF, ___________ 1998. the parties hereto have executed this
Agreement this 18th day of September, 1998.
Customer: CRYS-TEL TELECOMMUNICATION INC
By: /s/ Edward Yau
Authorized Signatory
Edward Yau
Title: President
Supplier: STARCOM-ACCESSPOINT
By:
Title: President
126
<PAGE>
GENERAL TERMS AND CONDITIONS
1. DEFINITIONS
In this Agreement and the Exhibits attached, the following words or phrases have
the meanings set out below:
"AGREEMENT" means, the Service Agreement and incorporates these General
Terms and Conditions and any exhibits attached;
"CUSTOMER PARTICULARS EXHIBIT" means, Exhibit 2 of this Agreement setting
out the particulars respecting Customer,
"CUSTOMER SITES" means, Customer "end-user" locations which are described
in the Customer Particulars Exhibit 2;
"CUSTOMER EQUIPMENT" means, Customer-owned equipment that provides the
interface to Supplier Equipment;
"EFFECTIVE DATE" means, the date of this Agreement as specified on page 1
of this Agreement;
"FEES" means, in respect of any Service or Services, the fees payable by
Customer to Supplier in respect of such Service or Services as described in each
Service Exhibit;
"MINIMUM PERFORMANCE OBJECTIVES" means, in respect of each Service or
Services, the minimum performance objectives set forth for such Service or
Services in the Service Exhibit which describes such Service or Services;
"PERFORMANCE OBJECTIVES" means, in respect of each Service or Services, the
performance objectives set forth for such Service or Services in the Service
Exhibit which describes such Service or Services;
"SERVICE EFFECTIVE DATE" has the meaning set forth in section 4, unless
otherwise specified in respect of a particular Service in a Service Exhibit;
"SERVICE EXHIBIT" means, Exhibit 1 setting out each of the Services to be
provided pursuant to the terms of this Agreement, including all such additional
Service Exhibits as may be added from time to time;
"SERVICE OR SERVICES" shall mean the Service or Services to be supplied to
Customer in accordance with the terms of this Agreement, all as described in the
Services Exhibit;
127
<PAGE>
"SUPPLIER EQUIPMENT" means, Supplier's equipment and hardware dedicated to
the supply of Services to Customer, including but not limited to that equipment
described in the Service Exhibit;
"SUPPLIER COMMUNICATION SYSTEM" means, Supplier Equipment and all Supplier
owned software and electronics used to provide Services to Customers;
"TERM" means a date specified by Supplier, as the date upon which the
services are to be available for use by the Customer and set out in the Customer
particulars Exhibit 2, unless otherwise specified in respect of a particular
Service in the Service Exhibit 1; and
"TERM" means, the term of this Agreement as set out in Exhibit 1.
2. SERVICES
2.1 Supplier agrees to supply the Services in accordance with and subject to
the terms of this Agreement. Customer agrees to receive such Services from
Supplier and agrees to comply with the terms and conditions contained in this
Agreement.
2.2 Throughout the Term of this Agreement, Customer may request in writing
that Services be made available at an additional Customer Site or may request
that additional access feeds be provided at an existing Customer site. To the
extent Supplier can reasonably accommodate such requests, it shall provide a
quote respecting the Fees applicable for such request and spec4' a Targeted
Start Date to Customer.
3. INSTALLATION
3.1 Supplier shall, if necessary, install and maintain cabling required to
provide Services to the legal boundary of property upon which the building
containing Customer Site is located. Customer shall be responsible for
obtaining all rights-of-way, permissions, and/or third party consents required
to permit Supplier to install and maintain cabling from such legal boundary to
the Customer Equipment and shall be responsible for all costs in connection with
the same. Further, Customer shall ensure it has all tights-of-way, permissions
or third party consents required in connection with installing and maintaining
such interior cabling.
3.2 Customer shall ensure that: (a) all work required to be done by it
pursuant to section 3.1 shall be done in accordance with all applicable laws
including, without limitation, all environmental regulations in accordance with
Supplier's specifications; and (b) all utilities, access and building
alterations required to install and service Supplier Equipment are provided 3
and/or completed at Customer's expense at least seven days prior to the Targeted
Start Date.
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<PAGE>
4. Service Effective Date
4.1 Supplier shall exert all reasonable efforts to ensure that the Services
can be used by Customer on the Targeted Start Dates. Customer shall use all
reasonable efforts to complete its obligations set out in section 3 in a timely
manner in order that all Services are available on their respective applicable
Targeted Start Date. The "Service Effective Date" shall be that date which is
the latter of:
4 4.1.1 the Targeted Start Date; and
4.1.2 the date upon which the Services are activated and accepted for
use by Customer.
5. SERVICE PERFORMANCE
5.1 Each of the Services has been designed for the respective performance
targets, including target availability, set out in the relevant Service Exhibit.
These targets do not include maintenance windows reserved to allow installation,
system upgrades, and to add or reconfigure Customer's end-users and other
customers. The scheduled maintenance will be arranged based on customer
information to minimize the interference with the Customer's use of the Services
and shall not commence unless the customer has received at least thirty (30)
days prior written notice.
5.2 In supplying the Services, Supplier shall use all reasonable efforts to
achieve the Performance Objectives in respect of each Service. The Performance
Objectives apply only to that portion of Services provided on the Supplier
Communication System and do not apply to any Services utilizing or
interconnecting with facilities or services provided by other service carriers.
5.3 Subject to paragraph 12.2, Win any fill calendar month after the Service
Effective Date and during the term of this Agreement, the Supplier fails to
achieve the Performance Objectives for a Service, the Fees for such month (or
partial month) shall be reduced to the pro-rata portion that the actual
performance for that month complied with the Performance Objective for such
Service.
6. Maintenance Obligations
6.1 Subject to being provided the access rights set forth in section 3,
Supplier shall maintain Supplier Equipment including labor, parts, and such
other servicing as is necessary to keep Supplier Equipment in good operating
condition at its expense provided that Supplier shall not be responsible for any
repair or maintenance caused by:
6.1.1 such equipment being utilized other than for the purpose intended
under the terms of this Agreement or being operated other than in accordance
with Supplier's specifications;
6.1.2 catastrophes, accidents or the fault, negligence, misuse, improper or
unauthorized use of such equipment by Customer or others or by any other
cause(s) external to such equipment;
6.1.3 such equipment being moved from the locations authorized pursuant to
this Agreement without Customer first obtaining the written consent of Supplier;
and
6.1.4 customer making or using additions, alterations or adaptations to
such equipment without the prior written consent of the Supplier, such consent
not to be unreasonably withheld.
6.2 In complying with its maintenance and repair obligations hereunder,
Supplier shall provide such services under normal conditions 24 hours a day,
seven days a week. A staffed help line will be available for this purpose on a
24 hour, seven days week basis.
6.3 Supplier, its employees, contractors, and agents shall at all times
enjoy reasonable access to any cabling or facilities which Supplier is obligated
in any manner to maintain, including Supplier Equipment, and shall provide a
safe environment in which to perform any installation, repair, maintenance or
other work to be undertaken by Supplier in complying with its obligation under
this Agreement. Customer shall be responsible for ensuring timely access by
Supplier to each Customer Site. In the event that Supplier is unreasonably
delayed in any manner in obtaining reasonable access to Customer's premises, the
Customer agrees to reimburse Supplier at its' labor rates in effect from time to
time if such delay or prohibited access results in travel or waiting time for
Supplier's employees, contractors or agents.
7. FEES
7.1 Unless otherwise specified and subject to any bona fide billing
disputes, Customer agrees to pay all Fees in connection with provision of the
Services within 30 days of the invoice date and at the times specified in
Section 12 of this Service Agreement.
8. CUSTOMER OBLIGATIONS
8.1 Unless otherwise specified, Customer shall maintain all Customer
supplied equipment at its expense. Customer shall ensure that every item of
equipment utilized by Customer (if not Supplier owned) is technically and
operationally compatible with the Supplier Equipment and the Supplier
Communication System and complies with all governmental rules and regulations.
Supplier shall not be obligated to link any Supplier Equipment to any Customer
owned 5 equipment which does not comply with these requirements and which the
Supplier has not approved.
129
<PAGE>
8.2 Receipt and use of the Services is restricted to the business of the
Customer.
8.3 Customer, in utilizing the Services, shall be responsible for ensuring
that no such use materially adversely affects the operation of Supplier
Communications System.
9. LIMITED SOFTWARE LICENSE
9.1 All right, title and interest in and to any software programs forming
part of the Supplier Equipment or Supplier Communication System shall remain
that of Supplier or the licensing party authorizing use by Supplier. Customer
shall not change or copy such software programs (except for safeguard or archive
copies marked to show supplier's ownership) nor to make it available to any
employees, contractors, agents or third parties other than those who require
same in order to receive the Services.
10. Renewal of Term
10.1 The term of the contract shall as stated in Exhibit 1.
10.2 In the event that both parties agree in writing, this contract may be
renewed on an annual basis under the same or different conditions and prices.
11. LIMITATION OF LIABILITY
11.1 Where there are omissions, interruptions, delays, errors or defects in
transmission or failures or defects in Supplier's facilities, Supplier's
liability is limited to a refund of charges, on request, proportionate to the
length of time the problem existed, commencing from the time Supplier is advised
of the problem. Supplier's entire liability for any claim arising from any
cause whatsoever shall in no event exceed the monthly Fees for the Services
which give rise to any claim.
11.2 The remedies set out in this Agreement are in lieu of all other
warranties, representations, conditions, guarantees and remedies regarding the
Services and the maintenance thereof and there are no other warranties,
representations, conditions, guarantees or remedies of any kind whatsoever
either expressed or implied by law or customer, including but not limited to
those regarding merchantability, fitness for purpose, design, condition or
quality.
11.3 Without in any manner limiting the express limitation contained in this
section 11, Supplier shall not be liable to Customer or any of their servants,
agents, contractors, representatives or any third parties for:
130
<PAGE>
11.3.1 any act of omission of a telecommunications carrier whose facilities
are used in establishing connections to points which Supplier does not directly
serve;
11.3.2 defamation or copyright infringement arising from material
transmitted or received by Customer over Supplier's facilities;
11.3.3 infringement of patents arising from combining or using
Customer-provided facilities with Supplier's service; or
11.3.4 any damages, loss of profits, loss of earnings, loss of business
opportunities, real or personal property damage, personal injury or other loss
or special or consequential damages arising directly or indirectly out or in
connection with the subject matter of this Agreement, including, without
limitations those arising from the acknowledged delays or interruptions in
service described in section 6 above.
The forgoing limitation shall not apply to grossly negligent acts or omissions
of Supplier, resulting in physical injury, death or damage to the customers
premises.
11.4 In no event shall either party be liable to the other for consequential
or indirect losses or damages howsoever arising and whether under contract, tort
or otherwise (including without limitation third parry claims, loss of profits,
loss of customers, or damage to reputation or goodwill.
12. TERMINATION AND SUSPENSION OF SERVICE
12.1 Supplier may terminate, restrict or suspend the provisioning of the
Service to Customer:
12.1.1 forthwith if any Fees payable hereunder are not paid within 30 days
of the invoice date, with ten (10) days prior written; notice and
12.1.2 if 30 days after written notice has been received, Customer fails to
comply with any of its other obligations set forth in this Agreement. 12.1.3
customer may terminate the agreement with 30 days notice delivered to the
supplier in writing, on the last day of the proceeding month.
12.2 Customer may terminate the Agreement if 30 days after written notice
has been received, Supplier fails to comply with any of its obligations set
forth in this agreement. In addition, in the event that the Supplier fails to
provide a Service or Services to the level of the Minimum Performance Objective
applicable to such Service or Services over a period of a calendar month and
Customer provides prompt written notice of such performance failure to Supplier,
Supplier shall have ten days from receipt of such notification to rectify, the
problem. If at the end of such ten day period, the affected Services still fail
131
<PAGE>
to meet the applicable Minimum Performance Objectives, Customer may, elect in
writing to terminate Services to the affected Customer Sites. If Customer does
so, Supplier shall terminate Services between those points and no further Fees
shall be applicable in connection with the discontinued service and Supplier
shall be entitled to remove all Supplier Equipment located at Customer Site.
Minimum Performance Objectives shall not be construed as guarantees or
warranties in any sense and the only remedy for failure to meet Minimum
Performance Objectives shall be as provided for herein.
13. GENERAL
13.1 This Agreement shall enure to the benefit and be binding upon Supplier
and Customer, and their respective executors, administrators, successors and
permitted assigns. Neither party may assign this Agreement without the other
part's prior written consent, such consent not to be unreasonably withheld.
13.2 The Agreement forms the entire agreement between the parties concerning
the subject matter hereof and supersedes all prior written and oral agreements
between the parties. Any modification of this Agreement, other than the
modifications imposed by any government or regulatory authority, shall not be
valid unless reduced to writing and agreed to by all parties.
13.3 All rights and remedies hereunder are cumulative and not alternative,
Supplier shall be entitled to pursue all of its respective rights hereunder and
at law either consecutively or concurrently and no rights or interests shall be
extinguished or merged by the taking or judgment for all monies which are or may
become due owing pursuant to this Agreement or pursuant to any extension or
subsequent agreement made between Supplier and Customer.
13.4 Customer shall pay in addition to the Fees specified herein, all taxes,
assessments and government charges including but not limited to Social Service
Tax, Excise taxes, Goods and Services Tax and any other applicable tax now or
hereafter imposed on the purchase or consumption of the services under the
authority of a federal, provincial or municipal; taxing jurisdiction, except
taxes on the income or assets of Supplier.
