U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933
(Amendment No. 2)
CALLFREE TELECOM COMMUNICATIONS CORP.
(Name of Small Business issuer in its Charter)
New York 4813 11-3436237
------------------------- ---------------------------- ---------------
(State or Jurisdiction of (Primary Standard Industrial I.R.S. Employer
Incorporation or organization Classification Code No. Identification No.
400 Perimeter Center Terrace, Atlanta, GA 30346
(770) 352-0162
------------------------------------------------------------
(Address and Telephone Number of Principal Executive Offices)
400 Perimeter Center Terrace, Atlanta, GA 30346
(770) 352-0162
---------------------------------------------------
(Address of principal place of business or intended
principal place of business)
Stuart Radin
1116 Neilson Street
Far Rockaway, New York 11691
(718) 868-0383
---------------------------------------------------------
(Name, Address and Telephone Number of Agent for Service)
Approximate date of proposed sale to the public: As soon as practicable after
the effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering pursuant
to Rule 462(b) under the Securities Act, please check the following box and list
the Securities Act registration statement number of the earlier effective
registration statement for the same offering |_| ____
If this Form is a post effective amendment filed pursuant to Rule 462(c) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering |_| ___________
If this Form is a post effective amendment filed pursuant to Rule 462(d) under
the Securities Act, please check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering |_| ___________
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box |_| ___________
<TABLE>
<CAPTION>
CALCULATION OF REGISTRATION FEE
===================================================================================================================================
Title of Each Class of Securities Amount to be Proposed Maximum Offering Maximum Aggregate Offering Amount of
to be Registered Registered Price per Unit (1) Price (1) Registration Fee
===================================================================================================================================
<S> <C> <C> <C> <C>
Units each consisting of one share 500,000 $6.00 $ 3,000,000 $ 909
of Common Stock $.001 par value,
one Class A Warrant and one Class
B Warrant
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock $.001 par value (2) 500,000 $8.00 $ 4,000,000 $1,212
- -----------------------------------------------------------------------------------------------------------------------------------
Common Stock $.001 par value (3) 500,000 $7.00 $ 3,500,000 $1,061
- -----------------------------------------------------------------------------------------------------------------------------------
Total $10,500,000 $3,182
===================================================================================================================================
</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee
(2) Issuable upon exercise of the Class A Warrants
(3) Issuable upon exercise of the Class B Warrants
The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
a further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the Commission, acting pursuant to said Section 8(a),
may determine.
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
Cross-Reference Sheet pursuant to Item 501(b) of Regulation S-K between
Registration Statement (Form SB-2) and Form of Prospectus.
Item Number and Caption Caption in Prospectus
- ----------------------- ---------------------
1. Front of Registration Statement and Outside Cover Page-Inside Front
Front Cover Page of Prospectus Cover page-Back Cover
2. Inside Front and Outside Back Inside Front Cover Page
Cover Pages of Prospectus Back Cover page
2. Summary Information and Risk Factors Summary of Prospectus
Risk Factors
4. Use of Proceeds Use of Proceeds
5. Determination of Offering Price Cover Page;
Description of Shares
6. Dilution Dilution
7. Selling Security Holders Not Applicable
8. Plan of Distribution Cover Page; Inside
Cover Page; Offering
9. Legal Proceedings Litigation
10. Directors, Executive Officers Management
Promoters and Control Persons
11. Security Ownership of Certain Principal Shareholders
Beneficial Owners and Management
12. Description of Securities Offering; Description of
Shares
13. Interest of Named Experts and Counsel Legal Matters
14. Disclosure of Commission Position Indemnification
on Indemnification for Securities Act
15. Organization Within Last Five Years Certain Transactions
16. Description of Business Business of the Company
17. Management's Discussion and Business of the Company
Analysis of Plan of Operation
18. Description of Property Business of the Company
19. Certain Relationships and Certain Transactions
Related Transactions
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20. Market for Common Equity and Risk Factors
Related Stockholder Matters
21. Executive Compensation Management-Remuneration
22. Financial Statements Financial Statements
23. Changes in and Disagreements with Not Applicable
Accounts on Accounting and
Financial Disclosures
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<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A New York Corporation)
200,000(minimum) to 500,000(maximum) Units
Offering Price $6.00 per Unit
Callfree Telecom Communications Corp. is offering a minimum of 200,000 up to a
maximum of 500,000 Units. Each unit consists of one share of Callfree's Common
Stock plus one common stock purchase A Warrant and one Common Stock purchase B
warrant. The A warrants can be used to purchase one share of Callfree's Common
Stock for $8.00 for 12 months from the date of this Prospectus. The price for
the A Warrants may be adjusted after the Warrants become separately tradeable.
The B Warrants can be used to purchase one share of Callfree's Common Stock for
$7.00 any time after the A warrant has been exercised up to 24 months from the
date of this Prospectus. The Common Stock and the Warrants included in the Units
will not be separately transferable for up to 90 days after the date of this
Prospectus. See "DESCRIPTION OF SECURITIES."
These units involve a high degree of risk and substantial dilution. Only persons
who can afford to lose their entire investment should purchase them. See "RISK
FACTORS" and "DILUTION."
This is an initial public offering. There is no assurance that a public market
will result after the sale of these Units or that the shares can be sold, if at
all, at the purchase price. Callfree arbitrarily determined the offering price
of the Units based upon what it believes investors will pay for this type of
speculative issue. The price bears no relationship to assets, earnings, book
value or other established criteria of value.
A minimum of 200,000 Units are being offered on a "best efforts, all-or- none"
basis and an additional 300,000 Units are being offered on a 'best efforts"
basis. There is no assurance that any or all of the Units will be sold. American
Securities Transfer & Trust, Inc., Denver, CO will hold in escrow all funds
received in this Offering until the minimum 200,000 Units are sold. If 200,000
Units are not subscribed to within 90 days after the effective date of this
Prospectus, all proceeds promptly will be refunded in full, without interest or
deductions. The Offering will begin on the effective date of this Prospectus and
continue for 90 days unless extended for an additional 90 days or until all
Units are sold. See "OFFERING."
The shares and warrants offered in this Prospectus are subject to prior sale and
approval of certain legal matters by counsel to the Company. Units are offered
for cash or check only and must be accompanied by a properly completed and
executed Subscription Agreement. Callfree reserves the right to reject any
subscription in whole or part for any reason or for no reason.
Callfree engaged Boe & Company, Aurora, CO, to sell the Units to public
investors in exchange for a commission of 10% of the gross sales price. No
commissions will be paid unless a minimum of 200,000 Units are subscribed and
paid for. In addition, Boe may receive a nonaccountable expense allowance of 3%
of the sales price per Unit. Boe would receive this additional fee before any
other Offering related expenses are paid.
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Underwriter Proceeds to the
Price (1) Commissions Company (2)(3)
- -----------------------------------------------------------------------
Price Per Unit $ 6.00 $ .60 $ 5.40
Aggregate
Subscription:
(200,000 Units
Minimum) $1,200,000 $ 120,000 $1,080,000
(500,000 Units
Maximum) $3,000,000 $ 300,000 $2,700,000
- -----------------------------------------------------------------------
The date of this Prospectus is September , 1999.
Callfree has not taken steps to create an aftermarket for the Common Stock
offered in the Units. In the future, the Company may attempt arrangements with
brokers to trade or make a market in the Common Stock but there is no assurance
that there will ever be a market for its stock.
Neither the Securities and Exchange Commission nor any state securities division
has approved or disapproved of these securities or determined if this Prospectus
is truthful or complete. Any representation to the contrary is a crime.
Offerees and subscribers are urged to read this Prospectus carefully and
thoroughly. The information contained in this document is correct as of its date
but may not be relied upon as an accurate presentation at a later time. No one
is authorized to provide and investors are warned not to rely upon any
information or representation beyond that contained in this Prospectus. This
Prospectus does not constitute an offer to sell or the solicitation of an offer
to sell any securities to any person in any jurisdiction where such offer or
solicitation would be unlawful.
Until _________________, all dealers may be required to deliver a Prospectus in
connection with transactions in the registered securities: whether or not
participating in this Offering. This is in addition to the obligation of dealers
to deliver a Prospectus when acting as underwriters and in respect to unsold
allotments or subscriptions.
Upon completion of this Offering, Callfree will be required to file reports and
other information with the Securities and Exchange Commission. You can read and
copy these documents at the Public Reference Facilities at 450 Fifth Street,
N.W., Washington, D.C. 20549. Callfree will provide its shareholders annual
reports with audited financial statements and quarterly reports with unaudited
financial statements.
SUMMARY OF PROSPECTUS
This summary highlights information contained elsewhere is this Prospectus and
may not contain all the information you should consider before investing in the
Units. You should read the entire Prospectus carefully, including the "RISK
FACTORS" section and the financial statements and notes to those statements.
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<PAGE>
The Company
Callfree Telecom Communications Corp. was formed on April 8, 1998 to
provide free long distance telephone service that is financed by advertising.
The subscribers receive one of two types of calling cards. The service will be
paid for by advertisers seeking to reach target audiences through brief
commercials aired before and during the conversation.
The Company has not yet commenced commercial operation. There is no
assurance that it will be successful in raising capital or developing its
business. The proceeds from the sale of the Units will enable the Company to
develop and expand its business. (See "BUSINESS OF THE COMPANY," "CERTAIN
TRANSACTIONS," "USE OF PROCEEDS" and "RISK FACTORS.")
Callfree's principal office is at 400 Perimeter Center Terrace, Suite 60,
Atlanta, GA 30346.
The Offering
Securities offered A minimum of 200,000 and maximum of
500,000 Units of Common Stock,
par value $.001.
Offering Price $6.00 per Unit
Offering The Units are offered for a period of
90 days and may be extended for an
additional 90 days by the Board of
Directors. (See "OFFERING.")
Net Proceeds Approximately $1,080,000 (minimum
subscription) $2,700,000 (maximum
subscription). (See "USE OF PROCEEDS.")
Use of Proceeds To be used for working capital and
operating expenses, deposits on
equipment, repayment of notes.
(See "USE OF PROCEEDS.")
Number of Shares Outstanding Before Offering: 1,067,000
After Offering: 1,267,000 (minimum)
1,567,000 (maximum)
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TABLE OF CONTENTS
PAGE
SUMMARY OF PROSPECTUS iv
THE COMPANY v
THE OFFERING v
RISK FACTORS 1
Start-up Company 1
High Risk 1
Reliance On Outside Financing 1
Reliance Upon Officers, Directors and Key Employees 1
Control of the Company 1
Dilution; Excessive Burden of Risk 2
Possible Rule 144 Sales 2
Competition 2
Insurance; Indemnification 2
No Cash Dividends Paid 3
Arbitrary Determination of Offering Price 3
No Present Market for Securities 3
Compliance with "Penny Stock" Rules 3
Issuance of Additional Shares 4
No Commitments to Purchase Shares 4
USE OF PROCEEDS 4
DILUTION 5
CAPITALIZATION 8
SUMMARY FINANCIAL INFORMATION 8
OFFERING 8
Engagement of the Services of an Underwriter 8
Underwriter Commissions and Compensation 9
Offering Period and Expiration Date 9
Determination of Offering Price 9
Procedures for Subscribing 9
Right to Reject 9
Escrow 10
BUSINESS OF THE COMPANY 10
General 10
Government Regulations 12
Employees 12
Management's Discussion and Analysis of Financial 12
Condition and Results of Operations
MANAGEMENT 13
Officers and Directors 13
Background Information 13
Executive Compensation 14
Indemnification 15
Office Facilities 15
vi
<PAGE>
TABLE OF CONTENTS - continued
PAGE
PRINCIPAL SHAREHOLDERS 15
Future Sales by Present Shareholders 16
DESCRIPTION OF SECURITIES 16
Common Stock 16
Units 16
Preferred Stock 17
Warrants 17
Non-Cumulative Voting 18
Dividends 18
Reports to Shareholders 18
Transfer Agent 18
CERTAIN TRANSACTIONS 18
LITIGATION 19
ADDITIONAL INFORMATION 19
EXPERTS 19
LEGAL MATTERS 19
FINANCIAL STATEMENTS 19
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<PAGE>
RISK FACTORS
The Units offered in this Prospectus involve an exceptionally high degree
of risk and are extremely speculative. In addition to the other information
contained in this Prospectus, you should carefully consider the following risk
factors that illustrate but do not exhaust the substantial uncertainty in this
investment.
Start-up Company
Callfree has been in business for a short time and has engaged in limited
activities since then. There is no assurance the Company will be successful in
raising funds to continue operating. Even if funds are raised, there is no
assurance that Callfree will be able to develop its business or that the
business ultimately will be profitable. If this Offering is successful, the
Company anticipates that the minimum proceeds will be sufficient to support
operations for approximately 12 months. (See "BUSINESS OF THE COMPANY.")
High Risk
There is a high risk of loss of any investment in Callfree's Units. If the
Company fails to establish its business, any investment may be lost and the
Company may need to be liquidated. (See "BUSINESS OF THE COMPANY" and
"DILUTION.")
Reliance on Additional/Outside Financing
The Company believes that the minimum proceeds of this Offering will
provide enough cash to fund its current operations and obligations for the next
twelve months. However, any expansion or acquisition would require additional
funds and another debt or equity financing. There is no assurance that Callfree
could find suitable financing on acceptable terms. All operations to date have
been financed by private sales of the Company's Common Stock and loans. Future
operations will depend on the availability of revenues from current operations
and/or additional financing. (See "USE OF PROCEEDS" and "CERTAIN TRANSACTIONS.")
Reliance on Officers, Directors and Key Employees
Callfree is completely dependent on the personal efforts and abilities of
its five officers and directors. Of these, Messrs. Stuart Radin, Seyed A. Hasan
and Abraham Ben-David are full-time key employees. Their participation is
critical to the Company's business and future success. The Company has
employment agreements with each of the officers and directors and key-man life
insurance for Messrs. Stuart Radin, Seyed A. Hasan and Abraham Ben-David. (See
"MANAGEMENT.")
Control of the Company
The present shareholders will continue to control the Company after the
sale of the minimum or maximum number of Units. These present shareholders will
be able to elect a majority of the Board of Directors and thereby control the
operations and policies of the Company. (See "MANAGEMENT.")
1
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Dilution: Excessive Burden of Risk
If the Units are sold, the present shareholders will hold approximately 84%
(minimum Offering) or 68% (maximum Offering) of the Company. The present
shareholders acquired their shares at prices substantially below the prices
investors will pay in this Offering. As a result, investors in this Offering
will contribute to the capital of the Company a disproportionately greater
percentage than the ownership they receive. Present shareholders will experience
an immediate increase in the net tangible book value of their shares at the same
time that Unit investors will incur substantial dilution of the net tangible
book value of their shares. The present shareholders will benefit from a
disproportionately greater share of the Company if it is successful while
investors in this Offering risk a disproportionately greater loss of cash
invested if the Company is not successful. (See "DILUTION" and "PRINCIPAL
SHAREHOLDERS.")
Possible Rule 144 Sales
In December 1998, the Company issued 800,000 shares of its Common Stock
which shares are held by current or former Officers, Directors and control
persons of Callfree. An additional 105,000 shares were issued in May 1999 to two
persons who are officers and directors of the Company. These shares are
considered restricted securities by the Securities and Exchange Commission. Rule
144 of the Securities Act of 1933 provides that restricted securities must be
held for a minimum period of one year. Thereafter, a limited number of the
shares may be sold every three months in brokerage transactions. The possible
sale of these restricted securities may have a depressive effect on the price of
the Company's Common Stock if there is a market for that stock. In addition,
persons who hold restricted securities for one year who are not considered
"affiliates" of the Company under Rule 144 may sell their securities without any
limitations on the number of shares sold. (See "PRINCIPAL SHAREHOLDERS - FUTURE
SALES BY PRESENT SHAREHOLDERS" and "DILUTION RESTRICTED SHARES ELIGIBLE FOR
FUTURE SALE.")
Competition
There is intense competition in the telephone industry. Many of the
Company's competitors have greater financial and other resources, better
distribution networks and greater name recognition. There can be no assurance
that Callfree will be able to successfully compete in this industry. (See
"BUSINESS OF THE COMPANY.")
Insurance and Indemnification
Since the Company has limited capital, it currently does not carry
insurance against liabilities arising from the negligence of its officers and
directors or in connection with deficiencies in any of its business operations.
Even if it was insured, there is no assurance that the coverage would be
adequate to satisfy potential claims against the Company, its officers and
directors or its business operations or products. The Company's Articles of
Incorporation and By-Laws provide for indemnification of the officers and
directors to the fullest extent possible under New York law. However, the
Securities and Exchange Commission considers any indemnification for officers,
directors and controlling persons for liabilities arising under the Securities
Act of 1933 as against public policy and unenforceable. (See "FINANCIAL
STATEMENTS" and "BUSINESS OF THE COMPANY.")
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No Cash Dividends Paid
The Company has not paid any cash dividends and does not anticipate paying
such dividends at any time in the foreseeable future. Any income received from
operations will be reinvested and devoted to the Company's operations and
expansion. (See "DESCRIPTION OF SECURITIES.")
Arbitrary Determination of Offering Price
The Company arbitrarily determined the price of the Units in this Offering.
The offering price is not an indication of and is not based upon the actual
value of the Company. It bears no relationship to the book value, assets or
earnings of the Company or any other recognized criteria of value. The offering
price should not be regarded as an indicator of the future market price of the
securities. (See "OFFERING.")
No Present Market for Securities
There presently is no public market for the Company's securities and there
can be no assurance that any such market will develop. In the event a public
trading market does develop, there is no assurance that it will continue.
Therefore, investors may not be able to sell shares promptly or at all and may
not receive a price equal to or above the price paid for those shares.
Compliance with Penny Stock Rules
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 or where the issuer meets certain minimum financial
requirements). The penny stock rules require a broker/dealer, prior to a
transaction in a penny stock, to deliver a standardized risk disclosure document
that provides information about penny stocks and the risks in the penny stock
market. The broker/dealer also must provide the customer with current 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 generally require that prior to a transaction in a penny
stock, the broker/dealer make a special written determination that the penny
stock is a suitable investment for the purchaser and receiver the purchaser's
written agreement to the transaction. Subsequent to the transaction, the
broker/dealer must deliver monthly or quarterly statements containing specific
information about the penny stock. These disclosure requirements may have the
effect of reducing the level of trading activity in the secondary market for a
stock that is subject to the penny stock rules. If Callfree's Common Stock
becomes subject to these penny stock rules, investors may find it more difficult
to sell their securities.
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Issuance of Additional Shares
The Board of Directors has the authority to issue an additional 8,800,000
shares (assuming a minimum subscription) or 8,500,000 shares (assuming a maximum
subscription) of Common Stock after completion of this Offering. The effect of
issuing additional shares to persons who are not public investors will be to
further dilute the book value per share and reduce the control held by held by
public investors. There currently are no commitments, contracts or intentions to
issue any additional shares.
(See "DILUTION.")
No Commitments to Purchase Units
Presently there are no commitments to purchase any of the 500,000 Units
offered in this Prospectus. Consequently, the Company cannot give any assurance
that any of the Units will be sold. However, the escrow arrangements provide
that the agent will hold all funds received until either 200,000 Units are sold
within 90 days from the date of this Prospectus or within 180 days if the
Company extends the offer for an additional 90 days. Thus, by subscribing to
Units in this Offering, an investor could invest money in the Company for as
long as 180 days and ultimately have that money returned without interest or
deductions. (See "OFFERING.")
USE OF PROCEEDS
The Company estimates the net proceeds from this Offering will be
approximately $1,004,000 (assuming a minimum subscription) or $2,570,000
(assuming a maximum subscription) after deductions for sales commissions and
estimated offering expenses. The Company anticipates that the proceeds will be
disbursed in the priority set forth below during the first 12 months after the
Offering.
Minimum Maximum
Description Subscription Subscription
- ------------ ------------ ------------
TOTAL PROCEEDS $1,200,000 $3,000,000
Offering Expenses:
Sales Commissions (10% of Units sold) (1) 120,000 300,000
(See "UNDERWRITING" and "OFFERING")
Nonaccountable Expense Allowance (2) 36,000 90,000
(See "UNDERWRITING")
Legal and Accounting Fees
and Offering Expenses (3) 40,000 40,000
---------- ----------
Total Net Proceeds $1,004,000 $2,570,000
4
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<TABLE>
Minimum % of net Maximum % of net
Description Subscription Proceeds Subscription Proceeds
- ----------- ------------ -------- ------------ --------
<S> <C> <C> <C> <C>
Administrative
and Salaries
Rent 60,000 6.6 60,000 2.33
Advertising 48,000 4.8 240,000 9.34
Office Expense 84,000 8.4 120,000 4.67
Fees/legal &
accounting 24,000 2.4 24,000 .94
Salaries 303,000 598,000 23.27
--------- ----- --------- -----
519,000 51.69 1,042,000 40.55
Directors Expenses -0- 60,000 2.3
Repayment of Notes 108,000 9.96 108,000 4.2
Working Capital 277,000 28.39 760,000 29.57
Deposit for POPs 100,000 9.96 600,000 23.35
--------- ----- --------- -----
1,004,000 100% 2,570,000 100%
</TABLE>
(1) Assumes that an underwriters' commission of 10% will be paid on all Shares
sold. (See "UNDERWRITING" and "OFFERING.")
(2) Assumes that a non-accountable expense allowance may be paid to the
underwriter equal to $36,000 in the event of a minimum subscription or $90,000
or in the event of a maximum subscription.
(3) The organizational and offering expenses, including accounting, legal,
printing, clerical and other expenses, and registration and filing fees, are
estimated to total $40,000.
The foregoing represents the Company's current intentions for the proceeds
of this Offering. However, the Company may reassess and reassign the
disbursements if it becomes beneficial for future operations and development. A
post effective amendment to this Prospectus will be issued if the Company
intends any material change in the use of proceeds.
Any net proceeds not required for immediate expenditure will be invested in
certificates of deposit or U.S. Treasury Notes.
DILUTION
Dilution is the difference between the offering price of the Common Stock
and the net tangible book value per share immediately after the Offering is
completed. Net tangible book value is calculated by subtracting the total
liabilities and intangible assets from the Company's total assets. Dilution can
occur when the offering price of the shares is arbitrarily determined based on
market factors rather than on book value.
As of June 30, 1999, the net tangible book value of the shares of the
Company (total assets, excluding intangible assets, less total liabilities,
excluding contingent liabilities) was ($203,923) or ($.20) per share based upon
1,067,000 shares outstanding at that time.
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Upon completion of this Offering, but without taking into account any
change in such net tangible book value after completion of this Offering, other
than that resulting from the sale of the shares offered hereby, the net tangible
book value of the 1,067,000 shares, based upon a minimum subscription (or
1,567,000 shares, based upon a maximum subscription) to be outstanding will be
approximately $996,077 based upon a minimum subscription (or $2,766,077 based
upon a maximum subscription), or approximately $.79 per share, based upon a
minimum subscription (or $1.77 per share based upon a maximum subscription).
Accordingly, the net tangible book value of the Shares held by the present
shareholders of the Company (i.e., 1,067,000 shares) will be increased by $.99
per share, based upon a minimum subscription (or increased by $1.97 per share,
based upon a maximum subscription), without any additional investment on their
part and the purchasers of the Shares offered hereby will incur immediate
dilution (a reduction in net tangible book value per share from the offering
price of $6.00 per Unit) of approximately $5.21 per share, based upon a minimum
subscription (or $4.23 per share, based upon a maximum subscription).
After completion of this Offering, the purchasers of the Shares offered
hereby will own approximately 15.9% (31.9%) of the total number of shares then
outstanding, for which they will have made a cash investment of $1,200,000 based
upon a minimum subscription (or $3,000,000, based upon a maximum subscription),
or $6.00 per Unit. The current shareholders of the Company will own
approximately 84.1% (68%) of the total number of shares then outstanding, for
which they have made actual cash contributions of $1,067 or $.001 per share.
The present shareholders of the Company's Common Stock acquired their
shares at a substantial discount to the offering price in order to raise working
capital during the past two years. The present shareholders will experience an
immediate substantial increase in the value of their shares and the public
investors will experience an immediate substantial dilution in the value of
their shares.
As of June 30, 1999, the net tangible book value of the shares was
($203,923) or ($.20) per share based on 1,067,000 shares outstanding at that
time. Assuming there are no changes in net tangible book value other than those
resulting from this Offering, the net tangible book value of the present
shareholders' shares will appreciate to approximately $997,077 or $.79 per share
based on a minimum subscription without any additional investment on their part.
In contrast the public investors will incur immediate dilution from $6.00 per
share to $.79 upon completion of the minimum subscription of this Offering.
The following table sets forth a comparison of the present
shareholders' and public investors' proportionate ownership compared to the
amounts paid and contributions to capital assuming no changes in net tangible
book value other than the completion of the minimum and maximum subscription.
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PRESENT SHAREHOLDERS
Minimum Subscription Maximum Subscription
-------------------- --------------------
Price Per Share $ .001 $ .001
Net Tangible Book
Value per Share $ (.20) $ (.20)
before Offering
Net Tangible Book
value per Share $ .79 $ 1.77
after Offering
Increase to present
Shareholders in
net tangible book
value per share due
to Offering $ .99 $ 1.97
Capital
contributions $ 1,067 $ 1,067
Number of Shares
outstanding
before Offering 1,067,000 1,067,000
Number of Shares
outstanding
After Offering 1,267,000 1,567,000
Percentage of ownership
after the Offering 84.1% 68.1%
PUBLIC INVESTORS
Minimum Subscription Maximum Subscription
-------------------- --------------------
Price Per Share $6.00 $6.00
Dilution Per Share $5.21 $4.23
Capital contributions $1,200 $3,000
Number of Shares after the
Offering held by the
Public Investors 200,000 500,000
Percentage of ownership
after the Offering 15.9% 31.9%
All 1,067,000 of the Company's currently outstanding shares of Common Stock
are "restricted securities" which, in the future, may be sold pursuant to Rule
144 under the Securities Act of 1933, as amended, if available. Rule 144
currently provides, in essence, that persons holding restricted securities for a
period of one year may each sell, every three months, in brokerage transactions,
a number of shares equal to one percent of the aggregate number of the Company's
outstanding shares, and after two years, persons other than "affiliates" of the
Company, may sell shares without any volume restrictions.
Sales of shares (a) held by present shareholders, after applicable
restrictions expire; and (b) offered in this Offering, which would be
immediately resalable, may have a depressing effect on the price of the
Company's shares in any market that may develop. (See "DILUTION.")
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CAPITALIZATION
The following table sets forth the capitalization of the Company as of June
30, 1999, and as adjusted to reflect the sale of the minimum Shares offered
hereby and the application of the net proceeds therefrom. (See "FINANCIAL
STATEMENTS.")
