SECURITIES AND EXCHANGE COMMISSION
Washington D.C. 20549
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FORM 10-SB12G/A
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GENERAL FORM FOR REGISTRATION OF SECURITIES OF
SMALL BUSINESS ISSUERS
Under Section 12(g) of
The Securities Exchange Act of 1934
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FLEXEMESSAGING.COM, INC.
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(Name of Small Business Issuer in its charter)
Idaho 82-0485978
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
Level 27 Grosvenor Place
225 George Street
Sydney, Australia NSW 2000
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(Address of principal executive offices) (Zip code)
Issuer's telephone number: (011) 61 2 9250-8888
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Securities to be registered pursuant to Section 12(b) of the Act: none
Securities to be registered pursuant to Section 12(g) of the Act: Common Stock
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TABLE OF CONTENTS
Page
PART I
Item 1. Description of Business
Item 2. Management's Discussion and Analysis
Item 3. Description of Property
Item 4. Security Ownership of Certain Beneficial Owners
and Management
Item 5. Directors, Executive Officers, Promoters and
Control Persons
Item 6. Executive Compensation
Item 7. Certain Relationships and Related Transactions
Item 8. Description of Securities
PART II
Item 1. Market for Common Equities and Related
Stockholder Matters
Item 2. Legal Proceedings
Item 3. Changes in and Disagreements with Accountants
Item 4. Recent Sales of Unregistered Securities
Item 5. Indemnification of Directors and Officers
PART F/S
Financial Statements
PART III
Item 1. Index to Exhibits
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PART I
The Company cautions readers regarding certain forward looking statements in the
following discussion and elsewhere in this document or any other statement made
by, or on the behalf of the Company, whether or not in future filings with the
Securities and Exchange Commission. Forward-looking statements are not based on
historical information but relate to future operations, strategies, financial
results or other developments. Forward looking statements are necessarily based
upon estimates and assumptions that are inherently subject to significant
business, economic and competitive uncertainties and contingencies, many of
which are beyond the Company's control and many of which, with respect to future
business decisions, are subject to change. These uncertainties and contingencies
can affect actual results and could cause actual results to differ materially
from those expressed in any forward looking statements made by, or on behalf of,
the Company. The Company disclaims any obligation to update forward-looking
statements.
Item 1. Description of Business
FlexEmessaging.Com, Inc. was formed under the laws of the State of Idaho on
August 29, 1957 under the name of Siler Equipment Sales, Inc. to salvage and
sell scrap metal, mine timber and related mining products (the "Company").
Thereafter, the name of the Company was changed to American Network
Technologies, Inc. on February 20, 1996, to Piazztec International, Inc. on June
18, 1997 and Siler Ventures, Inc. ("SVI") on February 23, 1998. On February 15,
1999, the Company changed its name to FlexEmessaging.Com, Inc. to better reflect
the new industry in which it now operates.
On February 5, 1999, SVI entered into an acquisition agreement with Trade Wind
Communications Limited ("TWC"), a Bermudan corporation listed on the Canadian
Venture Exchange, to purchase all of its business assets, consisting of the
stock of Trade Wind Group Pty Limited ("TWG"), a wholly-owned subsidiary of TWC,
incorporated on September 6, [3]1988. SVI was a non-operating public shell with
no tangible assets and 500,000 shares of common stock outstanding. This merger
of TWG and SVI (a non-operating public shell with a tangible asset value of nil)
resulted in TWG having actual or effective operating control of the combined
Company after the transaction. As a result, this transaction has been treated as
a capital transaction in substance, rather than a business combination and has
been accounted for as a reverse acquisition. Any references to past
accomplishments of the Company and its financial information, prior to the
acquisition, relate solely to TWG, as combined, since SVI (now known as
Flexemessaging.com, Inc.) has been inactive for several years. SVI acquired the
assets of TWG in exchange for the issuance of 8.8 million shares of common
stock. This valuation was based on arms length negotiation driven by ultimate
ownership principles. A forward valuation based on future revenues was
determined and from this capitalization model, the total outstanding common
stock was calculated. Thereafter, the respective equity ownership positions were
negotiated.
Company
Pursuant to the Merger Agreement, the Company entered into an agreement with
Atlantic International Capital Holdings Ltd., a Bermudan corporation ("AICH"),
with the objective of performing two tasks. First, AICH was to identify an
acquisition candidate and secondly AICH was to arrange for funding for the
Company. Pursuant to that agreement, AICH identified SVI as an acquisition
vehicle and assisted the Company in structuring and concluding the reverse
acquisition,, including assisting the Company in seeking financing of $3,660,000
through the sale of the Company's common stock utilizing private placements. As
a condition of the agreement with AICH, 600,000 shares of the Company's common
stock were issued to AICH as performance shares for arranging future financing
to fund the Company's operating needs. These performance shares are subject to a
lockup agreement signed by AICH whereby shares will be released from the lockup
agreement in proportion to the funds
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raised by AICH, subject to a minimum of $1 million. The funding minimum was not
raised within the required 70 days as a result of various delays concerning the
merger agreement with the US shell Company, SVI. The Company has informed its
transfer agent, Interstate Transfer Company of the restriction and non
performance. The treatment of these performance shares is under review by the
board pending the result of the latest capital raising activity by AICH.
The Company is primarily engaged in two major business segments: voice and data
systems and electronic messaging. The Company's voice and data systems segment
(hereinafter referred to as the "Voice & Data Division") is a distributor of
communication systems and data applications for financial traders and emergency
services operations. The Company's electronic messaging segment (hereinafter
referred to as the "Flexifax Division") provides customers with a global
enhanced fax and email broadcast services originating from the customers'
desktop personal computer ("PC"). The enhanced fax and email broadcast service
allows clients to prepare documents for distribution and send them directly from
their PC to the Flexifax network for distribution worldwide. Clients dial into
the Flexifax service using a modem or via the Web interface. The Company
specializes in "Broadcast" distribution whereby the same document(s) is sent to
multiple recipients. Once the document(s), together with the fax numbers and
email addresses of the recipients have been received by Flexifax they are
distributed by Flexifax via various carriers to the recipients anywhere in the
world.
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The Company presently operates through eight subsidiaries incorporated under the
laws of New South Wales, Australia and Singapore, and with approximately 63
employees, including 60 full-time employees as at December 15, 1999. One of the
eight subsidiaries of the acquired TWG is a wholly-owned subsidiary called Trade
Wind Marketing Pty Ltd ("TWM"), a New South Wales, Australian corporation. The
Company's above-described operating divisions operate under TWM using the
tradename of 'Flexifax Global Services' and `Trade Center Products'. The
Company's principal office is located in Sydney, Australia. The Company's assets
consist of office equipment, leasehold improvements and the value of its
on-going business operations.
Outlook
FlexiFax Division
Over the next 12 months the Company plans to re-position its offerings of
products and services into a more broad-based messaging operation, reducing its
dependence on fax and focusing on offering specific channel based value added
services to customers rather than solely carriage of fax traffic over a fax
network. Currently the Company enables clients to send documents for
distribution via fax or email and earn revenue based on a fee per minute. This
is considered a standard service. Channel based value added services ("VAS")
provides further added value by identifying the needs for certain market
segments(channels) and designing a special service around these needs (See
"Overview-FlexiFax Division - Product and Market Evolution" below for more
detail concerning VAS). Examples of such services are list and database
management and marketing services, as well as services that are complementary to
the existing messaging platforms which will drive and maximize e-commerce
opportunities and interactivity, including emarketing and one to one
(personalized) web marketing services.
To facilitate this, the Company plans to develop strategic relationships and/or
partnerships with telecommunications carriers, Internet Service Providers
("ISPs") and companies with complementary messaging technologies or services,
possibly even potential competitors. These relationships could cover areas and
activities such as sales, product marketing, services, technology sharing,
network partnering, traffic distribution and/or service provision agreements.
The Company may divest itself of certain technologies in order to move to newer
ones or seek alternative methods of global traffic distribution, thus providing
more scope for efficient and cost effective distribution of its customers
messaging traffic. The Company has already concluded one such strategic
alliance. On December 2, 1999, the Company signed an agreement with Premiere
Information Systems Pty Ltd ("Premiere"), a subsidiary of Premiere Technologies
Inc., (NASDAQ: PTEK) a communications Company based in Atlanta, Georgia whereby
the Company outsources the delivery of its fax traffic to the Premiere network.
The outsourcing to Premiere is expected to enablethe FlexiFax Division to
generate a profit in the immediate future, as the Company will no longer have to
run an expensive, low traffic volume, global network supported 24 hours a day
around the world. The agreement with Premiere is for a period of two years
subject to an initial one year period wherein the Company
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may cancel the agreement if the performance of the Premiere network does not
meet agreed levels of performance. Thereafter, the agreement is automatically
extended subject to a 6 months cancellation clause by either party. The
agreement also offers either party the ability of badging products (selling each
others products under their own corporate banner) from the other.