13.5 Notwithstanding any other terms of this Agreement, neither party shall
be liable for any delay, interruption, or fault in the performance of its
obligations hereunder if caused by acts of God war, declared or undeclared,
fire, flood, storm, slide, earthquake, power failure, inability to obtain
equipment, supplies or other facilities not caused by failure to pay the then
prevailing prices, labor disputes, or any other similar event beyond the control
of the party affected which may prevent or delay such performance. If any such
act or event occurs or is likely to occur, the party affected shall promptly
notify the other party, giving particulars of the event. 13.6 Supplier reserves
the right not to carry out any work required herein which, in Supplier's
opinion; would be hazardous. Supplier will comply with all of Customer's safety
requirements where applicable.
132
<PAGE>
13.7 The parties hereto represent that they have lull authority to enter
into the Agreement and that no further act or approval is required to make this
Agreement binding upon the respective parties should any portion of this
Agreement for any reason be held to be void in law, this Agreement shall be
construed, so far as is possible, as if such portion had never been contained
herein.
13.8 Any notice, payment or other communication required or permitted to be
given or served pursuant to this Agreement shall be in writing and shall be
delivered personally or forwarded by first class prepaid mail to the Party
concerned at the address first set out above and such notice will be deemed to
be received on the day of delivery, if delivered personally, or five business
days after posting if mailed. Notices sent by telex, facsimile shall
conclusively deemed to have been received when the delivery confirmation is
received.
13.9 This Agreement shall be construed and the powers and provisions herein
contained shall be administered, exercised and given effect to according to the
laws of the Province of British Columbia.
13.10 The parties will not reveal, divulge or make known the terms and
conditions of this Agreement or any document or agreement now or hereafter
executed in connection herewith, other than disclosure that is required by law
or agreed to by the other party. In addition, for the period of two (2) years
from the date of disclosure thereof, each party shall maintain the
confidentiality of all information or data of any nature ("Information")
provided to it by the other party hereto provided such Information contains a
conspicuous marking identifying it as "Confidential" or "Proprietary". Each
party shall use the same efforts (but in no case less than reasonable efforts)
to protect the Information it receives hereunder as it accords to its own
Information. The above requirements shall not apply to Information which is
already in the possession of the receiving Party or any third Party, is already
publicly available through no breach of this Agreement, or has been previously
independently developed by the receiving Party. This Agreement shall not
prevent any disclosure of Information pursuant to applicable law and regulation,
provided that prior to making such disclosure, the receiving Party shall use
reasonable efforts to notify,' the disclosing Party of the required disclosure.
133
<PAGE>
Exhibit 1 Supplier Services
TERM OF CONTRACT: month to month
Network Performance Targets
Availability 99.97% Uptime
Minimum Availability 99.95% Uptime
SERVICE FEES
Internet Access
1 10Mb/s FDX Ethernet port $ 395 per month
1 10Mb/s FDX Ethernet Setup $ 495 one-time
TRAFFIC
OPTION 1
Traffic metered and charged at $12 per. Gigabyte
Option 2 no access charge
O to 4OGB $586
41 to 80GB $670
81 to 125GB $736
126 to 170GB $982
171 to 210GB $1,213
211 to 300GB $1,838
301 to 38OGB $2,357
381 to 425GB $2,430
426 to 490GB (1.5Mb/s) $2,826
491 to 980GB (FDX 3.OMb/s) $5,543
Notes:
- - - Implementation 5 days subject to in-building wiring
- - - prices do not include applicable taxes
- - - contribution for contribution eligible traffic, will be the responsibility
of Crys-Tel Telecommunications Inc. to report and remit
134
<PAGE>
Exhibit 2 Customer Particulars Exhibit
Contract Number: CTIOO1
Customer Name: CRYS-TEL TELECOMMUNICATLON INC.
Billing Address: 1390 Ottawa Street , West Vancouver, BC V7T 2115
Prime Technical Contact: Name: Edward Yau Phone # 604-318 8899
Fax#: 604-926-5371
Email:[email protected]
Billing Contact Name: Alexia Manson Phone # 604-926-5352
Fax # 604-926-5371
Prime Trouble Contact Name:
Emergency 24 Hour Contact Name:
Site Locations: N/A
Targeted Start Date: The 1st day of October, 1998.
135
<PAGE>
Starcom
International Optics Corporation
October 19, 1998
Crys-Tel Telecommunications Inc.
1390 Ottawa Street
West Vancouver, BC V7T 2H5
ATTENTION: Edward Yau
Dear Mr. Yau,
Re: "Bringing Information to Light"
As Starcom's Customer Service Manager, I would like to take this opportunity,
and officially welcome Crys-Tel Telecommunications Inc. to our Fiber-One
Network.
Everyone at Starcom is dedicate4 to providing Crys-Tel Telecommunications Inc.
with exceptional service, timely installations, superior quality transmissions
and accurate invoicing.
If you have any comments as to how we may better meet your company's needs,
please do not hesitate to call me at 1-800-820-7878.
I look forward to a long a prosperous relationship for both companies.
Yours truly,
STARCOM SERVICE CORPORATION
PER:
/s/Karen A. Imlah
Karen A. Imlah
Customer Service, Manager
<TABLE>
<CAPTION>
ACCESSPOINT EXCALATION LIST
Should you or any of your Company's representatives require immediate
assistance, please use the following list.
CONTACT NAME TELEPHONE
- - --------- ----------------- ------ --------------
<S> <C> <C> <C>
Primary Mark Teolis Office (604) 688-4400
Data Network Mgr. Cell (604) 880-0478
Pager (604) 473-0476
- - --------- ----------------- ------ --------------
Secondary Russell Joyce Office (604) 688-4400
Mgr. Information Cell (604) 880-0475
Systems
Pager (800) 953-3354
Home (604) 263-3650
- - --------- ----------------- ------ --------------
Third Stan Dahl Office (604) 688-4400
Mgr. Network Cell (604) 880-0476
Operations
Pager (800) 820-8606
Home (604) 581-1774
- - --------- ----------------- ------ --------------
</TABLE>
For Non time sensitive issues, please use the following email ID's:
Mark Teolis [email protected]
Russell Joyce [email protected]
Brian Connors (VP Operations) [email protected]
For network problems [email protected]
For routing additions/updates [email protected]
136
<PAGE>
CRYS-TEL AUSTRALIA
PURCHASE ORDER NO.
021999
PURCHASE ORDER
- - --------------------------------------------------------------------------------
Name Name Robert Papalia
Crys-Tel Telecommunications Inc.
Address Address 1390 Ottawa Avenue
West Vancouver, BC V7T 2H5
Phone Phone (804)928-5352 Fax (604)926-5371
<TABLE>
<CAPTION>
Qty Part-No. Description Listprlce Cost TOTAL US$
<C> <S> <C> <C> <C> <C>
2 VX-70 Dual T1 Card 4,800.00 4,800.00 9,600.00
2 VS-109 Gateway Software Rel 3.0 NT 500.00 500.00 1,000.00
12 VX-113 DSP Software License 800.00 800.00 9,600.00
6 VC-206 DSP Mother Card 4 Chips 5,400.00 5,400.00 32,400.00
6 VX-112 DSP Daughter Card 4 Chips 3,600.00 3,600.00 21,600.00
4 VX-101 Fax Daughter Card 12 ports 11,520.00 11,520.00 46,080.00
2 VS-2500 Vienna-5000 16,800.00 16,800.00 33,600.00
TOTAL US$ 153,880.00
</TABLE>
PAYMENT DETAILS
100% UP-FRONT ($163,880.00 USD)
WIRE TRANSFER TO: CRYS-TEL TELECOMMUNICATIONS INC.
at
TD Bank (Toronto Dominion Bank)
1802 Marine Drive and 18th Street
West Vancouver, BC V7V 1J6
Account Number: 96640 004 0937 7300390
137
<PAGE>
WESTPAC BANKING CORPORATION
---------------------------
THE SECRETARY
CRYS-TEL TELECOMMUNICATIONS AUS++
151 RAMSEY STREET
HABERFIELD 2045
Thursday, 10 December 1998
CRYS-TEL TELECOMMUNICATIONS AUSTRALIA FTY LIMITED,
We are delighted that you chosen to open your account with Westpac. Today, we
opened the following account for you:
Account: Type/Designator Branch/Account No. Deposit Amount
BUSINESS CHEQUE 032283116180
We will provide you within five working days:
- your cheque books which will be available for collection at the branch
that you have selected.
You have not quoted your tax file number or exemption. Quotation is not
compulsory, however as you have not provided this information, tax may be taken
out of your interest. For more information about Tax File Number rules contact
the Australian Taxation Office.
Telephone Banking is available 24 hours a day, 7 days a week. To access
Telephone Banking simply call 132-142.and speak to a Customer Service
Representative.
Westpac is committed to meeting your financial needs, so please fell free to
contact me if you require any further assistance.
Yours sincerely,
/S/ DEL DI SIPIO
- - ---------------------
DEL DI SIPIO
Branch Administrator
138
<PAGE>
EXHIBIT 6.4
CRYS-TEL TELECOMMUNICATIONS - AUSTRALIA PTY LTD
151 Ramsay Street Haberfield 2045 - SYDNEY AUSTRALIA
Ph: 02 9716 6922 Fax: 02 9716 0223
Tony & Robert Papalia
Crys-tel International
Parker House
Wildley Business Park
Wildley road, St. Michael
Barbados 13th January 1999
Attn: Tony & Robert
After my telephone conversation with my associate Mr. Mariano Turrisi regarding
the signing of the agreement on the 5th January 1999, could you please send us a
list of materials required to setup the first station in Sydney.
Regard
/S/ Girardo C. Cassaniti
- - ---------------------------
Girardo C. Cassaniti
Director
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<PAGE>
EQUITY JOINT VENTURE AGREEMENT
THIS AGREEMENT is made as of the 5th day of January, 1999 between Crys-Tel
Australia (referred to as "CTA"), with its principle office at 151 Ramsey
Street, Harberfield 2045. Sydney, Australia and Crys-Tel International, a
Barbados incorporated company with its primary office located at Parker House,
Wildley Business Park, Wildley Road, St. Michael, Barbados (referred to as
"Crys-Tel").
WHEREAS:
1. Crys-Tel is in the business of selling IP telephony products and services;
2. Crys-Tel is in the process of setting up IP telephony gateways worldwide
starting with installations in Canada;
3. CTA has land and funds and desires Crys-Tel to joint venture with it to
install gateways in Australia to sell long distance IP telephony services,
and Crys-Tel is willing to joint venture with CTA in the installation of
the gateways in Australia upon the terms and conditions set forth below: -
4. In accordance with the domestic laws of British Columbia, Canada, the
parties agree to jointly invest to set up a joint venture in Australia;
NOW THEREFORE the parties have agreed as follows:
1. FORMATION OR CORPORATION
A Corporation under the name of Crys-Tel Australia or such other name as
may be mutually agreed upon by the parties (the "Corporation") shall be
organized under the laws of Australia, with the principal selling IP
telephony service to corporations and household customers. The legal
address of the Corporation shall be determined at a later date.
2. ISSUED CAPITAL
30% of the Corporation shall be owned by Crys-Tel and the remaining 70%
shall be owned by CTA.
3. PURCHASE OF SHARES
(1) Crys-Tel shall pay for the shares by:
a. Providing a turn-key operation for selling IP telephony services
in Australia;
b. Providing a full billing system for the new corporation
(2) CTA shall pay for its shares by:
(a) Purchasing the required equipment from Crys-Tel suppliers;
(b) Setting up 24 hours, 7 days a week customer service;
(c) contributing computer and office equipment;
(d) contributing premises for daily operation;
(e) obtaining the required bandwidth and PRI connections required for
the installation of gateways.
4. WORKING FUNDS
Should the aggregate contributions made by the parties in accordance with the
capitalization of the Corporation be insufficient to cover the Corporations
working fund requirements, the parties shall consult in good faith in order to
find an appropriate solution
140
<PAGE>
5. CORPORATE DOCUMENTS
The memorandum of association and articles of association of the Corporation
shall give full effect to the terms of this agreement and shall be in a form
satisfactory to both parties. In particular, and without in any way limiting or
derogating from the generality of the foregoing, the articles of association
shall provide that the following items of business for approval shall require a
100% vote by the board of directors:
(a) capital investment in excess of one million USD,
(b) long-term indebtedness;
(c) disposition of major assets;
(d) investments in unrelated businesses;
(e) granting of licenses;
(f) merger or consolidation with other businesses;
(g) liquidation; and
(h) Increase of issued share capital.
(1) The board of directors of the Corporation shall be composed of five
persons. Crys-Tel shall have the right to appoint at least two directors.
The chairman of the board shall be appointed by the CTA and its
vice-chairman by Crys-Te1. The term of office for the directors, chairman
and vice-chairman shall be 2 years.
(2) The chairman of the board shall be the legal representative of the
Corporation. Should the chairman be unable to exercise his responsibilities
for some reason, he shall authorize the vice-chairman or any other
directors to represent the Corporation temporarily.
(3) The board of directors shall convene at least one meeting every year. The
meeting shall be called and presided over by the chairman of the board. The
chairman may convene an interim meeting based on a proposal made by more
than 3 of the total number of directors.
(4) The highest authority of the Corporation shall be its board of directors.
It shall decide all major issues, except as provided otherwise in this
agreement.
(5) The board shall, in addition to its statutory functions:
(a) appoint members of the management, designate their primary tasks,
their salaries, and their standard of expense reimbursement;
(b) establish the signing authority of the management members to represent
and bind the Corporation;
(c) establish the terms and conditions of each management member's
employment, sign the contract of employment between the Corporation
and each management member, and represent the Corporation in case of
dispute between the Corporation and a management member;
(d) approve the Corporation's operating and investment budget;
(e) approve any borrowing;
(f) approve or disapprove decisions of management regarding all matters
transcending the ordinary course of the Corporation's day-to-day
business; (g) Consider and resolve any other matter which the
management submits for its consideration, and supervise the
management's activities, including review of the Corporation's annual
financial statements.