Upon Sale of
June 30, 1999 200,000 Units
------------- -------------
Common Stock:
10,000,000 Shares
authorized, par value
$.001; 1,067
issued and outstanding .................. 1,067 1,267
Preferred Stock
1,000,000 of shares
authorized, par value
$.01, no shares issued
and outstanding
Shareholders' Equity: ................... $(203,922) 996,077
SUMMARY FINANCIAL INFORMATION
BALANCE SHEET DATA: June 30, 1999
Current Assets...................................... $ 21,387
Current Liabilities................................. $ 255,310
Total Assets........................................ $ 21,387
Shareholders' Equity................................ $(203,922)
(See "FINANCIAL STATEMENTS)
OFFERING
The Units will be offered by the Company subject to prior sale and subject
to approval of certain legal matters by the Company's legal counsel. The Company
reserves the right to reject any subscription in whole or in part, for any
reason or for no reason.
A total of 800,000 shares of the Company's Common Stock were issued to
three persons who were officers, directors and control persons of the Company,
in December, 1998. An additional 105,000 shares were issued in May, 1999 to two
persons who are officers and directors of the Company. These shares are all
"restricted securities" under Rule 144 of the Securities Act of 1933, as
amended, and under such Rule, may not be sold for a period of at least two years
from acquisition thereof.
Engagement of an Underwriter
Callfree engaged Boe & Company, 3668 So. Jasper Street, Aurora, CO 80013, a
member of the National Association of Securities Dealers, as its agent to offer
prospective investors a minimum of 200,000 Units on a "best-efforts,
all-or-none" basis up to a maximum of 500,000 Units on a "best-efforts" basis at
an offering price of $6.00 per Unit. If Boe does not sell 200,000 Units within
90 days from the date of this Prospectus, all proceeds received will be promptly
refunded to investors in full without interest or deductions for commissions or
expenses.
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Underwriter Commissions and Compensation
The Underwriter will receive a sales commission of 10% or $.60 per Unit.
Total commissions will be $120,000 for the minimum subscription and $300,000 for
the maximum subscription. In addition, the Underwriter will receive a
nonaccountable expense allowance of 3% of the gross proceeds of the Offering
plus Warrants to purchase Common Stock equal to 10% of the number of Units it
sells. However, if the Underwriter fails to sell the minimum 200,000 Units
within the designated time, it will not receive any commissions or expense
allowance.
A copy of the proposed Underwriting Agreement is on file as Exhibit 1 to
the Registration Statement for this Offering.
Offering Period and Expiration Date
The Offering will commence on the date of this Prospectus and continue for
90 days. The Company and the Underwriter can mutually agree to extend the
Offering for an additional 90 days.
Determination of Offering Price
The offering price of the Units was determined arbitrarily by the Company.
The price does not bear any relationship to the Company's assets, book value,
earnings or other established criteria for valuing a privately held company.
Therefore, the offering price should not be considered an indication of the
actual value of the Company's securities. In contrast, the Company took into
consideration its capital structure, financial condition, prospects for business
and the industry and the general condition of the securities market in
determining the number of shares of Common Stock for this Offering.
Procedures for Subscribing
The Units will be subject to prior sale and approval of certain legal
matters by the Company's legal counsel.
Each investor subscribing for any of the Units must execute a Subscription
Agreement and return it to Boe with a check or certified funds payable to
American Securities Transfer and Trust, Inc./Callfree Telecom Communications,
Inc.
Right to Reject
The Company may accept or reject a subscription, in whole or in part, for
any reason or no reason. All funds from rejected subscriptions will be returned
immediately to the investors without interest or deduction for expenses.
Subscriptions for securities will be accepted or rejected within 48 hours after
the Company receives them.
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Escrow
Boe promptly will transmit all funds it receives to a special escrow
account at American Securities Transfer & Trust, Inc., 1825 Lawrence Street,
Denver, CO. The escrow agent will hold those funds until a minimum of 200,000
Units are sold. Once the 200,000 Unit threshold is met, the Company will receive
all proceeds directly until the maximum Units are sold or the Offering expires.
If at least 200,000 Units are not sold when the Offering expires or is
terminated, the Escrow agent will return all subscription funds promptly without
interest or deduction.
BUSINESS OF THE COMPANY
General
Callfree Telecommunications Corp. is a New York corporation that was
incorporated on April 8, 1998. The Company maintains its principal offices
at 400 Perimeter Center Terrace, Atlanta, GA 30346. (See "OFFICE
FACILITIES.")
The Company was formed to provide free long distance service to selected
target markets. The costs of the calls are supported by various entities that
will supply advertisements to be aired before and during the calls.
The Company will initiate operations between two corridors: New York City
and Tel Aviv, Israel and New York City and London, England. The Company's
principal service consists of an active Point of Presence called a POP - which
will be equipped with a Server supporting 1 to 144 simultaneous calls and up to
240 simultaneous calls when necessary. This will be transmitted on one Internet
T-1 (1,540K) line and between 1 to 240 PTSN (Public Switch Telephone Network).
CALLING CARD OPTIONS Customers can access the service through two calling card
options. One carries a nominal fee and both feature advertisements or HITS to
deliver the sponsors' messages.
UTILITY CARD - The UTILITY card will be available at authorized
distribution centers. The card is transferable and expires after 2 months or 2
hours of telephone time, whichever comes first. It cannot be recharged. The
Company targeted three industries to advertise on this card: Alcohol, Tobacco
and Prophylactics because they cannot be promoted on conventional television,
radio or in print media.
To make a call, the caller must dial into the Company's server using the
telephone number shown on the front of the card and press in a preselected
personal identification number, also known as a PIN number. At that point a
20-second commercial called an IMPACT advertisement will air. This is the only
advertisement the caller will hear if the call does not go through. Thereafter
the caller will be directed to enter the area code and number he wishes to call.
The caller and receiver will be HIT with a 30-second advertisement every 3
minutes. The advertisements will be in either English or Hebrew depending on
which area code is dialed and which telephone number was used to access the
service. If the call originates in Tel Aviv, the advertisement will be in Hebrew
and a receiver in New York will hear a different advertisement in English.
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The Company will receive the proceeds for the initial IMPACT HIT whether or
not the call is completed. Advertisers will pay a premium of $.30 for the
initial IMPACT HIT and $.10 for the subsequent HITS that air after every 3
minutes of talk time. The Advertisers will get a monthly report detailing the
calling patterns, length of calls, origination and destination of calls and how
many times their advertisements were aired.
PREMIUM CARD - The PREMIUM card is non-transferable and rechargeable. A
user must complete a demographic application in order to receive this card. The
application can be made via telephone, facsimile, mail or Internet. In addition,
there is a $10 processing fee charged on a major credit card every six months
when the calling card expires. The PREMIUM card features 180 hours or 10,800
minutes of talk time. Like the UTILITY card, the PREMIUM card calls begin with a
20-second IMPACT HIT.
Since demographic information is available under this calling card option,
advertisers can select their listening audience. As a result, advertisers will
be charged $.55 for the initial IMPACT HIT to select audiences. If an advertiser
declines to pay for an IMPACT HIT, it can still choose to HIT a select target at
a cost of $.35 per HIT. The final choice is a 15-second HIT for $.10 to air
after every three minutes of talk time.
The PREMIUM card will have an option for the caller to ignore the
advertisements by pressing "1" when the warning tone airs 10 seconds before the
commercial. The Company can bill the caller's credit card if he chooses to
ignore the message. The Company will charge a competitive rate for the
commercial-free talk time.
The Company also charges the advertisers for commercials directed at the
receivers. Since no demographic information is available for the receivers, HITS
are billed at the same rates as UTILITY cards. In addition, the language
requirement is the same for both the UTILITY and PREMIUM cards.
PRODUCT AND DELIVERY- The distinguishing factor in the Company's long
distance telephone service is that the calls are free to subscribers. The
demographic information collected from PREMIUM cardholders will be the basis for
the Company's customer database. This information will enable the Company's to
attract and keep advertisers.
MARKET DEFINITION-The long distance telecommunications market is growing at
a rapid rate. According to the Federal Communications Commission, in 1994 the
market for outgoing calls between the USA and Israel was 195,400,000 minutes.
The Company estimates that 27% of those calls originated in New York and had a
destination of Tel Aviv or Jerusalem. These facts would indicate a target market
of 57,618,000 minutes. Likewise, the same year the market for outgoing calls
between the USA and the UK was 905,500,000 minutes and rose to over 1 million
minutes the next year. The Company believes that 70% of those calls are business
related. Of the remaining 30%, an estimated 20% of the calls are from New York,
which indicates a target market of 61,044,000 minutes.
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ADVERTISING AND PROMOTION-The Company plans to promote its long distance service
through several channels: print and electronic media, direct sales, club
associations and barter deals with in-flight magazines. The determining factors
in choosing these channels are the low cost and effectiveness in targeting this
specific customer market. In addition, the Company will disseminate information
through direct response mail and telemarketing.
The Company plans to spend approximately $500,000 on advertising and
promotion during the next 18 months. There will be a budget allotment of 5% of
total sales for advertising investment. The Company has entered into an
agreement with Inter-World Communications, LLC, 60-50 Peachtree Parkway,
Norcross, GA, to handle advertising. Inter-World will receive a commission of
15% on all advertisements it generates. In addition, the Company will establish
its own marketing department within the next 24 months.
Government Regulations
The Company will be subject to the Federal Communications Commission
regulations governing long distance telecommunications and the Internet
telephone industry. Currently, no federal regulations are in place for the
Internet portion of the Company's service.
The sale of long distance telephone service is regulated by both federal
and state authorities. The Company will obtain all the required federal and
state permits, licenses and bonds to operate its facilities. Pursuant to current
FCC regulations, all communication companies are required to obtain FCC 214
licenses. The cost of each FCC 214 license is approximately $45,000. The Company
does not have to file this application, which takes 90 - 120 days to process,
until activation of its switching facility. Once the switching facility is
activated, the FCC grants a six month grace period in which to file the
application. There can be no assurance that the Company's operation and
profitability will not be subject to more restrictive regulation or increased
taxation by federal state or local agencies in the future.
Employees
The only direct employees of the Company in its initial stage of
operations, will be its officers and directors, all of whom presently serve
without compensation.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
The net proceeds from the successful completion of the minimum offering
will provide the Company with sufficient cash to operate its business for the
next twelve months, without the necessity of raising additional funds. Product
research and development will be conducted on behalf of the Company by other
companies with which the Company has business relationships, so the Company will
not have to conduct such research and development. The Company does not expect
to purchase or sell any plant or significant equipment during the next twelve
month period.
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Upon successful completion of the minimum offering, the Company intends to hire
two persons for office support and clerical and administrative duties.
Thereafter, the Company intends to hire at least one and up to four additional
personnel in advertising and marketing capacities.
MANAGEMENT
Officers and Directors
Each director of the Company is elected to a term of one year and serves
until his/her successor is elected and qualified. Each officer of the Company is
elected by the Board of Directors to a term of one year and serves until his/her
successor is duly elected and qualified or until he/she is removed. The Board of
Directors has no nominating, auditing or compensation committees.
The officers and directors of the Company, and further biographical
information concerning them are as follows:
Name and Address Age Position
Stuart Radin 32 President, Chief Executive Officer,
1116 Neilson Street Director
Far Rockaway, New York
11691
Eric A. Popkoff 44 Vice President Investor Relations,
1750 East 23rd Street Secretary and Director
Brooklyn, NY 11229
Seyed A. Hasan 35 Chief Operating Officer, Director
400 Perimeter Center Terrace
Atlanta, Georgia
Jay Radin 32 Chief Financial Officer, Director
1239 East 34th Street
Brooklyn NY 11210
Abraham S. Ben-David, Phd. 53 Chief Technology Officer, Director
38 Derech Hachoresh
Jerusalem, Israel 97278
Background Information
Stuart Radin has been the President of the Company since inception. He is
currently a professor at Baruch College, City University of New York, where he
teaches business data communications. He also has taught courses including
Business, Accounting, Tax, and Computers in other colleges. Mr. Radin holds an
MBA in business specializing in taxation from Baruch College, CUNY.
Eric A. Popkoff - From 1989 to 1994 Mr. Popkoff was a teacher of social studies
and accounting and business practices at various sites in the New York City
Public School system. He currently is an adjunct lecturer in economics at
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Brooklyn College, City University of New York. Since 1994 he has been the
President and Chief Executive Officer of Undiscovered Equities Research Corp.,
an information services company located in Brooklyn, New York, which provides
research on request from securities brokers and broker/dealers, and periodically
distributes written reviews of selected securities. Since 1997 he has been a
vice president and director of Summa Metals Corp. located in Laguna Nigel,
California. Mr. Popkoff holds an MBA in Management and an MBA in International
Business from Baruch College, CUNY.
Seyed A. Hasan - Mr. Hassan has been engaged in marketing, development and
operations of telecommunications companies in the United States and Europe
for the past 10 years
Abraham S. Ben-David - Mr. Ben-David received his doctorate in information and
communications technology from Lehigh University in 1976. From 1976 to 1979 he
was Associate Scientist at Xerox Corporation where he participated in both
advanced office and communications software technology development (hardware and
software). Thereafter he became Director of R&D for Fujitsu America where he was
responsible for development of communication and office hardware and software.
He became Director of R&D for Intafile International (a Geneva based company
with R&D facilities in Jerusalem) in 1981. where he was responsible for the
development of leading edge mobile communication and office equipment. He has
served on several senior faculty positions in Israel and in the United States.
Jay Radin - has been the Chief Financial Officer of the Company since its
inception. He is a graduate of Turo College, New York, and is the Fiscal Manager
of New York Community Hospital, Brooklyn, New York.
Executive Compensation
Upon completion of the minimum Offering the officers and directors of the
Company will receive the following salaries.
Name Capacities Served Annual Compensation
---- ----------------- -------------------
Stuart Radin President $92,300
Eric A. Popkoff Vice-President-Corporate $35,000
Relations, Secretary, Director
Syed A. Hasan Chief Operating Officer, Director $72,000
Jay Radin Director $59,800
Abraham S. Ben-David Chief Engineering Officer, Director $72,000
These salaries will not be retroactive and will commence only upon
completion of the minimum Offering.
No Option/SAR Grants or long-term Incentive Plans-Awards have been granted
or awarded to any officers or directors of the Company and there are presently
no plans to implement any such benefits.
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Indemnification
The Company's By-laws provide that it will indemnify any officers and
directors who are sued for any acts performed in their corporate capacity in
good faith in the best interests of the corporation. The Company may advance
expenses to defend such suits and must pay all expenses including attorney's
fees if the officers or directors are successful on the merits. For derivative
actions, indemnity is permitted only for expenses actually incurred and only by
a court order if the officer or director is judged liable. The indemnification
is intended to be to the fullest extent permitted by New York law.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933, as amended, may be permitted to officers, directors or persons
controlling the Company, pursuant to the foregoing provisions, the Company has
been informed that, in the opinion of the Securities and Exchange Commission,
such indemnification is against public policy as expressed in said Act and is
therefore unenforceable.
Office Facilities
The Company's principal offices are located at 400 Perimeter Center
Terrace, Atlanta, GA 30346, and are provided on a rent free basis by a Company
affiliated with Seyed A. Hasan, an officer and director of the Company.
PRINCIPAL SHAREHOLDERS
The following table sets forth certain information regarding ownership of
the Company's Common Stock as of the date of this Prospectus, and as adjusted to
reflect the sale of the Shares offered hereby, by each officer and director, all
officers and directors as a group, and by all other shareholders who own 5% or
more of the Company's Common Stock.
No. Percent Ownership Percent Ownership
of Before Offering After Offering
Shares Minimum Maximum
------ ------- -------
Stuart Radin 560,000 50.7 42.9 34.9
Eric A. Popkoff 230,000 20.8 17.6 14.3
Jay Radin 10,000 * * *
Seyed A. Hasan 75,000 6.8 5.7 4.7
Abraham Ben-David 30,000 2.7 3.0 1.9
All officers and 905,000 81.9% 69.3% 56.4%
Directors as a Group
(5 persons)(1)
* less than 1%
(1) Assumes that all of the Units offered hereby are sold, of which there can
be no assurance, and that the present shareholders do not purchase any
Units in this Offering. In either of such events, their percentage
ownership would increase accordingly. (See "RISK FACTORS-CONTROL OF THE
COMPANY", "DILUTION" and "OFFERING.")
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Future Sales by Present Shareholders
The aggregate of 1,067,000 shares of Common Stock held by the present
shareholders are deemed "restricted securities," as defined in Rule 144 of the
Rules and Regulations of the SEC. Under Rule 144, these shares can be publicly
sold, subject to volume restrictions and certain restrictions on the manner of
sale, commencing one year after their acquisition. Sales of shares by
"affiliates" are also subject to volume restrictions and certain other
restrictions pertaining to the manner of sale, all pursuant to Rule 144.
The 200,000 (500,000) Units in this offering are not "restricted
securities" under Rule 144 and can be publicly sold without compliance with Rule
144 if there is a market for these securitiese.
DESCRIPTION OF SECURITIES
The following statements summarize detailed provisions of the Company's
Certificate of Incorporation, By-laws, the Warrant Agreement among the Company,
Boe & Company, and American Securities Transfer & Trust, Inc. as Warrant Agent
and the Underwriting Agreement. All of these documents are available for public
review as filed with the Securities and Exchange Commission as Exhibits to the
Registration Statement for this Offering.
Common Stock
The authorized capital stock of the Company consists of 10,000,000 shares
of Common Stock, par value $.001 per share. The holders of Common Stock are
entitled to equal dividends and distributions per share when and if declared by
the Board of Directors from funds legally available for those purposes. No
holder of Common Stock has a pre-emptive right to subscribe for any securities
of the Company not are any Common Shares subject to redemption or convertible
into other securities of the Company. Upon liquidation, dissolution or winding
up of the Company, and after payment of creditors and preferred stockholders,
the remaining assets will be divided pro-rata on a share-for-share basis among
the holders of the shares of Common Stock. Each share of Common Stock is
entitled to one non-cumulative vote on all matters upon which stockholders may
vote. All shares of Common Stock now outstanding are fully paid, non-assessable
and validly issued as will all shares of Common Stock issued pursuant to this
Offering.
The Board of Directors is authorized to issue additional Common Stock
within the limits established by the Company's Articles of Incorporation and
By-laws.
Units
The Company is offering a minimum of 200,000 Units and a maximum of 500,000
Units of Common Stock, par value $.001, pursuant to this Prospectus. The
offering price is $6.00 per Unit. No fractional Units may be purchased. Each
Unit consists of one share of Common Stock and two Common Stock purchase
warrants, designated A Warrants and B Warrants.
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Preferred Stock
Each 5% Cumulative Convertible Preferred Share may be converted into one
share of Common Stock at any time until April 1, 2016. The right to convert is
suspended during the 5 day period immediately prior to shareholder meetings,
dates for dividend payments or issuance of rights, or when a change of
conversion or shares goes into effect. Any holder may convert a 5% Cumulative
Convertible Preferred share by surrendering the certificate(s) to a transfer
agency or, if none, at the principal offices of the Company. The certificates
must be duly endorsed in blank or accompany properly executed instruments for
transfer together with a written request for conversion. Upon conversion, that
interest will be reflected as a fully paid, non-assessable Common Stock holding
of record.
If any of the 5% Cumulative Convertible Preferred shares remain
outstanding, the Company may only declare a stock dividend if, by proper legal
action, it authorizes and reserves sufficient additional shares to completely
convert all outstanding Preferred shares plus the corresponding Common Stock
dividend on such shares. The Company has the right to declare and pay cash or
other dividend not specifically excluded.
The Warrants
Each of the A Warrants entitles the registered holder thereof to purchase
one share of the Common Stock at a price of $8.00, subject to adjustment in
certain circumstances at any time after the Warrants become separately
tradeable, until 12 months from the date of this Prospectus. Each of the B
Warrants entitles the registered holder thereof to purchase one share of the
Common Stock at a price of $7.00, subject to adjustment in certain
circumstances, at any time after the exercise of the A Warrant related to the
Units until 24 months from the date of this Prospectus. The Common Stock and the
Warrants included in the Units will not be separately transferable until 90 days
after the date of this Prospectus or such earlier date as the Company may
determine. The shares of Common Stock underlying the Warrants, when issued upon
the exercise thereof and payment of the purchase price, will be fully paid and
nonassessable.
The Warrants will be issued pursuant to a Warrant Agreement among the
Company, the Underwriter and the Warrant Agent, and will be evidenced by warrant
certificates in registered form. Upon notice to the Warrant holders, the Company
has the right to reduce the exercise price or extend the expiration date of the
Warrants. The exercise price and number of shares of Common Stock issuable upon
the exercise of the Warrants are subject to adjustment upon the occurrence of
certain events, including stock splits, combinations and reclassification. The
Company has reserved from its authorized but unissued shares a sufficient number
of shares of Common Stock for issuance upon the exercise of Warrants.
The Warrants may be exercised upon the surrender of the Warrant Certificate
on or prior to the expiration of the exercise period, with the form of election
to purchase included on the Warrant Certificate properly complete and executed,
together with payment of the exercise price to the Warrant Agent. No fractional
shares will be issued upon the exercise of the Warrants. The Warrants do not
confer upon the holders thereof any voting rights or any other rights as
shareholders of the Company. The exercise price of the Warrants is arbitrary and
there can be no assurance that the value of the Common Stock will ever rise to a
level where exercise of the Warrants would be of any economic benefit to the
Warrant holder.
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In order for the holder to exercise the Warrants, there must be a current
registration statement on file with the Securities and Exchange Commission and
various state securities commissions to continue registration of the shares of
Common Stock underlying the Warrants. The Company intends to file an amendment
to this Registration Statement covering the Warrants at a time when the market
price of the Common Stock is higher than the exercise price of the Warrants. The
filing of an amendment to this Registration Statement could result in
substantial expense to the Company, and there can be no assurance that the
Company will be able to file an amendment to this Registration Statement. The
Company will make reasonable efforts and believes that is will be able to
qualify the shares of Common Stock underlying the Warrants for sale in those
states where the Units are offered. The Warrants may be deprived of any value if
a current prospectus covering the Shares issuable upon exercise thereof is not
kept effective, if the underlying Shares are not qualified in states in which
the Warrant holder resides, or if the holder is unable to sell the Warrants.
Warrant holders who move to states in which the Warrants are not qualified for
sale may not be able to exercise their Warrants.
Non-cumulative Voting
The holders of Common Stock do not have cumulative voting rights.
Therefore, the holders of more than 50% of the combined shares voting for the
election of directors may elect all of the directors if they so choose. In that
event, the holders of the remaining shares will not be able to elect any of the
Company's directors. After this Offering is completed, the present stockholders
will own 84% (68%) of the outstanding shares.
Dividends
The Company had not paid any cash dividends to date and does not anticipate
paying any dividends in the foreseeable future. The Board of Directors may
declare dividends in its discretion depending on earnings, if any, capital
requirements, the financial position of the Company, general economic conditions
and other pertinent factors.
Reports to Shareholders
The Company will furnish annual reports to shareholders containing audited
financial statements of the Company, and will also furnish unaudited quarterly
financial statements.
Transfer Agent
The Company has appointed American Securities Transfer & Trust, Inc.,
Denver, Colorado, as the transfer agent for its Common Stock.
CERTAIN TRANSACTIONS
Callfree Technologies, an Israeli based company, will implement a standard
Point of Presence (a "POP") ready for operation for the Company.
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The POP will enable Callfree Telecom to provide the services as described above.
This POP will be based on a hardware product, Hi-Pnet, from ECI Telecom, Ltd.
with the addition of software developed by Callfree Technologies. Each POP will
be installed and tested for a one time charge of $100,000. Thereafter, a royalty
fee of $US 0.01 will be paid to Callfree Technologies on a per minute usage
basis. Callfree Technologies is a wholly owned subsidiary of CF Management, Ltd.
which is owned 32% by Rimon Corporation, 2% by David Sandel, 25% by Stuart
Radin, 8% by Seyed A. Hasan, and 33% by the Philip & Rebecca Goodman Family
Trust. Messrs. Stuart Radin and Hasan are officers and directors of the Company.
Rimon Corporation is a Florida corporation. Dr. Abraham Ben David, the Chief
Technology Officer and a director of the Company, is a controlling shareholder
and President of Call Free Technologies. Stuart Radin is also a Vice-President
of Call Free Technologies.
LITIGATION
The Company is not a party to any pending litigation and, to the best of
its knowledge, none is contemplated or threatened.
ADDITIONAL INFORMATION
The Company had filed a SB-2 Registration Statement in connection with this
Offering with the Securities and Exchange Commission. The Registration Statement
contains information including Exhibits and Schedules that do not appear in this
Prospectus. Investors may read and copy the complete Registration Statement at
the Securities and Exchange Commission, 450 Fifth Street, N.W., Washington, D.C.
20549 or call the SEC at 1-800-SEC-0330 for further information on the operation
of the Public Reference Room. Copies of the Registration Statement may be
obtained upon payment of the Commission's usual fees for reproduction and
handling.
EXPERTS
The audited financial statements of the Company as of February 28, 1999,
included in this Prospectus, have been examined by Ronald R. Chadwick, P.C.
LEGAL MATTERS
The law office of Steven L. Siskind, 645 Fifth Avenue, Suite 403, New York,
New York 10022, Telephone (212) 750-2002, has acted as legal counsel for the
Company regarding the validity of the securities in this offering.
FINANCIAL STATEMENTS
The Company's fiscal year ends December 31. The financial statements for
the period ended June 30, 1999 and the audited financial statements for the
Company for the period ended February 28, 1999 follow immediately.
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PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 22. Indemnification of Directors and Officers.
The only statute, charter provision, bylaw, contract, or other arrangement
under which any controlling person, director or officer of the Registrant is
insured or indemnified in any manner against any liability which he may incur in
his capacity as such, is as follows:
(1) Article Sixth of the Articles of Incorporation of the Company, filed as
Exhibit 3.1 to the Registration Statement.
(2) New York General Business Law ss. 722
The general effect of the foregoing is to indemnify a control person,
officer or director from liability, thereby making the Company responsible for
any expenses or damages incurred by such control person, officer or director in
any action brought against them based on their conduct in such capacity,
provided they did not engage in fraud or criminal activity.
Item 23. Other Expenses of Issuance and Distribution.
The estimated expenses of the offering (assuming all Shares are sold), all
of which are to be paid by the Registrant, are as follows:
SEC Registration Fee $ 3,182.00
National Association of
Securities Dealers, Inc.
Filing Fees 800.00
Printing Expenses 500.00
Accounting Fees and Expenses 5,000.00
Legal Fees and Expenses 27,500.00
Blue Sky Fees/Expenses 1,000.00
Transfer Agent Fees 500.00
Miscellaneous Expenses 1,518.00
----------
TOTAL $40,000.00
Item 24. Recent Sales of Unregistered Securities.