The Company's unique Flexifax client software application, Web page and Gateway
technology have been retained by the Company. The Company's Gateway technology
has allowed its delivery infrastructure to be modified so that it may interface
with more than one network at a time. For example, it allows for e-mail traffic
to be delivered to a high speed internet service, while passing off fax traffic
to the Premiere network. The development of the Gateway technology has provided
the following benefits: it has streamlined the ability of the Flexifax clients
to send the same document to a mixture of e-mail and fax addresses in the same
broadcast; it unlocked Flexifax's dependence on a customized network controlled
by a mainframe computer; and it has enabled rapid development of product
enhancements and the intelligent handling of different file formats. The Web
page technology is a web user interface that allow clients to send lists and
documents to FlexiFax via the internet for broadcast.
Voice and Data Division
The Company plans to expand its Voice and Data Division further into call center
(now often called 'contact centers') applications and has signed a distributor
agreement with IPC Information Systems ("IPC"), a New York corporation (NASDAQ:
IPI), involved in the delivery of integrated multimedia communications solutions
to the financial trading industry, to distribute its Turret systems in
Australia. This relationship will complement the Voice and Data Division call
center operations supplying Rockwell Electronic Commerce solutions and related
activities as the convergence between dealing room operations and call center
operations continue. Rockwell Electronic Commerce ("Rockwell") is a subsidiary
of Rockwell International (NYSE: ROK) a global electronics Company with
operations in industrial automation, avionics and communications, and electronic
commerce.
Overview
FlexiFax Division
Flexifax Global Services ("Flexifax") was initially started about 5 years ago
whereby the Company saw the growing need for sending information by fax
efficiently to multiple destinations. It was envisaged that the world would be
sending their messages from the desktop rather than from the fax machine. Thus
all future development would be based on the digital environment of the desktop.
The Company purchased a software application utilizing a Tandem Computer and
enhanced its functionality and efficiency. The Company then gradually
established a global network with remote nodes, which are industrial PC's with
fax cards, in international centers such as London, New York, Hong Kong, Tokyo,
Singapore, Wellington, Auckland and most of the major cities in Australia..
Presently the Company has outsourced its networking function to Premiere in
order to reduce the high costs of maintaining such a network for its own use.
Distributors were appointed in some countries, mainly where nodes existed. The
Company also established a presence in London and Singapore.
Product and Market Evolution
FlexiFax today is a digital fax and email broadcasting service which distributes
a document from a user's desktop to potentially thousands of recipients' fax
machines and/or PCs. The software enables stand-alone or networked PC users to
connect to the network for fast transmission to worldwide recipients. The
service offers a number of key features:
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Broadcast directly from the desktop.
Minimum online sending time.
Fine print definition due to transmission of document in digital format.
Flexible and secure list database management.
Web browser connection
File attachment
The growth of fax, and especially IP fax (see below) continues and the potential
for broadcast fax in the business-to-business area is a long way from being
fully realized.
The use of email and other forms of Internet-based messaging are also growing at
an even greater rate. These methods are complementary to, rather than
competitive with, fax broadcasts as each are suited to particular tasks.
Accordingly, FlexiFax now offers the capability of broadcasts that combine fax
and email addresses, with the added option of Web-browser access to its network,
leaving the choice of method to the senders, based on their customers'
preferences. The next stage of the Company's evolution is to provide a high
degree of specialist value added services across all messaging technologies and
become involved in the growth of technologies, such as e-mail management
outsourcing and e-commerce, where messaging forms an essential part of the
service. The Company will focus on specific channel based value added services
(VAS). The first channel based VAS launched by the Company is "Flexemedia". This
service caters to companies issuing press releases to a number of specific media
editors or similar services with the hope that their story will be picked up. To
this end, the Company has developed and is maintaining a number lists on such
editors in a centralized database and has determined the preferred format
editors desire to receive releases (by fax, email or both). These lists are
subdivided by type of media editors (e.g. metropolitan newspapers, sports
editors, financial editors etc.). The client sending the press release can
therefore choose the type of media distribution they desire to target.
Other services the Company plans to offer may include compiling a recipient list
database hosting applications for use by large clients, opt in data base lists
and profiling recipients so as to assist existing and potential clients to
target their marketing projects more closely to the recipients or clients areas
of interest. This is sometimes called "Target Marketing". The Company will
undertake this by building onto its Gateway technology and Web interface,
thereby enhancing or expanding its capabilities. Ideally the Company will offer
these services from its Web page. Such specific channel VAS can command a much
higher price and therefore margin for the Company.
Market Segmentation
The large potential of the total broadcast market arises from the very large
number of fax machines installed throughout the world. Estimates vary from 60
million to 100 million fax devices installed world wide all capable of receiving
fax messages from each other. The potential is also aided from innovation and
added value that message broadcasting brings to organizations using the more
conventional methods (postal mail outs, newspaper advertisements etc).
Users of broadcast messaging include, but are not limited to:
Banks, Securities Houses and Brokers
Public Relations and Marketing Companies
Wholesale Distributors (e.g. Computer Products, Books, Records,
Food) [11]Life Insurance and Superannuation (similar to defined
contribution plans) Companies
Shipping and Freight Forwarders
Professional Services Organizations
Professional Associations
Political and Lobby Organizations
Government and near-Government Organizations
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Global Service
The Flexifax Gateway technology uses Internet Protocol ("IP") or FTP to send its
traffic to the ISP or Carrier for message delivery. The agreement with Premiere
integrating the use of their Global Network opens up opportunities for business
in other locations in future by the Company, as the Premiere Global Network
consists of a number of nodes around the world. The current operation of the
Company is to originate traffic in Australia for delivery anywhere in the world
through the Premiere network for fax. However, in the future when the Company
sets up a VAS offering in another country, the Company's services will be
capable of integration with a local Premiere node (via a Flexifax Gateway server
located at that node) to take advantage of local delivery rates. This global
architecture of the fax delivery network lends itself to the establishment of
local subsidiaries, branch offices and distributors in the future. The service
can be made available from any chosen place in the world and supported by a 24
hour help desk.
Strengths for the Future.
Frost and Sullivan, an international marketing, consulting and training company,
in their report "World Internet Protocol Faxing Markets", estimated that global
IP faxing will have increased from 6 million minutes in 1997 to around 90
million minutes by the end of 2001. There is even more rapid growth in the
volume of e-mail. FlexiFax's IP messaging technology, combining fax and email in
the same broadcast, provides a platform springboard for becoming a broad-based
global messaging Company, which stands to benefit greatly from the expansion of
the market and the power of the Internet.
Growth Record
FlexiFax has increased its volume of delivered fax minutes from 280,000 in 1995
to 19.5 million in 1999.
Strategy for Future Growth
The Company recognizes that for strong growth in the future it has to
re-position itself into the broad-based electronic messaging market and focus on
specific market channels to provide value added services. The Company has
identified the need to move from its reliance on faxing technology and its use
of a fax only global network in order to share more in the high growth in the
Internet. This will involve the Company managing much higher volumes of client
electronic messaging business but with a lower unit cost and margin, preferably
with revenue realized on a per transaction basis. The first step has been the
strategic alliance with Premiere, whereby Flexifax has outsourced the delivery
of its fax traffic to the Premiere network. The Company's management plans to
further achieve its aims by aligning the Company with, and leveraging off,
larger industry players or recognized leaders in their field, and then provide
specialist added value messaging services to such players/leaders, and their
customers, in addition to providing such benefits to the Company's own
customers. This will involve partnerships, strategic alliances or even joint
ventures, with other technology companies or service providers and may involve
alternative methods of global traffic distribution and a change in the Company's
customer profile.
By re-positioning in this way the Company can seize opportunities that may
present themselves to move into yet other growth areas, such as e-commerce,
unified messaging or other growing markets. This is where the Company can take
advantage of the fact that messaging technology has to be included as an
essential part of the business. The Company's growing position in call centers
(See Voice and Data Division) is expected to open up new opportunities for
electronic messaging, universal messaging, messaging/e-mail outsourcing and
e-commerce.
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Voice and Data Division
The Voice and Data Systems Division is a leading systems integrator and
distributor of data and communications applications in Australia and New
Zealand, providing effective solutions to the critical needs of clients across
many sectors. This is evidenced by the dominant market position held in the
Australian dealing room market. A dealing room consists of dedicated voice
systems developed for financial traders. The Division has established market
leadership in 'instant-access' or 'turret' voice systems in many of these key
areas in Australia, with over 50% market share in the Australian financial
markets, and approximately 80% in emergency services. This is in addition to a
steadily growing market share of the broader 'command-control' sector including
airlines, utilities, defense and other areas of government.
This Division has maintained operating profits since its establishment more than
12 years ago. The Company plans to expand its opportunities in the Voice and
Data Division through the development of call centers. Call centers are growing
in Australia and Asia at an annual rate of 25% (source: New South Wales
Government report) and there is increasing demand for more sophisticated and
cost-effective technology. This Division is ideally situated to capitalize on
this growing trend with a range of world-class products.
As a leading systems integrator and distributor of data and communications
applications in Australia and New Zealand, this Division provides effective
solutions to the following cross sectors: stock and futures exchanges, financial
institutions, emergency service providers, government agencies, airlines, public
utilities, industrial companies and hospitals. This Division maintains a
dominant position in the financial, commercial, government and emergency
services markets as a specialist provider of leading edge communications
products, systems integration and turnkey solutions.