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7. MANAGEMENT
(1) The management shall be composed of not less than 2 nor more than 4
persons. The board shall elect the members of the Management, considering
their capabilities and usefulness to the successful operation of the
Corporation, and without regard to their nationality.
(2) The management shall be entrusted with the day-to-day business operation of
the Corporation, in accordance with the provisions of this agreement, the
articles and the guidelines to be established by the board and good
business practice. The primary task of each member shall be designated by
the board. The management and its members shall obtain the board's approval
for actions transcending the Corporation's day-to- day operation, inter
alia, to:
(a) acquire or lease land or real estate;
(b) enter into contracts for a longer duration than two years;
(c) establish operating and investment budgets;
(d) acquire assets or services exceeding in value $250,000, it being understood
that various items serving the same investment project shall be considered
in the aggregate and acquisitions stated in the operating of investment
budget shall not come under this restriction;
(e) engage in business activity other than Internet telephony;
(f) enter into licenses of technical assistance or similar agreements;
(g) enter into agreements between the Corporation and any of its shareholders
except if such agreement has been provided for in this agreement and only
upon such terms and conditions as set out in this agreement.
8. PROJECTIONS, PLANS, SCHEDULE OF IMPLEMENTATION
(1) The business projections and plans for the Corporation for the first five
years shall be established by the Parties within sixty days from the
signing of this agreement. Such projections shall be updated each year by
the Corporation.
(2) Within sixty days following signing of this agreement, the parties shall
prepare a schedule setting forth the principal actions to be taken by each
party for the Corporation to commence operations, and the target dates by
which such actions shall be completed, which dates may he extended by
mutual agreement of the parties. Each party agrees to complete each action
required of it on or before the designated target date.
9. OBLIGATIONS OF THE CTA
Notwithstanding the specific functions of the board of directors and management,
the CTA shall be responsible for the following:
(a) handling of applications for approval, registration, business license and
other matters concerning the establishment of the joint venture from
relevant governmental authorities in charge of the Territory;
(b) organizing the design and construction of the premises and other
engineering facilities of the Corporation;
(c) providing cash, computer equipment and premises as set out in this
agreement;
(d) assisting Crys-Tel in processing import customs declarations for the
machinery and equipment contributed by Crys-Tel and arranging for its
transportation within the Territory; (e) assisting the Corporation in
purchasing or leasing equipment. office supplies. (f) assisting the
Corporation in recruiting local management personnel, technical personnel,
workers and other personnel needed, in the Territory;
(g) assisting foreign workers and management in applying for entry visas, work
licenses, and processing of travel affairs: and
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(h) taking responsibility for those matters as may be agreed by the
Corporation.
10. OBLIGATIONS OF CRYS-TEL
Notwithstanding the specific functions of the board of directors and management,
Crys-Tel shall be responsible for the following:
(a) providing a turn-key solution to setting up IP telephony services in
Australia;
(b) handling the matters entrusted by the Corporation, including sales training
industry liaising;
(c) providing the needed technical personnel for installing, testing and trial
production of the equipment;
(d) training the technical personnel and workers of the Corporation;
(e) providing a full IP billing system for the use in Australia; and
(f) taking responsibility for those matters as may be agreed by the
Corporation.
11. RESEARCH AND DEVELOPMENT GROUP (CHANGE)
(1) A technical group with several technical personnel appointed by CTA and
Crys-Tel shall be organized. The group, under the leadership of the
construction office, shall be in charge of the examination, supervision,
inspection, testing, checking and accepting, and performance checking for
the project design, the quality of project, the equipment and materials and
the licensed technology.
(2) Subject to approval by both parties, the establishment, remuneration and
expenses of the staff of the construction office shall be covered in the
project budget.
(3) Following completion of the project, the construction office shall be
dissolved upon the approval of the board of directors.
12. LICENSE AGREEMENT
(1) Crys-Tel and the CTA shall together cause the Corporation to enter into the
license agreement attached as Schedule "B" and forming an integral part of
this agreement, under which Crys-Tel shall license the Corporation to setup
gateways in Australia linking them to the Crys-Tel network of gateways
being installed worldwide pursuant to the know how, patents and trade marks
described in the agreement.
(2) Crys-Tel shall provide the following guarantees on the technology contained
in the license agreement:
a. that the overall technology including the design, technology of
manufacturing, technological process, testing and inspection of the
Products will be truly advanced among the same type of technology in
Crys-Tel; and
b. that the technology, model, specification and quality of the equipment
and Products are first-class and that same will meet the rigorous
requirements of technological operation and practical usage.
13. PERSONNEL OF THE CORPORATION
(1) The estimated personnel requirements of the Corporation for its initial two
years of operation, the personnel organization chart and the initial
salaries of each category of personnel (including all taxes and social
security type contributions) shall be established by the Parties within
sixty days from the signing of this agreement.
(2) The terms of the employment of personnel from the Territory shall follow
the provisions of the law of the Territory. With respect to non-Territory
employees, the practice followed by internationally operating companies
shall be followed. Non-Territory personnel transferred to the Territory
temporarily, for years or less, shall be exempt from taxes and social
security type contributions within the Territory.
(3) Technical Director: Crys-Tel shall have the right, from time to time, to
appoint a technical director who shall assist the Corporation in the
management and operation of the Corporation's facilities for an initial
period of up to five years, commencing from the date of the establishment
of the Corporation's facilities.
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14. LABOUR
Labour contracts covering the recruitment, employment, dismissal and
resignation, wages, labour insurance, welfare, rewards, penalty and other
matters concerning the staff and workers of the Corporation shall be drawn up in
accordance with the labour regulations v/Australia.
15. PRODUCT SALES
(1) IP telephony product and services can only be sold in Australia & Europe or
any other country except Canada.
(2) The Corporation may directly sell the IP telephony products and services on
the international market.
16. UNDERTAKING BY THE CTA
The CTA undertakes on behalf of itself and its affiliates that it shall not
during the continuance of this agreement, setup or resale internet telephony
services for its own use, nor shall it sell or offer for sale, any products
similar to the Products, without the prior written permission of Crys-Tel.
17. CONFLICTING USE
(1) For the protection of the business of the Corporation, the CTA agrees on
behalf of itself and its affiliates that it will not buy, make or sell, for
resale or for its own use, items which incorporate or utilize in any way
the patents or know-how owned by Crys-Tel, nor will it directly or
indirectly (except through the Corporation), contact any of Crys-Tel's
suppliers or partners.
18. COMPLIANCE WITH LAWS OF THE TERRITORY
The parties agree to take all necessary steps to ensure that the Corporation
does not engage or participate. directly or indirectly, in any transaction
whatsoever with respect to the Products to be manufactured or sold by it, if
such transaction is prohibited by the laws and regulations of the Territory.
19. TAXES, FINANCE, AUDIT AND RECORD KEEPING
(1) The Corporation shall pay taxes in accordance with the laws of the
Territory.
(2) Staff members and workers of the Corporation shall pay individual income
tax according to the Italian laws.
(3) Allocations for reserve funds, expansion funds of the Corporation and
welfare funds and bonuses for staff and workers shall be set aside in
accordance with the laws of Australia. The annual proportion of allocations
shall be decided by the board of directors.
(4) The fiscal year end for the Corporation shall be June 30
(5) The Corporation shall keep all accounts and records required by law and
practice applicable in its domicile and, in so far as necessary, as
required by Italian law. The Corporation shall also keep books of account,
and prepare quarterly and annual financial statements, including a balance
sheet, income statement and such additional statements as either party may
reasonably request, in accordance with generally accepted Canadian
accounting principles. These accounts and statements shall control in
determining the performance of the Corporation, the amount of profits
available for distribution, and all other financial questions or matters.
The essential books of account and such other important records as may be
designated by the Parties.
(6) The independent certified public accounting firm of or such other
independent certified public accounting firm as the parties may designate,
shall set LIP the accounts and records of the Corporation. shall audit the
accounts and certify the annual financial statements of the Corporation,
and shall resolve
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all questions of proper accounting and financial reporting. If one party
disagrees with a determination of the accounting firm, it may submit the
question to arbitration in accordance with this agreement.
(7) In the first three months of each fiscal year, the management shall prepare
the previous year's balance sheet, profit and loss statement and proposal
regarding the disposal of profits, and shall submit same to the board of
directors for examination and approval.
20. TRANSFER OF SHARES
(1) Right of First Refusal: The CTA shall not sell to unrelated third parties
any part of the common shares owned by it in the Corporation unless said
shares have first been offered to Crys-Tel at their fair market price.
Crys-Tel shall have four weeks within which to accept such offer and to pay
the full purchase price of the shares offered for sale. Crys-Tel shall have
the same obligations with respect to the CTA provided, however, that if the
CTA is unable to acquire its shares because of restrictions imposed by the
government of the Territory, then the CTA shall have the right to require
Crys-Tel to sell its shares, in accordance with the conditions expressed in
this paragraph, to persons approved by the CTA. Nothing contained in this
agreement shall be deemed to prevent Crys-Tel from selling, transferring or
assigning to any subsidiary or affiliated corporation any or all of the
shares owned by it in the Corporation.
21. DISTRIBUTION OF PROFITS
(1) Unless the parties agree otherwise, at the annual shareholders' meeting
following the close of each year, they shall cause the Corporation to
distribute to the parties, in proportion to their equity ownership, an
amount equal to 30% of the total net after-tax profits for the year less
any accumulated losses from prior years and less current contributions to
reserves approved by the Board.
(2) Upon distribution of dividends by the Corporation, or should the
Corporation be liquidated, or should Crys-Tel sell all or part of its
equity' interest in the Corporation to the CTA or some other enterprise,
the ordinary dividends, liquidation distributions or sales proceeds (as the
case may be) shall be freely transferable from the Territory to Crys-Tel in
Canadian dollars or other convertible currency, without imposition or
withholding of any taxes on the amounts transferred.
(3) Ordinary dividends, liquidation distributions and proceeds from the sale of
all or part of Crys-Tel's equity interest in the Corporation, shall be
converted into Canadian dollars prior to their transfer to Crys-Tel, at the
rate of exchange most favourable to Crys-Tel at the date of the transfer,
but not less favourable to Crys-Tel than the exchange rate applied to
Crys-Tel's capital contribution to the Corporation.
22. R & D MARKET RESEARCH
Crys-Tel may at its sole option terminate this agreement in the event that
approval is not obtained from the government of the Territory of the terms and
conditions contained in this agreement and/or any modifications thereof agreed
to by the parties within twelve months from the date of the execution of this
agreement.
23. DURATION OF CORPORATION
The duration of the joint venture is 10 years. The establishment of the joint
venture shall start from the date on which the business license of the
Corporation is issued. An application for the extension of the duration,
proposed by one party and unanimously approved by the board of directors, shall
be submitted to the six months prior to the expiry date of the joint venture.
24. LIQUIDATION OF CORPORATION UPON EXPIRATION OF DURATION
Upon the expiration of the duration or termination before the date of expiration
of the joint venture, liquidation shall be carried out according to the relevant
law. The liquidated assets shall be distributed in accordance with the
proportion of investment contributed by Crys-Tel and the CTA. 25.
Confidentiality
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(1) Confidential Information: All information other than information generally
known in the telecommunication industry or information made known by a
third party to either party other than a consequence of the relationship
between the parties supplied by or on behalf of either party pursuant to
this agreement ("Confidential Information") shall be treated as
confidential by the other party.
(2) Duty Not to Disclose: The parties covenant and agree that no Confidential
Information shall be disclosed to anyone outside the organization of such
party without the prior written consent of the other.
(3) Reasonable Efforts: The parties agree to use all reasonable efforts to take
such action as may be appropriate to prevent the unauthorized use and
disclosure of, and to keep confidential all such Confidential Information,
including:
(a) ensuring that such Confidential Information is disclosed only to
responsible employees of the party who have first been properly
instructed to maintain such Confidential Information in confidence;
(b) not disclosing to any third party the terms and conditions of this
agreement;
(c) not disclosing methods of manufacture or sale of the Products
including production and marketing plans; and
(d) safeguarding all documents against theft, damage or access by
unauthorized persons.
26. TERMINATION
(1) This agreement shall terminate upon:
(a) expiration and non-renewal of the license agreement;
(b) liquidation of the Corporation;
(c) acquisition by the CTA of Crys-Tel's equity interest in the
Corporation;
(d) mutual agreement of the parties;
(e) final decision by the arbitrators appointed pursuant to this agreement
that this agreement shall terminate; or
(f) an event which substantially prevents the Corporation from achieving
its objectives. A failure by one of the parties to fulfil its
obligations under this agreement shall be considered as an event
entitling the other party to terminate this agreement only when such
failure substantially prevents the Corporation from achieving its
objectives.
(2) The provisions of paragraphs 25 shall survive termination and continue to
bind the parties.
(3) Whether the party has terminated or has the right to terminate this
agreement shall be arbitrable issues. Therefore, notice of termination
given by one party to the other, if not accepted by the other, shall not
relieve the notifying party of its obligations to submit the question to
arbitration.