During the past three years, the Registrant issued securities which were
not registered under the Securities Act of 1933, as amended, pursuant to an
exemption under Section 4(2) of that Act, to its founders and promoters as
follows:
Name & Address Date of issuance Number of Shares
- -------------- ---------------- ----------------
Consideration
Stuart Radin ................ 12/31/98 560,000
1116 Neilson Street
Far Rockaway, NY 11691
20
<PAGE>
Eric Popkoff ................ 12/31/98 230,000
1750 East 23rd Street
Brooklyn, NY 11229
Jay Radin ................... 12/31/99 10,000
1239 East 34th Street
Brooklyn, NY 11210
Seyed A. Hasan .............. 6/1/99 75,000
400 Perimeter Center Terrace
Atlanta, Georgia
Abraham Ben-David ........... 6/1/99 30,000
39 Derech Hachoresh
Jerusalem, Israel 97278
Between March 1, 1999 and June 30, 1999 the Company issued an aggregate of
162,000 shares of common stock to 27 investors, pursuant to an exemption from
Registration under Section 4(2) of the Act.
All purchasers of the Registrant's Common Stock acknowledged in writing
that they were obtaining "restricted securities", as defined in Rule 144 under
the Act; that such shares cannot be transferred without appropriate registration
or exemption therefrom; that they must bear the economic risk of the investment
for an indefinite period of time; that they would not sell the securities
without registration or exemption therefrom; and that the Registrant would
restrict the transfer of the securities in accordance with such representations.
Each purchaser agreed that any certificate representing such shares would be
stamped with the usual legend restricting the transfer of such shares.
No underwriters were used in the sale and issuance of the foregoing shares
and none of the shares were offered publicly.
All of the foregoing shares were issued in transactions between the Company
and its promoters and founders, and did not involve any public offering. The
purchasers were all officers and directors of the Company.
Item 25. Exhibits.
The following Exhibits are filed as part of this Registration Statement,
pursuant to Item 601 of Regulation S-K:
Exhibit No. Title
1 Underwriting Agreement
1.1 Selected Dealer Agreement
1.2 Warrant Agreement*
3.1 Articles of Incorporation
3.2 Bylaws
4.1 Subscription Agreement
5 Opinion of Steven L. Siskind, Esq. regarding the legality of
the Securities being registered
* To be filed later.
21
<PAGE>
10.1(a) Promissory Note payable to Tina Chromey
10.1(b) Promissory Note payable to Philip Goodman
10.1(c) Promissory Note payable to Robert P. Hennig
10.1(d) Promissory Note payable to James L. Perry
10.10(a) Common stock purchase option with Philip Goodman
10.11 Proceeds Escrow Agreement with American Securities Transfer &
Trust, Inc.*
10.12(a) Employment Agreement with Stuart Radin
10.12(b) Employment Agreement with Eric Popkoff
10.12(c) Employment Agreement with Jay Radin
23 Consent of Steven L. Siskind, Esq. (See Exhibit 5)
24.1 Consent of Ronald P. Chadwick, C.P.A.
Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Act and is,
therefore, unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Registrant of expenses incurred
or paid by a director, officer or controlling person of the Registrant in the
successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Act and will be governed by the final adjudication of
such issue.
The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being made, a
post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) To reflect in the prospectus any facts or events arising after the
effective date of the Registration Statement (or the most recent
post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth
in the Registration Statement;
(iii) To include any material information with respect to the plan of
distribution not previously disclosed in the Registration Statement or
any change to such information in the Registration Statement.
(2) That, for the purpose of determining any liability under the Securities Act
of 1933, each such post-effective amendment shall be deemed to be a new
Registration Statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial
bona fide offering thereof.
* To be filed later.
22
<PAGE>
(3) To remove from registration by means of a post-effective amendment any of
the securities being registered which remain unsold at the termination of
the offering.
THE REST OF THIS PAGE INTENTIONALLY LEFT BLANK
23
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
certifies that it has reasonable grounds to believe that it meets all of the
requirements for filing on Form SB-2 and has duly caused this Amendment No. 1 to
the Registration Statement to be signed on its behalf by the undersigned
thereunto duly authorized in Far Rockaway, New York on the ___ day of September,
1999.
CALLFREE TELECOM COMMUNICATIONS CORP.
By:
Stuart Radin, President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
Signatures Date
September , 1999
Stuart Radin, President
September , 1999
Eric A. Popkoff, Vice-President
Corporate Relations, Director
September , 1999
Seyed A. Hasan
September , 1999
Jay Radin, Director
September , 1999
Abraham S. Ben-David
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1998
& February 28, 1999
and Six Months Ended June 30, 1999
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
BALANCE SHEET
<TABLE>
<CAPTION>
December 31, February 28, June 30,
1998 1999 1999
------------ ------------ --------
ASSETS
Current assets
<S> <C> <C> <C>
Cash $( 250) $ 27,740 $21,387
----------- ----------- -------
Total current assets ( 250) 27,740 21,387
----------- ----------- -------
Total Assets $( 250) $ 27,740 $21,387
----------- ----------- -------
LIABILITIES AND STOCMIOLDERS' EQUITY
Current liabilities
Accrued payables - related party $ 49,437 68,187 61,186
Accounts payable 1,877 4,877 2,028
Interest payable 2,463 3,213 6,344
Notes payable 45,000 75,000 155,750
----------- ------------
Total current liabilities 98,777 151,277 225,310
----------- ------------ -------
Total Liabilities 98,777 151,277 225,310
----------- ------------ -------
Stockholders' equity
Preferred stock: $.01 par value,
1,000,000 shares authorized,
0 shares issued & outstanding
Common stock: $.001 par value,
10,000,000 shares authorized
800,000 shares issued & outstanding
& 1,067,000 shares issued & outstanding 800 800 1,067
Additional paid in capital 7,238 7,318 9,423
Deficit accumulated during
the development stage ( 107,065) ( 131,655) (214,412)
----------- ------------ ---------
Stockholders' Equity (Deficit) ( 99,027) ( 123,537) (203,922)
----------- ------------ ---------
Total Liabilities And Stockholders' Equity $ (250) $ 27,740 $ 21,387
=========== ============ =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Two Months Six Months April 8, 1998
Year Ended. Ended Ended ________(inception to)_______
December 31, February 28, June 30, February 28, June 30,
1998 1999 1999 1999 1999
------------- ------------- ----------- ------------ ---------
<S> <C> <C> <C> <C> <C>
Revenues. $ - $ - $ -
Operating expenses 104,564 23,360 103,504 128,324 208,068
---------- ---------- ---------- ---------- ----------
Income (loss) from operations (104,564) (23,360) (103,504) (128,324) (208,068)
---------- ---------- ---------- ---------- ----------
Other income (expense)
Interest (2,501) (830) (3,843) (3,331) (6,344)
---------- ---------- ---------- ---------- ----------
Income (loss) before provision
for income taxes (107,065) (24,590) (107,347) (131,655) (214,412)
---------- ---------- ---------- ---------- ----------
Provision for income tax
Net income (loss) (l07,065) (24,590) (107,347) (13l,655) (214,412)
========== ========== ========== ========== ==========
Net income (loss) per share $ (.13) $ (.03) $ (.10) $ (.17) $ (.20)
========== ========== ========== ========== ==========
Weighted average number of
common shares outstanding 800,000 800,000 1,067,000 800,000 1,067,000
========== ========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the Period April 8, 1998 (inception) to February 28, 1999
<TABLE>
<CAPTION>
COMMON STOCK Total
Paid in (Accumulated Stockliolders'
Shares Amount Capital Deficit Equity (Deficit)
------ ------ -------- -------- ----------------
Balances at
<S> <C> <C> <C> <C> <C>
April 8,1998 - $ - $ - $ - $ -
Common stock Issued
on December 15, 1998
at $.0 1/share, for services 800,000 800 7,200 - 8,000
Paid in capital - - 38 - 38
Net gain (loss)
for the period ended
December 31, 1998 - - - (107,065) (107,065)
--------- ------- ---------- --------- ----------
Balances at
December31, 1998 800,000 $ 800 $ 7,238 $(107,065) $ (99,027)
Paid in capital - - 80 - 80
Common stock issued 262,000 267 2,105 - $ 2,372
and additional
Paid in Capital
Net gain (loss) (107,347) (107,347)
for the period
ended June 30,
1999
Balances at
June 30, 1999 1,067,000 1,067 9,423 (214,412) (203,922)
--------- ------- ---------- --------- ----------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
CALLFREEE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Two Months Six Months April 8, 1998
Year Ended. Ended Ended ________(inception to)_______
December 31, February 28, June 30, February 28, June 30,
1998 1999 1999 1999 1999
------------- ------------- ----------- ------------ ---------
Cash Flows From Operating Activities:
<S> <C> <C> <C> <C> <C>
Net income (loss) $(107,065) $(24,590) $(107,347) $(131,655) $(214,412)
Adjustments to
reconcile net income (loss) to net
cash provided by (used for) operating
activities:
Stock issuances
Compensatory stock issuances 8,000 - 267 8,000 1, 067
Increase in accrued payables -
related parties 49,437 18,750 11,749 68,187 61,186
Increase in accounts payable 1,877 3,000 151 4,877 2,028
Increase in interest payable 2,463 750 3,881 3,213 6,344
Option interest expense 38 80 2,185 118 1,423
Additional paid-in capital
Net cash provided by (used for)
operating activities (45,250) (2,010) (89,112) (47,260) (134,362)
------- ------ ------- ------ -------
Cash Flows From Financing Activities:
Receipts from notes payable 45,000 30,000 110,750 75,000 155,750
Payments on notes payable - - - - -
------- ------ ------- ------ -------
Net cash provided by (used for)
financing activities 45,000 30,000 110,750 75,000 155,750
------- ------ ------- ------ -------
Net Increase (Decrease) In Cash (250) 27,990 21,637 27,740 21,387
Cash At The Beginning Of The Period - (250) (250) - -
------- ------ ------- ------ -------
Cash At The End Of The Period $ (250) $27,740 $21,387 $27,740 $ 21,387
======= ====== ====== ====== =======
</TABLE>
Schedule Of Non-Cash Investing And Financing Activities:
During the period ended December 31,1998 the Company:
1)recorded $8,000 in stockholders' equity from compensatory stock
issuances.
Supplemental Disclosure
Cash paid from April 8, 1998 (inception) to June 30, 1999 for income taxes: 680
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
CALLEREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company).
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND:SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Callfree Telecom Communications Corp. ("Callfree", the "Company"), was
incorporated in the state of New York on April 8, 1998. The Company was formed
to provide long distance telephone and advertising services over the Internet.
The Company has conducted only limited planned principal operations and is a
development stage company.
Income tax
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss
carryforwards and deferred tax liabilities are recognized for taxable temporary
differences.' Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
Accounting year
The Company employs a calendar accounting year.
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 revenue and expenses during the reporting period.Actual
results could differ from those estimates.
F-6
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CQRP.
(A Development Stage' Company)
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
Net income (loss) per share
The net 'income (loss) per share is computed by dividing, the net income (loss)
by the weighted average number of shares of common outstanding. Warrants, stock
options, and common stock issuable upon conversion of the Company's preferred
stock are not included in the computation if the effect of such inclusion would
be anti-dilutive and would increase the earnings or decrease loss per share.
Stock offering costs
Expenditures incident to the public stock offering which consist primarily of
legal, underwriting, commissions and printing expenses are capitalized as
incurred and will be charged against the proceeds of the public offering if said
offering is successful, and charged off as an expense if the offering is not
successful.
NOTE 2. RELATED PARTY TRANSACTIONS
As of June 30, 1999 the Company owed Stuart Radin, an officer, $46,937,
consisting of $36,937 for expenses incurred on behalf of the Company, and
$10,000 in compensation, and owed Eric Popkoff, an officer, $2,500. At June 30,
1999, the Company owed Stuart Radin $61,187, consisting of $36,937 for expenses
incurred on behalf of the Company, and $24,250 in compensation.
NOTE 3. INCOME TAXES
Deferred income taxes arise from the temporary differences between financial
statement and income tax recognition of net operating losses. These loss
carryovers are limited under the Internal Revenue Code should a significant
change in ownership occur. The Company accounts for income taxes pursuant to
SFAS 109. As of June 30, 1999, the Company had approximately $ 214,000 of unused
federal net operating loss carryforward, which will expire in the year 2019 if
not used. A deferred tax asset, arising from the net operating loss carryforward
of approximately $64,200 has been offset by a 100% valuation allowance.
F-7
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Coutinued
NOTE 4. NOTES PAYABLE
At December 31, 1998 and February 28, 1999, the Company had the following notes
payable outstanding:
<TABLE>
<CAPTION>
Balances at Balances at
December 31, June 30,
1998 1999
------------ -----------
<S> <C> <C>
Three notes payable, unsecured, interest at
10% per annum, maturing November26, 1998,
currently delinquent $ 40,000 $ 40,000
Note payable1 unsecured, interest at
5% per annum, maturing August 4, 1999 5,000 5,000
Note payable, unsecured, interest at 10% per annum,
maturing on various dates. - 110,750
-------- --------
Total notes payable $ 45,000 $155,750
</TABLE>
The schedule of maturities by fiscal year for all notes outstanding is as
follows:
Year ending December 31,
1998 $ 40,000
1999 5,000
2000 115,750
Total $115,750
F-8
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CQRP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 5. STOCKHOLDERS' EQUITY
Common stock
The Company as of June 30, 1999 had 10,000,000 shares of authorized common
stock, $.00l par value, with 1,067,00O shares issued and outstanding.
Preferred stock
The Company has 1,000,000 shares of authorized, 5% cumulative, convertible
preferred stock, par value $.01, with 0 shares issued and outstanding (the
"Preferred"). The Preferred is convertible at the option of the holder, prior to
April 1, 2016, into fully paid, nonassessable common shares of the Company at
the rate of one common share for one share of the Preferred.
Stock compensation awards
In December of 1998 the Company issued founders' stock to insiders, recording a
total compensation expense of $8,000.
Stock options: In June and August of 1998, and February of 1999, the Company
issued stock options to several individuals in connection with the borrowing of
money to support Company operations. The Company accounts for the fair value of
these note related options in accordance with SFAS 123. The options are
considered by the Company as a cost of borrowed funds. The exercise price of the
options granted in 1998 is $.001 per share, and $.01 and $7.20 per s hare for
those in 1999, and market price has been estimated at par ($.00l per share). The
related interest cost has been expensed on the date of grant, as the options are
immediately exerciseable or the amounts nominal. The Company has set no specific
limit on the amount of shares it may issue for options underlying borrowing
activities, and the maximum term of any one of these options is four years.
F-9
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
FINANCIAL STATEMENTS
December 31, 1998
& February 28, 1999
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
FINANCIAL STATEMENTS
TABLE OF CONTENTS
Page
----
INDEPENDENT AUDITOR'S REPORT ON
THE FINANCIAL STATEMENTS F-1
FINANCIAL STATEMENTS
Balance sheet F-2
Statement of operations F-3
Statement of stockholders' equity F-4
Statement of cash flows F-5
Notes to financial statements F-6
<PAGE>
RONALD R. CHADWICK, P.C.
CERTIFIED PUBLIC ACCOUNTANT
3025 5. PARKER ROAD
SUITE 109
AURORA, COLORADO 80014
TELEPHONE:(3O3)3O6-I967
TELECOPIER:(303)306-1944
INDEPENDENT AUDITOR'S REPORT
Board of Directors
Callfree Telecom Communications Corp.
Far Rockaway, New York
I have audited the accompanying balance sheets of Callfree Telecom
Communications Corp. as of December 31, 1998 and February 28, 1999 and the
related statements of operations, stockholders' equity and cash flows for the
period from April 8, 1998 (inception) to February 28, 1999. These financial
statements are the responsibility of the Company's management. My responsibility
is to express an opinion on these financial statements based on my audit.
I conducted my audit in accordance with generally accepted auditing standards.
Those standards require that I plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. Ah 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.
I believe that my audit provides a reasonable basis for my opinion.
In my opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of Callfree Telecom Communications
Corp. as of December 31, 1998 and February 28, 1999 and the results of its
operations and its cash flows for the period from April 8, 1998 (inception) to
February 28, 1999 in conformity with generally accepted accounting principles.
Aurora, Colorado /s/RONALD CHADWICK, P.C.
March23, 1999 RONALD CHADWICK, P.C.
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
BALANCE SHEET
<TABLE>
December 31, February 28,
1998 1999
--------- ---------
ASSETS
Current assets
<S> <C> <C>
Cash .......................................................... $ (250) $ 27,740
--------- ---------
Total current assets ......................................... (250) 27,740
--------- ---------
Total Assets ...................................................... 250) $ 27.740
========= =========
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accrued payables - related party .............................. $ 49,437 68,187
Accounts payable .............................................. 1,877 4,877
Interest payable .............................................. 2,463 3,213
Notes payable ................................................. 45,000 75,000
--------- ---------
Total current liabilities ..................................... 98,777 151,277
--------- ---------
Total Liabilities ................................................. 98,777 115,277
--------- ---------
Stockholders' equity
Preferred stock: $.0l par value, 1,000,000 shares authorized,
0shares issued & outstanding............................... - -
Common stock: $.00l par value, 10,000,000 shares authorized
800,000 shares issued & outstanding ........................ 800 800
Additional paid in capital .................................... 7,238 7,318
Deficit accumulated during
the development stage....................................... (107.065) (131,655)
--------- ---------
Stockholders' Equity ('Deficit) ................................... (99.027) (123,537)
--------- ---------
Total Liabilities And Stockholders' Equity ........................ $ (250) $ 27,740
========= =========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-2
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
April 8, 1998
Year Ended Two Months Ended (inception) to
December 31, 1998 February 28, 1999 February 28, 1999
----------------- ----------------- -----------------
<S> <C> <C> <C>
Revenues......................................... $ - $ - $ -
Operating expenses............................... 104.564 23.760 128.324
----------- ----------- ------------
Income (loss) from operations.................... ( 104.564) ( 23.760) ( 128.324)
----------- ----------- ------------
Other income (expense)
Interest.............................. ( 2.501) ( 830) ( 3,331)
----------- ----------- ------------
Income (loss) before provision
for income taxes...................... ( 107,065) ( 24,590) ( 131.655)
----------- ----------- ------------
Provision for income tax
Net income (loss)................................ ( 107,065) ( 24,590) ( 131,655)
----------- ----------- ------------
Net income (loss) per share...................... $ (.13) $(.03) $ (.17)
----------- ----------- ------------
Weighted average number of
common shares outstanding................. 800.000 800.000 800,000
----------- ----------- ------------
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-3
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
STATEMENT OF STOCKHOLDERS' EQUITY
For the Period April 8, 1998 (inception) to February 28, 1999
COMMON STOCK
<TABLE>
<CAPTION>
Total
Paid in (Accumulated Stockholders'
Shares Amount Capital Deficit Equity (Deficit)
------ ------ ------- ------------ -----------------
Balances at
<S> <C> <C> <C> <C> <C>
April 8, 1998 .............. $ -- $ -- $ -- $ -- $ --
Common stock issued
on December 15, 1998
at $.0 1/share, for services 800,000 800 7,200 -- 8,000
Paid in capital ............ -- -- 38 -- 38
Net gain (loss)
for the period ended
December 31, 1998 .......... -- -- -- (107.065) ( 107.065)
-------- -------- -------- ---------- ----------
Balances at
December 31, 1998 .......... 800,000 $ 800 $ 7,238 $(107,065) $( 99,027)
Paid in capital ............ -- -- 80 -- 80
Net gain (loss)
for the period ended
February 28, 1999 .......... -- -- -- ( 24.590) ( 24,590)
-------- -------- -------- ---------- ----------
Balances at
February 28, 1999 .......... 800.000 $ 800 $ 7.318 $(131.655) $(123,537)
======== ======== ======== ========== ==========
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-4
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
Two Months April 8,1998
Year Ended Ended (inception) to
December 31, February 28, February 28,
1998 1999 1999
------------ ----------- --------------
Cash Flows From Operating Activities:
<S> <C> <C> <C>
Net income (loss) ................................ $(107,065) $ (24,590) $(131,655)
Adjustments to reconcile net income
(loss) to net cash provided by (used for)
operating activities:
Compensatory stock issuance .................. 8,000
Increase in accrued payables - related parties 49,437 18,750 68,187
Increase in accounts payable ................. 1,877 3,000 4,877
Increase in interest payable ................. 2,463 750 3,213
Option interest expense ...................... 38 80 118
--------- --------- ---------
Net cash provided by (used for)
operating activities ................ (45,250) (2,010) (47,260)
--------- --------- ---------
Cash Flows From Financing Activities:
Receipts from notes payable ...................... 45,000 30,000 75,000
--------- --------- ---------
Payments on notes payable
Net cash provided by (used for)
financing activities ................ 45,000 30,000 75,000
Net Increase (Decrease) In Cash ....................... (250) 27,990 27,740
Cash At The Beginning Of The Period ................... -- (250) --
Cash At The End Of The Period ......................... $ (250) $ 27,740 $ 27,740
========= ========= =========
Schedule Of Non-Cash Investing And Financing Activities:
During the period ended December 31, 1998 the Company:
1) recorded $8,000 in stockholders' equity from compensatory stock
issuances.
Supplemental Disclosure
Cash paid from April 8, 1998 (inception) to February 28, 1999 for interest
and income taxes: None.
</TABLE>
The accompanying notes are an integral part of the financial statements.
F-5
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Callfree Telecom Communications Corp. ("Callfree", the "Company"), was
incorporated in the state of New York on April 8, 1998. The Company was formed
to provide long distance telephone and advertising services over the Internet.
The Company has conducted only limited planned principal operations and is a
development stage company.
Income tax
Deferred taxes are provided on a liability method whereby deferred tax assets
are recognized for deductible temporary differences and operating loss
carryforwards and deferred tax liabilities are recognized for taxable temporary
differences. Temporary differences are the differences between the reported
amounts of assets and liabilities and their tax bases. Deferred tax assets are
reduced by a valuation allowance when, in the opinion of management, it is more
likely than not that some portion or all of the deferred tax assets will not be
realized. Deferred tax assets and liabilities are adjusted for the effects of
changes in tax laws and rates on the date of enactment.
Cash and cash equivalents
The Company considers all highly liquid investments with an original maturity of
three months or less as cash equivalents.
Accounting year
The Company employs a calendar accounting year.
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 revenue and expenses during the reporting period.
Actual results could differ from those estimates.
F-6
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 1. ORGANIZATION, OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(Continued):
Net income (loss) per share
The net income (loss) per share is computed by dividing the net income (loss) by
the weighted average number of shares of common outstanding. Warrants, stock
options, and common stock issuable upon conversion of the Company's preferred
stock are not included in the computation if the effect of such inclusion would
be anti-dilutive and would increase the earnings or decrease loss per share.
Stock offering costs
Expenditures incident to the public stock offering which consist primarily of
legal, underwriting, commissions and printing expenses are capitalized as
incurred and will be charged against the proceeds of the public offering if said
offering is successful, and charged off as an expense if the offering is not
successful.
NOTE 2. RELATED PARTY TRANSACTIONS
As of December 31, 1998 the Company owed Stuart Radin, an officer, $46,937,
consisting of $36,937 for expenses incurred on behalf of the Company, and
$10,000 in compensation, and owed Eric Popkoff, an officer, $2,500. At February
28, 1999, the Company owed Stuart Radin $65,187, consisting of $36,937 for
expenses incurred on behalf of the Company, and $28,250 in compensation, and
owed Eric Popkoff $3,000.
NOTE 3. INCOME TAXES
Deferred income taxes arise from the temporary differences between financial
statement and income tax recognition of net operating losses. These loss
carryovers are limited under the Internal Revenue Code should a significant
change in ownership occur. The Company accounts for income taxes pursuant to
SFAS 109. As of December 31, 1998, the Company had approximately $107,000 of
unused federal net operating loss carryforward, which will expire in the year
2019 if not used. A deferred tax asset, arising from the net operating loss
carryforward of approximately $30,000 has been offset by a 100% valuation
allowance.
F-7
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 4. NOTES PAYABLE
At December 31, 1998 and February 28,1999, the Company had the following notes
payable outstanding:
<TABLE>
Balances at Balances at
December 31, February 28,
1998 1999
------------ ------------
<S> <C> <C>
Three notes payable,
unsecured, interest at 10% per annum,
maturing November 26, 1998,
currently delinquent $ 40,000 $ 40,000
Note payable,
unsecured, interest at 5% per annum,
maturing August 4, 1999 5,000 5,000
Note payable,
unsecured, interest at 10% per annum,
maturing February 18, 2000 -- 30,000
-------- --------
Total current notes payable $ 45.000 $ 75.000
======== ========
</TABLE>
The schedule of maturities by fiscal year for all notes outstanding is as
follows:
Year ending December 31,
1998.....................$ 40,000
1999..................... 5,000
2000..................... 30,000
Total.....................$ 75.000
F-8
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 5. STOCKHOLDERS' EQUITY
Common stock
The Company as of December 31, 1998 and February 28, 1999 had 10,000,000 shares
of authorized common stock, $.001 par value, with 800,000 shares issued and
outstanding.
Preferred stock
The Company has 1,000,000 shares of authorized, 5% cumulative, convertible
preferred stock, par value $.0l, with 0 shares issued and outstanding (the
"Preferred"). The Preferred is convertible at the option of the holder, prior to
April 1, 2016, into fully paid, nonassessable common shares of the Company at
the rate of one common share for one share of the Preferred.
Stock compensation awards
In December of 1998 the Company issued founders' stock to insiders, recording a
total compensation expense of $8,000.
Stock options: In June and August of 1998, and February of 1999, the Company
issued stock options to several individuals in connection with the borrowing of
money to support Company operations. The Company accounts for the fair value of
these note related options in accordance with SFAS 123. The options are
considered by the Company as a cost of borrowed funds. The exercise price of the
options granted in 1998 is $.001 per share, and $.01 and $7 per share for those
granted in 1999, and market price has been estimated at par ($.001 per share).
The related interest cost has been expensed on the date of grant, as the options
are immediately exercisable or the amounts nominal. The Company has set no
specific limit on the amount of shares it may issue for options underlying
borrowing activities, and the maximum term of any one of these options is four
years.
F-9
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 5. STOCKHOLDERS' EQUITY (Continued)
A summary of the status of the Company's stock options as of December 31, 1998
and February 28, 1999, and changes during the period ended on those dates is
presented below:
<TABLE>
December 31, 1998 February 28, 1999
--------------------- ---------------------
Weighted Ave. Weighted Ave.
Options Shares Exercise Price Shares Exercise Price
- ------- ------ -------------- ------ --------------
Outstanding at
<S> <C> <C> <C> <C>
beginning of period -- -- 38,000 $ .001
Granted 38,000 $ .001 80,000 $ 3.50
Exercised -- -- -- --
Forfeited -- -- -- --
------ -------
Outstanding at
end of period 38.000 $.OO1 118,000 $ 2.37
======
Options exercisable
at period end 38,000 -- 78,000 --
Weighted average fair
value of options
granted during the
the period $ .001 -- $ .001 --
</TABLE>
The following table summarizes information about stock options outstanding at
Decembe 31, 1998.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------- ------------------------------------
Number Weighted Ave. Number
Range of Outstanding Remaining Weighted Ave. Exercisable Weighted Ave.
Exercise Price at 12/31/98 Contractual Life Exercise Price at 12/31/98 Exercise Prices
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ .001 only 38,000 6 months $ .001 38,000 $ .001
</TABLE>
The following table summarizes information about stock options outstanding at
February 28,1999.