The Voice and Data Division integrates and supplies outstanding products from
the following vendors, for use by its clients, including:
o IPC - digital dealer board ("turret") systems (previously the Company
supplied V Band turret systems. V Band was recently acquired by IPC for
which the Company has been appointed the Australian distributor). (See,
"Outlook Voice and Data Division" and "The Future in Call Centres" in this
section, first paragraph.
o Multitone - paging, wide-area call-out systems, DECT cordless PABX
o CSK Software - Slingshot real-time data delivery via Internet/Intranets
o Rockwell - ACD and Call Center Solutions
o Aspect - Voicetek 'Generations' Interactive Voice Responses systems
o Pipkins Inc - 'Maxima Advantage' Workforce Management software
o Witness - Quality Monitoring systems
o Webline - Web-based Telebusiness/e-Commerce system
o Trans-Lux - electronic display systems
o Dictaphone - loggers
In addition, the Voice and Data Division has also developed certain products and
applications for the dealing room market which were previously supplied to V
Band. These include full duplex, multi channel open microphone systems for use
on V Band systems, speaker systems specifically designed for dealing rooms,
radio interfaces for emergency services integrated into V Band systems and
programmable modules for allocating lines on V Band consoles and others.
The Division grew out of supplying voice turret systems to the financial market.
Over the past number of years it has added products to its offerings to suit the
markets addressed.
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Major Project Installations.
Among the major project installations secured by the Companyin the last year
were as follows: (none of these installations represents a large percentage of
the Company's business for accounting purposes) :
o Jindalee Operational Radar Network (JORN) - a defense contract for
secure voice communications for the over-the-horizon radar
monitoring system.
o Qantas Airways - digital voice and radio communications for
streamlined load control operations throughout Australia New Zealand
and Papua New Guinea.
o Ambulance and Fire Brigade Services digital voice communication and
call-out systems with multi-location networking, paging and
computer-aided dispatch (CAD) systems integration.
o National Electricity Market Management Co (NEMMCO) - Operations
security communications systems. (NEMMCO is involved in the creation
of an Australia-wide electricity market.)
o Data Connections - Call Center systems including ACD, IVR and
Workforce Management.
o Parliament House, Canberra - Voice systems for Security Control Area
integrated with CCTV, perimeter door opening, intercom, lift phones
and radio channels.
o RAAF Radar Surveillance Units - secure voice communications.
o Intercapital Brokers - Turret system.
o Westpac Banking Corporation - Turret system
These project installations involve a systems integration process, whereby a
turnkey solution is implemented. The solution involves the configuration and
specification, assembly, installation and maintenance of certain voice and data
telecommunications equipment, components and accessories. The average length of
time to execute these projects is between four to six weeks, depending on the
size of the installation. The projects are normally invoiced in stages, at the
order, installation and acceptance stage.
The Future in Call Centers
The Company began its operations in this division in 1987 with a core product
distributed from V Band Corporation, ("V Band"), a New Jersey corporation, which
recently filed for protection under Chapter 11 of the US Bankruptcy Code. V Band
was acquired by its major competitor, IPC. Since then negotiations have been
successfully undertaken between the Company and IPC, with the Company emerging
as the non-exclusive Australian distributor for IPC products. (See,
"Outlook-Voice and Data Division" for description of IPC)
The Company recognized, over two years ago, that it had to diversify out of the
financial market for voice turrets as the financial market was consolidating.
The market chosen to diversify into was the call center market. Call Centers are
evolving into versatile 'customer interaction centers' facilitating contact by
telephone, email, fax or a Web browser. The Voice & Data Division is targeting
this stage of development (which will also offer messaging opportunities to
FlexiFax Division). The new generation of call centers provides opportunities
for sales of new systems and change-outs of older technology.
Call centers used to refer mainly to communications cost centers dealing with
large volumes of inbound calls organized around Automatic Call Distribution
(ACD) or 'queuing systems'. More recently the concept has been extended to
include varying mixes of outbound as well as inbound call handling - but call
centers are still viewed largely as systems for bulk-processing of telephone
traffic. However, business and government organizations need a variety of
systems to communicate with clients, employees, business partners and the public
and call centers are now evolving into 'customer interaction centers',
facilitating contact by telephone, email, fax or a Web browser.
Call centers can operate independently of the location of their customers, even
across international borders, and Australia is capitalizing on that flexibility.
Regional and international call centers are being installed in Australia because
of its lower staffing and establishment costs and multi-lingual workforce.
According to New South Wales Government Reports, the call center market in
Australia is growing at the rate of around 25% per annum. An estimated 550 call
centers are now operating in Australia, employing approximately 50,000 people
with an annual expenditure of $1.2 billion. A
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market study by Price Waterhouse/ACA estimated the growth of this market in
Australia at 20% annually. Other sources, such as the New South Wales Department
of State & Regional Development, put this growth at 25%. According to their 1998
report, the greater Sydney area is home to half the international call centers
operating in the Asia Pacific region.
Call centers serve the whole spectrum of industry, finance, transport, utilities
and government and the division has begun to extend its traditional focus on
financial and emergency services to a much larger market.
The growth and expansion of this industry has led to a need for products and
services by call centers providing assistance and/or solutions to their strained
and growing operations. By providing such products, the Company, even as a late
entrant, can solicit any client or potential client with such product offerings,
even though that client may be using competitors equipment. As a result of the
Company's targeting initiative the Division now represents ( together with other
distributors in many cases) Rockwell Electronic Commerce (Call Centers),
Dictaphone (Loggers), Witness Systems Inc (Quality monitoring systems),
Trans-lux Corporation (wall boards), Pipkins Inc.(workforce management software)
and others. The Division uses a solution oriented approach to meet most customer
technology needs.
Divisional sales for the year ended June 30, 1999 were $5.4 million, a decrease
of 29% over the previous year. Sales in the current fiscal year were
significantly lower than in fiscal 1998 mainly as a result of reduced sales of
the core turret system product due to the financial collapse of V Band but an
order book of over $4 million will provide a greater than usual level of
certainty for the year 2000. The Company has moved into the call center market
offering a number of products in this area. This should be considered as a start
up business although the skills required to support these products are similar
to those already being deployed in the financial trading area. Revenues
increased 56% to $4,229,231 for the six months ended December 31, 1999, from
$2,705,828 for the six months ended December 31, 1998. The increase is mainly
attributable to turret system sales of $2,264,338 being concluded as a result of
the division being awarded the Australian distributorship for IPC products as
compared to $1,408,994 being generated in the comparative period. The successful
conclusion of the Australian distributorship with IPC is expected to generate
further positive results in this fiscal year, with significantly higher turret
systems sales forecast.
Operational Concerns
International Operations. As the Company's operations are internationally based,
such operations are subject to numerous inherent risks beyond the Company's
control, including political and economic conditions affecting the countries of
operation. The Company's international business activities may include
difficulties in staffing and managing international operations, currency
fluctuations and currency management issues, difficulties in collecting accounts
receivable, imposition of public sector controls, trade and tariffs
restrictions, price or exchange controls, limitations on repatriation of
earnings, longer payment cycles, political and economic instability, seasonal
fluctuations in business activity during the summer months, foreign tax
consequences and the burdens of complying with a wide variety of foreign laws
and regulations.
The Company conducts most of its business outside the US and thus most of its
expenses and revenues, if not all, are derived in foreign currencies. Thus, the
Company may experience a material loss due to fluctuations in foreign
currencies. The Company typically denominate foreign transactions in foreign
currency and have not regularly engaged in hedging transactions.
Suppliers/Service Providers.
Dependence on Key Suppliers -Should any of the Company's key suppliers
experience difficulty in providing product in a timely manner, this could
adversely effect the Company's revenues and reputation in the market.
Additionally, the failure on the part of these suppliers to develop and
manufacture or supply new or enhanced products or software that meet or
anticipate technological changes on a timely and cost-competitive basis could
have a materially adverse effect on the Company's financial condition and
results of operations. [23]Key suppliers are:
IPC - Non-exclusive distribution agreement for Australia for an initial term of
two years, with automatic extension thereafter, unless terminated in writing
upon giving 60 days notice. Performance criteria of $2 million in sales per
annum.
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Premiere - Exclusive agreement for Premiere to carry all the fax broadcast
traffic for a period of 12 - 24 months subject to service and pricing criteria.
Witness - Non-exclusive distribution agreement for Australia for an initial
three year period. Thereafter it may be renewed for successive one year periods
by mutual agreement. Termination upon giving 60 days notice or on breach of
contract. Performance criteria of $500,000,$1,000,000 and $1,500,000 in years
1,2 and 3 respectively.
Pipkins - Non-exclusive distribution agreement for Australia to be finalized by
June 30, 2000.
Rockwell - Non-exclusive distribution agreement for Australia for an initial
term of one year, with extension by written amendment. Termination upon giving
90 days notice or on breach of contract.
Trans-lux - No contract in place. Has been operating on a purchase order basis
for in excess of seven years.
Trend Micro - An agreement for Trend Micro to supply up to date virus scanning
software on the FlexiFax Gateway for an initial period of two years with
automatic extension. Termination upon giving 60 days notice.
Agreement with IPC - For the fiscal six months ended December 31, 1999, sales of
the IPC products accounted for 70% of the sales of the Voice and Data Systems.
IPC, a previous competitor to V Band, has recently acquired V Band and the
Company has been appointed the Australian distributor of IPC products. Under the
new distributorship arrangement with IPC it is not yet certain what margins on
sales can be reasonably expected on an ongoing basis nor whether the costs to
support the new systems will be similar to those of supporting V Band products.