27. DISPUTE RESOLUTION
All disputes, controversy or claims arising out of or in connection with or in
relation to the contract, including any question regarding its existence,
validity or termination, shall be submitted to and be subject to the
jurisdiction of the courts of Paris, France which shall have exclusive
jurisdiction in the event of any dispute under this agreement. The parties
irrevocably submit to the jurisdiction of such courts to finally adjudicate or
determine any suit, action or proceedings arising out of or in connection with
this agreement. [Alternatively, the parties may agree to submit the matter to
arbitration in accordance with the Rules of Conciliation and Arbitration of the
International Chamber of Commerce by one or more arbitrators appointed in
accordance with the said Rules.]
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28. COSTS INCURRED FOR THIS AGREEMENT
Each party shall bear its own costs incurred in preparing and negotiating this
agreement, and obtaining government approvals. All costs incurred in taking the
formal legal steps required to establish the Corporation shall be borne by the
Corporation.
29. REPRESENTATIONS AND WARRANTIES
(1) Each party represents and warrants that it has the full legal power and
authority to enter into this agreement, and to perform its obligations
(subject only to obtaining certain governmental licenses and authorizations
as referred to in this agreement), and that this agreement when signed by
both parties will be binding and enforceable according to its terms.
(2) The CTA represents and warrants:
(a) that it has the ability to fulfil its obligations as set forth in this
agreement, and
(b) that it has not entered into a similar agreement with any other entity
for the same purposes.
30. EXCUSABLE DELAY
In case of force majeure preventing or hindering either party from performing
its obligations under this Agreement, the affected party may give written notice
to the other containing reasonable particulars of the force majeure in question
and the effect of such force majeure as it relates to the obligations of the
affected party and such force majeure shall not constitute a default, provided
that the party affected by the de- lay makes reasonable efforts to correct the
reason for such delay. Such notice shall entitle the affected party to suspend
deliveries or payments, as the case may be. For the purpose of this agreement,
"force majeure" shall mean any of the following events beyond the control of the
parties:
(a) lightning, storms, earthquakes, landslides, floods, washouts and other acts
of God;
(b) substantial or material fires, explosions, breakage of or accidents to
plant, machinery, equipment and storage of the supplier;
(c) strikes, lockouts or other industrial disturbances of the supplier;
(d) civil disturbances, sabotage, war, blockades, insurrections, vandalism,
riots, epidemics;
(e) inability to obtain supplies necessary to manufacture and package the
Products at the supplier's plants, if inability is industry wide among
similar manufacturers or inability to obtain electric power, water, fuel or
other utilities, or services necessary to operate the plants, and
(f) any other material event that could reasonably be considered to be force
majeure by reason that it is beyond the control of the party affected,
but shall not include the inability of either party to obtain financing or any
other financial inability on the part of either party.
31. ASSIGNMENT
This agreement is not assignable by either party, either directly or indirectly,
without the written consent of the other, which may be arbitrarily withheld.
32. EXTENDED MEANINGS
Words importing the singular number include the plural and vice versa and words
importing gender include all genders.
33. INTERPRETATION NOT AFFECTED BY HEADINGS
The division of this agreement into paragraphs and the insertion of headings are
for convenience of reference only and shall not affect the construction or
interpretation of this agreement.
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34. ENTIRE AGREEMENT
This Agreement constitutes the entire agreement of all the parties with respect
to the subject-matter hereof and, except as herein stated and in the instruments
and documents to be executed and delivered pursuant hereto, contains all of the
representations, undertakings and agreements of all parties hereto respecting
the subject-matter hereof. There are no representations, undertakings or
agreements of any kind between all the parties hereto respecting the
subject-matter hereof except those contained herein.
35. SEVERABILITY
The invalidity or unenforceability of any provision of this Agreement shall not
affect the validity or enforceability of any other provision.
36. NOTICES
(1) Any notice or other documents required or permitted to be given hereunder
shall be in writing and shall be delivered, mailed by pre-paid registered mail,
return receipt requested or sent by facsimile transmission addressed to the
party or parties to whom it is to be given at the ad- dress shown below or at
such other address or addresses as the party or parties to whom such writing or
document is to be given shall have last notified all other parties hereto in
accordance with the provisions of this section:
(a) if to CTA at: 151 Ramsey Street, Harberfield 2045, Sydney, Australia
(b) if to Crys-Tel at: 1390 Ottawa Avenue, West Vancouver, BC, Canada, V7T 2HS
(2) Any such notice or other document shall:
(a) if delivered, be deemed to have been given and received at the place of
receipt on the date of delivery, provided that if such date is a day other
than a business day in the place of receipt, such notice or document shall
be deemed to have been given and received at the place of receipt on the
first business day in the place of receipt, thereafter;
(b) if transmitted by facsimile transmission, be deemed to have been given and
received at the place of receipt on the next business day in the country of
receipt, following the day of sending, provided that the sender has
received telephone confirmation from the recipient of receipt of same on or
before the date transmission is deemed to have been received as above, and
(c) if mailed, be deemed to have been given and received at the place of
receipt on the date of actual receipt.
(3) In the event of postal disruption, such notices or documents must either be
delivered personally or sent by facsimile transmission.
37. AMENDMENT OF AGREEMENT
None of the terms, conditions or provisions of this agreement shall be held to
have been changed, waived, varied, modified or altered by any act or knowledge
of either party, their respective agents, servants or employees unless done so
in writing signed by both parties.
38. WAIVER OF BREACH
No waiver on behalf of any part of any breach of the provisions of this
agreement shall be effective or binding on such party unless the same shall be
expressed in writing and any waiver so expressed shall not limit or affect such
party's rights with respect to any future breach of any of the provisions.
39. FURTHER ASSURANCES
Each of the parties covenants and agrees that he, his heirs, executors,
administrators, successors and permitted assigns will execute such further
documents and do and perform or cause to be done and performed such further and
other acts as may be necessary or desirable from time to time in order to give
full effect to the provisions of this agreement.
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40. SUCCESSION AND ASSIGNS
This agreement shall be binding on and ensure to the benefit of the successors
and assigns of both pasties and all persons or corporations acquiring to or
acquiring the business now earned on by Crys-Tel or the CTA.
41. COMING INTO FORCE; EFFECTIVE DATE
(1) This agreement shall come into force after its signature on the date on
which the Parties have obtained and notified each other of receipt of all
governmental permissions, authorizations and export/import licenses
required from their respective governmental authorities in order to fulfil
all of their obligations wider this agreement; provided. however, that at
such time there is agreement between the parties as to the rate of parity
between Crys-Tel's capital contributions and the Re- public's capital
contribution and with regard to the taxation of the Corporation, during its
initial phases of operation.
(2) Each party shall use its best efforts to obtain from its own government the
authorizations, permissions and licenses required under this agreement, and
shall bear all expenses incurred therein. If this agreement has not come
into force within six months of its signature either Party may give notice
to the other of its intention to terminate if it does not come into force
within thirty days following such notice.
IN WITNESS WHEREOF. CRYS-TEL INTERNATIONAL, intended to be bound, have caused
this Agreement to be executed in duplicate originals by their duly authorized
representatives as of the day and year first written above.
For Crys-tel International For: Crys-Tel Australia
Name: Robert Papalia Name: Mariano Turrisi
Parker House Title: Managing Director
Wildley Business Park 151 Ramsey Street
Wildley Road, St. Michael Harberfield 2045
Barbados Sydney, Australia
Phone: Phone: +6129 716 6922
--------------------- ------------------
Fax: Fax: +6129 716 0223
--------------------- ------------------
Signature: /S/ Robert Papalia Signature: /S/ Mariano Turrisi
-------------------- ---------------------
01/05/1999
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TELEMATRIX
NETWORK ADMINISTRATION
AGREEMENT
This Network Administration Agreement is entered into this day of March 3,
1999. by Crys-TeI Telecommunications, Operator, with offices at #820 1140 W.
Pender St. Vancouver and TeleMatrix, a division of Chiyoda Corporation, with an
address at 1-19-11 Dogenzaka 9-10 Shibuya-kU. Tokyo 150 Japan.
WITNESSETH:
TeleMatrix and Crys-TeI currently operate and manage functioning, independent
Voice over Internet Protocol (VOIP) networks with capacity and connectivity
capable of terminating voice traffic worldwide.
Crys-TeI and TeleMatnx wish to interconnect their independent VoIP networks.
For the purpose of interconnection. Crys-Tel will deploy the necessary
equipment to the TeleMatrix Tokyo NOC.
Initially, Crys-Tel wishes to operate gateways on TeleMatrix' network, to be
managed by TeleMatrix for test purposes.
Crys-Tel and TeleMatrix are willing to grant each other a nonexclusive license
to use a portion of each other's network capacity for such purposes under the
terms and conditions contained herein.
In consideration of mutual promises and covenants hereinafter. TeleMatrix will
administer the network on behalf of Crys-Tel in accordance with the following
service, operating, and facility arrangements:
1.0 NETWORK ADMINISTRATION:
Until the networks can be tested, or until3hey are physically interconnected,
TeleMatrix will provide Call Processing Server (CPS) functions for any gateway
on the Network, specifically providing:
CALL ROUTING: TeleMatrix will determine the routing of any and all calls
transiting the Network.
CALL AUTHENTICATION: TeleMatrix will provide a means for authentication and will
issue Personal Identification Numbers (PINs) to Operator for test distribution.
CALL DETAIL RECORDS (CDR): TeleMatrix will provide complete CDR files containing
all calls for all accounts active during the prior billing period.
All Gateways, servers, routers or any other equipment that is to reside on the
Network are to be configured, maintained and managed by fully qualified staff to
the exact specifications as provided by TeleMatrix. TeleMatrix will not be
responsible for any installation, integration, configuration or upgrades of
hardware or software which constitutes any portion of the Operator's equipment,
or the equipment of any third party commissioned or contracted by the Operator.
It is agreed between the parties that all CPS functions listed above would be
managed by the Operator as soon a physical interconnect is possible in Tokyo.
2.0 PROVISIONING OF CONNECTIONS
Each party will be responsible for the provisioning of all PSTN, Internet
bandwidth connections and shall maintain adequate capacity and port availability
to accommodate this interconnection.
3.0 ANCILLARY SERVICES
Information and data need to be shared between each party's NOC. Each party
agrees that access to information regarding call routing, CDR, and other network
logs and functions will not be unduly withheld.
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NETWORK ADMINISTRATION
AGREEMENT
Each Party will be solely responsible for maintenance of their equipment.
4.0 CHARGES; BILLING AND PAYMENT
It will be each party's responsibility to bill and collect the amount due from
the other party with respect to termination costs.
Each party will submit a monthly statement of accounts outlining all amounts
due, inclusive of fees, charges, taxes which may fall under the jurisdiction of
any and all agreements to which both parties have agreed. Such statement shall
also include all appropriate CDR as transmitted electronically. All bills are
to be paid by direct bank transfer in US$ in the amount and to the account
specified. Bills are due when issued and payable within thirty (30) days. Any
dispute or request for billing adjustment shall be made within thirty (30) days
of the invoice date.
BILLING AND PAYMENT:
- - ----------------------
Parties shall pay for the Services at the rates and charges set out in the
attached Service Schedules and such other exhibits or attachments as may be
attached hereto and made a part hereof from time to time.
a) There is no security deposit required for the consummation of this
agreement. Each party reserves the right to request a deposit or to
suspend the agreement temporarily, or permanently in the event of
delayed or delinquent payment by the other party. Additionally either
party may request a deposit in the event that the terminated traffic
between the parties become increasingly disproportionate. In the event
that a security deposit is requested, either party may elect to provide
a Letter of Credit, in lieu of cash security deposit. Any Letter of
Credit must comply with the terms for a Letter of Credit as outlined
in Exhibit II
b) FRAUDULENT USAGE: Parties hereby agree to defend and indemnify each other
against any fraudulent use of Service. Any claims of fraud shall not
solely constitute valid justification for dispute of an Invoice.
Purchaser is solely responsible for all Services usage, allegedly
fraudulent or otherwise, and for all additional charges as may be
associated with such usage. Each party will monitor End-User call
activity for fraudulent use using the same procedures they use for its
own customers and in any condition of suspect fraud hereby agrees to
notify the other party immediately.
c) Rates and monthly recurring and other charges in this Agreement (and any
exhibit, attachment or schedule) at any time upon written notice to the
other party.
BILLING DISPUTES:
- - ------------------
The Parties agree that time is of the essence for payment of all Invoices.
Purchaser has the affirmative obligation of providing written notice and
supporting documentation for any good faith dispute with an Invoice ("Dispute")
within 30 Business Days after Purchaser's receipt. Purchaser shall pay alt
disputed amounts, subject to resolution of the Dispute. Parties agree to use
reasonable efforts to resolve timely Disputes within 30 Business Days after its
receipt of the Dispute notice. The Parties agree to exercise all reasonable
efforts to resolve Disputes within the time frames established herein.
5.0 TERM AND TERMINATION
The term of this agreement is one year, commencing as of the date first written
above. Either party may terminate the agreement prior to the end of the current
term by providing the other party with 60 days' prior written notice.
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NETWORK ADMINISTRATION
AGREEMENT
It is agreed that this Interconnect agreement is to include a test period which
is not to exceed 30 (thirty) days. While the test period may be concluded in
less than 30 days, both parties agree that any modifications or amendments to
this agreement will be to be completed prior to the end of the test period.
6.0 INDEMNIFICATION AND LIABILITY
Each party shall defend, indemnify, and hold harmless the other, its officers
and directors, employees, and agents from and against any and all lawsuits,
claims, demands, penalties, losses, fines, liabilities, damages, and expenses
(including attorney's fees) of any kind provided that this section shall not
apply to the extent that any injury, loss, or damage is caused by the gross
negligence or willful misconduct on the part of one specific party.
Except as expressly provided in this agreement, TeleMatrix makes no expressed or
implied representations, or warranties, including any warranties regarding
merchantability or fitness for a particular purpose.