<TABLE>
<CAPTION>
Options Outstanding Options Exercisable
--------------------------------------------------- ------------------------------------
Number Weighted Ave. Number
Range of Outstanding Remaining Weighted Ave. Exercisable Weighted Ave.
Exercise Price at 12/31/98 Contractual Life Exercise Price at 12/31/98 Exercise Prices
- ---------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
$ .001-7.00 118,000 23 months $ 2.37 78,000 $ .006
</TABLE>
F-10
<PAGE>
CALLFREE TELECOM COMMUNICATIONS CORP.
(A Development Stage Company)
NOTES TO FINANCIAL STATEMENTS - Continued
NOTE 6. PROPOSED PUBLIC OFFERING
The Company plans to raise capital through a public stock offering. The offering
calls for the sale to the public of a minimum of 200,000 units and a maximum of
500,000 units on a best efforts basis, at a price of $6.00 per unit. Each unit
consists of 1 share of common stock and 2 warrants.
F-11
Exhibit 1
PROPOSED UNDERWRITING AGREEMENENT
Gentlemen:
CALLFREE TELECOM COMMUNICATIONS CORP. (the "Company"), a New York corporation
incorporated on April 8, 1998 desires to offer for sale to the public an
aggregate of 500,000 Units of its Common Stock $.001 par value (the "Units").
The Units will be offered to the public at an offering price of $6.00 per share
for an aggregate of $3,000,000.
The Company desires to offer such Units for sale through you, Boe and Company
(the "Underwriter"). The offering will be undertaken by the Underwriter as agent
for the Company on a "best efforts, all Units or none" basis as to a minimum of
200,000 Units and on a "best efforts" basis thereafter up to a maximum of
500,000 Units. In the event $1,200,000 for the minimum purchase of 200,000 Units
is not received within the agreed period, no Units will be sold and the
Underwriter will not be entitled to any compensation other than as set forth
herein.
1. Appointment of Underwriter
The Company hereby appoints Underwriter, on all the terms and conditions
hereinafter set forth, as the Company's exclusive agent to use its best efforts
to sell on behalf of the Company up to 500,000 Units at the public offering
price set forth herein.
2. Representations and Warranties of the Company
As an inducement to and to obtain the reliance of the Underwriter in connection
herewith, the Company represents, warrants and agrees with the Underwriter as
follows:
(a) The Company has prepared and filed with the United States Securities and
Exchange Commission (the "Commission"), a Registration Statement on Form SB-2,
including a Prospectus, relating to the shares in accordance with Section 5 of
the Securities Act of 1933, as amended, and the Rules and Regulations of the
Commission promulgated thereunder (collectively referred to hereinafter as the
"Act"). As used in this Agreement, the term "Registration Statement" means such
Registration Statement, including exhibits, financial statements and schedules,
as amended, when the post-effective amendment thereto naming the Underwriter as
"underwriter" becomes effective and the term "Prospectus" means the Prospectus
filed with said Registration Statement. (The Registration Statement and
Prospectus, as defined herein, are herein-after collectively referred to as the
"Filing") . The company will utilize its best efforts to cause the Registration
Statement to become effective and to maintain its effectiveness during the term
hereof.
<PAGE>
(b) The Commission has not issued and to the knowledge and belief of the Company
does not have cause to issue an order preventing or suspending the use of the
Prospectus; the Registration Statement and Prospectus conform in all material
respects with the requirements of the Act and the rules and regulations of the
Commission promulgated thereunder (the "Regulations") and do not include any
untrue statement of material fact or omit to state a material fact necessary to
make the statements therein, in light of the circumstances under which they were
made, not misleading; and on the Effective Date (as hereinafter defined) and at
all times subsequent thereto up to the Termination Date (as hereinafter
defined), the Filing and any amendment or supplement thereto will fully comply
with the provisions of the Act and the Regulations, and will not contain any
untrue statements of a material fact or omit to state any material fact
necessary to make the statements therein, in light of the circumstances under
which they were made, not misleading; provided that the foregoing
representations and warranties shall not apply to statements in or omissions
from the Filing, or any amendments or supplements thereto, made in reliance upon
and in conformity with information furnished herein or in writing to the Company
by or on behalf of the Underwriter expressly for use therein.
(c) The Company has no subsidiaries.
(d) Except as reflected in or contemplated by the Filing, since the respective
dates as of which information is given in the Filing, there as not been and on
the Effective Date there will not have been, any material adverse changes in the
condition of the Company, financial or otherwise, or in the results of its
operations.
(e) The authorized capital stock of the Company consists of 10,000,000 shares of
common stock, par value $.00l, of which 1,067,000 shares of common stock are
duly and validly authorized and issued, are fully paid and non-assessable, and
conform to the description thereof contained in the Filing. On the Termination
Date, the Shares (as hereafter defined) will be duly and validly authorized,
and, when issued and paid for in accordance with this Agreement, will be validly
issued, fully paid and non-assessable, and will conform to the description
thereof contained in the Filing. The execution and delivery of, and compliance
with, this Agreement, and the issuance of the Shares will not conflict with or
constitute a breach of or default under the Articles of Incorporation or By-Laws
of the Company, and indenture, agreement or other instrument by which the
Company is bound or any order, decree, rule or regulation of any court, or any
law or administrative regulation, applicable to the Company.
(f) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of New York with an
authorized and outstanding capitalization as set forth in the Filing and with
full corporate power and authority to carry on the business in which it is now
engaged. The Company is qualified or licensed and in good standing as a foreign
corporation in each jurisdiction in which the ownership or leasing of any
properties or the character of its operations requires such qualification or
licensing. The Company has all requisite corporate power and authority, and all
material and necessary authorizations, approvals, orders, licenses, certificates
and permits of and from all governmental regulatory officials and bodies to own
or lease its properties and conduct its businesses as described in the
Prospectus, and the Company is doing business in strict compliance with all such
authorizations, approvals, orders, licenses, certificates and permits and all
federal, state and local laws, rules and regulations concerning the business in
which the Company is engaged. The disclosures in the Filing concerning the
effects of federal, state and local regulations on the Company's business as
<PAGE>
currently conducted and as contemplated are correct in all material respects and
do not omit to state a material fact. The Company has all corporate power and
authority to enter into this Agreement and to carry out the provisions and
conditions hereof, and all consents, authorizations, approvals and orders
required in connection therewith have been obtained or will have been obtained
prior to the Closing Date. No consent, authorization or order of, and no filing
with any court, governmental agency or other body is required for the issuance
of the Shares pursuant to the Prospectus and the Registration Statement, except
with respect to applicable federal and State securities laws.
(g) The Filing contains or will contain on the Effective Date an audited balance
sheet of the Company as of ________________, ("the Balance Sheet"); the related
audited statements of operations, changes, in stockholders' equity and changes
in financial position of the Company for the period from inception to _______ ,
including the notes hereto, together with the opinion of Ronald R. Chadwick,
P.C., certified public accountants, with respect thereto (the "Financial
Statements"). Such Financial Statements have been prepared in accordance with
generally accepted accounting principles consistently followed throughout the
periods indicated, except as otherwise indicated in the notes thereto. The
Balance Sheet presents fairly as of its date the financial condition of the
Company; the Company did not have, as of the date of such Balance Sheet, except
as and to the extent reflected or reserved against in such Balance Sheet
(including the notes thereto), any liabilities or obligations (absolute or
contingent) of a nature customarily reflected in a balance sheet or the notes
thereto prepared in accordance with generally accepted accounting principles.
The statement of income included in the Financial Statements present fairly the
results of operations of the Company for the period indicated. The statement of
stockholders' equity and changes in financial position present fairly the
information which should be presented therein in accordance with generally
accepted accounting principles.
(h) Except as set forth in the Filing, there is no action, suit or proceeding
before any court or government agency, authority or body pending or, to the
knowledge of the Company, threatened which might result in judgments against the
Company which is not adequately covered by insurance, or which is pending or, to
the knowledge of the Company, threatened by any public body, agency or
authority, which might result in any material adverse change in the condition
(financial or otherwise), business or prospects of the Company or would
materially affect its properties or assets.
(i) The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated, and compliance with the terms and provisions
hereof will not conflict with, or constitute a breach of, any of the terms,
provisions or conditions of any agreement or instrument to which the Company is
a party, nor will any one or any combination of the foregoing have such a
result.
(j) The Company has the legal right, power and authority to enter into this
Agreement, and the execution, delivery and, except as otherwise indicated in
this Agreement, performance thereof by the Company do not require the consent or
approval of any governmental body, agency or authority which has not been
obtained.
(k) The Company is not a party to any material contract (meaning thereby a
contract materially affecting its business or properties) that is not referred
to in the Filing. No default of any material significance exists in the due
performance and observance by the Company of any term, covenant or condition of
any such contract; all such contracts are in full force and effect and are
<PAGE>
binding upon the parties thereto in accordance with their terms; and, to the
knowledge of the Company, no other party to any such material contract has
threatened or instituted any action or proceeding wherein the Company is alleged
to be in default thereunder.
(l) No stock options or warrants are or will be outstanding or issued during the
period covered by this Agreement except as set forth in the Filing.
(m) The Company is not delinquent in the filing of any tax return or in the
payment of any taxes, knows of no proposed predetermination or assessment of
taxes; and has paid or provided for adequate reserves for all known tax
liabilities.
(n) The Company has obtained a CUSIP number for its Shares.
(o) During the period of the offering of the Shares and for six (6) months from
the Effective Date, the Company will not sell any securities without the
Underwriter's prior written consent, which will not be unreasonably withheld.
(p) The Company's securities, however characterized, are not subject to
pre-emptive rights.
(q) The Company will have the legal right and authority to enter into this
Agreement upon its execution, to effect the proposed sale of the Shares, and to
effect all other transactions contemplated by this Agreement.
(r) The Company knows of no person who rendered any services in connection with
the introduction of the Company to the Underwriter. No broker's or other
finder's fees are due and payable by the Company and none will be paid by it.
(s) The Company and its affiliates are not currently offering any securities nor
has the Company or its affiliates offered or sold any securities except as
required to be described in the Prospectus.
(t) All original documents and other information relating to the Company's
affairs have and will continue to be made available upon request to the
Underwriter and to its counsel at the Underwriter's office or at the office of
the Underwriter's counsel and copies of any such documents will be furnished
upon request to the Underwriter and to its counsel. Included within the
documents made available have been at least the Articles of Incorporation and
any Amendments, Minutes of all of the meetings of the Incorporators and
Directors and Shareholders, all financial statements and copies of all
contracts, leases, patents, copyrights, licenses or agreements to which the
Company is a part or in which the Company has an interest.
(u) The Corporation will use the proceeds from the sale of the Shares as set
forth in the Prospectus.
(v) There are no contracts or other documents required to be described in the
Prospectus or to be filed as exhibits to the Prospectus which have not been
described or filed as required.
(w) The Company has not made any representations, whether oral or in writing, to
anyone, whether an existing shareholder or not, that any of the Shares will be
reserved for or directed to them during the proposed offering.
(x) The Company has caused each of its current shareholders to agree in writing
with respect to shares acquired by them prior to the effective date that they
have acquired the shares for investment purposes only and they acknowledge that
they hold "restricted securities" as defined in Rule 144.
<PAGE>
3. Employment of the Underwriter
Upon the foregoing representations, agreements, and warranties and subject to
the terms and conditions of this Agreement:
(a) The Company hereby employs the Underwriter as its agent to sell for the
Company's account up to 500,000 Units. The Underwriter agrees to use its best
efforts as agent, promptly following the receipt of written notice of the
Effective Date of the Registration Statement, to offer for sale the aggregate of
500,000 Units subject to the terms, provisions, and conditions hereinafter set
forth.
(b) In the event the Underwriter does not find subscribers for the minimum
number of Shares having a total aggregate purchase price of $1,200,000 within 90
days following the Effective Date (unless extended for up to an additional 90
days by written agreement of the Company and the Underwriter), this Agreement
shall terminate and neither party to this Agreement shall have any obligations
to the other party hereunder except for certain expenses payable to the
Underwriter. Appropriate arrangements for placing all funds received for the
Shares in escrow shall be made prior to the commencement of the offering
hereunder, with provisions for refund to the purchasers as set forth above or
for delivery to the Company of the net proceeds therefrom if more than
$1,200,000 in cash has been received from the sale of Shares hereunder.
(c) The 500,000 Units shall be offered to the general public at the initial
public offering price of $6.00 per Unit.
(d) The Underwriter is granted irrevocable authority as agent for the Company to
declare any contract to purchase Shares offered to the public hereunder in
default if such Shares are not paid for in cash within seven (7) days after the
contract date. The Underwriter shall deposit promptly pursuant to the
requirements of Rule 15c2-4 promulgated under the Securities Exchange Act of
1934 the gross proceeds from sales of Shares in the amount with the escrow agent
until $1,200,000 is received from said sale. In no event shall the deposit in
escrow of any proceeds required hereunder be made later than noon of the
business day after receipt of such funds by the Underwriter. Said deposit shall
include all cash and checks received with respect to the offering and all checks
received from customers shall be made payable to the escrow agent.
(e) As its compensation and subject to the sale of the minimum number of Units,
the Underwriter shall be entitled to receive a commission of 10% of the sales
price per Unit and a non-accountable expense allowance of 3% of the sales price
per Unit, and Underwriter's Warrants issued by the Company, for total
consideration of $100, entitling it to purchase shares in an amount equal to Ten
(10%) of the amount of Units sold by the Underwriter in this offering at $7.20
per share as compensation. The shares contained in the Underwriter's Warrants
are identical to the shares being offered to the public, except that the
exercise price of the Class A and Class B Warrants are, respectively $8.00 and
$7.00 per share. The Underwriter's Warrants will be exercisable only during the
48 month period commencing 12 months after said Effective Date of the Company's
Registration Statement (the "Effective Date"), as amended, and expiring 60
months after the Effective Date. The Underwriter's Warrants shall contain
provisions protecting the holders of the Underwriter's Warrants against
dilution.
(f) The Company agrees to issue or have issued such Shares in such names and
denominations as may be specified by the Underwriter, and to deliver
certificates representing the Shares against payment to the Company in cash or
cashier's check in the amount of the selling price of the Shares less the
Underwriter's sales commission and expenses as provided herein. Such payment and
delivery shall be made to _________at such a date and time within three (3) days
following the sale of the minimum number of Shares as provided in subparagraph 3
(b) hereof as shall be agreed upon by the Underwriter and the Company (the
"Closing Date") . The Underwriter's requisitions for certificates shall be in
writing and shall be given to the Company before the delivery date. The
<PAGE>
Underwriter agrees to deliver certificates to the buyers of the Shares within
seven (7) days of the delivery of certificates to the Underwriter as provided
herein. For purposes of expediting the checking and packaging of the
certificates, the Company agrees to make the certificates available for
inspection by the Underwriter, the transfer agent or other authorized
representative at the Company's principal office at least 24 hours prior to the
time of each closing.
(g) The Underwriter is hereby authorized to organize a group of participating
dealers consisting exclusively of members of the National Association of
Securities Dealers, Inc. (the "selling group"). Such members of the selling
group are to act as agents, and shall be allowed to purchase from the
Underwriter at a price which provides a concession out of the Underwriter's
commission in such amount as the Underwriter may determine.
(h) The Company has appointed American Securities Transfer (AST) in Denver
Colorado to act as the Transfer Agent. AST has acted in said capacity since the
inception of the Corporation.
4. Representations and Warranties of the Underwriter
As an inducement and to obtain the reliance of the Company in connection
herewith, the Underwriter represents, warrants and agrees with the Company as
follows:
(a) The Underwriter is duly registered as a securities broker-dealer in
accordance with the Securities Exchange Act of 1934 and the states in which the
offering shall be sold by it.
(b) The Underwriter will not publish, issue or circulate or authorize the
publication, issuance or circulation of any circular, notice or advertisement
which offers the Shares for sale which shall not have previously been approved
by the Company and its counsel, except for so-called "tombstone" advertisements,
and which has not been approved by the Commission prior to its use, if such
prior approval is required.
(c) The Underwriter is, to the best of its information and belief, in good
standing with and in full and current compliance in all material respects with
the rules of the National Association of Securities Dealers, Inc., ("NASD"). It
is understood that any Dealer to whom an offer may be made as herein before
provided shall be a member of the NASD or a foreign dealer not eligible for
membership in the NASD who agrees not to re-offer, resell or deliver the Stock
in the United States of to persons to whom it has reason to believe are citizens
or residents of the United States and, in making sales, to comply with the
NASD's Interpretation with Respect to Free-riding and withholding and Sections
8, 24 and 36 of Article III of the NASD's Rules of Fair Practice as if such
foreign dealer were an NASD member and Section 25 of such Article III as it
applies to a non-member broker or dealer in a foreign country.
5. Covenants by the Company
In further consideration of the agreements by the Underwriter herein contained,
the Company covenants as follows:
(a) At least 48 hours prior to submission of the Filing or any amendment or
supplement thereto to the Commission, the Underwriter and its counsel shall be
provided with a copy of such Filing or amendment, and no such Filing will be
made to which the Underwriter or its counsel shall object within the 48 hour
period.
<PAGE>
(b) The Company will use its best efforts to cause the registration Statement to
become effective and will not at any time, whether before, on or after the
Effective Date, file any amendments to the Filing or supplement to the
Prospectus without first obtaining the Underwriter's approval. Such approval
shall be obtained by compliance with subsection (a) above. Said Filings or any
amendments or supplements thereto shall be in compliance with the Act and the
Regulations of the Commission to best of the Company's knowledge, information
and belief.
(c) As soon as the Company is advised thereof, the Company will advise the
Underwriter and confirm the advice in writing (i) as to when the Registration
Statement has become effective; (ii) of any request made by the Commission for
amendment of the Filing, for supplementing the Prospectus or for additional
information with respect thereto; and (iii) of the issuance by Commission of any
stop order suspending the effectiveness of the Registration Statement or of any
amendment thereto or the initiation, or threat of initiation, of any proceedings
for such purpose, and the Company will use its best efforts to prevent the
issuance of any such order and to obtain as soon as possible the lifting
thereof, if issued.
(d) The Company will deliver to the Underwriter and members of the selling
group, as designated by the Underwriter, prior to the Effective Date,
preliminary prospectuses and, on the Effective Date of the Registration
Statement, without charge and from time to time thereafter, Prospectuses and
amendments thereto as required by law to be delivered in connection with sales,
in such quantities as the Underwriter may request.
(e) The Company will deliver to the Underwriter, without charge, one manually
executed copy and one conformed copy of the Registration Statement together with
all required exhibits, as filed and all amendments thereto with exhibits which
have not previously been furnished to the Underwriter, and will deliver to the
Underwriter and to members of the selling group, as designated by the
Underwriter, without charge, such reasonable number of copies of the
Registration Statement and Prospectus (excluding exhibits) and all amendments
thereto as the Underwriter may reasonable request.
(f) Prior to the Termination Date if, in the opinion of the Underwriter's
counsel, any statements are contained in the Prospectus which are misleading or
inaccurate in light of the circumstances under which they are made, the
Underwriter may require the Company to amend or supplement the Prospectus to
correct said statements and may request such reasonable number of copies of any
amended or supplemented Prospectus as may be necessary to comply with the Act
and Regulations.
(g) The Company will secure, on or before the Effective Date of the Registration
Statement, and maintain for such period as may be required for distribution,
such exemptions, registrations and qualifications of the Shares as will permit
the public offering thereof under the securities or "blue sky" laws of the
states as the Underwriter and the Company shall agree upon; provided, that no
such qualification shall be required if, as a result thereof, the Company would
be made subject to service or general process or would be required to qualify
for authority to do business as a foreign corporation in any jurisdiction where
it is not now so subject or qualified.
<PAGE>
(h) The Company will pay all costs and expenses incident to the performance of
its obligations under this Agreement, including (i) all expenses incident to its
insurance and delivery of the Shares, (ii) the fees and expenses incident to the
preparation, printing and filing of the Registration Statement and Prospectus
(including all exhibits thereto) with the Commission, the various "blue sky"
agencies and the National Association of Securities Dealers, Inc., and (iii) the
costs of furnishing the Underwriter copies of the Registration Statement,
Prospectus and preliminary prospectuses. The Company shall not, however, be
required to pay for transfer tax stamps on any sales of the Shares which the
Underwriter may make; or to pay for any of the Underwriter's expenses or those
of any other dealers other than as herein set forth.
(i) For a period of five years from the Effective Date, the Company will furnish
the Underwriter with (i) all reports and financial statements, if any, filed
with or furnished by the Company to the Commission or any stock exchange upon
which the securities of the Company are listed, (ii) such other periodic and
special reports as the Company from time to time furnishes generally to holders
of any class of its stock, (iii) every press release and every news item and
article with respect to the affairs of the Company which was released by the
Company, and (iv) such additional documents and information with respect to the
affairs of the Company which was released by the Company, if any, as the
Underwriter may from time to time reasonably request. For 180 days following the
Effective Date of the registration Statement, the Company will cause its
transfer agent or agents to furnish to the Underwriter weekly transfer sheets
covering the transfers of the Company's securities, including the Shares.
(j) The Company will mail or otherwise make generally available to its security
holders as soon as practicable, but in no event more than fifteen months after
the close of the fiscal quarter ending after the Effective Date of the
Registration Statement, an earnings statement, which need not be audited,
covering a period of at least twelve months beginning after the Effective Date
of the Registration Statement.
(k) The Company will, as promptly as practicable after the end of each fiscal
year, release to the press an appropriate report covering its operations for
such year, and send to the Underwriter, to all holders of record of the
Company's common stock and to recognized statistical services, a report covering
operations for such year, including a balance sheet of the Company and
statements of earnings and of retained earnings, as examined by the Company's
independent accountants.
(l) The Company will apply the net proceeds from the offering received by it in
substantially the manner set forth in the Prospectus.
(m) The Company will comply with the reporting requirements to which it is
subject pursuant to Section 15(d) of the Securities Exchange Act of 1934.
(n) The Company will file with the Commission the required Reports on Form SR
and will file with the appropriate state securities commissioners any sales and
other reports required by the rule and Regulations of such agencies and will
supply copies to the Underwriter.
(o) Except with the Underwriter's approval, the Company agrees that the Company
will not do the following until (a) the completion of the offering of the
Shares, or (b) the termination of this Agreement, or (c) 90 days after the
Effective Date, whichever occurs later:
<PAGE>
(i) Undertake or authorize any change in its capital structure or
authorize, issue, or permit any public or private offering of additional
securities;
(ii) Authorize, create, issue, or sell any funded obligations, notes or
other evidences of indebtedness, except in the ordinary course of business
and within 12 months from their creation;
(iii) Consolidated or merge with or into any other corporation; or
(iv) Create any mortgage or any lien upon any of its properties or assets
except in the ordinary course of its business.
(p) The Company agrees to have the Shares listed in the "Pink Sheets" of the
National Quotation Bureau on the first day of trading in the Shares.
(q) Within 30 days after the successful termination of the offering of the
Shares, the Company agrees to submit information about the Company to be
included in various securities manuals, including Standard and Poor's
Corporation Records to facilitate secondary trading in the Shares.
(r) The Company agrees to cause the stock certificates of all of the current
shareholders of the Company and of any future officers or directors of the
Company to be clearly legended as being restricted against transfer without
compliance with the Act and to cause the Company's transfer agent to put stop
transfer instructions against such stock certificates.
6. Reciprocal Indemnification
(a) The Company agrees to indemnify and hold harmless the Underwriter and
members of the selling group and any person who may be deemed to be in control
of the Underwriter or any member of the selling group within the meaning of
Section 15 of the Act; and
(b) The Underwriter agrees to indemnify and hold harmless the Company, its
directors, such of its officers as sign the Registration Statement and any
person who may be deemed to control and company within the meaning of the Act,
and to obtain a similar indemnification from each of the members of the selling
group; against any and all losses, claims, damages or liabilities whatsoever
(including, but- not limited to, any and all legal or other expenses whatsoever
reasonably incurred in investigating, preparing or defending against any actions
or threatened actions or claims) based on or arising out of any untrue statement
or alleged untrue statement of a material fact contained in the Registration
Statement or Prospectus (as from time to time amended or supplemented) or any
application or other document filed in any state in order to register, qualify
or obtain an exemption for the Shares under the laws thereof (blue sky
application), as the case may be, or any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, or any violation by any of the indemnifying
parties of any provisions of the Act or any Regulation, or of common or
statutory law, and against any and all losses, claims, damages or liabilities
whatsoever to the extent of the aggregate amount paid in settlement of any
action, commenced or threatened, or of any claim whatsoever based upon any such
untrue statement or omission or any such violation (including but not limited to
any and all legal or other expenses whatsoever reasonably incurred in
investigation, preparing or defending against any such actions or claims) if
such settlement is effected with the written consent of any indemnifying party.
The indemnification by the Underwriter and members of the selling group shall
not extend to any such statements or omissions made in reliance upon and in
conformity with written information furnished by the Company to the Underwriter
or members of the selling group.
<PAGE>
Each of the foregoing indemnification's is expressly conditioned upon the
indemnifying parties being notified by the person seeking indemnification, by
letter or by telegram confirmed by letter, of any action commenced against such
person, within a reasonable time after such person shall have been served with
the Summons or other first legal process giving information as to the nature and
basis of the claim, and in any event at least ten days prior to the entry of any
judgment in such action, but the failure to give such notice shall not relieve
any indemnifying party of any liability which such party may have to such person
otherwise than on account of this indemnity agreement. Any party whose
indemnification is being relied upon shall assume the defense of any action or
claim, including the employment of counsel and the payment of all expenses. Any
indemnified party shall have the right to separate counsel in any such action
and to participate in the defense thereof but the fees and expenses of such
counsel shall be at the expense of such indemnified party unless (i) the
employment thereof shall have been specifically authorized by the indemnifying
party or (ii) the indemnifying party shall have failed to assume the defense and
employ counsel.
The indemnification contained above in this Section 6, and the representations
and warranties of the Company set forth in this Agreement will remain operative
and in full force and effect, regardless of any investigations made by or on
behalf of the Underwriter or any controlling person thereof, or by or on behalf
of the Company or its directors or officers and will survive delivery of and
payment for the Shares.
7. Conditions to Obligations of the Company
The obligation of the Company to deliver the Shares being sold by the
Underwriter hereunder is subject to the conditions that (i) the Registration
Statement shall have become effective not later than 5:00 West Coast Time the
twenty-fifth business day following the date hereof or such later time and date
as is acceptable to the Company; and (ii) no stop order suspending the
effectiveness of the Registration Statement shall have been issued and shall be
in effect at the time of closing and no proceeding for that purpose shall have
been initiated or, to the knowledge of the Company, threatened by the
Commission, it being understood that the Company shall use its best efforts to
prevent the issuance of any such stop order and, if one has been issued, to
obtain the lifting thereof. In the event that the Shares (or any part thereof)
are not delivered by virtue of the provisions of clause (i) of this paragraph,
the Company shall not be liable to the Underwriter.