No Long-term Contracts - The Company does not typically have or utilize
long-term contractual agreements with its clients, suppliers or vendors and thus
such may not continue to transact business with the Company in the future if
competitors develop products and services that are more sophisticated, efficient
and cost effective, or our technological advances are not timely and responsive
to our clients individual needs or our products become obsolete. The information
and telecommunications service market continually attracts new competitors and
technologies which may offer or provide more sophisticated, efficient and cost
effective products and services which would have a material adverse effect upon
the Company's business, financial condition and operations.
Reliance on third parties - A substantial portion of the Company's total
revenues are derived from the sale of products manufactured by third parties and
the provision of professional services in connection with the sale and
maintenance of such products. As a result, any factor adversely affecting such
distribution rights or services would have a material adverse effect on the
Company's business and results of operations.
Regulations.
Enforcement of Civil Claims - The Company was incorporated under the laws of
Idaho, while the operating entities are based in Australia. Certain of its
directors and all of its officers reside, and all of its assets are located,
outside of the United States. It may not be possible for investors to effect
service of process within the United States upon the directors and officers of
the Company. It may also not be possible to enforce judgments obtained in United
States courts predicated upon the civil liability provisions of applicable
securities laws of the United States against the Company or its directors and
officers.
Change in government policies - A deterioration in economic conditions in
countries where the Company carries on business or other factors could result in
a change in government policies which may materially affect the Company's
financial position and results of operations.
Regulation of the telecommunications industry - The telecommunications industry
is subject to regulatory control. Any amendments to current regulations could
have a material adverse effect on the Company's business, results of operations
and prospects.
Deregulation of the Australian Telecommunications Industry - On July 1, 1997 the
Australian Telecommunications Industry deregulated. Until late 1999, only
national and international calls were allowed to be offered by licenced
carriers. Since deregulation new and emerging carriers have been taking market
share away from the incumbent, Telstra Corporation Limited. This is evidenced by
Telstra's retail market share of the national and international call market
being forecast at below 50% in 1999, as compared to 74% in 1994
(Source:Telstra/Austel). As a result, fax broadcast revenues and margins per
minute are expected to continually reduce in order to secure market share and
customer base, as existing
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and new competitors continue to increase market share through cost leadership
strategies, as a result of reduced carriage costs.
Regulation of broadcast faxing and Emailing - In recent years, legislation has
been enacted in the United States, Europe, Australia and other countries
restricting fax or Email broadcasting especially by businesses to private
numbers/addresses. Similar restrictions are starting to appear governing
business-to-business fax broadcasting and this may have an adverse affect on the
Company's business and results. Current trends in regulation of electronic
messaging are that messages should only be sent to those that want the
information in the message or have "opted in" to receive specific types of
information from time to time. The Company is not aware if the Company's
customers have obtained 'opt in' status from the recipients to whom they intend
to send their messages.
Competition and Competitive Business Conditions.
Competition - The Company's Voice and Data Division operates in a highly
competitive environment. The markets in which the Company operates are comprised
of a substantial number of global and regional competitors, many of which have
greater financial, engineering, manufacturing and other resources than the
Company. Competing with such companies will require continued investment by the
Company in engineering, research and development, marketing and customer service
and support. Future profitability will depend upon broader market penetration
that the Company has yet to secure.The fax broadcast and messaging industry is
intensely competitive and served by a wide range of companies, including major
telephone service providers, ISPs in developed countries and other companies
specializing in providing fax services. Many of these companies have
significantly greater financial resources and reach than the Company and
extensive established networks. Typically, FlexiFax does not have long-term
contractual agreements with its clients and there can be no assurance that its
clients will continue to transact business with the Company in the future. In
addition, there can be no assurance that clients will not elect to use
alternatives to FlexiFax's fax or messaging communications services, such as the
Internet, to carry such communications or that companies offering such
alternatives will not develop product features or pricing policies which are
more attractive to clients than those offered by the Company. Such competition
companies may also invite partnering or joint venture arrangements with the
Company in one country under a mutual agreement but still remain a strong
competitor to the Company in others. This could require the Company to adapt or
change out its technology to achieve such partnering or joint venture
relationships.
Uncertainty of Strategic Relationships - The Company plans to enter into
strategic relationships or partnerships in order to enable the Company to offer
its products and services to a larger customer base and on more economies of
scale. The Company's success depends in part on the success of these
relationships and the ability of these strategic partners to market and supply
the Company's products and services. Failure of one or more of these strategic
relationships or partners to successfully develop and sustain a market for our
services or the termination of one or more of these strategic relationships
could hinder the Company's ability to increase sales and revenue. Additionally,
our strategic partners may not view their relationship with the Company as
significant to their business and thus any reassessment of their commitment to
the relationship could have a material adverse effect on the Company. The
ability of our strategic partners to incorporate our products and services into
their product and services now and in the future will require the Company to
respond timely with new products and services as technological advances are
made. If the Company fails to enhance or create new products and services in
response to technological changes such could result in the Company's strategic
partners terminating their relationship or seeking alternative providers.
Further, the telecommunications industry is experiencing rapid consolidation.
Consolidation within the industry, including consolidations of the Company's
clients and strategic partners, could have a material adverse effect on the
Company's business, financial condition and operations.
Uncertainty of Market Acceptance - The Company's future success depends upon the
market acceptance of its existing and future computer product lines and services
integrating the functionality of the telephone and the computer. This will
require the market to accept a new way of exchanging and transmitting
information which will most likely depend upon several factors, including ease
of use, price, reliability, access and quality of the service, system security
and the products functionality. A decline in the demand for, or the failure to
achieve broad market
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acceptance of the Company's product lines and services would have a material
adverse effect on the Company's business, financial condition and operations.
The Company believe that its future success is also dependent in part upon its
ability to route more of its client traffic through the Internet and expand its
base of Internet capable nodes. Thus, the Company is dependent upon the
viability of the Internet as a medium for the transmission of documents. The
Company relies upon third party ISP providers for access to the Internet through
Internet capable nodes at varying prices. There can be no assurance that the
current pricing structure for the Company's access and use of the Internet will
not adversely change. If the Internet proves to be an impractical or unreliable
medium for transmission of documents or material capacity constraints develop,
the Company's business, financial condition and operations may be adversely
affected.
Reliance on computer and communications systems - The Company's business is
highly dependent on its computer and telecommunications systems and those of
others, such as Premiere, for the operation and quality of service of the
FlexiFax system. The temporary or permanent loss of all or a portion of any
system, for whatever reason, could have a materially adverse effect on the
Company's business, financial condition and results of operations.
Dependence on Telephone Services - In broadcasting faxes or other messaging
technologies, FlexiFax is highly dependent on telephone service provided by
local and long distance telephone companies in countries throughout the world.
The quality and availability of telephone service varies and in some areas is
limited. Any significant interruption in telephone service could adversely
affect the Company. Rate increases imposed by telephone companies where FlexiFax
operates nodes will increase the Company's tariffs from Premiere and could
adversely affect its financial condition and results of operations. There can be
no assurance that an act of sabotage, technical failure, natural disaster or
similar event would not cause the failure of a telephone network, other portions
of the network or one of the switching facilities as a whole, resulting in the
interruption of the Company's services. Such an interruption of service could
have a material adverse impact on the Company's business, financial condition
and operations.
Dependence on Internet Service Providers (ISPs) - In using the Internet as a
receiving, transport or delivery mechanism for its messages, the service is
highly dependent on the performance of ISPs throughout the world. As message
traffic can be handed off from ISP to ISP beyond the control of the Company, any
resultant traffic loss, failure or poor performance by any ISP in the chain
could have a detrimental effect upon the service level and performance of the
Company's service. This in turn could effect the Company's clients who may then
opt not to use the service. Although the Company will always try to use reliable
ISPs there can be no assurance that such performance problems will not occur.
Dependence on key customers - FlexiFax derives a significant portion of its
revenues from a relatively small number of customers and there and there is no
assurance that such customers will continue to provide the same levels of
revenue in the future.
Concentration of Clients in the Financial Services Industry - Historically, a
significant portion of the Company's revenues have been derived from sales to
clients in the financial services industry. If the financial services industry
suffers an economic downturn, it is likely that the Company would experience a
decline in revenues, which could have a materially adverse effect on the
Company's financial condition and results of operations.
Technology.
Lack of Patentable Technology - The Company owns no patentable technology. None
of the Company's distributorship agreements provide the Company with exclusive
proprietary technology and there can be no assurance that the Company will be
able to sustain a competitive advantage against other firms with access to the
same technology.
Dependence on unpatented proprietary know-how - Unlike certain of its
competitors, FlexiFax relies on unpatented proprietary know-how. This know-how,
or in house knowledge concerning the underlying concepts and operational methods
of its technology cannot be patented.
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While the Company employs various methods to protect its know-how, such methods
may not afford complete protection and there can be no assurance that others
will not independently develop such know-how, obtain access thereto or develop a
more efficient system.