Except as provided for above, under no circumstances shall either party be
liable to the other for special, incidental. indirect, consequential, or
similar damages.
7.0 FORCE MAJEURE
Neither party shall be responsible for delays or failures in performance
resulting from acts or occurrences beyond the reasonable control of such party,
regardless of whether such delays or failures in performance were foreseen or
foreseeable as of the date of this agreement, Including, without limitation:
fire, explosion, acts of God, war, revolution, civil commotion, or acts of
public enemies; any law, order, regulation, or ordinance of any government or
legal body; strikes; or delays caused by the other party or any circumstances
beyond the party's reasonable control. In such event, the party affected shall,
upon giving prompt notice to the other, be excused from such performance to the
extent of such interference. The affected party shall use its reasonable
efforts to avoid or remove the cause of non-performance.
8.0 ASSIGNMENT
This agreement may not be assigned by Operator except to a wholly owned
subsidiary or affiliate held under common control with Operator, without prior
written consent of both parties. TeleMatrix must receive at least 30 days to
consider such request, and agrees its consent will not be unreasonably withheld.
9.0 CONFIDENTIALITY
This agreement and all of the non-tariffed rates, terms, conditions, and other
information herein are confidential and shall not be disclosed by either party
to any other person, except as may be required by a court or government agency
acting in accordance with its jurisdiction. If either party discloses such
information to a person within said party's company on a need to know basis,
such person will be advised of the confidential and non-disclosable nature of
said information and required to abide thereby.
10.0 NOTICES
Any notice required or permitted to be given under this agreement by a party
shall be in writing and shall be delivered by hand, mail, national overnight
courier service or by fax if confirmed by telephone to the other party at the
address or phone numbers shown in Exhibit I or at such other address or phone
numbers as shall be designated from time to time.
Acknowledged as of the date first written above:
152
<PAGE>
NETWORK ADMINISTRATION
AGREEMENT
TeleMatrix
Operator
By: ____________________ By: ____________________
153
<PAGE>
<TABLE>
<CAPTION>
NETWORK ADMINISTRATION AGREEMENT
EXHIBIT I
CONTRACT NOTICES
Crys-Tel Telecommunications TeleMatrix / Chiyoda Corporation
- - ------------------------------ --------------------------------- --------------------------------
<S> <C> <C>
Contractual Notices Jim Rodgers CEO TeleMatrix / Chiyoda Corporation
Crys-Tel Telecommunications, Inc. Chiyoda Corporation
#820-1140 West Pender 1-19-11 Dogenzaka 9F
Vancouver, BC Canada Shibuya-ku, Tokyo 150-0043 JAPAN
Tel: 604-662-3667 Tel: 813-3462-7130
Fax: 604-662-3734 Fax: 813-3462-7133
Edward Yau President David Kleiman, Vice President
Crys-TeI Telecommunications Inc TeleMatrix - USA
#820-1140 West Pender 1097 Howard Street Suite #203
Vancouver, BC Canada San Francisco, CA 94103-2878
Tel: 604-662-3667 Tel: (415) 626-1090
Fax: 604-662-3734 Fax: (415) 626-1271
email: [email protected] e-mail: [email protected]
- - ------------------------------ --------------------------------- --------------------------------
INVOICING AND ACCOUNTS PAYABLE
- - ------------------------------ --------------------------------- --------------------------------
Invoicing and Anthony Papalia Mere Higuchi and Darcie Anderson
Accounts Payable Crys-Tel Telecommunications Inc Chiyoda Corporation
#820-1140 West Pender 1-19-11 Dogenzaka 9F
Vancouver, BC Canada Shibuya-ku, Tokyo 150-0043 JAPAN
Tel: 604-662-3667 Tel: 81 3-3462-7130
Fax: 604-662-3734 Fax: 813-3462-7133
email: [email protected] e-mail: [email protected]
- - ------------------------------ --------------------------------- --------------------------------
CORPORATE COMMUNICATIONS
- - ------------------------------ --------------------------------- --------------------------------
CORPORATE COMMUNICATIONS Edward Yau President David Kleiman, Vice President
Crys-TeI Telecommunications Inc 1097 Howard Street Suite #203
#820-1140 West Pender San Francisco, CA 94103-2878
Vancouver, BC Canada Tel: (415) 626-1090
Tel: 604-662-3667 Fax: (415) 626-1271
Fax: 604-662-3734 e-mail: [email protected]
email: [email protected]
- - ------------------------------ --------------------------------- --------------------------------
Technical Contacts
- - ------------------------------ --------------------------------- --------------------------------
Technical Contacts Edward Yau President Kaoru Yamada
Crys-Tel Telecommunications Inc TeleMatrix
#820-1140 West Pender 1-19-11 Dogenzaka 9F
Vancouver, BC Canada Shibuya-ku, Tokyo 150 JAPAN
Tel: 604-662-3667 Tel: 813-3462-7409
Fax: 604-662-3734 Cellular: 8160-126-8206
Contact #1 email: [email protected] Email: [email protected]
David Kleiman, Vice President
TeIe Matrix - USA
1097 Howard Street Suite #203
San Francisco, CA 94103-2878
Tel: (415) 626-1090
Fax: (415) 626-1271
Cellular: (415) 307-1692
Contact #2 e-mail: [email protected]
- - ------------------------------ --------------------------------- --------------------------------
</TABLE>
154
<PAGE>
NETWORK ADMINISTRATION AGREEMENT
EXHIBIT II
LETTER OF CREDIT INSTRUCTIONS
-----------------------------
Customer agrees that the terms and conditions set forth below are some of those
terms and conditions required to be contained in the Letter of Credit as
required prior to the effectiveness of the Agreement.
1. The Letter of Credit is to be issued and advised by a bank acceptable to
the creditor, in its sole determination, and may be required to be confirmed by
a bank chosen by the creditor, in its sole determination. The Letter of Credit
must be written in the English language and should be transmitted by
swift/tested telex.
2. The Letter of Credit is to be drawn in irrevocable form and subject to
the Uniform Customs and Practice for Documentary Credits, as published and
updated from time to time by the International Chamber of Commerce.
3. The beneficiary shall be shown to be:
4. The Letter of Credit is to be transferable and the proceeds of the Letter
of Credit are assignable.
5. The Letter of Credit is to be negotiable at the counter of any Japanese,
or U.S. bank.
6. The Letter of Credit shall be a clean standby Letter of Credit. The Letter
of Credit shall be payable at sight simply at the presentation of the
creditor's draft if accompanied by the creditor's signed and dated statement
containing one of the following representations:
(i) "The undersigned, an authorized officer of [name of Creditor]
hereby certifies that [name of Purchaser] has not paid invoice(s) for [name of
Creditor] telecommunications services; that written notice has been given to
[name of Purchaser]: that payment has not been received from [name of Purchaser]
or other source, and the subject payment is now seven (7) or more calendar days
past the due date" or
(ii) "The undersigned, an authorized officer of (name of Creditor]
hereby certifies that, although all or a portion of (name of Purchaser's)
indebtedness has been paid, the payment, or a potion thereof, was paid within
ninety (90) days of a petition filed by or against [name of Purchaser's) under
the Bankruptcy Code or a general assignment for the benefit of [name of
Purchaser's] creditors."
7. The invoice shall not be required to be approved by Customer.
8. The Letter of Credit shall be payable in U.S. currency.
9. The Letter of Credit shall be payable in full or a partial drawing. The
failure to make a drawing for a payment shall not, in and of itself, result in
the Letter of Credit ceasing to be available for future drawings. The Letter of
Credit shall state that it shall be replenished up to the full initial stated
amount each time there is a draw on the Letter of Credit.
10. The Letter of Credit shall state that all banking charges inside and
outside Japan, or the U.S. (including those of the issuing bank) are for the
sole account of the Account Party - the Purchaser. Such charges shall include
without limitation those charges for issuance, advising, amendment, transfer,
payment, assignment, confirmation and cancellation, and communication of all of
the same.
12. The expiration date shall be determined by the creditor and shall be no
less than fourteen months after the Effective Date of the Agreement. The
creditor may request Purchaser, and
155
<PAGE>
NETWORK ADMINISTRATION AGREEMENT
EXHIBIT II
Purchaser shall comply, to extend or renew the Letter of Credit for an
additional period of time.
INVOICE AND DEMAND
------------------
Demand for Payment Under
[Letter of Credit Bank]
Letter of Credit No._______
[Full Name of Letter of Credit Bank]
[Full Address of Letter of Credit Bank)
Ladies and Gentlemen:
The undersigned, [the creditor], hereby demands payment under the
above-referenced Letter of Credit, and in connection therewith, certifies as
below. Any capitalized terms used herein and not defined herein shall have the
respective meanings set forth in such Letter of Credit.
[SELECT ONE OF THE TWO OPTIONS BELOW AND DELETE THE OTHERJFILL IN CUSTOMERNAME
AS INDICATED]
[1. The undersigned, an authorized officer of [name of Creditor] hereby
certifies that (name of Purchaser] has not paid invoice(s) for [name of
Creditor] telecommunications services: that written notice has been given
to [name of Purchaser]; that payment has not been received [name of Purchaser]
or other source, and the subject payment is now seven (7) or more calendar
days past the due date] or
[1. The undersigned, an authorized officer of [name of Creditor] hereby
certifies that, although all or a portion of [name of Purchaser's] indebtedness
has been paid, the payment, or a portion thereof, was paid within ninety (90)
days of a petition filed by or against [name of Purchaser's) under the
Bankruptcy Code or a general assignment for the benefit of [name of Purchaser]
creditors.
2. Payment of U.S. S________ is hereby demanded by [name of Creditor]
under the Letter of Credit. Please remit payment of such amount in immediately
available funds in accordance with the Letter of Credit and as set forth below:
Remittance Instructions:
- - -------------------------
[Name of the creditor's designated bank]
[Account and wire/swift instructions]
IN WITNESS WHEREOF, [name of Creditor] has executed and delivered this Invoice
and Demand as of the___, day of ___, 19___.
By: ________________________
Name: ______________________
Title: _____________________
156
<PAGE>
<TABLE>
<CAPTION>
International Termination Rates
Code Country Rate
- - ---- -------------- -------
<C> <S> <C>
81 Japan $0.1000
82 Korea $0.1800
86 China $0.3400
852 Hong Kong $0.2850
886 Taiwan $0.1800
604 Vancouver, CA $0.035
</TABLE>
157
<PAGE>
HEADS OF AGREEMENT
RECITALS:
- - ---------
Whereas, Kaiden S.A., Galerie St.-Francois 8 - P.O. Box 2224 - CH - 1002,
Lausanne, Switzerland owns seventy-five per cent (75%) of Crys-Tel
International, Inc. (hereinafter "CT"), and
Whereas, Pacrim Information Systems, Inc.,1390 Ottawa Avenue, West Vancouver,
British Columbia, Canada, V7T 2H5 owns twenty-five per cent (25%) of CT, and
Whereas, Crys-Tel Telecomniunications.com, Inc., a Florida corporation trading
on the NASD Electronic Bulletin Board under the proposed symbol CCOM,
(hereinafter "CCOM") shall acquire the after tax cash flow of CT by means of CT
directing all income streams from Barbados and from its wholly owned Alberta
subsidiary Crys-Tel Telecommunications, Inc. and from a thirty per cent joint
venture named Crys-Tel Italia S.P.A. and all other income streams to CCOM, and,
Whereas, CCOM has one million free trading shares issued and shall allot a
further one million five hundred thousand no par value common shares with s.
144 legend attached as well as seven million five hundred thousand preference
shares to acquire the after tax income stream of CT.
NOW, THEREFORE, IN CONSIDERATION OF TEN DOLLARS, THE COVENANTS HEREIN AND OTHER
GOOD AND VALUABLE CONSIDERATION, THE RECEIPT OF WHICH IS HEREBY ACKNOWLEDGED,
the parties hereto agree as follows:
EXCHANGE OF PROMISES
- - ----------------------
1.) This Heads of Agreement shall be replaced by a more comprehensive and
detailed agreement as soon as all counsel are available to create same.
However, this clause in no way detracts from the legal and binding
nature of this Heads of Agreement. The more comprehensive and detailed
agreement shall add relevant covenants and warranties yet not detract
from the basic contract and understanding between the parties hereto.
2.) CT shall be caused by its shareholders Kaiden and Pacrim to assign one
hundred per cent (1 000/a) of its after tax income stream from its
Barbados, Alberta, Italian and all other worldwide operations to CCOM
in consideration of one million five hundred thousand no par value
common shares, subject to s. 144 restrictions and seven million five
hundred thousand preferred shares of CCOM
TERMS AND CONDITIONS
- - ----------------------
1.) The seven million five hundred thousand preferred shares shall be
convertible into no par value common shares pursuant to the following
formula:
(a) on a quarterly basis, beginning January 1, 1.999, one U.S.
dollar of after tax earnings stream received by CCOM shall entitle but not
oblige preferred shareholders to convert one preference share to one no par
value common share, subject to s. 144 restrictions.
158
<PAGE>
2) The income stream is generated from an International Business Corporation
domiciled in Barbados, West Indies (CT) whereby income tax of 2.5%
and then diminishing rates are payable and this income stream is free
from Internal Revenue Service attribution rules.
3.) Upon execution of this agreement by Pamela Wilkinson, President of CCOM,
Interwest Transfer Co., Inc. 1981 E. 4800 South, Suite 100, Slat lake
City, Utah, USA 48117, shall be directed to issue share certificates as
directed by the Vendors, Kaiden and Pacrim.
4.) Upon shares being issued as outlined in section three hereto, James N.