8. Conditions to the Obligations of the Underwriter
The several obligations of the Underwriter hereunder are subject to the
accuracy, as of the date hereof and on the Closing Date of the representations
and warranties made herein by the Company; to the accuracy in all material
respects of the statements of the officers of the Company made pursuant to the
provisions hereof; to the performance by the Company of its obligations
hereunder required on its part to be performed or complied with prior to or at
such Closing Date; and to the following additional conditions:
(a) The Registration Statement and Prospectus shall have fully complied with the
provisions of the Act and the Regulations, and neither document shall contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading; provided, however, that statements or omissions in the Registration
Statement or Prospectus in reliance upon, and in conformity with, information
furnished in writing by or on behalf of the Underwriter expressly for use
therein shall not be considered within the scope of this provision.
<PAGE>
(b) The Underwriter shall not have advised the Company that the Registration
Statement or prospectus, or any amendment or supplement thereto, contains an
untrue statement or fact which, in the opinion of counsel for the Underwriter,
is material, or omits to state a fact which, in the opinion of such counsel, is
material and is required to be stated therein or is necessary to make the
statements therein not misleading.
(c) The Registration Statement shall have become effective not later than the
date specified in Section 7, or such later time and date as is acceptable by the
Underwriter, and prior to the Closing Date no stop order shall have been issued
by the Commission with respect to the Registration Statement and Prospectus, no
proceedings therefor shall have been initiated by the Commission, and to the
knowledge of the Company or the Underwriter, no such proceedings shall be
contemplated by the Commission.
(d) Each contract to which the Company is a party and which is filed as an
exhibit to the Registration Statement shall be in full force and effect at the
Closing Date, or shall have been terminated, in accordance with its terms; no
party to any such contract shall have given any notice of cancellation, or to
the knowledge of the Company, shall have threatened to cancel any such contract;
and there shall be no material misstatement in any description of a contract
contained in the Registration Statement or Prospectus.
(e) From the date hereof until the Closing Date, no material litigation or legal
proceedings of any nature shall have been commenced or threatened against the
Company, nor any litigation of the transactions herein contemplated; and no
substantial change, financial or otherwise, shall have occurred in or relating
to the condition, business or assets of the Company which shall render such
condition, business or assets substantially less favorable, in the Underwriter's
judgment, than as set forth in the Filing.
(f) The Underwriter shall have received at the Closing Date an opinion,
addressed to the Underwriter, of Steven L. Siskind, counsel for the Company,
dated as of the Closing Date and in a form and substance satisfactory to counsel
for the Underwriter, to the following effect:
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of New York, with power and
authority to own its properties, hold its franchises and conduct its
business, as described in the Prospectus, and, to the best of the knowledge
and information of said counsel, is duly qualified to do business and is in
good standing in every other jurisdiction where the location of its
properties or the conduct of its business makes such qualification
necessary;
(ii) The Company has authorized capital stock as set forth in the
Prospectus; the Shares and all other outstanding shares of common stock of
the Company have been duly and validly authorized and issued and are fully
paid and non-assessable; and the description of the capital stock of the
Company made in the Registration Statement and Prospectus accurately set
forth matters respecting such shares required to be set forth therein;
(iii) The Agreement has been duly authorized, executed and delivered by the
Company and constitutes a valid and binding agreement of the Company;
(iv) The certificates to be issued for the Shares are in due and proper
form;
<PAGE>
(v) The Registration Statement has become, and at the Closing Date is,
effective under the Act, and is effective in each state in which the Shares
are sold and, to the best of the knowledge of such counsel, no proceedings
for a stop order are pending or threatened under the Regulations and the
Act;
(vi) The Registration Statement and Prospectus (except as to the financial
statements contained therein, with respect to which said counsel need
express no opinion) comply as to form in all material respects with the
requirements of the Act and the applicable Regulations, and said counsel
has no reason to believe that either the Registration Statement or
Prospectus as then amended or supplemented contains any untrue statement of
a material fact or omits to state a material fact required to be stated
therein or necessary in order to make the statements therein not
misleading;
(vii) All contracts and documents summarized in the Registration Statement
and Prospectus are accurately summarized, such summaries fairly presented
the information required to be show; and such counsel does not know of any
contract or document required to be summarized, disclosed or filed which
have not been so summarized, disclosed or filed;
(viii) Such counsel knows of no material legal proceedings pending or
threatened against the Company except as set forth in the Prospectus; and
(ix) To the best of said counsel's knowledge, the consummation of the
transactions contemplated herein did not and will not conflict with or
result in a breach of any of the terms, provisions or conditions of any
agreement or instrument to which the Company is a party or by which the
Company may be bound.Such counsel may rely, as to matters of local law,
upon opinions of local counsel satisfactory to him, and, as to matters of
fact, upon affidavits or certifications of officers of the Company.
(g) The Company shall have furnished to the Underwriter a certificate of the
president or vice president and any financial officer of the Company, dated as
of the Closing Date, to the effect that:
(i) The representations and warranties of the Company in this Agreement are
true and correct at and as of the Closing Date, and the Company has
complied with all the agreements and satisfied all the conditions on its
part to be performed or satisfied at or prior to the first Closing Date.
(ii) The Registration Statement has become effective and no order
suspending the effectiveness of the Registration Statement has been issued;
and to the best of the knowledge of the respective signers, no proceeding
for that purpose has been initiated or is threatened by the Commission.
(iii) The respective signers have each carefully examined the Registration
Statement and the Prospectus and any amendments and supplements thereto,
and to the best of their knowledge the Registration Statement and the
Prospectus and any amendments and supplements thereto and all statements
contained therein are true and correct, and neither the Registration
Statement nor any amendment or supplement thereto includes any untrue
statement of a material fact or omits to state any material fact required
to be stated therein or necessary to make the statements therein not
misleading, and since the effective date of the Registration Statement,
there has occurred no event required to be set forth in an amended or
supplemented Prospectus which has not been so set forth.
<PAGE>
(iv) Except as set forth in the Registration Statement and Prospectus,
since the respective dates as of which or periods for which information is
given in the Registration Statement and Prospectus, and prior to the date
of such certificate, (A) there has not been any substantially adverse
change, financial or otherwise, in the affairs or condition of the Company,
and (B) the Company has not incurred any liabilities, direct or contingent,
or entered into any transactions otherwise than in the ordinary course of
business.
(h) The Company shall have furnished to the Underwriter, at each Closing Date,
such other certificates, additional to those specifically mentioned herein, as
the Underwriter may have reasonably requested as to the accuracy and
completeness, at the Closing Date, of any statement in the Registration
Statement or the Prospectus, or in any amendment or supplement thereto, as to
the accuracy, at the Closing Date, of the representations and warranties of the
Company herein and as to the performance by the Company of its obligations
hereunder, or as to the fulfillment of the conditions concurrent and precedent
to its obligations hereunder which are required to be performed or fulfilled on
or prior to the Closing Date.
(i) The Company shall have' furnished to the Underwriter a letter of
auditors to the Company, in form and substance satisfactory to the
Underwriter, to the effect that:
(i) They are independent accountants within the meaning of the Act and
the Regulations.
(ii) In the opinion of said auditor, the financial statements of the
Company included in the Prospectus and covered by their opinion
thereon comply as to form in all material respect with the applicable
accounting requirements of the Act and the Regulations.
(iii) On the basis of a limited review (but not an audit or
"examination" as used in accountants' opinions) of the latest
available financial statements of the Company, a reading of the
minutes of the Company and consultations with and inquiries of
officers of the company responsible for financial and accounting
matters, said auditor has no reason to believe that during the period
from April 8, 1998, to a specified date not more than five business
days prior to the Closing Date, there has been any material change in
the capital stock, or funded or current debts of the Company, or any
significant increases or decreases in the financial position, or
results of operations, if any, of the Company from that set forth in
the financial statements included in the prospectus, except as set
forth or contemplated therein.
(iv) On the basis of the examination referred to in their opinion
included in the Prospectus, the other procedures referred to in
subdivision (iii) above and such other procedures as the Underwriter
may specify, nothing came to their attention which in their judgment
would indicate that the statements appearing in the Registration
Statement and the information of a financial or accounting nature
pertaining to the Company set forth in the Prospectus under the
captions "Use of Proceeds", "Capitalization", "Dilution", "Description
of the Common Stock" to the extent such statements and information are
derived from the general accounting records of the Company, and
excluding any questions requiring interpretation by legal counsel, are
not in all material respects a fair and reasonable presentation of the
information purported to be shown. All the opinions, letters,
certificates and evidence mentioned above or elsewhere in this
Agreement shall be deemed to be in compliance with the provisions
hereof only if they are in form and substance satisfactory to counsel
to the Underwriter, whose approval shall not be unreasonably withheld.
The Underwriter reserves the right to waive any of the conditions
herein above set forth.
<PAGE>
(j) All proceedings taken and to be taken in connection with the sale of the
Shares pursuant to this Agreement shall be satisfactory as to legal aspects to
counsel to the Underwriter.
(k) If (i) any of the foregoing conditions shall not have been fulfilled as
above provided; or (ii) prior to the Closing Date, the conditions of the
securities market, or any material factor, whether of an economic or military or
political nature or otherwise, bearing upon the marketability of the Shares
proposed to be sold shall be such as, in the Underwriter's reasonable judgment,
would seriously affect the offering, sale or delivery to the public of the
Shares, or would render such delivery at the initial public offering price
impracticable or inadvisable, the Underwriter shall have the right to terminate
its obligations under this Agreement forthwith, by written or telegraphic notice
to the Company, without any liability on the part of the Underwriter.
(l) If at any time prior to the Closing Date (i) trading in securities on the
New York Stock Exchange shall be suspended, (ii) minimum prices shall be
established on said Exchange by action of said Exchange or the Commission, (iii)
there shall be an outbreak of hostilities between the United States and any
foreign power which resulted in the declaration of a national emergency or
declaration of war or there shall be an outbreak of civil disorder within the
United States which has resulted in the declaration of a national emergency, the
Underwriter shall have the right to terminate its obligations under this
Agreement forthwith, by written or telegraphic notice to the Company, without
any liability on the part of the Underwriter.
If the sale of the Shares as herein contemplated shall not be carried out
because of any of the conditions set forth in Sections 7 or 8 hereof shall not
have been fulfilled, then the Company shall not be liable to the Underwriter for
lost profits or expenses incurred by it in connection herewith; provided that
the Underwriter shall be entitled to retain the accountable legal expenses
allowance to the extent necessary to reimburse it for legal expenses actually
incurred. In no event shall the Underwriter be liable to the Company for lost
profits or for expenses incurred in connection herewith.
9. Definitions
(a) "Effective Date" shall mean the date following any required waiting period,
when the Registration Statement shall have been declared effective by the
Commission.
(b) "Termination Date" shall mean the date specified below which first occurs:
(i) The date which is 90 days following the Effective Date, or the
date 180 days from the Effective Date if the Company and the
Underwriter have agreed to so extend the offering period.
(ii) The date upon which all offered Shares are sold and payment
received therefor by the Company.
10. Miscellaneous Provisions
(a) This Agreement contains the entire agreement of the parties hereto and
cannot be altered except in a writing signed by both parties hereto and which
makes specific reference to this Agreement.
(b) The representations and warranties contained herein shall be effective
regardless of any investigations made or participation in the preparation of the
Filing, or any amendment or supplement thereto and shall survive the Termination
Date and the delivery of and payment of the Shares contemplated herein.
<PAGE>
(c) This Agreement has been and is made solely for the benefit of the
Underwriter, the Company and their respective successors, and, to the extent
expressly provided herein, for the benefit of the directors of the Company, the
officers of the Company who signed the Filing, or authorized the same, the
persons controlling the Underwriter or the Company, and their respective
successors and assigns, and no other person or persons shall acquire or have any
right under or by virtue of this Agreement. The term "successor" shall not
include any purchaser, as such, of any Shares from the Underwriter.
(d) Each of the parties hereto hereby respectively warrant and represent that
the person executing this Agreement on its behalf has full power and authority
to execute, acknowledge and deliver this Agreement for and on behalf of such
corporation.
(e) Except as otherwise provided herein, all communications hereunder shall be
in writing and, if sent to the Underwriter, shall be mailed, delivered or
telegraphed to it at the following address:
with copies to:
Or, if sent to the Company, shall be mailed, delivered or telegraphed and
confirmed to it at the following address:
400 Perimeter Center Terrace, Suite 60
Atlanta, GA 30346
with copies to:
Steven L. Siskind, Esq.
645 Fifth Avenue, Suite 403
New York, NY 10022
(f) In the event that any party prevails in any action or suit brought by them
to obtain relief for any default under the terms hereof, the non-prevailing
party shall be liable to the prevailing party for all costs, including
reasonable attorney's fees, incurred in connection with such action or suit.
(g) The representations, warranties and undertakings herein on the part of the
Company and the Underwriter shall not create any rights in or duties to any
person not a party to this Agreement. It is expressly understood and agreed that
such persons as shall purchase Shares in the public offering described herein,
shall be entitled to rely solely and only on the statements and representations
made in the Prospectus.
(h) This Agreement may be executed in one or more counterparts which taken
together shall constitute one and the same instrument.
As evidence of our understanding, this Agreement has been signed, accepted and
copies thereof delivered by or on behalf of, and to, the Company and the
Underwriter, on _______________, 1999.
Very truly yours,
BY___________________________________
Duly Authorized Officer
The foregoing Underwriting Agreement is accepted on the date first above
written.
BY___________________________________
Duly Authorized Officer
PROPOSED
SELECTED DEALER AGREEMENT
Dear Sirs:
Subject to the terms and conditions of the Underwriting agreement with
___________________________________________ we have been employed to find
purchasers for an aggregate of 500,000 Units: of Common Stock of Callfree
Telecom Communications Corp. (the "Company"{ on a best efforts, 200,000 Units or
none basis as to the minimum offering, and on a best efforts basis thereafter up
to 500,000 Units, as more fully described in and subject to the conditions set
forth in the Prospectus contained in the Registration Statement on Form SB-2
under the Securities Act of 1933 with respect to the Units, which is effective.
The public offering price is $6.00 per Unit.
As underwriters, we are offering to certain selected dealers who are
members in good standing of the National Association of Securities Dealers, Inc.
("NASD") (herein collectively called the "Selected Dealers") the right as set
forth herein to subscribe to a portion of the Unites at the public offering
price of $6.00 per Unit, less a concession as set forth below and on the
following terms and conditions; provided, however, that no NASD member may
re-allow commissions to any non-member broker-dealer.
1. Terms and Allotments. We expressly reserve the right to accept or
reject in our discretion, either in whole, or in part, and to allot and
over-allot. in the case of over-allotment, we agree to accept subscriptions, up
to the amount of a Selected Dealer's Allotment, in the order of their receipt by
us. If the above described offering is over-allotted, we agree to notify you as
soon as practicable if we may not be able to fill orders for the entire number
of Units indicated on y our acceptance hereof.
2. Concessions. Except as may otherwise expressly be agreed, we agree
to allow a concession of $______ per Unit on all Units confirmed by us. We
reserve the right to modify or change, but not decrease, the foregoing
concessions, and shall be under no obligation to allow the same concession to
all Selected Dealers. We reserve the right not to pay such concession on Unites
purchased by members from us and repurchased by us at or below the public
offering price prior to termination of this Agreement.
Subscribers will be permitted to purchase only whole number of Unites
in round loots as the Company will issue no fractional Units.
3. Delivery and Payment. You will notify us in writing when you have
obtained subscriptions to the Unites allotted to you and have received the
purchase price therefor. All checks received in payment for the Unites shall be
payable to "American Securities Transfer & Trust, Inc. Escrow Agent for Callfree
Telecom Communications Corp." You agree and covenant to transmit such
subscriptions (if any) without deduction for concessions promptly upon the
receipt thereof. (but in any event by noon of the business day following
receipt) for deposit to the escrow account of American Securities Transfer &
Trust, For the Benefit of Callfree Telecom Communications Corp., where they will
be held until paid to the Company on the closing date, hereinafter specified or
until returned to the respective subscribers. Each transmittal of funds to the
escrow account must be accompanied by a transmittal letter specifying the total
amount transmitted and the name, address, tax I.D. number and number of Unites
purchased for each subscriber whose funds are being transmitted.
<PAGE>
A copy of such letter must be sent to us at ______________________________ In
the event that subscriptions for a minimum of 200,000 Units are obtained, you
will receive a notice from us to that effect specifying a closing date on which
delivery will be made to you of Units purchased by you pursuant hereto against
payment therefor at the public offering price. The closing shall be held at the
offices of_____________________________on such closing date. In the event that a
minimum of 200,000 Units are not sold prior to _____________________ 19__ (90
days from the Effective Date) or the date 9O day thereafter if we have notified
you of such extension1 you will be so notified, and you covenant and agree, in
such event, that all subscriptions received by you (other than those
subscriptions returned directly by the Escrow Agent) shall be returned without
charge and without interest to the respective subscribers promptly upon receipt
of notice from us. Delivery of certificates for Units. subscribed for by you and
confirmed by us hereunder will take place at the closing or as soon thereafter
as practicable. certificates delivered will be in customer's names where
practicable and the balance in street name and. in denominations of 1,000 Units.
Settlement for concessions payable will be made as promptly as practicable after
delivery of certificates. In the event that you fail to make payment of an
accepted subscription as above provided, we may, in addition to any other
remedies provided by law, cancel such subscription by letter, telephone or
telegraph notice to you.
4. Offering. Selected Dealers may immediately offer Units for sale and
take orders therefor, but only subject to confirmation. We, in turn, are
prepared to receive subscriptions and orders, subject, as set forth above, to
acceptance and allotment by us in whole or in part. Orders transmitted to us by
telephone should be confirmed by you by letter or telegram.
You agree to make a bona fide public offering of said Units, but you
will not offer or sell any of such Units below the public offering price before
the termination of this Agreement.
You also agree to abide by all applicable provisions of the Securities
Act of 1933, as amended, the Securities Exchange Act of 1934, and the Rules and
Regulations under such Acts.
You agree, upon our request, at any time or times prior to the
termination of this Agreement to report to us as to the number of Units
purchased by you pursuant to the provisions hereof which then remain unsold and
sell to us, for our account, such portion of such unsold as we may designate, at
the public offering price less an amount to be determined by us not in excess of
the concession allowed to you.
No expenses shall be charged to Selected Dealers; however, you shall
pay any transfer tax on sales of the Units by you and you shall pay your
proportionate share of any transfer tax or other tax in the event that any such
tax shall from time to time be assessed against you and other Selected Dealers
as a group or otherwise.
You further agree not to sell any of the Units offered hereunder to any
officer, director, controlling stockholder, partner, employee or agent of your
organization, or member of the immediate family of any such person, except as
permitted under the Rules of Fair Practice of the National Association of
Securities Dealers, Inc., and the interpretations thereof.
5. Blue Sky. You agree to limit your offers and sales of the Units to
the following state in which you are qualified to act as a broker or dealer in
securities:
<PAGE>
6. Termination. This Agreement shall terminate o'90 days from the
Effective Date unless the offering is extended for an additional 90 days or
unless sooner terminated by us by notice to you for any reason.
You understand that the offering is being made on a Shares or none best
efforts basis, as to the minimum of 200,000 Units, by the Underwriter in
accordance with the terms of the Underwriting Agreement and will be terminated
in the event 200,000 Units are not sold in accordance with the terms thereof. In
such event, none of the Unit-s- to be sold hereunder shall be issued or sold;
and you agree that in such case you will promptly return all funds received by
you and Which you may be holding on account of proposed purchases of the Units
to the persons who tendered the same, without deduction. In the event of any
termination, the Underwriter shall have no responsibility to you.
Notwithstanding such termination, you may remain liable to the extent
provided by law for your proportionate amount of any claim, demand or liability
which may be asserted against you alone or against you together with other
Selected Dealers and/or us, based upon the claim that the Selected Dealers or
any of them and/or we constitute an association, an unincorporated business, or
any other separate entity.
7. Use of Prospectus. Neither you nor any other person is authorized by
the Company or by us to give any information or make any representation other
than those contained in the Prospectus in connection with the sale of the Units
and, if given or made, such information or representation must not be relief
upon as having been authorized by the company or us. You also agree to deliver a
copy of the Prospectus to each prospective purchaser as required by the
Securities Act and by the Rules and Regulations thereunder. Additional copies of
the Prospectus will be supplied in reasonable quantity upon request.
You are not authorized to act as our agent or as agent for the Company
in offering the Units to the public or otherwise. Nothing contained herein or
otherwise shall constitute Selected Dealers partners with us or with one
another.
8. Underwriter's Authority. We shall have authority to take such action
as we deem advisable in respect of all matters pertaining to the Offering or
arising hereunder. We and our agents shall be under no liability to you for or
in respect of the authorization, issue, full payment, non-assessability or
validity of the Shares or the component securities thereof; for or in respect of
the form of, or the statements contained in or omitted from the Prospectus, the
Underwriting Agreement, or other instruments executed by the Company or by
others; for or in respect of the delivery of the Shares or the performance by
the Company or by others of any agreement on its or their part; for or in
respect of the qualifications of the Shares for sale under the laws of any
jurisdiction; or for or in respect of any other matter connected with this
Agreement, except agreements expressly assumed by us herein and for lack of good
faith. No obligations not expressly assumed herein shall be implied; provided
that nothing herein contained shall be deemed to deny, exclude or impair any
liability imposed upon us or our agents as an underwriter by state or federal
securities law.
<PAGE>
9. Applicable Securities Laws. By accepting this offer to become a
Selected Dealer, you represent to the Underwriter that you are qualified under
the Securities Exchange Act of 1934 and the Blue Sky laws of any State in which
you offer the Shares, as a dealer or broker in securities, and that you are a
member in good standing of the National Association of Securities Dealers1 Inc.;
provided, however, that no NASD member may re-allow commission to any non-member
broker-dealer. Alternatively, this offer may be accepted by a foreign dealer not
eligible for membership in the NASD who agrees not to re-offer, resell or
deliver the Shares in the United States or to persons to whom ~t has reason to
believe are citizens or residents of the United States and, in making sales, to
comply with NASD'S Interpretation with Respect to Free-Riding and Withholding
and Sections 8, 24 and 36 of Articles III of the NASD's Rules of Fair Practice
as if such foreign dealer were an NASD member and Section 25 of such Article III
as it applies to a non-member broker or dealer in a foreign country.
10. Communications. All communications from you to us should be
addressed to ____________________________________. All communications from us
and/or the Company to you shall be deemed to have been duly given if mailed,
telegraphed or telephoned to you at the address to which this letter is mailed,
unless written notification shall be received from you of a change in address.
If you desire to become a Selected Dealer, please advise us immediately
by signing and returning to us the form of acceptance attached hereto.
Very truly yours,
By _________________________
DATED _______________________
<PAGE>
Dear Sirs:
We agree to become a Selected Dealer with respect to the offering of
Units of Common Stock of Callfree Telecom Communications Corp. at the public
offering price of $6.00 per Unit as outlined in this Agreement, and we
acknowledge receipt of the Prospectus, dated _________________________ , 1999.
We agree to subscribe on the terms set forth in this Agreement for
_________________Units of Common Stock of Callfree Telecom Communications Corp.
as described in the Prospectus, and to make payment for such securities within
(10) days of the date of the confirmation from you of our order, provided that
funds received from our customers on subscription for Units shall be transmitted
to the escrow account of American Securities Transfer & Trust, Inc. For the
Benefit of Callfree Telecom Communications Corp. in accordance with Rule 15c2-4.
We confirm that we are a member in good standing of the National
Association of Securities Dealers, Inc., and we agree to abide by the "Rules of
Fair Practice' of the National Association of Securities Dealers, Inc., and the
interpretations thereof.
DATED: ______________ __________________________________
Signature of Selected Dealer
Address: ___________________________
___________________________
___________________________
Phone: ____________________________
CERTIFICATE OF INCORPORATION
OF
CALLFREE TELECOM COMMUNICATIONS CORP.
Filed by
Michael S. Winokur, Esq.
97-49 63rd Drive
Rego Park, New York 11374
<PAGE>
CERTIFICATE OF INCORPORATION
CALLFREE TELECOM COMMUNICATIONS CORP.
Under Section 402 of the Business Corporation Law.
The undersigned, for the purpose of forming a corporation pursuant to
Section 402 of the Business Corporation Law of the State of New York, does
hereby certify and set forth:
FIRST: The name of the corporation is CALLFREE TELECOM COMMUNICATIONS
CORP.
SECOND: The purposes for which the corporation is formed are:
To engage in any lawful act or activity for which corporations may be
organized under the business corporation law, provided that the corporation is
not formed to engage in any act or activity which requires the act or approval
of any state official, department, board, agency or other body without such
approval or consent first being obtained.
To establish, maintain and conduct a general service organization for
the purpose of providing communications services of every kind and description.
To maintain executive and operating personnel for the purpose of providing
communications services of every kind and description. Generally to do
everything ordinarily done by those engaged in a similar line of business
including owning, buying selling, renting, leasing and otherwise dealing with
and disposing of any and all equipment, materials, supplies and accessories
necessary to conduct the foregoing, and to dispose of all real and personal
property.
To carry on a general mercantile, industrial, investing and trading
business in all its branches; to devise, invent, manufacture, fabricate,
assemble, install, service, maintain, alter, buy, sell, import, export, license
as licensor or licensee, lease as lessor or lessee, distribute, job, enter into,
negotiate, execute, acquire, and assign contracts in respect of, acquire,
receive, grant, and assign licensing arrangements, options, franchises, and
other rights in respect of, and generally deal in and with, at wholesale and
retail, as principal, and as sales, business, special, or general agent,
representative, broker, factor, merchant, distributor, jobber, advisor, or in
<PAGE>
any other lawful capacity, shares with a par value of One Tenth ($0. 001) of a
Cent and One goods, wares, merchandise, commodities, and unimproved, improved,
finished, processed and other real, personal and mixed property of any and all
kinds, together with the components, resultants, and by - products thereof.
To acquire by purchase, subscription, underwriting or otherwise, and to
own, hold for investment, or otherwise, and to use, sell, assign, transfer,
mortgage, pledge, exchange or otherwise dispose of real and personal property of
every sort and description and wheresoever situated, including shares of stock,
bonds, debentures, notes, scrip, securities, evidences of indebtedness,
contracts or obligations of any corporation or association, whether domestic or
foreign, or of any firm or individual or of the United States or any state,
territory or dependency of the United States or any foreign country, or any
municipality or local authority within or without the United States, and also to
issue in exchange therefor, stocks, bonds or other securities or evidences of
indebtedness of this corporation and, while the owner or holder of any such
property, to receive, collect and dispose of the interest, dividends and income
on or from such property and to possess and exercise in respect thereto all of
the rights, powers and privileges of ownership, including all voting powers
thereon.
To construct, build, purchase, lease or otherwise acquire,' equip,
hold, own, improve, develop, manage, maintain, control, operate, lease,
mortgage, create liens upon, sell, convey or otherwise dispose of and turn to
account, any and all plants, machinery, works, implements and things or
property, real and personal, of every kind and description, incidental to,
connected with, or suitable, necessary or convenient for any of the purposes
enumerated herein, including all or any part or parts of the properties, assets,
business and goodwill of any persons, firms, associations or corporations.