Technology Risk - The market for the Company's products and services is
characterized by rapidly changing technology, frequent new product
introductions, evolving industry standards and evolving methods of building and
operating communications systems. The Company's ability to compete effectively
is dependent upon its ongoing significant investment in software development and
telecommunications technology by continuing to enhance its current services, and
develop and introduce new services and products in a timely fashion. There can
be no assurance that the Company will be successful in anticipating or adapting
to technological changes or in selecting and developing new and enhanced
technology on a timely basis. Future technological advances in the continually
changing telecommunications industry may result in the availability of new
services, products or methods of electronic document delivery that could compete
with the document distribution services currently provided by FlexiFax.
Moreover, decreases in the cost of existing products or services could enable
the Company's current or potential clients to fulfill their own needs for
electronic document distribution services more cost efficiently than through the
use of the Company's services. The Company could be adversely affected in the
event of such technological change, or if such changes in technology enable
additional companies to offer services which could replace some or all of the
services presently offered by FlexiFax.
Competition
The Company's competition is very strong and consists of large carriers, ISPs as
well as new start up industries. For the Flexifax Division such competitors
include Premiere Technologies Inc. (incorporating Xpedite), NetMoves (formally
FaxSav), Sprint, Cable & Wireless or other carriers or ISPs, in addition to some
large media companies distributing news releases, and some start-up companies
offering "free" fax services. The competitors for Voice and Data include British
Telecom, Lucent Technologies, Panasonic, Sony, Hanson, NEC, Nortel and any
Company offering call center services, products or solutions.
Item 2. Management's Discussion and Analysis
The core elements of the Company's business are messaging and communications
represented by the Company's two operating divisions, FlexiFax and Voice & Data.
The Company offers a range of quality products and solutions in both of these
markets. The expansion of digital messaging is particularly strong and the
FlexiFax Division is rapidly broadening its offerings to meet customer demand.
Similarly, in the systems market, the convergence of computer technology with
telecommunications infrastructures has created a demand for ever-increasing
functionality. The Voice & Data Division markets a range of products designed to
take advantage of some of these opportunities within its targeted niches of
financial trading, command/control centers and call centers.
In connection with their report on our consolidated financial statements for the
years ended June 30, 1999 and 1998, BDO Nelson Parkhill, our independent
auditors, expressed substantial doubt about our ability to continue as a going
concern because of recurring net losses and negative cash flows from operations.
See Note 1c to the Consolidated Financial Statements as well as the section on
Liquidity and Capital Resources, below, for discussion.
Plan of Operations
Management has established the following objectives for the Company over the
next 12 months:
1. Reposition the Company into a more broad based and value added messaging
service and away from its heavy reliance on fax distribution using its
proprietary network. The aim is to turn the messaging activity from a loss
making operation to cashflow positive operation with eventual
profitability. The Company has outsourced its network operation to reduce
its overhead and integrated its Flexifax technology into the Premiere fax
network under a Strategic Partnership Agreement. This allowed the Company
to replace its network infrastructure and take advantage of the volume
discounts offered by Premiere. More focus can now be placed on the
customer interface and better functionality. The cost of developing the
integration technology was born by the Company as part of its in-house
development over three months.
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2. Identify e-commerce opportunities complementary to the messaging basis of
the Company. These opportunities are currently under active consideration
but will involve web based development. The initial development cost is to
be raised by AICH as part of the $3.66 million capital raising effort. The
actual costs will only be known after a project research and feasibility
study is completed. This is expected to be completed by the end of the
fourth fiscal quarter.
3. Seek Partnering or Joint Venture opportunities which will be complementary
and provide opportunities for growth. The first Partner Agreement along
these lines has been with Trend Micro Australia Pty Ltd, providing
resident antivirus software on the Gateways allowing the Company to
promote distribution of email in different formats. At present, jobs are
submitted in Postscript, tiff or pdf format which has minimal risk of
distributing viruses. The Company will stamp or legend each outgoing email
with a "swept for viruses by Trend Micro" message. The Partnership will
involve minimal cash expenditure by the Company. (see "Operational
Concerns - Dependance on Key Suppliers" for more information)
4. Expand or identify channel opportunities to service new areas of the
market. The first of these opportunities has been the Flexemedia Service
whereby the Company distributes corporate news releases to news editors
and the like based on lists maintained by the Company. Similar vertical
market applications are being pursued where centralized lists are a key
VAS to the customer. The development costs for each new activity will
depend upon the need but will likely be in the range of $50,000 to
$150,000 to launch depending upon the complexity.
5. Upgrade, add features and improve Flexifax software. The Company currently
employs 3 software engineers/developers tasked with adding functionality
to the Gateway and Web based technology and user interface software.
6. Expand the Company's voice and data systems business and product range.
Due to the consolidation in the financial dealing room market the emphasis
will be changed from turret systems to call centers and their
applications. (See, "Overview - Voice and Data Division" for details).
Most of the Company's objectives will involve minimal capital expenditure until
the capital raising being undertaken by AICH is complete. Once the capital has
been raised by AICH then these major projects will be undertaken.
CompanyCompanyCompanyCompany As a result of the reverse acquisition of TWG by
the Company in February 1999, the financial information and financial statements
presented herein are those of TWG, the accounting acquirer. Thus, the financial
position and results of operation of the Company were recorded in Australian
dollars, the functional currency, and have been converted to US dollars.
Results of operations and financial position for Fiscal Years Ending June 30,
1999 and 1998
The financial position and results of operations of the Company for the years
ended June 30, 1999 and 1998 are determined using the Australian dollar as the
functional currency. Assets and liabilities are translated at the exchange rate
in effect at each period end. Amounts on the statement of loss and comprehensive
loss are translated at the average rate of exchange prevailing during the
period. Translation adjustments arising from the use of different exchange rates
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from period to period are included in the comprehensive income account in
shareholders' equity. The gains and losses from foreign currency transactions
are included in net loss. The Australian and United States dollar exchange rates
at the balance sheet date and the average exchange rates for each year under
review were as follows for $1 Australian:
December 31, 1999 0.6500
July 1, 1999 - December 31, 1999 0.6533
June 30, 1999 0.6565
July 1, 1998 - June 30, 1999 0.6273
June 30, 1998 0.5980
July 1, 1997 - June 30, 1998 0.6710
June 30, 1997 0.7440
Management considers that there are no potential inflation issues affecting the
Company's business. The Company does not currently have any currency rate hedges
in place.
Management's discussion and analysis of operations for all periods are on the
converted US dollar figures. References have been made to certain figures before
taking into account the effect of the foreign currency translation adjustment
where necessary.
Combined Results of Operations
Combined revenues decreased by 20% to $8,873,845 for the year ended June 30,
1999, compared to $11,103,370 for the year ended June 30, 1998. Cost of sales
reduced to $4,686,123, down from $6,516,246 in the prior year. Cost of sales as
a percentage of revenue improved to 53%, down from 59% in the corresponding
period. Total operating expenses increased 8% to $5,713,499 from $5,267,999 in
the prior year. A net loss for the year ended June 30, 1999 of $1,822,201 was
reported, which was up from the net loss reported for the year ended June 30,
1998 of $703,094.
A detailed explanation of the results by operating division follows.
FlexiFax Division
Revenues. FlexiFax revenue decreased 0.5% to $3,447,030 for the year ended June
30, 1999 from $3,462,992 for the year ended June 30, 1998. (Revenues were 6%
higher than the comparative figure before adjusting for the foreign currency
translation difference). Revenues generated in countries outside of the US
(excluding Australia) increased by 61% while revenue generated in Australia
remained constant as growth in this market was offset by some migration of
customers due to the deregulation of the Australian Telecommunication Industry
resulting in tight competitive conditions. (See "Operational Concerns -
Deregulation of the Australian Telecommunications Industry" for more information
regarding the risks associated with deregulation). Strong growth in
international markets was achieved through greater market penetration in
existing areas such as the United Kingdom, Singapore and Vancouver, as well as
in new areas such as Switzerland. A large amount of management effort and
resources were directed to the establishment and growth of direct sales offices
located in London and Singapore, including recruiting and training staff and
establishing the office, and ongoing operational involvement in day to day
management. The expenses incurred in relation to this expansion are identified
under total operating expenses. (See "FlexiFax Global Services Division - Total
operating expenses" below).
Cost of sales. Cost of sales comprises local access charges, leased network
backbone circuit expenses, line rental, distributors' commission, software
maintenance and support, and domestic, long distance and international
termination charges. These are variable costs based on actual volumes. Cost of
sales amounted to $2,219,827 for the year ended June 30, 1999 compared to
$2,118,018 for the prior year. Cost of sales as a percentage of revenue
increased to 64% for the year ended June 30, 1999, compared to 61% for the
corresponding period as a result of lower revenues per minute being achieved due
to tight trading conditions.
Total operating expenses. Total operating expenses consist of expenses
associated with staff, premises, communications, travel, group management fees,
depreciation and other expenses incurred in running the operation. Total
operating expenses for the year ended June 30, 1999 amounted to $2,596,181
compared to $1,991,437 in the corresponding period. Significant expenses were
incurred in connection with the establishment of a direct office in London,
which amounted to $439,075. The balance of the increase in expenditure resulted
mainly from increased staff costs. Depreciation
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increased to $304,409 for the year ended June 30, 1999, compared to $289,536 in
the prior year, as a result of network equipment acquired to increase network
capacity and efficiency.