Rodgers shall accept the Position of President of CCOM and issue a News
Release, a draft copy of which is attached hereto.
GENERALITIES
- - ------------
1.) All parties hereto warrant and represent that they have full authority
to enter into a final agreement consistent with this Heads of Agreement.
2.) All parties agree to Issue a News Release outlining the terms and
conditions herein, a description of the business of CT, the election of
a new President and the share structure of CCOM after execution of this
Heads of Agreement.
KAIDENS S.A. PACRIM INFORMATION SYSTEMS
- - ------------------------------ -----------------------------
BY ITS AUTHORIZED SIGNATORY BY ITS AUTHORIZED SIGNATORY
PROGRESSIVE GENERAL CORPORATION
(to be named Crys-Tel Telecommunications com, Inc.)
- - ------------------------------
BY ITS AUTHORIZED SIGNATORY
DATED FOR REFERENCE THIS 19 DAY OF NOVEMBER, 1998.
159
<PAGE>
PREFERRED SHARE CONSOLIDATION AND CONTROL BLOCK
RESOLUTION
CORPORATE RESOLUTION TO EFFECT A SHARE CONSOLIDATION AND CONTROL BLOCK
DESIGNATION
Crys*Tel Telecommunications.com. Inc
------------------------------------
COMPANY NAME (SECURITIES NAME)
Preferred and Common
--------------------
CLASS OF STOCK
Whereas, preferred shareholders Kaiden S.A. and Pacrim Information Systems Inc.
are consolidating their conversion rights from preferred stock to common stock
on a six for one basis. (6 for 1);
Whereas, the issued and outstanding preferred shares will be 7,500,000 resulting
in a maximum of 7,500,000 common shares being issued upon conversion.
Resolved, that Interwest Transfer Co. Inc., P.O. Box 17136, Salt Lake City,
Utah, U.S.A. 84117, a Utah corporation, sole Transfer Agent for the above Class
of stock for the above company, is authorized by the company to do the
following;
1. Share certificates 2004, 2005, 2006, 2007, 2008, 2009, 2011, 2012, 2013,
2014, 2015 as well as the shares of Phlox Investments Ltd. and Redoubt
Holdings Ltd. are deemed to be a control block and should be legend
stamped 144 restriction.
2. The board of directors and majority shareholders hereby direct the
Transfer Agent Interwest to so legend the shares as described in
paragraph one hereof
3. The board of directors and majority shareholders hereby deem it to be in
the best interest of the company to rescind the stop transfer order on
the stock certificates of Phlox Investments Ltd. and Redoubt Holdings
Ltd. subject to placing a 144 legend thereon.
Be it so resolved on the 31st day of March 1999 by consent of the board of
directors and majority shareholders.
160
<PAGE>
We, the undersigned qualified directors and shareholders of the above named
company, do hereby indemnity, lnterwest Transfer Co. Inc and their employees
against any and all action taken by the above company and certify that this a
true copy of a resolution set forth and adopted on thc below date and that the
said resolution has not been in any way rescinded, annulled or revoked but the
same is still in full force and effect.
/s/ James N. Rodgers
------------------ ----------- ------------
James N. Rodgers Edward Yau Mike Hanson
-------------------- ------------- ------------------
Anthony J. Papalia Edward Nixon Benjamin Englisch
-----------------------------------
Pacrim Information Systems, Inc.
------------
Kaiden S.A.
DATED: March 31, 1999
161
<PAGE>
We, the undersigned qualified directors and shareholders of the above named
company, do hereby indemnity, lnterwest Transfer Co. Inc and their employees
against any and all action taken by the above company and certify that this a
true copy of a resolution set forth and adopted on thc below date and that the
said resolution has not been in any way rescinded, annulled or revoked but the
same is still in full force and effect.
/s/ James N. Rodgers
------------------ ----------- ------------
James N. Rodgers Edward Yau Mike Hanson
-------------------- ------------- ------------------
Anthony J. Papalia Edward Nixon Benjamin Englisch
/S/
-----------------------------------
Pacrim Information Systems, Inc.
------------
Kaiden S.A.
DATED: March 31, 1999
162
<PAGE>
We, the undersigned qualified directors and shareholders of the above named
company, do hereby indemnity, lnterwest Transfer Co. Inc and their employees
against any and all action taken by the above company and certify that this a
true copy of a resolution set forth and adopted on thc below date and that the
said resolution has not been in any way rescinded, annulled or revoked but the
same is still in full force and effect.
/s/ James N. Rodgers
------------------ ----------- ------------
James N. Rodgers Edward Yau Mike Hanson
-------------------- ------------- ------------------
Anthony J. Papalia Edward Nixon Benjamin Englisch
Pacrim Information Systems, Inc.
-----------------------------------
/S/ Kaiden S.A.
------------
Kaiden S.A.
DATED: March 31, 1999
163
<PAGE>
We, the undersigned qualified directors and shareholders of the above named
company, do hereby indemnity, lnterwest Transfer Co. Inc and their employees
against any and all action taken by the above company and certify that this a
true copy of a resolution set forth and adopted on thc below date and that the
said resolution has not been in any way rescinded, annulled or revoked but the
same is still in full force and effect.
/s/ James N. Rodgers
------------------ ----------- ------------
James N. Rodgers Edward Yau Mike Hanson
/S/ Edward Nixon
-------------------- ------------- ------------------
Anthony J. Papalia Edward Nixon Benjamin Englisch
/S/
-----------------------------------
Pacrim Information Systems, Inc.
/S/ Kaiden S.A.
------------
Kaiden S.A.
DATED: March 31, 1999
164
<PAGE>
[Company Logo omitted]
INTERNET SERVICES AND CO-LOCATION AGREEMENT
Please read this Internet Services and Co-Location Agreement (this "Agreement")
carefully before signing, since by signing this Agreement, you consent to all of
its terms and conditions. This Agreement is made by and between AboveNet
Communications, Inc. ("AboveNet") and Customer. This Agreement is effective
upon AboveNet's acceptance as indicated by its signature below on the date below
(the "Effective Date"). This Agreement may be executed in two or more
counterparts, each of which will deemed an original, but all of which together
shall constitute one and the same instrument.
Customer Signature /s/ Anthony J. Papalia Customer ID#
------------------------- -----------
(print name) Anthony J. Papalia Contract No. C
-------------------- -----------
Title Secretary Effective Date
--------- -----------
Date May 10th 99 AboveNet Signature
Company Name CRYS-TEL Telecommunications.Com, Inc. (print name)
Address 820 - 1140 West Pender St.
---------------------------------
Vancouver, BC, Canada, V6E-1GL
---------------------------------
Phone 604/662-3667
---------------------------------
Fax 604/662-3434
---------------------------------
- - --------------------------------------------------------------------------------
Thank you for choosing AboveNet to provide your Internet co-location services.
As used in this Agreement, the term "you" and "Customer" refers to the
above-named corporation, partnership or other business entity that enters into
this Agreement, and "Service" means the transmission of data to and from the
Internet through the network of routers, switches and communication channels
owned and controlled by AboveNet ("Network") together with co-location services
including 24x7 connectivity to the Internet and Co-Location Space, as further
defined in this Agreement and in your Order for AboveNet Services Form (the
"Order Form"). The initial Order Form is attached to this Agreement as Exhibit
-------
A. AboveNet and Customer may enter into subsequent Order Forms, which may
supercede or complement prior Order Forms. As used in this Agreement, the term
"Customer Equipment" refers to any and all computer equipment, software,
networking hardware or other materials placed by or for Customer in the
Co-Location Space, other than AboveNet Equipment.
- - --------------------------------------------------------------------------------
AboveNet will begin installation, initiation and Service after it receives and
accepts: (1) your Order Form; (2) a copy of this Agreement signed by your
authorized representative and (3) payment of amounts due under Section 1.1
below, detailed on your Order Form.
1. SERVICE FEES AND BILLING. Customer agrees to pay the Service Activation
Charges, Monthly Service Fees, and other fees indicated on the Order Form
(collectively, "Service Fees").
1.1 ACTIVATION CHARGES. AboveNet will bill Customer for all Service
Activation Charges and first and last month Service Fees (the
"Activation Charges") upon AboveNet's acceptance of this Agreement and
the Order Form. Above Net will not commence installation, initiation
and Service unless and until it either has received payment in full of
all Activation Charges or has agreed, at its sole option, to extend
credit to Customer.
1.2 RECURRING FEES. AboveNet will begin billing for recurring Service Fees
on the date that it is the earlier of: (a) the Installation Date
specified in the Order Form; and (b) the date that Customer places
Customer Equipment in AboveNet's premises. If, however, Customer is
unable to use the Services commencing on the Installation Date solely
as a result of delays caused by AboveNet, then the Installation Date
specified in the Order Form shall be extended one day for each day of
delay caused by AboveNet. On or about the
165
<PAGE>
first day of each month, AboveNet will bill Customer for Network
services provided during the previous month, and for co-location
services to be provided in the current month. Recurring Service Fees
do not include monthly telephone company charges which are billed
separately by the local telephone company(s).
1.3 PAYMENT. All Fees and charges will be due, in U.S. dollars, within
twenty (20) days of the date of each AboveNet invoice. Late payments
will accrue interest at a rate of one and one-half percent (1 1/1%)
per month, or the highest rate allowed by applicable law, whichever is
lower. If in its judgment AboveNet determines that Customer lacks
financial resources, AboveNet may, upon written notice to Customer,
modify the payment terms to secure Customer's payment obligations
before providing Services.
1.4 TAXES. All payments required by this Agreement are exclusive of
applicable taxes and shipping charges. Customer will be liable for and
will pay in full all such amounts, other than taxes based on AboveNet
net income.
2. CO-LOCATION.
2.1 INSTALLATION. AboveNet grants you the right to operate Customer
Equipment at the Co-location Space, as specified on your Order Form.
The Co-location Space is provided on an "AS-IS" basis and you may use
the Co-location Space only for purposes of maintaining and operating
Customer Equipment as necessary to support local access communications
facilities and links to AboveNet and to third parties. Customer will
install Customer Equipment in the Co-location Space after obtaining
the appropriate authorization from AboveNet to access AboveNet
premises. Customer will remove and be solely responsible for all
packaging for Customer Equipment.
2.2 ACCESS. You may access the Co-location Space only in accordance with
the AboveNet Co-location Access Policies located at
http://www.above.net/html/security.html, as updated from time to time.
---------------------------------------
Customer may not provide or make available to any third party any
portion of the Co-location Space without AboveNet's prior written
consent, which consent AboveNet may withhold in its sole discretion.
2.3 REMOVAL OF CUSTOMER EQUIPMENT. Customer will provide AboveNet with
written notification two (2) days before Customer wishes to remove any
Customer Equipment. Before authorizing the removal of any Customer
Equipment, AboveNet's accounting department will verify that Customer
will remove such Customer Equipment, and will be solely responsible to
bring appropriate packaging and moving materials. Should Customer use
an agent or other third party (for example, but without limitation, a
common carrier such as U.P.S.) to remove Customer Equipment, Customer
will be solely responsible for the acts of such party, and any damages
caused by such party to Customer Equipment or otherwise. At Customer's
option, AboveNet will remove and package Customer Equipment, and place
such Customer Equipment in a designated area for pick-up, on the
condition that Customer either provides all packaging needed or pays
AboveNet to package Customer Equipment Customer may thereafter remove
Customer Equipment from the designated area, or may arrange for a
carrier to remove and ship such equipment with any necessary insurance
to be paid by Customer.
3. SECURITY. AboveNet does not guarantee security of Customer Equipment, the
Co-Location Space or of the Network. AboveNet requires that you and your
employees comply with all Co-Location Security Procedures, as modified from
time to time, in order to maximize the security of the Network and AboveNet
premises. AboveNet's current Co-Location Security Procedures are located at
http://www.above.net/html/security.html. In particular, you must establish
---------------------------------------
a password with AboveNet for purposes of requesting any support services
with respect to Customer Equipment or your Network connection, either by
telephone or email. Information detailing password requirements is
available on the World Wide Web at http://www.above.net/html/aug.html. Only
----------------------------------
individuals whom you have identified as "Customer Representatives" in
writing to AboveNet will be permitted to enter the Co-Location Space, to
request Services on your behalf, or to request any support services with
respect to Customer Equipment or your Network connection, either by
telephone or email (for example, but without limitation, instructing
AboveNet to modify or reconfigure its Services or to remove Customer
Equipment). For good cause, AboveNet may suspend the right of any Customer
Representative or other person to visit the AboveNet premises and/or the
Co-Location Space. AboveNet will assist in Network security breach
detection or identification, but shall not be liable for any inability,
failure or mistake in doing so.
4. LOCAL AND LONG DISTANCE CARRIERS. AboveNet will provide Customer with a
list of approved third party carriers for data communications and
telecommunications. Customer is responsible for ordering all local and
long-distance lines from such third party carriers and ordering any and all
necessary cross-connects from AboveNet. AboveNet Service Fees for Customer
will be solely responsible for such circuits and for all payments due to
the carriers. Customer will notify the carrier directly when Customer
wishes to terminate or modify such circuit.
5. DOMAIN INFORMATION AND REGISTRATION APPLICATION. If Customer has not
registered the domain name that it wishes to use, Customer may complete the
applicable sections of the Order Form to request registration or a change
in domain name.
166
<PAGE>
6. OTHER NETWORKS; APPROVAL AND USAGE. Services include the ability to
transmit data beyond AboveNet's Network, through other networks, public and
private. Use of or presence on other networks may require approval of the
respective network authorities and will be subject to any acceptable usage
policies such networks may establish. Customer will not hold AboveNet
responsible for, and AboveNet will not be liable for, such approval or for
violation of such policies. Customer understands that AboveNet does not own
or control other networks outside of its Network, and AboveNet is not
responsible or liable for performance (or non-performance) within such
networks or within Interconnection points between the Service and other
networks that are operated by third parties.