The powers, rights and privileges provided in this certificate are not to
be deemed to be in limitation of similar, other or additional powers, rights and
privileges granted or permitted to a corporation by the Business Corporation
Law, it being intended that this corporation shall have all rights, powers and
privileges granted or permitted to a corporation by such statute.
THIRD The office of the corporation is to be located in the County of
Queens, State of New York.
FOURTH: The aggregate number of shares which the corporation shall have the
authority to issue is Ten Million (10,000,000) common shares with a par value of
<PAGE>
One Tenth ($0.01) of a Cent and One Million convertible preferred shares with a
par value of one ($0.01) Cent.
The 5% Cumulative Convertible Preferred Shares at the option of the
respective holders thereof, may at any time, and from time to time1 prior to
April 1, 2016, be converted into fully paid and nonassessable Common Shares of
the Corporation at the rate of one Common Share for one 5% Cumulative
Convertible Preferred Share provided, however, that such right of conversion may
not be exercised and shall be suspended during the period of five days
immediately preceding the date of any meeting of shareholders, or the date for
the payment of any dividend, or the date for the issuance of rights, or the date
when any change of conversion or a change of shares shall go into effect. Upon
the conversion, as herein provided, of any shares of the 5% Cumulative
Convertible Preferred Shares, all rights of the holders of such shares shall
cease and determine and the Common Shares issued in lieu thereof shall be of
record as of the time of such conversion.
So long as any of the 5% Cumulative Convertible Preferred Shares shall
be outstanding, the Corporation will not make any share distribution on its
Common Shares unless the Corporation, by proper legal action, shall have
authorized and reserved an amount of shares equal to the amount thereof which
would have been declared upon the Common Shares into which such 5% Cumulative
Convertible Preferred Shares might have been converted, and the Corporation
<PAGE>
shall, out of such additional shares so authorized and reserved on account of
such share distribution, upon the conversion of any 5% Cumulative Preferred
Shares, deliver with any Common Shares into which 5% Cumulative Convertible
Preferred Shares are converted, but without additional consideration therefor,
such amount of Common Shares as would have been deliverable to the holders of
the Common Shares into which such 5% Cumulative Convertible Preferred Shares has
been so converted had such Common Shares been outstanding at the time of such
share distribution. For the purpose of this paragraph, a share distribution
shall be a dividend payable only in Common Shares of the Corporation of the same
class as the present authorized Common Shares. This shall not limit the right of
the Corporation, however, to declare and pay any dividends whether in cash,
shares, or otherwise, except as specifically otherwise provided in this
paragraph.
Any holder of the 5% Cumulative Convertible Preferred Shares desiring to
exercise the right of conversion herein provided shall surrender to the
Corporation at one of its share transfer agencies, or in the event that at that
time there is no such agency, then at the principal office of the Corporation,
the certificate or certificates representing the 5% Cumulative Convertible
Preferred Shares so to be converted, duly endorsed in blank for transfer or
accompanied by properly executed instruments for the transfer thereof, together
<PAGE>
with a written request for the conversion thereof. No such shares, however,
shall be accepted for conversion on or after April 1, 2016, at which time the
conversion privilege and right shall cease and determine.
FIFTH: The Secretary of State is designated as the agent of the corporation
upon whom process against it may be served. The post office address to which the
Secretary of State shall mail a copy of any process against the corporation
served on him is:
Stuart Radin
1043 Neilson Street
Far Rockaway, New York 11691
SIXTH: The personal liability of directors to the corporation or its
shareholders for damages for any breach of duty in such capacity is hereby
eliminated except that such personal liability shall not be eliminated if a
judgment or other final adjudication adverse to such direct9r establishes that
his acts or omissions were in bad faith or involved intentional misconduct or a
knowing violation of law or that he personally gained in fact a financial.
profit or other advantage to which he was not legally entitled or that his acts
violated Section 719 of the Business Corporation Law.
IN WITNESS WHEREOF, this certificate has been subscribed to this 6th day of
April, 1998 by the undersigned who affirms that the statements made herein are
true under the penalties of perjury.
/S/
-------------------------------
GERALD WEINBERG
90 State Street
Albany, New York
--------------------
BY-LAWS
--------------------
ARTICLE I
The Corporation
Section 1. Name. The legal name of this corporation (hereinafter called the
"Corporation") is
Section 2. Offices. The Corporation shall have its principal office in the
State of New York. The Corporation may also have offices at such other places
within and without the United States as the Board of Directors may from time to
time appoint or the business of the Corporation may require.
Section 3. Seal. The corporate seal shall have inscribed thereon the name
of the Corporation, the year of its organization and the words "Corporate Seal,
New York." One or more duplicate dies for impressing such seal may be kept and
used.
ARTICLE II
Meetings of Shareholders
Section 1. Place of Meetings. All meetings of the shareholders shall be
held at the principal office of the Corporation in the State of New York or at
such other place, within or without the State of New York, as is fixed in the
notice of the meeting.
Section 2. Annual Meeting. An annual meeting of the shareholders of the
Corporation for the election of directors and the transaction of such other
business as may properly come before the meeting shall be held on the first
Monday of in each year if not a legal holiday, and if a legal holiday, then on
the next secular day following, at ten o'clock A.M., Eastern Standard Time, or
at such other time as is fixed in the notice of the meeting. If for any reason
any annual meeting shall not be held at the time herein specified, the same may
be held at any time
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<PAGE>
thereafter upon notice, as herein provided, or the business thereof may be
transacted at any special meeting called for the purpose.
Section 3. Special Meetings. Special meetings of shareholders may be called
by the President whenever he deems it necessary or advisable. A special meeting
of the shareholders shall be called by the President whenever so directed in
writing by a majority of the entire Board of Directors or whenever the holders
of one-third (113) of the number of shares of the capital stock of the
Corporation entitled to vote at such meeting shall, in writing, request the
same.
Section 4. Notice of Meetings. Notice of the time and place of the annual
and of each special meeting of the shareholders shall be given to each of the
shareholders entitled to vote at such meeting by mailing the same in a postage
prepaid wrapper addressed to each such shareholder at his address as it appears
on the books of the Corporation, or by delivering the same personally to any
such shareholder in lieu of such mailing, at least ten (10) and not more than
fifty (50) days prior to each meeting. Meetings may be held without notice if
all of the shareholders entitled to vote thereat are present in person or by
proxy, or if notice thereof is waived by all such shareholders not present in
person or by proxy, before or after the meeting. Notice by mail shall be deemed
to be given when deposited, with postage thereon prepaid, in the United States
mail. If a meeting is adjourned to another time, not more than thirty (30 days
hence, or to another place, and if an announcement of the adjourned time or
place is made at the meeting, it shall not be necessary to give notice of the
adjourned meeting unless the Board of Directors, after adjournment fix a new
record date for the adjourned meeting. Notice of the annual and each special
meeting of the shareholders shall indicate that it is being issued by or at the
direction of the person or persons calling the meeting, and shall state the name
and capacity of each such person. Notice of each special meeting shall also
state the purpose or purposes for which it has been called. Neither the business
to be transacted at nor the purpose of the annual or any special meeting of the
shareholders need be specified in any written waiver of notice.
Section 5. Record Date for Shareholders. For the purpose of determining the
shareholders entitled to notice of or to vote at any meeting of shareholders or
any adjournment thereof, or to express consent to corporate action in writing
without a meeting, or for the purpose of determining shareholders entitled to
receive payment of any dividend or other distribution or the allotment of any
rights) or entitled to exercise any rights in respect of any change, conversion,
or exchange of stock or for the purpose of any other lawful action, the Board
5
<PAGE>
of Directors may fix, in advance, a record date, which shall not be more
than fifty(S) days nor less than ten (10) days before the date of such meeting,
nor more than fifty (50) days prior to any other action. If no record date is
fixed, the record date for determining shareholders entitled to notice of or to
vote at a meeting of shareholders shall be at the close of business on the day
next preceding the day on which notice is given, or, if no notice is given, the
day on which the meeting is held; the record date for determining shareholders
entitled to express consent to corporate action in writing without a meeting,
when no prior action by the Board of Directors is necessary, shall be the day on
which the first written consent is expressed; and the record date for
determining shareholders for any other purpose shall be at the close of business
on the day on which the Board of Directors adopts the resolution relating
thereto. A determination of shareholders of record entitled to notice of or to
vote at any meeting of shareholders shall apply to any adjournment of the
meeting; provided, however) that the Board of Directors may fix a new record
date for the adjourned meeting.
Section 6. Proxy Representation. Every shareholder may authorize another
person or persons to act for him by proxy in all matters in which a shareholder
is entitled to participate, whether by waiving notice of any meeting, voting or
participating at a meeting, or expressing consent or dissent without a meeting.
Every proxy must be signed by the shareholder or by his attorney-in-fact. No
proxy shall be voted or acted upon after eleven months from its date unless such
proxy provides for a longer period. Every proxy shall be revocable at the
pleasure of the shareholder executing it, except as otherwise provided in
Section 608 of the New York Business Corporation Law.
Section 7. Voting at Shareholders' Meetings. Each share of stock shall
entitle the holder thereof to one vote. In the election of directors, a
plurality of the votes cast shall elect. Any other action shall be authorized by
a majority of the votes cast except where the New York Business Corporation Law
prescribes a different percentage of votes or a different exercise of voting
power. In the election of directors, and for any other action, voting need not
be by ballot.
Section 8. Quorum and Adjournment. Except for a special election of
directors pursuant to Section 603 of the New York Business Corporation Law, the
presence, in person or by proxy, of the holders of a majority of the shares of
the stock of the Corporation outstanding and entitled to vote thereat shall be
requisite and shall constitute a quorum at any meeting of the shareholders. When
a quorum is once present to organize a meeting, it shall not be broken by
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<PAGE>
the subsequent withdrawal of any shareholders. If at any meeting of shareholders
there shall be less than a quorum so present, the shareholders present in person
or by proxy and entitled to vote thereat, may adjourn the meeting from time to
time until a quorum shall be present, but no business shall be transacted at any
such adjourned meeting except such as might have been lawfully transacted had
the meeting not adjourned.
Section 9. List of Shareholders. The officer who has charge of the stock
ledger of the Corporation shall prepare, make and certify, at least ten (1) days
before every meeting of shareholders, a complete list of the shareholders, as of
the record date fixed for such meeting, arranged in alphabetical order, and
showing the address of each shareholder and the number of shares registered in
the name of each shareholder. Such list shall be open to the examination of any
shareholder, for any purpose germane to the meeting, during ordinary business
hours, for a period of at least ten (10) days prior to the meeting, either at a
place within the city or other municipality or community where the meeting is to
be held. The list shall also be produced and kept at the time and place of the
meeting during the whole time thereof, and may be inspected by any shareholder
who is present. If the right to vote at any meeting is challenged, the
inspectors of election, if any, or the person presiding thereat, shall require
such list of shareholders to be produced as evidence of the right of the persons
challenged to vote at such meeting, and all persons who appear from such list to
be shareholders entitled to vote thereat may vote at such meeting.
Section 10. Inspectors of Election. The Board of Directors, in advance of
any meeting, may, but need not, appoint one or more inspectors of election to
act at the meeting or any adjournment thereof. If an inspector or inspectors are
not appointed, the person presiding at the meeting may, and at the request of
any shareholder entitled to vote thereat shall, appoint one or more inspectors.
In case any person who may. be appointed as an inspector fails to appear or act,
the vacancy may be filled by appointment made by the Board of Directors in
advance of the meeting or at the meeting by the person presiding thereat. Each
inspector, if any, before entering upon the discharge of his duties, shall take
and sign an oath faithfully to execute the duties of inspector at such meeting
with strict impartiality and according to the best of his ability. The
inspectors, if any, shall determine the number of shares of stock outstanding
and the voting power of each, the shares of stock represented at the meeting,
the existence of a quorum, the validity and effect of proxies, and shall receive
7
<PAGE>
votes, ballots or consents, determine the result, and do such acts as are proper
to conduct the election or vote with fairness to all shareholders. On request of
the person presiding at the meeting or any shareholder entitled to vote thereat,
the inspector or inspectors, if any, shall make a report in writing of any
challenge, question or matter determined by him or them and execute a
certificate of any fact found by him or them. Any report or certificate made by
the inspector or inspectors shall be prima facie evidence of the facts stated
and of the vote as certified by them.
Section 11. Action of the Shareholders Without Meetings. Any action which
may be taken at any annual or special meeting of the shareholders may be taken
without a meeting on written consent, setting forth the action so taken, signed
by the holders of all outstanding shares entitled to vote thereon. Written
consent thus given by the holders of all outstanding shares entitled to vote
shall have the same effect as a unanimous vote of the shareholders.
ARTICLE Ill
Directors
---------
Section 1. Number of Directors. The number of directors which shall
constitute the entire Board of Directors shall be at least three, except that
where all outstanding shares of the stock of the Corporation are owned
beneficially and of record by less than three shareholders, the number of
directors may be less than three but not less than the number of shareholders.
Subject to the foregoing limitation, such number may be fixed from time to time
by action of a majority of the entire Board of Directors or of the shareholders
at an annual or special meeting, or, if the number of directors is not so fixed,
the number shall be three or shall be equal to the number of shareholders
(determined as aforesaid), whichever is less. Until such time as the corporation
shall issue shares of its stock, the Board of Directors shall consist of two
persons. No decrease in the number of directors shall shorten the term of any
incumbent director.
Section 2. Election and Term. The initial Board of Directors shall be
elected by the incorporator and each initial director so elected shall hold
office until the first annual meeting of shareholders and until his successor
has been elected and qualified. Thereafter, each director who is elected at an
annual meeting of shareholders, and each director who is elected in the interim
8
<PAGE>
to fill a vacancy or a newly created directorship, shall hold office until the
next annual meeting of shareholders and until his successor has been elected and
qualified.
Section 3. Filling Vacancies. Resignation and Removal. Any director may
tender his resignation at any time. Any director or the entire Board of
Directors may be removed, with or without cause, by vote of the shareholders. In
the interim between annual meetings of shareholders or special meetings of
shareholders called for the election of directors or for the removal of one or
more directors and for the filling of any vacancy in that connection, newly
created directorships and any vacancies in the Board of Directors, including
unfilled vacancies resulting from the resignation or removal of directors for
cause or without cause, may be filled by the vote of a majority of the remaining
directors then in office, although less than a quorum or by the sole remaining
director.
Section 4. Qualifications and Powers. Each director shall be at least
eighteen years of age. A director need not be a shareholder, a citizen of the
United States or a resident of the State of New York. The business of the
Corporation shall be managed by the Board of Directors, subject to the
provisions of the Certificate of Incorporation. In addition to the powers and
authorities by these By-Laws expressly conferred upon it, the Board may exercise
all such powers of the Corporation and do all such lawful acts and things as are
not by statute or by the Certificate of Incorporation or by these By-Laws
directed or required to be exercised or done exclusively by the shareholders.
Section 5. Regular and Special Meetings of the Board. The Board of
Directors may hold its meetings, whether regular or special, either within or
without the State of New York. The newly elected Board may meet at such place
and time as shall be fixed by the. vote of the shareholders at the annual
meeting, for the purpose of organization or otherwise, and no notice of such
meeting shall be necessary to the newly elected directors in order legally to
constitute the meeting, provided a majority of the entire Board shall be
present; or they may meet at such place and time as shall be fixed by the
consent in writing of all directors. Regular meetings of the Board may be held
with or without notice at such time and place as shall from time to time be
determined by resolution of the Board. Whenever the time or place of regular
meetings of the Board shall have been determined by resolution of the Board, no
regular meetings shall be held pursuant to any resolution of the Board
9
<PAGE>
altering or modifying its previous resolution relating to the time or place of
the holding of regular meetings, without first giving at least three days
written notice to each director, either personally or by telegram, or at least
five days written notice to each director by mail, of the substance and effect
of such new resolution relating to the time and place at which regular meetings
of the board may thereafter be held without notice. Special meetings of the
Board shall be held whenever called by the President, Vice-President, the
Secretary or any director in writing. Notice of each special meeting of the
Board shall be delivered personally to each director or sent by telegram to his
residence or usual place of business at least three days before the meeting, or
mailed to him to his residence or usual place of business at least five days
before the meeting. Meetings of the Board, whether regular or special, may be
held at any time and place, and for any purpose, without notice, when all the
directors are present or when all directors not present shall, in writing, waive
notice of and consent to the holding of such meeting. All or any of the
directors may waive notice of any meeting and the presence of the director at
any meeting of the Board shall be deemed a waiver of notice thereof by him. A
notice, or waiver of notice, need not specify the purpose or purposes of any
regular or special meeting of the Board.
Section 6. Quorum and Action. A majority of the entire Board of Directors
shall constitute a quorum except that when the entire Board consists of one
director, then one director shall constitute a quorum, and except that when a
vacancy or vacancies prevents such majority, a majority of the directors in
office shall constitute a quorum, provided that such majority shall constitute
at lease one-third of the entire Board. A majority of the directors present,
whether or not they constitute a quorum, may adjourn a meeting to another time
and place. Except as herein otherwise provided, and except as otherwise provided
by the New York Business Corporation Law, the vote of the majority of the
directors present at a meeting at which a quorum is present shall be the act of
the Board.
Section 7. Telephonic Meetings. Any member or members of the Board of
Directors, or of any committee designated by the Board, may participate in a
meeting of the Board, or any such committee, as the case may be, by means of
conference telephone or similar communications equipment allowing all persons
participating in the meeting to hear each other at the same time, and
participation in a meeting by such means shall constitute presence in person at
such meeting.
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Section 8. Action Without a Meeting. My action required or permitted to be
taken at any meeting of the Board of Directors, or of any committee thereof, may
be taken without a meeting if all members of the Board or committee, as the case
may be, consent thereto in writing, and the writing or writings are filed with
the minutes of proceedings of the Board or committee.
Section 9. Compensation of Directors. By resolution of the Board of
Directors, the directors may be paid their expenses, if any, for attendance at
each regular or special meeting of the Board or of any committee designated by
the Board and may be paid a fixed sum for attendance at such meeting, or a
stated salary as director, or both. Nothing herein contained shall be construed
to preclude any director from serving the Corporation in any other capacity and
receiving compensation therefor; provided however that directors who are also
salaried officers shall not receive fees or salaries as directors.
ARTICLE IV
Committees
Section 1. In General. The Board of Directors may, by resolution or
resolutions passed by the affirmative vote therefore of a majority of the entire
Board, designate an Executive Committee and such other committees as the Board
may from time to time determine, each to consist of three or more directors, and
each of which, to the extent provided in the resolution or in the certificate of
incorporation or in the By-Laws, shall have all the powers of the Board, except
that no such Committee shall have power to fill vacancies in the Board, or to
change the membership of or to fill vacancies in any Committee, or to make,
amend, repeal or adopt By-Laws of the Corporation, or to submit to the
shareholders any action that needs shareholder approval under these By-Laws or
the New York Business Corporation Law, or to fix the compensation of the
directors for serving on the Board or any committee thereof, or to amend or
repeal any resolution of the Board which by its terms shall not be so amendable
or repealable. Each committee shall serve at the pleasure of the Board. The
Board may designate one or more directors as alternate members of any committee,
who may replace any absent or disqualified member at any meeting of the
committee. In the absence of disqualification of a member of a committee, the
member or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously appoint
another member of the Board of Directors to act at the meeting in the place of
any such absent or disqualified member.
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Section 2. Executive Committee. Except as otherwise limited by the Board of
Directors or by these By-Laws, the Executive Committee, if so designated by the
Board of Directors, shall have and may exercise, when the Board is not in
session, all the powers of the Board of Directors in the management of the
business and affairs of the Corporation, and shall have power to authorize the
seal of the Corporation to be affixed to all papers which may require it. The
Board shall have the power at any time to change the membership of the Executive
Committee, to fill vacancies in it, or to dissolve it. The Executive Committee
may make rules for the conduct of its business and may appoint such assistance
as it shall from time to time deem necessary. A majority of the members of the
Executive Committee, if more than a single member, shall constitute a quorum.
ARTICLE V
Officers
Section 1. Designation, Term and Vacancies. The officers of the Corporation
shall be a President, one or more Vice-Presidents, a Secretary, a Treasurer, and
such other officers as the Board of Directors may from time to time deem
necessary. Such officers may have and perform the powers and duties usually
pertaining to their respective offices, the powers and duties respectively
prescribed by law and by these By-Laws, and such additional powers and duties as
may from time to time be prescribed by the Board. The same person may hold any
two or more offices, except that the offices of President and Secretary may not
be held by the same person unless all the issued and outstanding stock of the
Corporation is owned by one person, in which instance such person may hold all
or any combination of offices.
The initial officers of the Corporation shall be appointed by the initial
Board of Directors, each to hold office until the meeting of the Board of
Directors following the first annual meeting of shareholders and until his
successor has been appointed and qualified. Thereafter, the officers of the
Corporation shall be appointed by the Board as soon as practicable after the
election of the Board at the annual meeting of shareholders, and each officer so
appointed shall hold office until the first meeting of the Board of Directors
following the next annual meeting of shareholders and until his successor has
been appointed and qualified. Any officer may be removed at any time, with or
without cause, by the affirmative vote therefor of a majority of the entire
Board of Directors. All other agents and employees of the Corporation shall hold
12
<PAGE>
office during the pleasure of the Board of Directors. Vacancies occurring among
the officers of the Corporation shall be filled by the Board of Directors. The
salaries of all officers of the Corporation shall be fixed by the Board of
Directors.
Section 2. President. The President shall preside at all meetings of the
shareholders and at all meetings of the Board of Directors at which he may be
present. Subject to the direction of the Board of Directors, he shall be the
chief executive officer of the Corporation, and shall have general charge of the
entire business of the Corporation. He may sign certificates of stock and sign
and seal bonds, debentures, contracts or other obligations authorized by the
Board, and may, without previous authority of the Board, make such contracts as
the ordinary conduct of the Corporation's business requires. He shall have the
usual powers and duties vested in the President of a corporation. He shall have
power to select and appoint all necessary officers and employees of the
Corporation, except those selected by the Board of Directors, and to remove all
such officers and employees except those selected by the Board of Directors, and
make new appointments to fill vacancies. He may delegate any of his powers to a
Vice-President of the Corporation.
Section 3. Vice-President. A Vice-President shall have such of the
President's powers and duties as the President may from time to time delegate to
him, and shall have such other powers and perform such other duties as may be
assigned to him by the Board of Directors. During the absence or incapacity of
the President, the Vice-President, or, if there be more than one, the
Vice-President having the greatest seniority in office, shall perform the duties
of the President, and when so acting shall have all the powers and be subject to
all the responsibilities of the office of President.
Section 4. Treasurer. The Treasurer shall have custody of such funds and
securities of the Corporation as may come to his hands or be committed to his
care by the Board of Directors. Whenever necessary or proper, he shall endorse
on behalf of the Corporation, for collection, checks, notes, or other
obligations, and shall deposit the same to the credit of the Corporation in such
bank or banks or depositaries, approved by the Board of Directors as the Board
of Directors or President may designate. He may sign receipts or vouchers for
payments made to the Corporation, and the Board of Directors may require that
such receipts or vouchers shall also be signed by some other officer to be
designated by them. Whenever required by the Board of Directors, he shall render
13
<PAGE>
a statement of his cash accounts and such other statements respecting the
affairs of the Corporation as may be required. He shall keep proper and accurate
books of account. He shall perform all acts incident to the office of Treasurer,
subject to the control of the Board.
Section 5. Secretary. The Secretary shall have custody of the seal of the
Corporation and when required by the Board of Directors, or when any instrument
shall have been signed by the President duly authorized to sign the same, or
when necessary to attest any proceedings of the shareholders or directors, shall
affix it to any instrument requiring the same and shall attest the same with his
signature, provided that the seal may be affixed by the President or
Vice-President or other officer of the Corporation to any document executed by
either of them respectively on behalf of the Corporation which does not require
the attestation of the Secretary. He shall attend to the giving and serving of
notices of meetings. He shall have charge of such books and papers as properly
belong to his office or as may be committed to his care by the Board of
Directors. He shall perform such other duties as appertain to his office or as
may be required by the Board of Directors.
Section 6. Delegation. In case of the absence of any officer of the
Corporation, or for any other reason that the Board of Directors may deem
sufficient, the Board may temporarily delegate the powers or duties, or any of
them, of such officer to any other officer or to any director.
ARTICLE VI
Stock
Section 1. Certificates Representing Shares. All certificates representing
shares of the capital stock of the Corporation shall be in such form not
inconsistent with the Certificate of Incorporation, these By-Laws or the laws of
the State of New York and shall set forth thereon the statements prescribed by
Section 508, and where applicable, by Sections 505, 616, 620, 709 and 1002 of
the Business Corporation Law. Such shares shall be approved by the Board of
Directors, and shall be signed by the President or a Vice-President and by the
Secretary or the Treasurer and shall bear the seal of the Corporation and shall
not be valid unless so signed and sealed. Certificates countersigned by a duly
appointed transfer agent and/or registered by a duly appointed registrar shall
be deemed to be so signed and sealed whether the signatures be manual or
facsimile signatures and whether the seal be a facsimile seal or any other form
14
<PAGE>
of seal. All certificates shall be consecutively numbered and the name of the
person owning the shares represented thereby, his residence, with the number of
such shares and the date of issue, shall be entered on the Corporation's books.
All certificates surrendered shall be canceled and no new certificates issued
until the former certificates for the same number of shares shall have been
surrendered and canceled, except as provided for herein.
In case any officer or officers who shall have signed or whose facsimile
signature or signatures shall have been affixed to any such certificate or
certificates, shall cease to be such officer or officers of the Corporation
before such certificate or certificates shall have been delivered by the
Corporation, such certificate or certificates may nevertheless be adopted by the
Corporation, and may be issued and delivered as though the person or persons who
signed such certificates, or whose facsimile signature or signatures shall have
been affixed thereto, had not ceased to be such officer or officers of the
Corporation.
Any restriction on the transfer or registration of transfer of any shares
of stock of any class or series shall be noted conspicuously on the certificate
representing such shares.
Section 2. Fractional Share Interests. The Corporation, may, but shall not
be required to, issue certificates for fractions of a share. If the Corporation
does not issue fractions of a share, it shall (1) arrange for the disposition of
fractional interests by those entitled thereto, (2) pay in cash the fair value
of fractions of a share as of the time when those entitled to receive such
fractions are determined, or (3) issue scrip or warrants in registered or bearer
form which shall entitle the holder to receive a certificate for a full share
upon the surrender of such scrip or warrants aggregating a full share. A
certificate for a fractional share shall, but scrip or warrants shall not unless
otherwise. provided therein, entitle the holder to exercise voting rights, to
receive dividends thereon, and to participate in any distribution of the assets
of the Corporation in the event of liquidation. The Board of Directors may cause
scrip or warrants to be issued subject to the conditions that they shall become
void if not exchanged for certificates representing full shares before a
specified date, or subject to the condition that the shares for which scrip or
warrants are exchangeable may be sold by the Corporation and the proceeds
thereof distributed to the holders of scrip or warrants, or subject to any other
conditions which the Board of Directors may impose.