Voice and Data Division
Revenues. Revenues consist of sales from systems integration solutions for
voice, call center, electronic display, paging, call recording and data
applications. Revenues decreased 29% to $5,426,815 for the year ended June 30,
1999, from $7,640,378 for the year ended June 30, 1998. The decrease is mainly
attributable to: (1) reduced sales of V Band voice systems because of the global
consolidation of financial market players and the inability of V Band Inc to
continue to operate as a going concern (sales reduced by $167,830); (2)
significant customer delay (between expected order date and received order date)
in the electronic display and call center markets; (3) a large project secured
by the paging division in the prior year (sales reduced by $966,570); (4)
reduced sales activity in the Singapore region (sales reduced by $395,450). The
successful conclusion of the Australian distributorship with IPC is expected to
generate positive results in the next financial year, with turret systems sales
for fiscal 2000 forecast to be significantly higher than for the fiscal 1999
year.
Cost of sales. Cost of sales consists of the purchase of third party product,
necessary to complete the systems integration solution. Cost of sales for the
year ended June 30, 1999 amounted to $2,466,296, compared to $4,398,228 for the
previous 12 months. Cost of sales as a percentage of revenue decreased to 45%
for the current financial year down from 58% for the year ended June 30, 1998.
The decreased percentage is a result of providing a larger proportion of
relocation and ancillary support and maintenance services to the V Band voice
customer base as opposed to supplying larger project system sales, as well as a
change in the overall revenue mix, where different product groups attract
different gross margins.
Total operating expenses. Total operating expenses consist of expenses
associated with staff, premises, communications, travel, group management fees,
depreciation and other expenses incurred in running the operation. Total
operating expenses for the year ended June 30, 1999 amounted to $2,858,593
compared to $3,109,126 in the corresponding period. Depreciation increased to
$126,159 for the year ended June 30, 1999, compared to $107,558 in the prior
year,
Liquidity and Capital Resources for the fiscal years ended June 30, 1999 and
1998
The Company's consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities in the normal course of business. In connection with their report
on our consolidated financial statements for the years ended June 30, 1999 and
1998, BDO Nelson Parkhill, our independent auditors, expressed substantial doubt
about our ability to continue as a going concern because of recurring net losses
and negative cash flows from operations. See Note 1c to the Consolidated
Financial Statements for discussion.
Our current cash requirements to satisfy the management objectives outlined
above as well as to provide working capital and sustain our operations for the
next fiscal year are estimated to be $1,100,000. We expect that these
requirements will be provided by
Internally:
o Sales of the accounts receivable of the FlexiFax Division under a working
capital based factoring facility established with Scottish Pacific
Business Finance Pty Ltd (see below for details)
o Cash profits generated from the Voice & Data division
The Company anticipates raising additional capital of $3.66 million with the
assistance of AICH by means of private placement. (See below for more details).
If the private placement is not completed, the Company will:
o Restructure certain business activities in order to reduce the negative
cash flows and to transform loss making operations into profitable ones.
This would be achieved by cost reduction and identifying areas that could
provide
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efficiency with an outsourced solution.
Thereafter, if the Company's operations do not begin to deliver positive
cashflows in amounts enough to satisfy the Company's requirements, then it will
be necessary for the Company to source alternative funds through bank debt,
equity funding, partnering with others or undertake appropriate divestment
strategies of certain technologies for equity or cash. Additional funding may
not be available, or may not be available on terms and timing acceptable to the
Company, which could have a material adverse effect on the Company's financial
position, its overall business and the result of the Company's operations.
The market for fax and messaging is very competitive and the Voice and Data
Division is heavily influenced by the economic conditions existing in Australia
at the time. The Company does not expect this to change and in fact expects that
even greater effort will be needed in the future. The Company will therefore
continue to have the need for additional funding until it reaches significant
levels of revenue and margin to become cashflow positive.
The Company has financed its cash requirements for operations and investments in
capital assets mainly through private sales of equity securities and loan
finance. AICH were engaged by the Company to raise up to $3.66 million through
private placements. In July 1999, AICH has provided a bridge loan for $500,000
secured by a promissory note, accruing interest only after AICH had raised
minimum net capital of $1.5 million for the Company. The promissory note will be
repaid out of proceeds of the intended private placement capital raising of
$3.66 million, once the Company is listed on a national exchange such as
American Stock Exchange, NASDAQ or other national exchange. AICH was expected to
arrange for the share placement with one or more brokers, fund managers or other
accredited parties. The Company is not party to any plan to place shares with
one or another particular person or group.
In September 1997, the Company arranged an unlimited working capital-based
facility with Scottish Pacific Business Finance Limited ("Scottish Pacific"), in
respect of the Australian domiciled customers of FlexiFax Global Services. In
accordance with Scottish Pacific lending criteria, this facility has been
secured by a charge over the assets of Trade Wind Marketing Pty Ltd (a wholly
owned subsidiary of Trade Wind Group Pty Ltd) as well as guarantees by Trade
Wind Group Pty Ltd and its subsidiaries. Interest is charged at the highest of
the prevailing rates of either Westpac Banking Corporation, Australia and New
Zealand Banking Group Limited or National Australia Bank Limited plus a margin
of 2%. The prevailing interest rate at June 30, 1999 was 10.93% (1998: 11.06%).
The original term of this agreement was for a 12 month period with automatic
renewal. This agreement may be terminated by Scottish Pacific by giving one
month's notice or by the Company giving three month's notice. If this facility
were terminated by the Company, paying off the outstanding balance would result
in the Company having direct access to all the receipts on the outstanding
invoices, for working capital purposes.
As a result of operating losses, cash used in operating activities amounted to
$1,823,623 for the year ended June 30, 1999, compared to $128,251 being
generated from operations for the year ended June 30, 1998. Accounts receivable
decreased $224,035 to $1,899,714 from $2,123,749 for the year ended June 30,
1998 as a result of a general reduction in sales activity as well as the
relative cash flow timings of the Voice & Data Division revenue flows. Accounts
payable and other accruals reduced by $1,030,846 compared to an increase of
$357,100 in the prior comparative year, mainly as a result of some of the
funding received going towards reducing the payables to an acceptable level, as
well as a general reduction in sales activity.
Cash used in investing activities, consisting primarily of the purchase of
capital assets, amounted to $481,852 for the year ended June 30, 1999, compared
to an inflow of $21,246 in the corresponding period in 1998.
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Cash generated from financing activities, amounted to $1,834,510 compared to
$151,861 in the prior year primarily as a result of the sale of stock. 300,000
shares were sold on March 16, 1999 at a price of $2.50 per share under a private
placement, with a further issue of 200,000 shares on June 9, 1999 at a
discounted price of $1.25 under the private placement, for the raising of
bridging finance for a potential acquisition. Capital was contributed by Trade
Wind Communications Limited in the amount of $917,435, compared to $481,659 in
the prior year.
Cash and equivalents decreased to $118,912 for the year ended June 30, 1999,
from $589,877 in the previous year, as a result of funding operations and
capital asset acquisitions, primarily through private issues of securities and
the provision of loan finance.
Results of operations and financial position for the six months ended December
31, 1999 and 1998
Management's discussion and analysis of operations for the period ended December
31, 1999 and 1998 are on the converted US dollar figures. References have been
made to certain figures before taking into account the effect of the foreign
currency translation adjustment where necessary.
Consolidated Results of Operations
Consolidated revenues increased by 40% to $6,028,155 for the six months ended
December 31, 1999, compared to $4,296,269 for the six months ended December 31,
1998. As a result of increased sales volumes Cost of sales increased to
$3,602,655, from $2,359,504 in the prior period. Cost of sales as a percentage
of revenue increased to 60%, up from 55% in the corresponding period. Total
operating expenses before restructuring costs increased 25% to $3,065,735 from
$2,452,688 in the prior period. Total operating expenses after restructuring
costs increased 55% to $3,791,470 from $2,452,688 in the prior period. The net
loss before restructuring costs for the six months ended December 31, 1999 was
$657,753, which was up from the amount reported for the six months ended
December 31, 1998 of $534,349. A net loss after restructuring costs for the six
months ended December 31, 1999 of $1,383,488 was reported, which was up from the
net loss reported for the six months ended December 31, 1998 of $534,349.
A detailed explanation of the results by operating division follows.
FlexiFax Division
Revenues. FlexiFax revenues increased 13% to $1,798,924 for the six months ended
December 31, 1999 from $1,590,441 for the six months ended December 31, 1998.
Revenues generated in countries outside of the US increased by 13%. As a result
of the outsourcing of our network, the Company will only report a percentage of
the revenue generated by the customer base, now serviced by Premiere.
Cost of sales. Cost of sales comprises local access charges, leased network
backbone circuit expenses, line rental, distributors' commission, software
maintenance and support, and domestic, long distance and international
termination charges. These are variable costs based on actual volumes. Cost of
sales amounted to $1,009,448 for the six months ended December 31, 1999 compared
to $1,034,597 for the prior period. Cost of sales as a percentage of revenue
decreased to 56% for the six months ended December 31, 1999, compared to 65% for
the corresponding period, mainly as a result of lower termination pricing being
negotiated with carriers. Note from December 1999, cost of sales will only
include distributors' commission, software maintenance and support, and
domestic, long distance and international termination charges.