7. RESALE. Customer may resell the Service after receiving AboveNet's prior
written approval as to the nature and scope of such resale as set forth in
Section 2.2. Should Customer resell any portion of the Service to any other
party, Customer assumes all liabilities arising out of or related to such
third party sites and communications. Customer agrees to enter into written
agreements with any and all parties to which it resells any portion of the
Services with terms and conditions at least as restrictive and as
protective of AboveNet's rights as the terms and conditions of this
Agreement, including, without limitation, Sections 2.3, 3, 6, 8, 9.6-9.8,
10, 11, 12, 14 and 16, and naming AboveNet as a third party beneficiary.
8. ACCEPTABLE USE GUIDELINES. Customer must at all times conform its use of
the Service to AboveNet's Acceptable Use Guidelines and Anti-SPAM Policy,
as AboveNet may update such Guidelines and Policy from time to time. The
current version of AboveNet's Acceptable Use Guidelines can be found at
http://www.above.net/html/aug.html. AboveNet's Anti-SPAM Policy is located
---------------------------------------
at http://www.above.net/html/anti-spam.html. If AboveNet is informed by
---------------------------------------
government authorities or other parties of inappropriate or illegal use of
AboveNet's facilities (including but not limited to the Network) or other
networks accessed through AboveNet, or AboveNet otherwise learns of such
use or has reason to believe such use may be occurring, then Customer will
cooperate in any resulting investigation by AboveNet or government
authorities. Any government determinations will be binding on Customer. If
Customer fails to cooperate with any such investigation or determination,
or fails to immediately rectify any illegal use, AboveNet may immediately
suspend Customer's Service. Further, upon notice to Customer, AboveNet may
modify or suspend Customer's Service as necessary to comply with any law or
regulation as reasonably determined by AboveNet. This includes, without
limitation, any use contrary to the Digital Millennium Copyright Act of
1998. 17 U.S.C. 512.
9. LIMITED SERVICE LEVEL WARRANTY. AboveNet warrants that it will use its
commercially reasonable efforts to minimize Excess Packet Loss and Latency,
and to avoid Downtime, and that AboveNet will provide the following
remedies to Customer: (Excess Packet Loss, Latency and Downtime are defined
below)
9.1 PACKET LOSS AND LATENCY. AboveNet does not proactively monitor the
packet loss or transmission latency of specific customers, AboveNet
does, however, proactively monitor the aggregate packet loss and
transmission latency within its LAN and WAN. In the event that
AboveNet discovers (either from its own efforts or after being
notified by Customer) that Customer is experiencing packet loss in
excess of five percent (5%) ("Excess Packet Loss") or transmission
latency in excess of 120 milliseconds round-trip time based on
AboveNet's measurements ("Latency") between any two routers within the
continental United States portion of the Network on average for each
hour, and Customer notifies AboveNet (or AboveNet has notified
Customer), then AboveNet will use its commercially reasonable actions
to determine the source of the Excess Packet Loss or Latency and
correct the problem.
9.2 REMEDY FOR FAILURE. If either Excess Packet Loss or Latency occurs and
it stems from a source within the Network and not from the Customer or
beyond the Network, and if AboveNet fails to correct the Excess Packet
Loss or Latency after using its commercially reasonable efforts for a
period of twenty four (24) hours after the onset of such Excess Packet
Loss or Latency, then AboveNet will credit Customer's account the
pro-rata Bandwith Fees (as set forth in the applicable Order Form) for
the continuous duration of such Excess Packet Loss or Latency,
provided that all such credits will not exceed an aggregate maximum
credit of Bandwith Fees otherwise due from Customer for one (1)
calendar month for failures in any one (1) calendar month.
9.3 INABILITY TO ACCESS THE INTERNET (DOWNTIME). AboveNet will use its
commercially reasonable efforts to avoid Downtime for 99.9% of the
hours as an average calculated over each calendar year. If Customer is
unable to transmit and receive information from the Network to other
portions of the Internet because AboveNet failed to provide Network
access Services ("Downtime") for more than four (4) continuous hours,
then AboveNet will credit Customer's account the pro-rata Bandwith
Fees (as set forth in the applicable Order Form) for the aggregate
maximum credit of Bandwith Fees otherwise due from Customer for one
(1) calendar month for failures in any one (1) calendar month. For
purposes of the foregoing, "unable to transmit and receive" shall mean
sustained packet loss in excess of fifty percent (50%) based on
AboveNet's measurements.
9.4 YEAR 2000 . AboveNet hereby incorporates its Year 2000 Compliance
Disclosure found at http://www.above.net/html/y2k.html into this
----------------------------------
Agreement. If Customer experiences any Excess Packet Loss, Latency or
Downtime due to AboveNet's failure to be Year 2000 compliant (as
defined in the Year 2000
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Compliance Disclosure), Customer will have the remedies set forth in
this Section 9, and the limitations set forth in this Section 9,
Section 11 and the Year 2000 Compliance Disclosure. The Year 2000
Compliance Disclosure, as incorporated into this Agreement, is
provided as a "Year 2000 Readiness Disclosure" as defined in the Year
2000 Information and Readiness Disclosure Act of 1998 (Public Law
105-271, 112 Stat. 2386; enacted on October 19, 1998.
9.5 CUSTOMER MUST REQUEST CREDIT. Customer must notify AboveNet within
three (3) business days from the time Customer becomes eligible to
receive a credit under this Section 9 to receive such credit. Failure
to comply with this requirement will forfeit Customer's right to
receive a credit.
9.6 LIMITATION ON REMEDIES. If Customer is entitled to multiple credits
under this Section 9, such credits shall not be cumulative beyond a
total of credits for one (1) calendar month of Bandwidth Fees in any
one (1) calendar month in any event. AboveNet will not apply a credit
under Section 9.2 for any Excess Packet Loss or Latency for which
Customer received a credit under Section 9.3. AboveNet will only apply
a credit to the month in which the incident occurred. Further,
AboveNet will not apply a credit for any period in which Customer
received any bandwidth Services free of charge. Sections 9.2 and 9.3
above state Customer's sole and exclusive remedy for any failure by
AboveNet to provide Services or adequate Service levels, including but
not limited to any outages or Network congestion. AboveNet's blocking
of data communications in contravention of its Anti-SPAM Policy or
Acceptable Use Guidelines shall not be deemed to be a failure of
AboveNet to provide adequate Service levels under this Agreement.
9.7 NO OTHER WARRANTY. Except for the express warranty set out in this
Section 9 above, the Services are provided on an "AS IS" basis, and
Customer's use of the Services is at its own risk. AboveNet does not
make, and hereby disclaims, any and all other express and implied
warranties, including, but not limited to, warranties or
merchantability, fitness for a particular purpose, noninfringement and
title, and any warranties arising from a course of dealing, usage, or
trade practice. AboveNet does not warrant that the Services will be
uninterrupted, error-free, or completely secure.
9.8 DISCLAIMER OF THIRD PARTY ACTIONS AND CONTROL. AboveNet does not and
cannot control the flow of data to or from the Network and other
portions of the Internet. Such flow depends in large part on the
performance of Internet services provided or controlled by third
parties. At times, actions or inactions caused by these third parties
can produce situations in which AboveNet customers' connections to the
Internet (or portions thereof) may be impaired or disrupted. Although
AboveNet will use commercially reasonable efforts to take actions it
deems appropriate to remedy and avoid such events. AboveNet cannot
guarantee that they will not occur. Accordingly, AboveNet disclaims
any and all liability resulting from or related to such events.
10. INSURANCE. Customer will keep in full force and effect during the term of
this Agreement: (i) business loss and interruption insurance in an amount
not less than that necessary to compensate Customer and its customers for
complete failure of Service; (ii) comprehensive general liability insurance
in an amount not less than one (1) million dollars per occurrence for
bodily injury and property damage; (ii) employer's liability insurance in
an amount not less than one (1) million dollars per occurrence; and (iii)
workers' compensation insurance in an amount not less than that required by
applicable law. Customer also agrees that it will be solely responsible for
ensuring that its agents (including contractors and subcontractors)
maintain other insurance at levels no less than those required by
applicable law and customary in Customer's and its agents' industries.
Prior to installation of any Customer Equipment in the Co-location Space or
otherwise as AboveNet may request, Customer will furnish AboveNet with
certificates of insurance which evidence the minimum levels of insurance
set forth above. Customer agrees that prior to the installation of any
Customer Equipment at AboveNet premises or the Co-location Space, Customer
will cause its insurance provider(s) to name both AboveNet and the AboveNet
landlord indicated on the applicable Order Form as additional insured and
notify AboveNet in writing of the effective date of such coverage. Customer
agrees that Customer and its representatives shall not pursue any claims
against AboveNet for any liability AboveNet may have under or relating to
this Agreement unless and until Customer or Customer's employee, as
applicable, first makes claims against Customer's insurance provider(s) and
such insurance provider(s) finally resolve(s) such claims. Any inability by
Customer to furnish the proof the insurance required under this Section 10
or failure to obtain such insurance shall be a material breach of this
Section 10 and of this Agreement.
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11. LIMITATIONS OF LIABILITY:
11.1 PERSONAL INJURY. Each Customer Representative and any other persons
visiting AboveNet facilities does so at his or her own risk and
AboveNet shall not be liable for any harm to such persons resulting
from any cause other than AboveNet's gross negligence or willful
misconduct resulting in personal injury to such persons during such a
visit.
11.2 DAMAGE TO CUSTOMER BUSINESS. Except as expressly set forth in Section
9 including the limited remedy and other limitations set forth under
Section 9, in no event will AboveNet be liable to Customer, any
Customer Representative, or any third party for any claims arising out
of or related to Customer's business, Customer's customers or clients,
Customer Representative's activities at AboveNet or otherwise, or for
any lost revenue, lost profits, replacement goods, loss of technology,
rights or services, incidental, punitive, indirect or consequential
damages, loss of data, or interruption or loss of use of Service or of
any Customer's business, even if advised of the possibility of such
damages, whether under theory of contract tort (including negligence),
strict liability or otherwise.
11.3 DAMAGE TO CUSTOMER EQUIPMENT. AboveNet assumes no liability for any
damage to, or loss of, any Customer Equipment resulting from any cause
other than AboveNet's gross negligence or willful misconduct. To the
extent AboveNet is liable for any damage to, or loss of, the Customer
Equipment for any reason, such liability will be limited solely to the
then current value of the Customer Equipment and further subject to
the limitations set forth in this Section 11.3 and in Section 11.4
below. In no event will AboveNet be liable to Customer, any Customer
Representative, or any third party for any claims arising out of or
related to Customer Equipment for any lost revenue, lost profits,
replacement goods, loss of technology, rights or services, incidental,
punitive, indirect or consequential damages, loss of data, or
interruption or loss of use of any Customer Equipment, even if advised
of the possibility of such damages, whether under theory of contract,
tort (including negligence), strict liability or otherwise.
11.4 MAXIMUM LIABILITY. Notwithstanding anything to the contrary in this
Agreement, AboveNet's maximum aggregate liability to Customer related
to or in connection with this Agreement will be limited to the total
amount paid by Customer to AboveNet hereunder for the Twelve (12)
month period prior to the event or events giving rise to such
liability.
12. DEFENSE OF THIRD PARTY CLAIMS AND INDEMNIFICATION.
12.1 DEFENSE. Customer will defend AboveNet, its directors, officers,
employees, affiliates and customers (collectively, the "Covered
Entities") from and against any and all claims, actions or demands
brought by or against AboveNet and/or any of the Covered Entities
alleging: (a) with respect to the Customer's business: (i)
infringement or misappropriation of any intellectual property rights;
(ii) defamation, libel, slander, obscenity, pornography, or violation
of the rights of privacy or publicity; or (iii) spamming, or any other
offensive, harassing or illegal conduct or violation of the Acceptable
Use Guidelines or Anti-Spam Policy; (b) any damage or destruction to
the Co-location Space, the Network, AboveNet premises, AboveNet
Equipment or to any other AboveNet customer which damage is caused by
or otherwise results from acts or omissions by Customer, Customer
Representative(s) or Customer's designees; (c) any personal injury or
property damage to any Customer employee, Customer Representative or
other Customer designee arising out of such individual's activities
related to the Services, unless such injury or property damage is
caused solely by AboveNet's gross negligence or willful misconduct; or
(d) any other damage arising from the Customer Equipment or Customer's
business (collectively, the "Covered Claims").
12.2 INDEMNIFICATION. Customer hereby agrees to indemnify AboveNet and each
Covered Entity from and against all damages, costs, and fees awarded
in favor of third parties in each Covered Claim, and Customer will
indemnify and hold harmless AboveNet and each Covered Entity from and
against any and all claims, demands, liabilities, losses, damages,
expenses and costs (including reasonable attorneys (fees)
(collectively, "Losses") suffered by AboveNet and each Covered Entity
which Losses result from or arise out of a Covered Claim.
12.3 NOTIFICATION. Customer will provide AboveNet with prompt written
notice of each Covered Claim of which Customer becomes aware, and, at
AboveNet's sole option, AboveNet may elect to participate in the
defense and settlement of any Covered Claim, provided that such
participation shall not relieve Customer of any of its obligations
under this Section 12.