Section 3. Addresses of Shareholders. Every shareholder shall furnish the
Corporation with an address to which notices of meetings and all other notices
15
<PAGE>
may be served upon or mailed to him, and in default thereof notices may be
addressed to him at his last known post office address.
Section 4. Stolen. Lost or Destroyed Certificates. The Board of Directors
may in its sole discretion direct that a new certificate or certificates of
stock be issued in place of any certificate or certificates of stock theretofore
issued by the Corporation, alleged to have been stolen, lost or destroyed, and
the Board of Directors when authorizing the issuance of such new certificate or
certificates, may, in its discretion, and as a condition precedent thereto,
require the owner of such stolen, lost or destroyed certificate or certificates
or his legal representatives to give to the Corporation and to such registrar or
registrars and/or transfer agent or transfer agents as may be authorized or
required to countersign such new certificate or certificates, a bond in such sum
as the Corporation may direct not exceeding double the value of the stock
represented by the certificate alleged to have been stolen, lost or destroyed,
as indemnity against any claim that may be made against them or any of them for
or in respect of the shares of stock represented by the certificate alleged to
have been stolen, lost or destroyed.
Section 5. Transfers of Shares. Upon compliance with all provisions
restricting the transferability of shares, if any, transfers of stock shall be
made only upon the books of the Corporation by the holder in person or by his
attorney thereunto authorized by power of attorney duly filed with the Secretary
of the Corporation or with a transfer agent or registrar, if any, upon the
surrender and cancellation of the certificate or certificates for such shares
properly endorsed and the payment of all taxes due thereon. The Board of
Directors may appoint one or more suitable banks and/or trust companies as
transfer agents and/or registrars of transfers, for facilitating transfers of
any class or series of stock of the Corporation by the holders thereof under
such regulations as the Board of Directors may from time to time prescribe. Upon
such appointment being made all certificates of stock of such class or series
thereafter issued shall be countersigned by one of such transfer agents and/or
one of such registrars of transfers, and shall not be valid unless so
countersigned.
ARTICLE VII
Dividends and Finance
Section 1. Dividends. The Board of Directors shall have power to fix and
determine and to vary, from time to time, the amount of the working capital of
the Corporation before declaring any dividends among its shareholders, and to
16
<PAGE>
direct and determine the use and disposition of any net profits or surplus, and
to determine the date or dates for the declaration and payment of dividends and
to determine the amount of any dividend, and the amount of any reserves
necessary in their judgment before declaring any dividends among its
shareholder, and to determine the amount of the net profits of the Corporation
from time to time available for dividends.
Section 2. Fiscal Year. The fiscal year of the Corporation shall end on the
last day of in each year and shall begin on the next succeeding day, or shall be
for such other period as the Board of Directors may from time to time designate
with the consent of the Department of Taxation and Finance, where applicable.
ARTICLE VIII
Miscellaneous Provisions.
Section 1. Stock of Other Corporations. The Board of Directors shall have
the right to authorize any director, officer or other person on behalf of the
Corporation to attend, act and vote at meetings of the Shareholders of any
corporation in which the Corporation shall hold stock, and to exercise thereat
any and all rights and powers incident to the ownership of such stock, and to
execute waivers of notice of such meetings and calls therefor; and authority may
be given to exercise the same either on one or more designated occasions, or
generally on all occasions until revoked by the Board. In the event that the
Board shall fail to give such authority, such authority may be exercised by the
President in person or by proxy appointed by him on behalf of the Corporation.
Any stocks or securities owned by this Corporation may, if so determined by
the Board of Directors, be registered either in the name of this Corporation or
in the name of any nominee or nominees appointed for that purpose by the Board
of Directors.
Section 2. Books and Records. Subject to the New York Business Corporation
Law, the Corporation may keep its books and accounts outside the State of New
York.
Section 3. Notices. Whenever any notice is required by these By-Laws to be
given, personal notice is not meant unless expressly so stated, and any notice
so required shall be deemed to be sufficient if given by depositing the same in
17
<PAGE>
a post office box in a sealed postpaid wrapper, addressed to the person entitled
thereto at his last known post office address, and such notice shall be deemed
to have been given on the day of such mailing.
Whenever any notice whatsoever is required to be given under the provisions
of any law, or under the provisions of the Certificate of Incorporation or these
By-Laws a waiver thereof in writing, signed by the person or persons entitled to
said notice, whether before or after the time stated therein, shall be deemed
equivalent thereto.
Section 4. Amendments. Except as otherwise provided herein, these By-Laws
may be altered, amended or repealed and By-Laws may be made at any annual
meeting of the shareholders or at any special meeting thereof if notice of the
proposed alteration, amendment or repeal or By-Law or By-Laws to be made be
contained in the notice of such special meeting, by the holders of a majority of
the shares of stock of the Corporation outstanding and entitled to vote thereat;
or by a majority of the Board of Directors at any regular meeting of the Board
of Directors, or at any special meeting of the Board of Directors, if notice of
the proposed alteration, amendment or repeal, or By-Law or By-Laws to be made,
be contained in the Notice of such Special Meeting.
18
SUBSCRIPTION AGREEMENT
Califree Telecom Communications Corp.
400 Perimeter Center Terrace
Atlanta, Georgia 30346
Dear Sirs:
Concurrent with execution of this Agreement, the undersigned (the "Purchaser")
is purchasing ________________ Units of Common Stock of Callfree Telecom
Communications Corp. (the "Company") at a price of $6.00 per Unit (the
"Subscription Price")
Purchaser hereby confirms the subscription for and purchase of said number of
Units and hereby agrees to pay herewith the Subscription Price for such Units.
MAKE CHECK PAYABLE TO:
American Securities Transfer & Trust,
Escrow Agent for Callfree Telecom
Communications Corp.
Executed this day of 1999 at
Street Address: ___________________________________________________________
___________________________________________________________
City State Zip Code
Signature of Purchaser _________________________________
Printed Name of Purchaser_______________________________
______________________________________________________________________________
Street Address
______________________________________________________________________________
City State Zip Code
Social Security Number/ Tax I.D. Number ____________________________
Number of Units Purchased __________________________________________
CALLFREE TELECOM COMUUNICATIONS CORP.
BY: _________________________________
LAW OFFICES
STEVEN L. SISKIND
MEMBER OF NEW YORK
AND FLORIDA BARS
Suite 403
645 FIFTH AVENUE
NEW YORK, NEW ~ 10022
(212) 750-2002 FLORIDA OFFICE:
Fax (212) 838-7982 ONE FINANCIAL PLAZA
SUITE 2626
FT. LAUDERDALE, FL 33394
(305) 523-2626
September 27, 1999
Mr. Stuart Radin
Callfree Telecom Communications Corp.
400 Perimeter Center Terrace
Atlanta, Georgia 30346
Dear Mr. Radin:
I have acted as counsel to Callfree Telecom Communications Corp. (the
"Company"), in connection with an offering of 500,000 Units of the
Company's securities, pursuant to a Registration Statement on Form
SB-2 ("Registration Statement") . You have requested my opinion as to
certain matters in connection with the post effective amendment to the
Registration Statement.
In my capacity as counsel to the Company, I have examined and am
familiar with the originals or copies, the authenticity of which have
been established to my satisfaction, of all documents, corporate
records and other instruments I have deemed necessary to express the
opinions hereinafter set forth.
Based on the foregoing and upon consideration of applicable law, it is
my opinion that the 500,000 Units to be issued by the Company, will,
upon payment for and delivery of the Units in the manner described in
the Registration Statement, be validly issued, fully paid and
non-assessable.
Furthermore, I consent to the use of this opinion as an Exhibit to the
Post Effective Amendment to the Registration Statement.
Very truly yours,
/s/ Steven L. Siskind
----------------------
Steven L. Siskind
PROMISSORY NOTE
$20,000 Dated: May 27, 1998
FOR VALUE RECEIVED, the undersigned. CALLFREE TELECOM COMMUNICATIONS, INC.,
a New York corporation with an office at 1043 Nielson Street, Far Rockaway, New
York 11591 (the "Company"), promises to pay to the order of Tina Chromey
("Payee"), the sum of Twenty Thousand ($20,000) Dollars, with interest, from the
date written above until paid, at the rate of ten (10%) percent per annum. All
payments hereunder shall be made in lawful currency of the United States of
America, at the address of the Payee located at 20 Mason Road, Willington, CT,
06279, or at such other place as the Holder hereof may designate in writing.
Interest shall accrue commencing on the date hereof and shall be paid
simultaneously with the principal, six months from the date hereof.
This Note may be prepaid at any time in whole or from time to time in part,
in each case without premium or penalty, but with interest on the amount prepaid
to the date of prepayment.
The entire unpaid principal amount of this Note and interest then due
thereon and any other amount due hereunder shall become immediately due and
payable on the happening of any one or more of the following events:
(a) the dissolution or termination of existence of the Company;
(b) any petition in bankruptcy being filed by or against the Company or any
endorser or guarantor hereof or any. proceedings in bankruptcy or under any
laws relating to the relief of debtors, being commenced for the relief or
readjustment of any indebtedness of the undersigned or any endorser or
guarantor hereof, either through reorganization, composition, extension or
otherwise;
(c) the making by the Company of any assignment for the benefit of creditors or
the taking advantage by any of the same of any insolvency law;
(d) the appointment or a receiver of any property of the Company;
(e) the attachment or restraint of any funds or other property of the Company
which may be in or come into the possession or control of the Payee,. or of
any third party acting for the Payee, or if such property or funds shall
become subject at any time to any mandatory order of court or other legal
process;
The Company and all other parties liable herein, whether as principal,
endorser, guarantor or otherwise, hereby jointly and severally (i) waive
<PAGE>
presentment, demand for payment, notice of dishonor, notice of protest and
protest and all other notices or demands in connection with the delivery,
acceptance, performance, default, endorsement or guaranty of this Note1 (ii)
waive recourse to suretyship defenses generally, including oextensions of time,
release of security and other indu1gence which nay be granted, from time to time
by the Holder of this Note to the Company or any party liable herein, and (iii)
agree to pay all costs and expenses, including reasonable attorneys' fees, in
connection with the enforcement or collection of this Note.
The Company hereby represents that it is a corporation duly organized1
validly existing and in good standing under the laws of the state of New York,
that it has the corporate power and the right and legal authority to execute
deliver and perform its obligations under this Note and has taken a1l corporate
action to authorize the execution and delivery of and the performance of its
obligations under this Note and that this Note constitutes its legal, valid and
binding obligations.
This Note shall be governed by the internal laws of the State of New York
without regard to its principles of conflict of laws.
No delay on the part of Payee in exercising any of its options, powers or
rights, nor any partial or single exercise of its options, power or right, shall
constitute a waiver thereof or of any other option, power or right, and no
waiver on the part of Payee of any of its options, powers or rights shall
constitute a waiver of any other option, power or right.
This Note may be modified or canceled only by the written agreement of the
Company and Payee. Failure of the Holder hereof to assert any right herein shall
not be deemed to be a waiver thereof.
The Company hereby waives any right to trial by jury in any legal
proceeding related in any way to this Note.
IN WITNESS WHEREOF, the Company has executed this Note as of the 27th day
of May, 1998.
CALLFREE TELECOM COMMUNICATIONS, INC.
BY: /s/ Eric Popkoff
---------------------------------
Eric Popkoff, Vice President
PROMISSORY NOTE
$30,000 Dated; February 19, 1999
FOR VALUE RECEIVED, the undersigned CALFREE TELECOM COMMUNICATIONS, Inc., a
New York corporation with an office at 1043 Nielson Street, Far Rockaway, New
York 11591 (the "Company") promises to pay to the order of Philip Goodman
("Payee'1), the sum of Thirty Thousand ($30,000) Dollars, with interest, from
the date written above until paid, at the rate of ten (10%) percent per annum
All payments hereunder shall be made in lawful currency of the United States of
America, at the address of the Payee located at Kokav Yaakov #92, Mizrach
Benjamin, Israel, 90622, ,or at such other place as the Holder hereof may
designate in writing. Interest shall accrue commencing on the date hereof and
shall be paid, simultaneously with the principal, one year from the date hereof.
This Note may be prepaid at any time in whole or from time to time in part,
in each case without premium or penalty, but with interest on the amount prepaid
to the date of prepayment.
The entire unpaid principal amount of this Note and interest then due
thereon and any other amount due hereunder shall become immediately due and
payable on the happening of any one or more of the following events:
(a{ the dissolution or termination of existence of the Company;
(b) any petition in bankruptcy being filed by or against the Company or any
endorser or guarantor hereof or any. proceedings in bankruptcy or under any
laws relating to the relief of debtors, being commenced for the relief or
readjustment of any indebtedness of the undersigned or any endorser or
guarantor hereof, either through reorganization, composition, extension or
otherwise;
(c) the making by the Company of any assignment for the benefit of creditors or
the taking advantage by any of the same of any insolvency law;
(d) the appointment or a receiver of any property of the Company;
(e) the attachment or restraint of any funds or other property of the Company
which may be in or come into the possession or control of the Payee,. or of
any third party acting for the Payee, or if such property or funds shall
become subject at any time to any mandatory order of court or other legal
process;
The Company and all other parties liable herein, whether as principal,
endorser, guarantor or otherwise, hereby jointly and severally (i) waive
<PAGE>
presentment, demand for payment, notice of dishonor, notice of protest and
protest and all other notices or demands in connection with the delivery,
acceptance, performance, default, endorsement or guaranty of this Note (ii)
waive recourse to suretyship defenses generally, including oextensions of time,
release of security and other indu1gence~ which nay be granted, from time to
time by the Holder of this Note to the Company or any party liable herein, and
(iii) agree to pay all costs and expenses, including reasonable attorneys' fees,
in connection with the enforcement or collection of this Note.
The Company hereby represents that it is a corporation duly organized1
validly existing and in good standing under the laws of the state of New York,
that it has the corporate power and the right and legal authority to execute,
deliver and perform its obligations under this Note and has taken &1l corporate
action to authorize the execution and delivery of and the performance of its
obligations under this Note and that this Note constitutes its legal, valid and
binding obligations.
This Note shall be governed by the internal laws of the State of New York
without regard to it. principles of conflict of laws.
No delay on the part of Payee in exercising any of its' options, powers or
right~1 nor any partial or single exercise of its options, powers or rights
shall constitute a waiver thereof or of any other option, power or right, and no
waiver on the part of Payee of any of it's options, powers or rights shall
constitute a waiver of any other option1 power or right.
This Note may be modified or canceled only by the written agreement 'of the
Company and Payee. Failure of the Holder hereof to assert any right herein shall
not be deemed to be a waiver thereof.
The Company hereby waives any right to trial by jury in any legal
proceeding related in any way to this Note.
IN WITNESS WHEREOF, the Company has executed this Note as of the 19th day
of February, 1999.
CALLFREE TELECOM COMMUNICATIONS, INC.
BY:/s/ Stuart Radin
----------------------------------
Stuart Radin, President
PROMISSORY NOTE
$10,000 Dated: May 27, l998
FOR VALUE RECEIVED, the undersigned CALLFREE TELECOM COMMUNICATIONS, INC.,
a New York corporation with an office at 1043 Nielson Street, Far Rockaway, New
York 11591 (the "Company"), promises to pay to the order of Robert P. Hennig
("Payee"), the sum of Ten Thousand ($10,000) Dollars, with interest from the
date written above until paid, at the rate of ten (10%) percent per annum. All
payments hereunder shall be made in lawful currency of the United States of
America, at the address of the Payee located at 601 W. Monroe Street. Princeton
Indiana 47670, or at such other place as the Holder hereof may designate in
writing. Interest shall accrue commencing on the date hereof and shall be paid
simultaneously with the principal, six months from the date hereof.
This Note may be prepaid at any time in whole or from time to time in part,
in each case without premium or penalty, but with interest on the amount prepaid
to the date of prepayment.
The entire unpaid principal amount of this Note and interest then due
thereon and any other amount due hereunder shall become immediately due and
payable on the happening of any one or more of the following events:
(a{ the dissolution or termination of existence of the Company;
(b) any petition in bankruptcy being filed by or against the Company or any
endorser or guarantor hereof or any. proceedings in bankruptcy or under any
laws relating to the relief of debtors, being commenced for the relief or
readjustment of any indebtedness of the undersigned or any endorser or
guarantor hereof, either through reorganization, composition, extension or
otherwise;
(c) the making by the Company of any assignment for the benefit of creditors or
the taking advantage by any of the same of any insolvency law;
(d) the appointment or a receiver of any property of the Company;
(e) the attachment or restraint of any funds or other property of the Company
which may be in or come into the possession or control of the Payee, or of
any third party acting for the Payee, or if such property or funds shall
become subject at any time to any mandatory order of court or other legal
process;
The Company and all other parties liable herein, whether as principal,
endorser, guarantor or otherwise, hereby jointly and severally (i) waive
<PAGE>
presentment, demand for payment, notice of dishonor, notice of protest and
protest and all other notices or demands in connection with the delivery,
acceptance, performance, default, endorsement or guaranty of this Notes (ii)
waive recourse to suretyship defenses generally, including oextensions of time,
release of security and other indu1gence~ which nay be granted, from time to
time by the Holder of this Note to the Company or any party liable herein, and
(iii) agree to pay all costs and expenses, including reasonable attorneys' fees,
in connection with the enforcement or collection of this Note.
The Company hereby represents that it is a corporation duly organized1
validly existing and in good standing under the laws of the 9tate of New York,
that it has the corporate power and the right and legal authority to execute;'
deliver and perform its obligations under this Note and has taken &1l corporate
action to authorize the execution and delivery of and the performance of its
obligations under this Note and that this Note constitutes its legal, valid and
binding obligations
This Note shall be governed by the internal laws of the State of New York
without regard to it principles of conflict of laws.
No delay on the part of Payee in exercising any of its' options, powers or
rights nor any partial or single exercise of its options, powers or rights shall
constitute a waiver thereof or of any other option, power or right, and no
waiver on the part of Payee of any of it's options, powers or rights shall
constitute a waiver of any other option1 power or right.
This Note may be modified or canceled only by the written agreement 'of the
Company and Payee. Failure of the Holder hereof to assert any right herein shall
not be deemed to be a waiver thereof.
The Company hereby waives any right to trial by jury in any legal
proceeding related in any way to this Note,
TN WITNESS WHEREOF, the Company has executed this Note as of the 27th day
of May, 1998.
CALLFREE TELECOM COMMUNICATIONS, INC.
BY: /s/ Stuart Radin
---------------------------------
Stuart Radin, President
PROMISSORY NOTE
$10,000 Dated: May 27, 1998
FOR VALUE RECEIVED, the undersigned CALLFREE TELECOM COMMUNICATIONS, INC.,
a New York corporation with an office at 1043 Nielson Street, Far Rockaway, New
York 11591 (the "Company"), promises to pay to the order of James L. Perry
("Payee"), the sum of Ten Thousand ($10,000) Dollars, with interest, from the
date 'written above until paid, at the rate of ten (10%) percent per annum. All
payments hereunder shall be made in lawful currency of the United States of
America, at the address of the Payee located at 474 Woolbridge, San Luis, Obispo
93401, or at such other place as the Holder hereof may designate in. writing.
Interest shall accrue commencing on the date hereof and shall be paid
simultaneously with the principal, six months from the date hereof.
This Note may be prepaid at any time in whole or from time to time in part,
in each case without premium or penalty, but with interest on the amount prepaid
to the date of prepayment.
The entire unpaid principal amount of this Note and interest then due
thereon and any other amount due hereunder shall become immediately due and
payable on the happening of any one or more of the following events:
(a) the dissolution or termination of existence of the Company;
(b) any petition in bankruptcy being filed by or against the Company or any
endorser or guarantor hereof or any. proceedings in bankruptcy or under any
laws relating to the relief of debtors, being commenced for the relief or
readjustment of any indebtedness of the undersigned or any endorser or
guarantor hereof, either through reorganization, composition, extension or
otherwise;
(c) the making by the Company of any assignment for the benefit of creditors or
the taking advantage by any of the same of any insolvency law;
(d) the appointment or a receiver of any property of the Company;
(e) the attachment or restraint of any funds or other property of the Company
which may be in or come into the possession or control of the Payee,. or of
any third party acting for the Payee, or if such property or funds shall
become subject at any time to any mandatory order of court or other legal
process;
The Company and all other parties liable herein, whether as principal,
endorser, guarantor or otherwise, hereby jointly and severally (i) waive
<PAGE>
presentment, demand for payment, notice of dishonor, notice of protest and
protest and all other notices or demands in connection with the delivery,
acceptance, performance, default, endorsement or guaranty of this Notes (ii)
waive recourse to suretyship defenses generally, including oextensions of time,
release of security and other indu1gence~ which nay be granted, from time to
time by the Holder of this Note to the Company or any party liable herein, and
(iii) agree to pay all costs and espenses, including reasonable attorneys' fees,
in connection with the enforcement or collection of this Note.
The Company hereby represents that it is a corporation duly organized1
validly existing and in good standing under the laws of the 9tate of New York,
that it has the corporate power and the right and legal authority to execute;'
deliver and perform its obligations under this Note and has taken &1l corporate
action to authorize the execution and delivery of and the performance of its
obligations under this Note and that this Note constitutes its legal, valid and
binding obligations
This Note shall be governed by the internal laws of the State of New York
without regard to it. principles of conflict of laws.
No delay on the part of Payee in exercising any of its' options, powers or
right~1 nor any partial or single exercise of its options, powers or rights
shall constitute a waiver thereof or of any other option, power or right, and no
waiver on the part of Payee of any of it's options, powers or rights shall
constitute a waiver of any other option1 power or right.
This Note may be modified or canceled only by the written agreement 'of the
Company and Payee. Failure of the Holder hereof to assert any right herein shall
not be deemed to be a waiver thereof
The Company hereby waives any right to trial by jury in any legal
proceeding related in any way to this Note,
IN WITNESS WHEREOF, the Company has executed this Note as of the 27th day
of May, 1998.
CALLFREE TELECOM COMMUNICATIONS, INC.
BY: /s/Stuart Radin
---------------------------------
Stuart Radin, President
OPTION HOLDER: Philip Goodman
THIS OPTION EXPIRES ON FEBRUARY 18, 2004
STOCK PURCHASE OPTION
To Subscribe for and purchase Shares of
CALLFREE TELECOM COMMUNICATIONS,INC.
THIS CERTIFIES THAT, for value received, Philip Goodman or his Designees
("Optionee") are entitled to purchase from Callfree Telecom Communications,
Inc., a New York corporation ("Optionor/the Company"), up to 40,000 restricted
Shares of Common Stock ~.001 par value per share at, an option purchase price of
$7.00 per share (the "Option"), pursuant to Rule 144 of the Securities Act of
1933,' as amended (the "Act") Optionor warrants and represents that upon
exercise and payment, the optioned share will be fully paid and non-assessable
shares of the Company's Common Stock1 $.00l par value per share.
This Option may be exercised in whole or in part at any time commencing
February 18, 2000 and terminating on February 18, 2004 (the "Expiration Date").
Any Option not exercised by the Expiration Date expires automatically.
This Option may be sold, transferred, assigned or hypothecated by Optionee
for the life of the Option. During the life of this Option, it may also be
transferred by the laws of descent by Optionee.
By acceptance of this Option, the Optionee agrees that, prior to the
disposition of any shares of common stock purchased upon the exercise of this
Option, the Optionee will comply with the provisions of the Act as then in
force1 or any similar federal statute then in force, and the rules and
regulations then in effect.
The Optionor covenants and agrees that the optioned shares when issued,
will be validly issued, fully paid and non-assessable, and free from all taxes,
liens and charges with respect to their issue.
The Optionee will not have any of the rights, privileges, or liabilities af
a Shareholder of the Company (either in law or equity) prior to the purchase of
shares subject to this Option.
IN WITNESS WHEREOF, the Optionor has caused this Option to be signed this
19th day of February, 1999.
CALLFREE TELECOM COMMUNICATIONS,INC.
By: /s/ Stuart Radin
--------------------------------
Stuart Radin, President
CALLFREE TELECOM COMMUNICATIONS, CORP.
1116 NEILSON STREET
FAR ROCKAWAY, NY 11691-4720
(718) 868-0383
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 27th day of May, 1999 by and between Callfree
Telecom Communications, Corp. a New York corporation with its principal offices
at 1116 Neilson Street, Far Rockaway, New York 11691 (the "Company"), and Stuart
Radin whose address is 1116 Neilson Street, Far Rockaway, New York 11691-4720
(the "Employee").
WITNESSETH:
WHEREAS, the Company desires to obtain the benefit of the services of
Employee, and Employee desires to render such services, on the terms and
conditions hereinafter set forth;
NOW THEREFORE, the parties hereto, in consideration of the premises
and mutual covenants herein contained, hereby agree as follows:
1. Upon the execution of this Agreement, all prior employment agreements,
whether written or oral, between Employee and the Company, or any of its
parents, subsidiaries, affiliates, or predecessor constituent corporations, are
terminated and are of no further force and effect.
2. Subject to the terms and conditions hereinafter set forth, the Company hereby
employs Employee, and Employee hereby enters into the Employ of the Company as
the Company shall from time to time select, for an employment term commencing on
the Effective Date of this Agreement as hereinafter provided, and terminating
two (2) years thereafter (the "Term of Employment").
3. This Agreement shall become effective on the date of the closing of the
minimum public offering of shares of the Company's Common Stock ("the Effective
Date), and shall continue for a period of two (2) years from such Effective
Date.
4. During the Term of Employment, Employee shall render and perform such
executive and managerial services as President & CEO for the Company as may be
assigned to him by or under the authority of the Board of Directors of the
Company. During the Term of Employment, Employee shall hold such other offices
of the Company or its subsidiaries to which he may be appointed by the board of
Directors subject to the by-laws of the Company and the direction and action of
the Board of Directors; it being understood and agreed that all policy in
connection with the operations and conduct of the business of the Company shall
be set by the Board of Directors, whose instructions in connection therewith
shall be followed by Employee. Employee shall devote such time as shall be
reasonably required to perform his duties as such President, CEO & Director for
the Company, and the Company acknowledges that Employee has other business and
employment agreements. Employee shall serve the Company faithfully and shall use
his best efforts to promote the interests of the Company. During the Term of
Employment, Employee agrees not to engage, directly or indirectly, in any
business which is competitive with the business now or hereafter conducted by
the Company, or by the parent, subsidiary, or affiliate of the company, in the
capacity of proprietor, partner, joint venturer, stockholder, director, officer,
lender, manager, employee, consultant, advisor, or agent, or as a person
controlling such business; provided, however, that Employee may buy or sell
stock in any corporation which is traded on any stock exchange or over the
counter, except that Employee shall not purchase or sell more than one (1%)
percent of the outstanding stock of any corporation engaged in the same or
similar business to that of the Company or any parent, subsidiary, or affiliate
of the Company.