Total operating expenses. Total operating expenses consist of expenses
associated with staff, premises, communications, travel, group management fees,
depreciation, restructuring costs and other expenses incurred in running the
operations. Total operating expenses before restructuring costs for the six
months ended December 31, 1999 amounted to $1,366,843 as compared to $959,288 in
the corresponding period. Significant expenses in the amount of $178,743 were
incurred in connection with the establishment of an office in London for the six
months ended December 31, 1999. The balance of the increase in expenditure
resulted mainly from increased staff costs, largely as a result of the
establishment of the Flexemedia division, for the dissemination of news
releases. Depreciation decreased to $148,380 for the six months ended December
31, 1999, compared to $164,765 in the prior period. Total operating expenses
after restructuring costs for the six months ended December 31, 1999 amounted to
$2,092,578 as compared to $959,288 in the corresponding period. It is
anticipated that expenses will be reduced by approximately $80,000 per month as
a result of the Premiere agreement.
-19-
<PAGE>
Voice and Data Division
Revenues. Revenues consist of sales from systems integration solutions for
voice, call centre, electronic display, paging, call recording and data
applications. Revenues increased 56% to $4,229,231 for the six months ended
December 31, 1999, from $2,705,828 for the six months ended December 31, 1998.
The increase is mainly attributable to turret system sales of $2,264,338 being
concluded as a result of the Company entering into an agreement with IPC to be
its Australian distributor for its products as compared to $1,408,994 being
generated in the comparative period. The agreement with IPC is expected to
generate further positive results in this fiscal year, with significantly higher
turret systems sales forecast.
Cost of sales. Cost of sales consists of the purchase of third party product,
necessary to complete the systems integration solution. Cost of sales for the
six months ended December 31, 1999 amounted to $2,593,207 as compared to
$1,324,907 for the comparative quarter as a result of increased sales volumes.
Cost of sales as a percentage of revenue increased to 62% for the current fiscal
period as compared to 49% for the six months ended December 31, 1998. The
increased percentage is a result of supplying larger project system sales as
opposed to providing a larger proportion of relocation and ancillary support and
maintenance services to the V Band voice customer base, as well as a change in
the overall revenue mix, where different product groups attract different gross
margins.
Total operating expenses. Total operating expenses consist of expenses
associated with staff, premises, communications, travel, group management fees,
depreciation and other expenses incurred in running the operations. Total
operating expenses for the six months ended December 31, 1999 amounted to
$1,535,183 as compared to $1,453,095 in the corresponding period. Depreciation
was $62,720 for the six months ended December 31, 1999, as compared to $57,806
in the prior period,
Liquidity and Capital Resources
The Company's consolidated financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the settlement
of liabilities in the normal course of business.
The Company anticipates raising additional capital to meet its planned
operational and expansion requirements over the remaining part of the fiscal
year ending June 30, 2000. Should the appropriate level of funding not become
available, then the Company will have to reduce its costs employed in various
areas including its global expansion activities, network expansion, new
channel marketing initiatives, R&D, sales and general marketing activities to
a cost level which will meet the anticipated cash needs for working capital
and capital expenditure requirements. Thereafter, if the Company's operations
do not begin to deliver positive cashflows in amounts sufficient to satisfy
the Company's requirements then it will be necessary for the Company to raise
additional funds through bank debt, equity funding, partnering with others to
share overheads or undertake appropriate divestment strategies of certain
technologies for equity or cash, or through other sources of capital.
Additional funding may not be available, or may not be available on terms and
timing acceptable to the Company, which could have a material adverse effect
on the Company's financial position, its overall business and the result of
the Company's operations.
The market for fax and messaging is very competitive and the Voice and Data
business is heavily influenced by the economic conditions pertaining in
Australia at the time. The Company does not expect this to change. In fact,
the Company expects that it will be required to use even greater effort to
remain competitive in the future. The Company's needs for additional funding
will continue until it reaches significant levels of revenue and margin to
become cashflow positive.
The Company has financed its cash requirements for operations and investments in
capital assets mainly through loan financing.
As a result of operating losses, cash used in operating activities amounted to
$508,583 for the six months ended December 31, 1999, as compared to $1,089,356
for the six months ended December 31, 1998. Accounts receivable increased to
$2,767,835 from $1,899,714 for the six months ended December 31, 1998 mainly as
a result of increased sales volumes in the second quarter. Accounts payable and
other accruals increased by $893,783 as compared to a decrease of $1,464,691 in
the prior comparative period, mainly as a result of increased sales activity in
the second quarter as well as some of the funding received going towards
reducing the payables to an acceptable level in the prior period.
-20-
<PAGE>
Cash used in investing activities, consisting primarily of the purchase of
capital assets, amounted to $41,951 for the six months ended December 31, 1999,
and $119,083 in the corresponding period in 1998.
Cash generated from financing activities, amounted to $649,147 as compared to
$672,599 in the prior period primarily as a result of unsecured loans in the
amount of $757,695. In the prior period, Trade Wind Communications Limited
contributed capital in the amount of $681,635.
New Accounting Pronouncements
In April 1998, the American Institute of Certified Public accountants issued
Statement of Position 98-5, "Reporting on the Costs of Start-Up activities",
("SOP 98-5") which provides guidance on the financial reporting of start-up
costs and organization costs. It requires costs of start-up activities and
organization costs to be expensed as incurred. SOP 98-5 is effective for fiscal
years beginning after December 15, 1998 with initial adoption reported as the
cumulative effect of a change in accounting principle. Adoption of this standard
will not have a material effect on the financial statements. During 1998, the
FASB issued SFAS 132, "Employers' Disclosures about Pensions and Other Post
retirement Benefits". This statement revised employers' disclosures about
pension and other post retirement benefit plans but does not change measurement
of recognition of those plans. SFAS 132 is effective for fiscal years beginning
after December 15, 1998. Adoption of this standard will not have a material
effect on the financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS No. 133.
"Accounting for Derivative Instruments and Hedging Activities". SFAS No. 133
requires companies to recognize all derivatives contracts as either assets of
liabilities in the balance sheet and to measure them at fair value. If certain
conditions are met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss recognition on the
hedging derivative with the recognition of (i) the changes in the fair value of
the hedged asset or liability that are attributable to the hedged risk or (ii)
the earnings effect of the hedged forecasted transaction. For a derivative not
designated as a hedging instrument, the gain or loss is recognized in income in
the period of change SFAS No. 133 is effective for all fiscal quarters of fiscal
years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts either to
hedge existing risks or for speculative purposes. Accordingly, the Company does
not expect adoption of the new standards on July 1, 2000 to affect its financial
statements.
Uncertainty due to the Year 2000 Issue
The Year 2000 Issue arises because many computerized systems use two digits
rather than four to identify a year. Date-sensitive systems may recognize the
year 2000 as 1900 or some other date, resulting in errors when information using
year 2000 dates is processed. In addition, similar problems may arise in some
systems that use certain dates in 1999 to represent something other than a date.
The effects of the Year 2000 Issue may be experienced before, on, or after
January 1, 2000, and, if not addressed, the impact on operations and financial
reporting may range from minor errors to significant systems failure that could
affect an entity's ability to conduct normal business operations. The Company
formulated a Y2K compliance program to test the Company's products and services
for compliance and all such products and services were successfully tested. The
Company received compliance statements from its principals who supply products.
However in the telecommunications environment, individual products may be
compliant but their operation as a whole also depends on third parties over
which the Company has no control or in some cases even input. As of February 29,
2000, the Company has not experienced any delays or material adverse effect on
its business as a result of Y2K.
The cost to the Company of the Y2K compliance program was not separated but was
written off into general operating expenses and leasing costs (for equipment
upgrade).
Further, there were no material or known problems concerning Y2K that have not
been fixed and remedied either prior to the change of date or since.
-21-
<PAGE>
Item 3. Description of Property
All Company property is leased. The Company currently operates from the
following offices
<TABLE>
<CAPTION>
<S> <C> <C> <C>
Australia Sydney 27th floor Grosvenor Place Head Office address for all companies of Lease expires on
225 George Street Sydney Trade Wind Communications Limited. 31 July 2000
NSW 2000 Australia FlexiFax Sydney
Australia Sydney 210 George Street Voice and Data Sydney address Lease expires on
NSW 2000 Australia 30 June 2000
Australia Melbourne Level 7, Royal Insurance Building Flexifax Melbourne Monthly tenancy
440 Collins Street Voice & Data Melbourne
Melbourne Victoria 3000
Singapore 200 Telok Ayer Street Voice & Data Singapore Lease expires on
Singapore 0106 FlexiFax Singapore 31 May 2000
London 98 Curtain Road FlexiFax Global Services UK Monthly tenancy
London EC2A3AA
</TABLE>
Property occupied is currently adequate for the Company's needs.
Item 4. Security Ownership of Certain Beneficial Owners and Management
The table below lists the beneficial ownership of the Company's voting
securities by each person known by the Company to be the beneficial owner of
more than 5% of such securities, as well as the securities of the Company
beneficially owned by all directors officers of the Company. Unless otherwise
indicated, the shareholders listed possess sole voting and investment power with
respect to the stock shown.