13. RELIANCE ON DISCLAIMER, LIABILITY LIMITATIONS AND INDEMNIFICATION
OBLIGATIONS. Customer acknowledges that AboveNet has set its prices and
entered into this Agreement in reliance upon the limitations and exclusions
of liability, the disclaimers of warranties and damages and Customer's
indemnity obligations set forth herein, and that the same form an essential
basis of the bargain between the parties. The parties agree that the
limitations and exclusions of liability and disclaimers specified in this
Agreement will survive and apply even if this Agreement is found to have
failed of their essential purpose.
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14. CONFIDENTIAL INFORMATION. Each party acknowledges that it will have access
to certain confidential information of the other party concerning the other
party's business, plans, customers, technology, and products, including the
terms and conditions of this Agreement ("Confidential Information").
Confidential Information will include, but not be limited to, each party's
proprietary software and customer information. Each party agrees that it
will not use in any way, for its own account or the account of any third
party, except as expressly permitted by this Agreement, nor disclose to any
third party (except as required by law or to that party's attorneys,
accountants and other advisors as reasonably necessary), any of the other
party's Confidential Information and will take reasonable precautions to
protect the confidentiality of such information. Information will not be
deemed Confidential Information hereunder if such information: (i) is known
to the receiving party prior to receipt from the disclosing party directly
or indirectly from a source other than one having an obligation of
confidentiality to the disclosing party; (ii) becomes known (independently
or disclosure by the disclosing party) to the receiving party directly or
indirectly from a source other than one having an obligation of
confidentiality to the disclosing party; (iii) becomes publicly known or
otherwise ceases to be secret or confidential, except through a breach of
this Agreement by the receiving party; (iv) is independently developed by
the receiving party; or (v) is required to be released by law or
regulation, provided that the receiving party provide prompt written notice
to the disclosing party of such impending release, and the releasing party
cooperate fully with the disclosing party to minimize such release.
15. TERM. This Agreement will be effective beginning on the Effective Date and
ending at the end of the last "Term" specified in any Order Form accepted
by AboveNet, unless terminated as provided in Section 16 below. Use of any
Service after the Term specified on the Order Form under which such Service
was provided will constitute Customer's acceptance of AboveNet's then
current standard Agreement and the fee rates then in effect, but be
terminated by AboveNet upon notice.
16. TERMINATION.
16.1 FOR NONPAYMENT. After fifteen (15) days of non-payment from the due
date, or such longer period as AboveNet's Billing Terms & Conditions
may provide, AboveNet may disable Service. To re-enable Service,
AboveNet will require a reconnection fee. After thirty (30) days of
nonpayment from the AboveNet invoice due date, or such longer period
as AboveNet's Billing Terms & Conditions may provide, AboveNet may
terminate the Service permanently. Termination does not remove
Customer's obligations under this Agreement, including the obligation
to pay all fees for Service until termination or due for a committed,
initial Term.
16.2 UNACCEPTABLE USE; BANKRUPTCY. AboveNet may terminate this Agreement
upon written notice to Customer for violation of the Acceptable Use
Guidelines or Anti-Spam Policy or if Customer becomes the subject of a
voluntary petition in bankruptcy or any voluntary proceeding relating
to insolvency, receivership, liquidation, or composition for the
benefit of creditors or becomes the subject of an involuntary petition
in bankruptcy or any involuntary proceeding relating to insolvency,
receivership, liquidation or composition for the benefit of creditors.
If such petition or proceeding is not dismissed within sixty (60) days
of filing.
16.3 FOR CAUSE. Either party may terminate this Agreement if the other
party materially breaches any term or condition of this Agreement and
fails to cure such breach within thirty (30) days after receipt of
written notice of the same, except in the case of failure to pay fees
which failure is subject to Section 16.1 above or for failure to
comply with AboveNet's Acceptable Use Guidelines or Anti-SPAM Policy
as set forth in Section 16.2.
16.4 NO LIABILITY FOR TERMINATION. Neither party will be liable to the
other for any termination or expiration of this Agreement in
accordance with its terms. However, expiration or termination will not
extinguish claims or liability (including, without limitation, for
payments due) arising prior to such expiration or termination.
16.5 EFFECT OF TERMINATION. Upon the effective date of expiration or
termination of this Agreement: (a) AboveNet will immediately cease
providing the Services; (b) any and all payment obligations of
Customer under this Agreement will become due immediately, including
but not limited to Recurring Service Fees through the end of the term
indicated on the Order Form adjusted for the net present value of the
prospective payments; (c) within thirty (30) days after such
expiration or termination, each party will return all Confidential
Information of the other party in its possession at the time of
expiration or termination and will not make or retain any copies of
such Confidential Information except as required to comply with any
applicable legal or accounting record keeping requirement and (d)
Customer will remove from AboveNet's premises all Customer Equipment
and any of its other property on AboveNet premises within ten (10)
days of AboveNet's request (and only after Customer receives
authorization from AboveNet as provided in Section 2.3) and return the
Co-location Space to AboveNet in the same condition as it was prior to
Customer's installation. If Customer does not remove such property (or
cannot remove such property because of payments due to AboveNet)
within such ten (10) day period, then AboveNet may move any and all
such property to storage and charge Customer for the cost of such
removal and storage, without being liable for related damages. If
Customer does not pay all amounts due to AboveNet and remove such
property from AboveNet premises or storage within thirty (30) days of
such AboveNet request, AboveNet may liquidate the property in any
reasonable manner, without being liable for related damages.
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16.6 SURVIVAL. The following provisions will survive any expiration or
termination of the Agreement: Sections 1.3, 1.4, 2 (until all Customer
Equipment is removed from the Co-location Space), 3, 4, 6, 8, 9.5-9.8,
10-13, 14 (for a period of three (3) years), 16.4-16.6, and 17.
17. MISCELLANEOUS PROVISIONS.
17.1 FORCE MAJEURE. Except for the obligation to pay money, neither party
will be liable for any failure or delay in its performance under this
Agreement, or for credits under Section 9, due to any cause beyond its
reasonable control, including act or war, acts of God, earthquake,
flood, embargo, riot, sabotage, labor shortage or dispute,
governmental act or failure of the Internet, provided that the delayed
party: (a) gives the other party prompt notice of such cause, and (b)
uses its reasonable commercial efforts to correct promptly such
failure or delay in performance.
17.2 NO LEASE. This Agreement is a services agreement and is not intended
to and will not constitute a lease of any real or personal property.
In particular, Customer acknowledges and agrees that Customer has not
been granted any real property interest in the Co-location Space or
other AboveNet premises, and Customer has no rights as a tenant or
otherwise under any real property or landlord/tenant laws,
regulations, or ordinances.
17.3 MARKETING. Customer agrees that AboveNet may refer to Customer by
trade name and trademark, and may briefly describe Customer's
Business, in AboveNet marketing materials and web site. Customer
hereby grants AboveNet a limited license to use any Customer trade
names and trademarks solely in connection with the rights granted to
AboveNet pursuant to this Section 17.3. All goodwill associated with
Customer's trade name and trademarks will inure solely to Customer.
Customer may display the slogan "Powered by AboveNet" together with
the AboveNet logo, or any other AboveNet trademark or service mark or
logo, on Customer's web sites or marketing literature only after
obtaining AboveNet's written approval on a case-by-case basis, and
provided that Customer abide by the AboveNet trademark guidelines and
such other guidelines as AboveNet may provide Customer. All goodwill
associated with AboveNet's trade name, trademarks, slogans and logos
will inure solely to AboveNet.
17.4 GOVERNMENT REGULATIONS. Customer will not export, transfer, or make
available, whether directly or indirectly, any regulated item or
information to anyone outside the U.S. in connection with this
Agreement without first complying with all export control laws and
regulations which may be imposed by the U.S. Government and any
country or organization of nations within whose jurisdiction Customer
operates or does business.
17.5 ASSIGNMENT. Neither party may assign its rights or delegate its duties
under this Agreement either in whole or in part without the prior
written consent of the other party, except to a party that acquires
substantially all of the assigning party's assets or a majority of its
stock as part of a corporate merger or acquisition. Any attempted
assignment or delegation without such consent will be void. This
Agreement will bind and inure to the benefit of each party's
successors and permitted assigns.
17.6 NOTICES. Any notice or communication required or permitted to be given
hereunder may be delivered personally, deposited with an overnight
courier, sent by confirmed facsimile, or mailed by registered or
certified mail, return receipt requested, postage prepaid, in each
case to the address of the receiving party first indicated above, or
at such other address as either party may provide to the other by
written notice. Such notice will be deemed to have been given as of
the date it is delivered, or five (5) days after mailed or sent,
whichever is earlier.
17.7 RELATIONSHIP OF PARTIES. AboveNet and Customer are independent
contractors and this Agreement will not establish any relationship of
partnership, joint venture, employment, franchise or agency between
AboveNet and Customer. Neither AboveNet nor Customer will have the
power to bind the other or incur obligations on the other's behalf
without the other's prior written consent, except as otherwise
expressly provided herein.
17.8 CHOICE OF LAW AND ARBITRATION. This Agreement will be governed by and
construed in accordance with the laws of the State of California,
excluding its conflict of laws principles. Each party agrees to submit
any and all disputes concerning this Agreement, if not resolved
between the parties, to binding arbitration under one (1) neutral,
independent and impartial arbitrator in accordance with the Commercial
Rules of the American Arbitration Association ("AAA"); provided,
however, the arbitrator may not vary, modify or disregard any of the
provisions contained in this Section 17.8. The decision and any award
resulting from such arbitration shall be final and binding. The place
of arbitration will be at AboveNet's offices. The arbitrator is not
empowered to award damages in excess of compensatory damages and each
party hereby irrevocably waives any right to recover such damages with
respect to any dispute resolved by arbitration. Both parties shall
equally share the fees of the arbitrator. The language of arbitration
will be English; provided, however, that an interpreter may be
provided for any witness that requires an interpreter. The costs of
such interpretation will be borne by the party requesting the
interpreter. Any final decision or award from arbitration under this
Section 17.8 will be in writing and reasoned. The arbitrator may award
attorneys' fees to the prevailing party as determined by the
arbitrator with wide discretion considering both (i) which party
bettered its position most by the outcome of the arbitration, and (ii)
that the parties intended that all limitations on liability would be
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enforced by the arbitrator. Except for attorney's fees as the
arbitrator may award as provided in the previous sentence, each will
bear their own costs and expenses that are reasonable and necessary
for participating in arbitration under this Section 17.8. As part of
any arbitration conducted under this Section 17.8, each party may: (i)
request from the other party documents and other materials relevant to
the dispute and likely to bear on the issues in such dispute, (ii)
conduct no more than five (5) oral depositions each of which will be
limited to a maximum of seven hours in testimony, and (iii) propound
to the other party no more than thirty (30) written interrogatories,
answers to which the other party will give under oath. All the dispute
resolution proceedings contemplated in this Section 17.8 will be as
confidential and private as permitted by law. The parties will not
disclose the existence, content or results of any proceedings
conducted in accordance with this Section 17.8, and materials
submitted in connection with such proceedings will not be admissible
in any other proceeding, provided however, that this confidentiality
provision will not prevent a petition to vacate or enforce an
arbitration award, and shall not bar disclosure required by law. The
parties agree that any decision or award resulting from proceedings in
accordance with this Section 17.8 shall have no preclusive effect in
any other matter involving third parties. All applicable statutes of
limitation and defenses based upon the passage of time will be tolled
while the procedures specified in this Section 17.8 are pending. The
parties will take such action, if any, required to effectuate such
tolling. The arbitration shall be governed by the United States
Arbitration Act and judgment upon the award rendered by the arbitrator
may be entered by any court having jurisdiction.
17.9 CHANGES PRIOR TO EXECUTION. Customer represents and warrants that it
made no changes to this Agreement prior to providing this Agreement to
AboveNet for its acceptance and execution, and that AboveNet alone
incorporated any and all changes negotiated between, and accepted by,
Customer and AboveNet into this Agreement or into an addendum executed
by both parties.
17.10 ENTIRE AGREEMENT. This Agreement, together with the Order Form and
AboveNet policies referred to in this Agreement represents the
complete agreement and understanding of the parties with respect to
the subject matter herein, and supersedes any other agreement or
understanding, written or oral. This Agreement may be modified only
through a written instrument signed by both parties. Both parties
represent and warrant that they have full corporate power and
authority to execute and deliver this Agreement and to perform their
obligations under this Agreement and that the person whose signature
appears above is duly authorized to enter into this Agreement on
behalf of the respective party. Should any terms of this Agreement be
declared void or unenforceable by any arbitrator or court of competent
jurisdiction, such terms will be amended to achieve as nearly as
possible the same economic effect as the original terms and the
remainder of this Agreement will remain in full force and effect. If a
conflict arises between Customer's purchase order terms and this
Agreement, this Agreement shall take precedence. In the case of
international, federal, state or local government orders, Customer's
purchase order must contain the following language: "Notwithstanding
any provisions to the contrary on the face of this purchase order,
attachments to this purchase order, or on the reverse side of this
purchase order, this purchase order is being used for administrative
purposes only, and this purchase order is placed under and subject
solely to the terms and conditions of the AboveNet Network Agreement
executed between Customer and AboveNet."
End of AboveNet Internet Services Agreement
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EXHIBIT 23. CONSENT OF INDEPENDENT AUDITORS
CONSENT OF INDEPENDENT AUDITORS
----------------------------------
Board of Directors
Crys-Tel Telecommunications.com, Inc.
18 Half Moon
Irvine, California 92614
We consent to the use in this Registration Statement of Crys-Tel
Telecommunications.com, Inc. on Form 10-SB, of our report dated September 30,
1999 of Crys-Tel Telecommunications.com for the years ended June 30, 1998 and
1999, which are part of this Registration Statement, and to all references to
our firm included in this Registration Statement.
September 30, 1999
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