5. As full compensation for all services of employee provided for herein,
including, without limiting the generality of the forgoing, all services to be
rendered by Employee as an officer or director of the company, or of any parent,
subsidiary, or affiliate of the Company, the Company will pay, or cause to be
paid to Employee, during the Term of Employment, and Employee will accept,
A. (i) for the first year of the Term of Employment, a salary at the rate
of $72,000.00, and:
(ii) for the second year of the Term of Employment, a salary at the
rate of $79,200.00 and $101,530.00 respectively.
<PAGE>
B. Such salary will be paid in regular installments in accordance with
the Company's usual paying practices, but not less frequently than
monthly. Such payments will be subject to such deductions by the
Company as the Company is from time to time required to make pursuant
to law, government regulations, or order, or by agreement with or
consent of Employee.
6. Employee shall be entitled to reimbursement by the Company for reasonable
expenses actually incurred by him on its behalf in the course of his employment
by the Company, upon presentation by Employee, from time to time of an itemized
account of such expenditure, together with said vouchers and other receipts as
the Company may require.
7. Employee shall be entitled to vacations in accordance with the company's
prevailing policy for its operating executives, provided that such vacations do
not interfere with the business operations of the Company.
8. During the Term of Employment, if Employee shall be unable, for a period of
more than two (2) consecutive months or for periods of aggregating more than
eight (8) weeks in any fifty-two (52) consecutive weeks, to perform the services
provided for herein as a result of illness or incapacity or a physical, mental,
or other disability of any nature, the Company, upon not less than ten (10) days
notice, may terminate Employee's employment hereunder. Employee shall be
considered unable to perform the services provided for herein if he is unable to
attend to the normal duties required of him. The Company shall pay to Employee,
or to his legal representatives, compensation as specified in Paragraph 5 hereof
to the end of the month in which termination occurs. Upon completion of the
termination payments provided for in this paragraph, all of the Company's
obligations to pay compensation under this Agreement shall cease.
9. Employee shall be entitled to participate in all group insurance, medical and
hospitalization plans and pension and profit sharing plans as are presently
offered by the Company or which may hereafter during the Term of Employment be
offered by the Company generally to its operating Executives.
10. Employee will not, at any time during or after the Term of Employment,
directly or indirectly disclose or furnish to any other person, firm or
corporation any information relating to the Company or its parent, subsidiaries,
or affiliates with respect to technology of the Company's products, methods of
obtaining business, advertising products, obtaining customers or suppliers, or
any confidential or proprietary information acquired by employee during the
course of his employment by the Company or its parent, subsidiaries, or
affiliates.
11. As between Employee and the Company, all products, processes, discoveries,
materials, ideas, creations, inventions, and properties, whether or not
furnished by employee or created, developed, invented, or used in connection
with Employees employment hereunder, or prior to this Agreement while employed
by the Company, which relate to the business of the Company, will be the sole
and absolute property of the Company for any and all purposes whatsoever, in
perpetuity, whether or not conceived, discovered, and / or developed during
regular working hours. Employee will not have, under the Agreement or otherwise,
any right, title or interest of any kind or nature whatsoever in or to any such
products; process, discoveries, materials, ideas, creations, inventions or
properties.
12. The Employee represents and warrants to the Company that he is not under any
obligation of a contractual or their nature to any other party which obligation
is inconsistent or in conflict with this Agreement or which would prevent,
limit, or impair in any way the performance by Employee of his obligations here
under.
13. The parties hereto recognize that irreparable damage will result to the
Company and its business and properties if Employee fails or refuses to perform
his obligations under this Agreement and that the remedy at law for any such
failure or refusal will be inadequate. Accordingly, in addition to any other
remedies and damage available, the Company shall be entitled to injunctive
relief, and Employee may be specifically restrained from violating the terms and
conditions of this Agreement.
14. Employee will execute and deliver all such other further instruments and
documents as may be necessary, in the opinion of the Company, to carry out the
intents and purposes of this Agreement and the transactions contemplated hereby,
and to confirm, assign, or convey to the Company any products, processes,
discoveries, materials, ideas, creations, inventions, or properties referred to
in Paragraph 11 hereof, including the execution of all patent and copyright
applications.
<PAGE>
15. This Agreement constitutes the entire agreement between the parties hereto
relating to the subject matter set forth herein and supersedes any prior oral
and / or written agreements, understandings, negotiations, or discussions of the
parties. There are no warranties, representations or agreements between the
parties in connection with the subject matter hereof, except as set forth or
referred to herein. No supplement, modification, waiver or termination of the
Agreement or any provisions here shall be binding unless executed in writing by
the parties to be bound thereby. Waiver of any of the provisions of the
Agreement shall not constitute a waiver of any other provision (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
specifically provided.
16. The failure of either party at any time to require performance by the other
of any provision hereof shall not affect in any way the full right to require
such performance at any time thereafter, nor shall the waiver by either party of
the breach of any provision hereof be taken or be held to be a waiver of the
provision itself.
17. Any notice or other communication required or permitted to be given under or
in connection with this Agreement shall be in writing, delivered in person or by
public telegram, or by mailing same, certified or registered mail, postage
prepaid, in an envelope addressed to the party to whom notice is to be given, at
the address given at the beginning of this Agreement, and shall be effective
upon receipt thereof. Each party shall be entitled to specify a different
address by giving notice as aforesaid to the other party.
18. The invalidity or unenforceability of any paragraph, term, or provision
hereof shall in no way affect the validity or enforceability of the remaining
paragraphs, terms or provisions hereof. In addition, in any such event, the
parties agree that it is their intention and agreement that any such paragraph,
term or provision which is held or determined to be unenforceable as written
shall nonetheless be in force and binding to the fullest extent permitted by law
as though such paragraph, term or prevision had been written in such a manner
and to such an exact as to be enforceable under the circumstance. Without
limiting the foregoing, with respect to any restrictive covenant contained
herein, if it is determined that any such provision is excessive as to duration
or scope, it is intended that it nevertheless shall be enforce for such shorter
duration, or with such narrower scope, as will render it enforceable.
19. All of the terms and provisions of this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, transferees, successors, and assigns, except that
Employee shall have not right to assign any of his rights or obligations to any
other party.
20. This Agreement shall be governed and construed under the laws of the State
of New York. Each of the parties hereto consents to the jurisdiction of the
appropriate state and federal courts of New York for all purposes in connection
with this Agreement. Each of the parties hereto further consents that any
process or notice of motion or other application of either of said Courts or a
judge thereof, or any notice in connection with any proceedings hereunder, may
be served inside or outside the State of New York by registered or certified
mail, return receipt requested, or by personal service, provided a reasonable
time for appearance is allowed, or in such other manner as may be permissible
under the rules of said Courts.
21. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which, taken together, shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be entered
into as of the date and year hereinabove first set forth.
CALLFREE TELECOM COMMUNICATIONS, CORP.
By: /s/ Eric Popkoff
----------------------------------
Eric Popkoff, Vice President
By: /s/ Stuart Radin
----------------------------------
Stuart Radin, Employee
CALLFREE TELECOM COMMUNICATIONS, CORP.
1116 NEILSON STREET
FAR ROCKAWAY, NY 11691-4720
(718) 868-0383
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 27th day of May, 1999 by and between Callfree
Telecom Communications, Corp. a New York corporation with its principal offices
at 1116 Neilson Street, Far Rockaway, New York 11691 (the "Company"), and Eric
Popkoff whose address is 1750 East 23rd Street, Brooklyn, New York 11229 (the
"Employee").
WITNESSETH:
WHEREAS, the Company desires to obtain the benefit of the services of
Employee, and Employee desires to render such services, on the terms and
conditions hereinafter set forth;
NOW THEREFORE, the parties hereto, in consideration of the premises and mutual
covenants herein contained, hereby agree as follows:
1. Upon the execution of this Agreement, all prior employment agreements,
whether written or oral, between Employee and the Company, or any of its
parents, subsidiaries, affiliates, or predecessor constituent corporations, are
terminated and are of no further force and effect.
2. Subject to the terms and conditions hereinafter set forth, the Company hereby
employs Employee, and Employee hereby enters into the Employ of the Company as
the Company shall from time to time select, for an employment term commencing on
the Effective Date of this Agreement as hereinafter provided, and terminating
two (2) years thereafter (the "Term of Employment").
3. This Agreement shall become effective on the date of the closing of the
minimum public offering of shares of the Company's Common Stock ("the Effective
Date), and shall continue for a period of two (2) years from such Effective
Date.
4. During the Term of Employment, Employee shall render and perform such
executive and managerial services as Vice President of Investor Relations for
the Company as may be assigned to him by or under the authority of the Board of
Directors of the Company. During the Term of Employment, Employee shall hold
such other offices of the Company or its subsidiaries to which he may be
appointed by the board of Directors subject to the by-laws of the Company and
the direction and action of the Board of Directors; it being understood and
agreed that all policy in connection with the operations and conduct of the
business of the Company shall be set by the Board of Directors, whose
instructions in connection therewith shall be followed by Employee. Employee
shall devote at least ten (10) hours per week or such time as shall be
reasonably required to perform his duties as such Vice President of Investor
Relations & director for the Company and the Company acknowledges that Employee
has other business and employment agreements. Employee shall serve the Company
faithfully and shall use his best efforts to promote the interests of the
Company. During the Term of Employment, Employee agrees not to engage, directly
or indirectly, in any business which is competitive with the business now or
hereafter conducted by the Company, or by the parent, subsidiary, or affiliate
of the company, in the capacity of proprietor, partner, joint venturer,
stockholder, director, officer, lender, manager, employee, consultant, advisor,
or agent, or as a person controlling such business; provided, however, that
Employee may buy or sell stock in any corporation which is traded on any stock
exchange or over the counter, except that Employee shall not purchase or sell
more than one (1%) percent of the outstanding stock of any corporation engaged
in the same or similar business to that of the Company or any parent,
subsidiary, or affiliate of the Company.
5. As full compensation for all services of employee provided for herein,
including, without limiting the generality of the forgoing, all services to be
rendered by Employee as an officer or director of the company, or of any parent,
subsidiary, or affiliate of the Company, the Company will pay, or cause to be
paid to Employee, during the Term of Employment, and Employee will accept,
A. (i) for the first year of the Term of Employment, a salary at the rate
of $35,000.00 and:
(ii) for the second year of the Term of Employment, a salary at the
rate of $45,000.00
<PAGE>
B. Such salary will be paid in regular installments in accordance with
the Company's usual paying practices, but not less frequently than
monthly. Such payments will be subject to such deductions by ,the
Company as the Company is from time to time required to make pursuant
to law, government regulations, or order, or by agreement with or
consent of Employee.
6. Employee shall be entitled to reimbursement by the Company for reasonable
expenses actually incurred by him on its behalf in the course of his employment
by the Company, upon presentation by Employee, from time to time of an itemized
account of such expenditure, together with said vouchers and other receipts as
the Company may require.
7. Employee shall be entitled to vacations in accordance with the company's
prevailing policy for its operating executives, provided that such vacations do
not interfere with the business operations of the Company.
8. During the Term of Employment, if Employee shall be unable, for a period of
more than two (2) consecutive months or for periods of aggregating more than
eight (8) weeks in any fifty-two (52) consecutive weeks, to perform the services
provided for herein as a result of illness or incapacity or a physical, mental,
or other disability of any nature, the Company, upon not less than ten (10) days
notice, may terminate Employee's employment hereunder. Employee shall be
considered unable to perform the services provided for herein if he is unable to
attend to the normal duties required of him. The Company shall pay to Employee,
or to his legal representatives, compensation as specified in Paragraph 5 hereof
to the end of the month in which termination occurs. Upon completion of the
termination payments provided for in this paragraph, all of the Company's
obligations to pay compensation under this Agreement shall cease.
9. Employee shall be entitled to participate in all group insurance, medical and
hospitalization plans and pension and profit sharing plans as are presently
offered by the Company or which may hereafter during the Term of Employment be
offered by the Company generally to its operating Executives.
10. Employee will not, at any time during or after the Term of Employment,
directly or indirectly disclose or furnish to any other person, firm or
corporation any information relating to the Company or its parent, subsidiaries,
or affiliates with respect to technology of the Company's products, methods of
obtaining business, advertising products, obtaining customers or suppliers, or
any confidential or proprietary information acquired by employee during the
course of his employment by the Company or its parent, subsidiaries, or
affiliates.
11. As between Employee and the Company, all products, processes, discoveries,
materials, ideas, creations, inventions, and properties, whether or not
furnished by employee or created, developed, invented, or used in connection
with Employees employment hereunder, or prior to this Agreement while employed
by the Company, which relate to the business of the Company, will be the sole
and absolute property of the Company for any and all purposes whatsoever, in
perpetuity, whether or not conceived, discovered, and / or developed during
regular working hours. Employee will not have, under the Agreement or otherwise,
any right, title or interest of any kind or nature whatsoever in or to any such
products; process, discoveries, materials, ideas, creations, inventions or
properties.
12. The Employee represents and warrants to the Company that he is not under any
obligation of a contractual or their nature to any other party which obligation
is inconsistent or in conflict with this Agreement or which would prevent,
limit, or impair in any way the performance by Employee of his obligations here
under.
13. The parties hereto recognize that irreparable damage will result to the
Company and its business and properties if Employee fails or refuses to perform
his obligations under this Agreement and that the remedy at law for any such
failure or refusal will be inadequate. Accordingly, in addition to any other
remedies and damage available, the Company shall be entitled to injunctive
relief, and Employee may be specifically restrained from violating the terms and
conditions of this Agreement.
14. Employee will execute and deliver all such other further instruments and
documents as may be necessary, in the opinion of the Company, to carry out the
intents and purposes of this Agreement and the transactions contemplated hereby,
and to confirm, assign, or convey to the Company any products, processes,
discoveries, materials, ideas, creations, inventions, or properties referred to
in Paragraph 11 hereof, including the execution of all patent and copyright
applications.
<PAGE>
15. This Agreement constitutes the entire agreement between the parties hereto
relating to the subject matter set forth herein and supersedes any prior oral
and / or written agreements, understandings, negotiations, or discussions of the
parties. There are no warranties, representations or agreements between the
parties in connection with the subject matter hereof, except as set forth or
referred to herein. No supplement, modification, waiver or termination of the
Agreement or any provisions here shall be binding unless executed in writing by
the parties to be bound thereby. Waiver of any of the provisions of the
Agreement shall not constitute a waiver of any other provision (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
specifically provided.
16. The failure of either party at any time to require performance by the other
of any provision hereof shall not affect in any way the full right to require
such performance at any time thereafter, nor shall the waiver by either party of
the breach of any provision hereof be taken or be held to be a waiver of the
provision itself.
17. Any notice or other communication required or permitted to be given under or
in connection with this Agreement shall be in writing, delivered in person or by
public telegram, or by mailing same, certified or registered mail, postage
prepaid, in an envelope addressed to the party to whom notice is to be given, at
the address given at the beginning of this Agreement, and shall be effective
upon receipt thereof. Each party shall be entitled to specify a different
address by giving notice as aforesaid to the other party.
18. The invalidity or unenforceability of any paragraph, term, or provision
hereof shall in no way affect the validity or enforceability of the remaining
paragraphs, terms or provisions hereof. In addition, in any such event, the
parties agree that it is their intention and agreement that any such paragraph,
term or provision which is held or determined to be unenforceable as written
shall nonetheless be in force and binding to the fullest extent permitted by law
as though such paragraph, term or prevision had been written in such a manner
and to such an exact as to be enforceable under the circumstance. Without
limiting the foregoing, with respect to any restrictive covenant contained
herein, if it is determined that any such provision is excessive as to duration
or scope, it is intended that it nevertheless shall be enforce for such shorter
duration, or with such narrower scope, as will render it enforceable.
19. All of the terms and provisions of this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, transferees, successors, and assigns, except that
Employee shall have not right to assign any of his rights or obligations to any
other party.
20. This Agreement shall be governed and construed under the laws of the State
of New York. Each of the parties hereto consents to the jurisdiction of the
appropriate state and federal courts of New York for all purposes in connection
with this Agreement. Each of the parties hereto further consents that any
process or notice of motion or other application of either of said Courts or a
judge thereof, or any notice in connection with any proceedings hereunder, may
be served inside or outside the State of New York by registered or certified
mail, return receipt requested, or by personal service, provided a reasonable
time for appearance is allowed, or in such other manner as may be permissible
under the rules of said Courts.
21. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which, taken together, shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be entered
into as of the date and year hereinabove first set forth.
CALLFREE TELECOM COMMUNICATIONS, CORP.
By: /s/ Stuart Radin
----------------------------------
Stuart Radin, President & CEO
By: /s/
----------------------------------
Eric Popkoff, Employee
CALLFREE TELECOM COMMUNICATIONS, CORP.
1116 NEILSON STREET
FAR ROCKAWAY, NY 11691-4720
(718) 868-0383
EMPLOYMENT AGREEMENT
AGREEMENT made as of the 27th day of May, 1999 by and between Callfree
Telecom Communications, Corp. a New York corporation with its principal offices
at 1116 Neilson Street, Far Rockaway, New York 11691 (the "Company"), and Jay
Radin whose address is 1239 East 34th Street, Brooklyn, New York 11210 (the
"Employee").
WITNESSETH:
WHEREAS, the Company desires to obtain the benefit of the services of
Employee, and Employee desires to render such services, on the terms and
conditions hereinafter set forth;
NOW THEREFORE, the parties hereto, in consideration of the premises and mutual
covenants herein contained, hereby agree as follows:
1. Upon the execution of this Agreement, all prior employment agreements,
whether written or oral, between Employee and the Company, or any of its
parents, subsidiaries, affiliates, or predecessor constituent corporations, are
terminated and are of no further force and effect.
2. Subject to the terms and conditions hereinafter set forth, the Company hereby
employs Employee, and Employee hereby enters into the Employ of the Company as
the Company shall from time to time select, for an employment term commencing on
the Effective Date of this Agreement as hereinafter provided, and terminating
two (2) years thereafter (the "Term of Employment").
3. This Agreement shall become effective on the date of the closing of the
minimum public offering of shares of the Company's Common Stock ("the Effective
Date), and shall continue for a period of two (2) years from such Effective
Date.
4. During the Term of Employment, Employee shall render and perform such
executive and managerial services as Chief Financial Officer (CFO) for the
Company as may be assigned to him by or under the authority of the Board of
Directors of the Company. During the Term of Employment, Employee shall hold
such other offices of the Company or its subsidiaries to which he may be
appointed by the board of Directors subject to the by-laws of the Company and
the direction and action of the Board of Directors; it being understood and
agreed that all policy in connection with the operations and conduct of the
business of the Company shall be set by the Board of Directors, whose
instructions in connection therewith shall be followed by Employee. Employee
shall devote such time as shall be reasonably required to perform his duties as
such CFO & Director for the Company, and the Company acknowledges that Employee
has other business and employment agreements. Employee shall serve the Company
faithfully and shall use his best efforts to promote the interests of the
Company. During the Term of Employment, Employee agrees not to engage, directly
or indirectly, in any business which is competitive with the business now or
hereafter conducted by the Company, or by the parent, subsidiary, or affiliate
of the company, in the capacity of proprietor, partner, joint venturer,
stockholder, director, officer, lender, manager, employee, consultant, advisor,
or agent, or as a person controlling such business; provided, however, that
Employee may buy or sell stock in any corporation which is traded on any stock
exchange or over the counter, except that Employee shall not purchase or sell
more than one (1%) percent of the outstanding stock of any corporation engaged
in the same or similar business to that of the Company or any parent,
subsidiary, or affiliate of the Company.
5. As full compensation for all services of employee provided for herein,
including, without limiting the generality of the forgoing, all services to be
rendered by Employee as an officer or director of the company, or of any parent,
subsidiary, or affiliate of the Company, the Company will pay, or cause to be
paid to Employee, during the Term of Employment, and Employee will accept,
A. (i) for the first year of the Term of Employment, a salary at the rate
of $59,800.00 and:
(ii) for the second year of the Term of Employment, a salary at the
rate of $65,780.00.
<PAGE>
B. Such salary will be paid in regular installments in accordance with
the Company's usual paying practices, but not less frequently than
monthly. Such payments will be subject to such deductions by ,the
Company as the Company is from time to time required to make pursuant
to law, government regulations, or order, or by agreement with or
consent of Employee.
6. Employee shall be entitled to reimbursement by the Company for reasonable
expenses actually incurred by him on its behalf in the course of his employment
by the Company, upon presentation by Employee, from time to time of an itemized
account of such expenditure, together with said vouchers and other receipts as
the Company may require.
7. Employee shall be entitled to vacations in accordance with the company's
prevailing policy for its operating executives, provided that such vacations do
not interfere with the business operations of the Company.
8. During the Term of Employment, if Employee shall be unable, for a period of
more than two (2) consecutive months or for periods of aggregating more than
eight (8) weeks in any fifty-two (52) consecutive weeks, to perform the services
provided for herein as a result of illness or incapacity or a physical, mental,
or other disability of any nature, the Company, upon not less than ten (10) days
notice, may terminate Employee's employment hereunder. Employee shall be
considered unable to perform the services provided for herein if he is unable to
attend to the normal duties required of him. The Company shall pay to Employee,
or to his legal representatives, compensation as specified in Paragraph 5 hereof
to the end of the month in which termination occurs. Upon completion of the
termination payments provided for in this paragraph, all of the Company's
obligations to pay compensation under this Agreement shall cease.
9. Employee shall be entitled to participate in all group insurance, medical and
hospitalization plans and pension and profit sharing plans as are presently
offered by the Company or which may hereafter during the Term of Employment be
offered by the Company generally to its operating Executives.
10. Employee will not, at any time during or after the Term of Employment,
directly or indirectly disclose or furnish to any other person, firm or
corporation any information relating to the Company or its parent, subsidiaries,
or affiliates with respect to technology of the Company's products, methods of
obtaining business, advertising products, obtaining customers or suppliers, or
any confidential or proprietary information acquired by employee during the
course of his employment by the Company or its parent, subsidiaries, or
affiliates.
11. As between Employee and the Company, all products, processes, discoveries,
materials, ideas, creations, inventions, and properties, whether or not
furnished by employee or created, developed, invented, or used in connection
with Employees employment hereunder, or prior to this Agreement while employed
by the Company, which relate to the business of the Company, will be the sole
and absolute property of the Company for any and all purposes whatsoever, in
perpetuity, whether or not conceived, discovered, and / or developed during
regular working hours. Employee will not have, under the Agreement or otherwise,
any right, title or interest of any kind or nature whatsoever in or to any such
products; process, discoveries, materials, ideas, creations, inventions or
properties.
12. The Employee represents and warrants to the Company that he is not under any
obligation of a contractual or their nature to any other party which obligation
is inconsistent or in conflict with this Agreement or which would prevent,
limit, or impair in any way the performance by Employee of his obligations here
under.
13. The parties hereto recognize that irreparable damage will result to the
Company and its business and properties if Employee fails or refuses to perform
his obligations under this Agreement and that the remedy at law for any such
failure or refusal will be inadequate. Accordingly, in addition to any other
remedies and damage available, the Company shall be entitled to injunctive
relief, and Employee may be specifically restrained from violating the terms and
conditions of this Agreement.
14. Employee will execute and deliver all such other further instruments and
documents as may be necessary, in the opinion of the Company, to carry out the
intents and purposes of this Agreement and the transactions contemplated hereby,
and to confirm, assign, or convey to the Company any products, processes,
discoveries, materials, ideas, creations, inventions, or properties referred to
in Paragraph 11 hereof, including the execution of all patent and copyright
applications.
<PAGE>
15. This Agreement constitutes the entire agreement between the parties hereto
relating to the subject matter set forth herein and supersedes any prior oral
and / or written agreements, understandings, negotiations, or discussions of the
parties. There are no warranties, representations or agreements between the
parties in connection with the subject matter hereof, except as set forth or
referred to herein. No supplement, modification, waiver or termination of the
Agreement or any provisions here shall be binding unless executed in writing by
the parties to be bound thereby. Waiver of any of the provisions of the
Agreement shall not constitute a waiver of any other provision (whether or not
similar), nor shall such waiver constitute a continuing waiver unless otherwise
specifically provided.
16. The failure of either party at any time to require performance by the other
of any provision hereof shall not affect in any way the full right to require
such performance at any time thereafter, nor shall the waiver by either party of
the breach of any provision hereof be taken or be held to be a waiver of the
provision itself.
17. Any notice or other communication required or permitted to be given under or
in connection with this Agreement shall be in writing, delivered in person or by
public telegram, or by mailing same, certified or registered mail, postage
prepaid, in an envelope addressed to the party to whom notice is to be given, at
the address given at the beginning of this Agreement, and shall be effective
upon receipt thereof. Each party shall be entitled to specify a different
address by giving notice as aforesaid to the other party.
18. The invalidity or unenforceability of any paragraph, term, or provision
hereof shall in no way affect the validity or enforceability of the remaining
paragraphs, terms or provisions hereof. In addition, in any such event, the
parties agree that it is their intention and agreement that any such paragraph,
term or provision which is held or determined to be unenforceable as written
shall nonetheless be in force and binding to the fullest extent permitted by law
as though such paragraph, term or prevision had been written in such a manner
and to such an exact as to be enforceable under the circumstance. Without
limiting the foregoing, with respect to any restrictive covenant contained
herein, if it is determined that any such provision is excessive as to duration
or scope, it is intended that it nevertheless shall be enforce for such shorter
duration, or with such narrower scope, as will render it enforceable.
19. All of the terms and provisions of this Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, transferees, successors, and assigns, except that
Employee shall have not right to assign any of his rights or obligations to any
other party.
20. This Agreement shall be governed and construed under the laws of the State
of New York. Each of the parties hereto consents to the jurisdiction of the
appropriate state and federal courts of New York for all purposes in connection
with this Agreement. Each of the parties hereto further consents that any
process or notice of motion or other application of either of said Courts or a
judge thereof, or any notice in connection with any proceedings hereunder, may
be served inside or outside the State of New York by registered or certified
mail, return receipt requested, or by personal service, provided a reasonable
time for appearance is allowed, or in such other manner as may be permissible
under the rules of said Courts.
21. This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original and all of which, taken together, shall constitute
one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be entered
into as of the date and year hereinabove first set forth.
CALLFREE TELECOM COMMUNICATIONS, CORP.
By: /s/ Stuart Radin
----------------------------------
Stuart Radin, President & CEO
By: /s/ Jay Radin
----------------------------------
Jay Radin, Employee
RONALD R. CHADWICK, P.C.
CERTIFIED PUBLIC ACCOUNTANT
6025 S. PARKER ROAD
SUITE 109
AURORA, COLORADO 80014
-----------------
TELEPHONE: (303) 306-1967
TELECOPIER: (303) 306-1944
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
I hereby consent to the use in this Form SB-2 filing by Callfree Telecom
Communications Corp., of my report dated March 23, 1999 relating to the
financial statements of Callfree Telecom Communications Corp. which appear in
said filing. I also consent to the reference of my firm under the heading
"Experts" in said filing.
/s/ Ronald R. Chadwick, P.C.
-------------------------------
RONALD R.CHADWICK. P.C.
Aurora, Colorado
September 27, 1999