<TABLE>
<CAPTION>
Name Number of Shares Percentage of Outstanding Shares(6)
<S> <C> <C>
Skyglen Pty Limited(1) (5) 1,391,259 13.40%
Martin McCarthy(5) 231,314 2.2%
Minbura Holdings Pty Limited (2) (5) 536,942 5.2%
Patvilt Pty Limited(3) (5) 1,237,073 11.9%
Valazco Pty Limited (4) (5) 168,307 1.6%
Trade Wind Communications Limited 8,800,000 84.6%
</TABLE>
(1) An Australian trustee Company controlled by Nicholas Rowland Bird.
(2) An Australian trustee Company controlled by Sion Grand
(3) An Australian trustee Company controlled by Arthur Christopher Walton
(4) An Australian trustee Company controlled by Frank Favretto
(5) Beneficially held through Trade Wind Communications Limited.
-22-
<PAGE>
(6) As at October 31, 1999
All Officers and Directors as a Group 17.2% (3 persons)
(1) Beneficial ownership has been determined in accordance with Rule 13d-3 of
the Securities Exchange Act of 1934. Generally, a person is deemed to be the
beneficial owner of a security if he has the right to acquire voting or
investment power within 60 days.
(2) Unless otherwise indicated, all addresses are at the Company's office.
The balance of the Company's securities are held by approximately fifty persons.
AICH directly or indirectly beneficially owns 800,000 shares of the Company's
common stock. However 600,000 of these shares are subject to a lock up agreement
and potential cancellation if AICH fails to perform under the terms of its
agreement with the Company.
Item 5. Directors, Executive Officers, Promoters and Control Persons.
The directors and officers of the Company are as follows:
Name Age Position
Nicholas Bird 61 CEO, Director
Frank Favretto 47 Director
Martin McCarthy 43 Director
Nicholas Bird is a co-founder of TWC and has extensive engineering and
managerial experience, especially in South East Asia. In 1970, he joined Philips
Telecommunications Industries, Hilversum, Holland in their Singapore operation
and was soon promoted to Regional Manager of South East Asia for
Telecommunications and Data Systems. During this time, he set up a
telecommunications factory in Singapore for PABX and application development.
Until 1981, Mr. Bird led Philips Telecommunications' Singapore operation in
becoming a market leader in most of its chosen areas, increasing annual revenues
of S$250,000 to in excess of S$20 million. Philips transferred Mr. Bird to
Australia in 1985 as its Group Product Manager, Telecommunications and Data
Systems. In this position, he was responsible for strategy and direction to make
the Australian operations profitable. Philips instructed its Australian Company
to rationalize its operations through a management buy-out. He participated in
the buy-out and founded Trade Wind Technologies Pty Ltd (formerly known as Trade
Wind Communications Pty Ltd) in December 1986. He has been significant in the
growth and development of TWC and he now uses his expertise for the continued
growth of the Company in the capacity of Chief Executive Officer. Mr. Bird was
appointed as Chief Executive Officer and as a Director to the Board of Directors
of the Company on February 5, 1999.
Frank Favretto is a Chartered Accountant in Australia and is the non-executive
director of AusAsean Management Ltd., an Australian private Company and Chairman
of Coms21 Limited, an Australian public Company. Mr. Favretto established
Bankers Trust Australia's stockbroking operations in 1984 and held the positions
of Chairman and non-member director of its Australian Stock Exchange membership
from 1984 to 1991. In 1991, he became Executive Vice-President of Bankers Trust
Australia's equity underwriting committee. In this role, Mr. Favretto gained
considerable experience in private and public capital raisings. He was appointed
a Director of TWC in November, 1996 and has been appointed to the Board of
Directors of the Company since completion of the reverse acquisition.
Martin McCarthy, was recently appointed a Director of the Company in May, 1999.
Mr. McCarthy was the President and CEO of IDD Enterprises, L.P. ("IDD") which
was recently sold to Dow Jones and Company. Mr. McCarthy has been a pioneer in
the online world for almost two decades. He has managed large organizations
which have created, commercialized and deployed leading edge technologies in the
areas of communications, information services and transactions. Prior to joining
IDD in 1988, Mr. McCarthy served as Vice President of Office Message and
Information Services at Western Union and was the youngest corporate officer in
the firm's 130 year history. Mr. McCarthy has an MBA from Harvard University.
-23-
<PAGE>
The above listed officers and directors will serve until the next annual meeting
of the shareholders or until their death, resignation, retirement, removal, or
disqualification, or until their successors have been duly elected and
qualified. Vacancies in the existing Board of Directors are filled by majority
vote of the remaining Directors. Officers of the Company serve at the will of
the Board of Directors.
Conflicts of Interest
Members of the Company's management are associated with other firms involved in
a range of business activities. Consequently, there are potential inherent
conflicts of interest in their acting as officers and directors of the Company.
Insofar as the officers and directors are engaged in other business activities,
management anticipates it will devote only a minor amount of time to the
Company's affairs.
The officers and directors of the Company are now and may in the future become
shareholders, officers or directors of other companies which may be formed for
the purpose of engaging in business activities similar to those conducted by the
Company. Accordingly, additional direct conflicts of interest may arise in the
future with respect to such individuals acting on behalf of the Company or other
entities. Moreover, additional conflicts of interest may arise with respect to
opportunities which come to the attention of such individuals in the performance
of their duties or otherwise.
The officers and directors are, so long as they are officers or directors of the
Company, subject to the restriction that all opportunities contemplated by the
Company's plan of operation which come to their attention, either in the
performance of their duties or in any other manner, will be considered
opportunities of, and be made available to the Company and the companies that
they are affiliated with on an equal basis. A breach of this requirement will be
a breach of the fiduciary duties of the officer or director. If the Company or
the companies in which the officers and directors are affiliated with both
desire to take advantage of an opportunity, then said officers and directors
would abstain from negotiating and voting upon the opportunity. However, all
directors may still individually take advantage of opportunities if the Company
should decline to do so. Furthermore, no officer or director of the Company has
ever promoted, is promoting or will be promoting any other blank check Company
during their tenure as an officer and director of the Company. Accordingly,
there presently exists no conflict of interest in this regard. Except as set
forth above, the Company has not adopted any other conflict of interest policy
with respect to such transactions.
Item 6. Executive Compensation.
The Company does not currently compensate any executive directly. Nicholas Bird
is an employed by TWG, the Company's operating subsidiary, under the terms of an
employment agreement. For the year ended June 30, 1999, Mr. Bird received total
remuneration of $81,543 (1998: $91,209), which comprised base salary of $41,713
(1998: $65,620), and other compensation, comprising superannuation contributions
(similar to defined contribution plans) and life insurance premiums of $39,830
(1998: $25,589). No employees received in excess of $100,000.
Board of Directors Compensation
The Company does not pay directors who are also executive officers for service
on the Board of Directors. Non-executive directors receive $1,500 per meeting
and are reimbursed for their expenses incurred in attending meetings of the
Board of Directors.
Long-term Incentive and Pension Plans
The Company does not hold any long-term incentive or defined benefit pension
plans. In relation to the Company's subsidiary operations in Australia,
according to legislation the Company provides funds for long service leave to
which staff become eligible after 10 years continuous service. Superannuation
(defined contribution benefits) payments are in line with norms in the various
countries that the Company and its subsidiaries does business in.
The Company is presently reviewing the merits of establishing an incentive stock
option plan for its key executives and employees; however, no such plan has been
approved or implemented.
-24-
<PAGE>
Other
No director or executive officer is involved in any material legal proceeding
against the Company in which he will receive a benefit from such legal
proceedings.
Employment Agreements
The Company currently has no employment agreement any of its employees. Certain
employees have appointment letters whichset out the standard terms and
conditions of employment but do not incorporate any contractual obligations on
employees to remain in the employ of the Company.
Indemnification of Directors and Officers
The Company's Charter and Bylaws provide that indemnification for all directors
and officers to the full extent permitted by the Idaho Corporation Law. Under
such provisions, any director or officer who, in such capacity, is made or
threatened to be made a party to any suit or proceeding, may be indemnified if
the Board determines the director or officer acted in good faith and in a manner
the director or officer reasonably believed to be in or not opposed to the
Company's best interest. The Charter, Bylaws, and the Idaho Corporation Law
further provide that indemnification is not exclusive of any other rights to
which individuals may be entitled under the Charter, the Bylaws, any agreement,
any vote of stockholders or disinterested directors, or otherwise.
The Company has the power to purchase and maintain insurance on behalf of any
person who is or was our director, officer, employee, or agent, or is or was
serving at our request as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, or other enterprise against any
expense, liability, or loss incurred by any person in any capacity or arising
out of his status as, whether or not we would have the power to indemnify person
against liability under Idaho law.
Item 7. Certain Relationships and Related Transactions.
There have been no related party transactions, or any other transactions or
relationships required to be disclosed pursuant to Item 404 of Regulation S-B.
Item 8. Description of Securities.
The Company's authorized capital stock consists of 20,000,000 shares of Common
Stock, par value $0.001 per share and 5,000,000 shares of Preferred Stock, par
value $0.001 per share. There are 10,400,000 Common Stock issued and outstanding
as of the date of this filing. There are no preferred stock issued or
outstanding.
Common Stock. All shares of Common Stock have equal voting rights and, when
validly issued and outstanding, are entitled to one vote per share in all
matters to be voted upon by shareholders. The shares of Common Stock have no
preemptive, subscription, conversion or redemption rights and may be issued only
as fully-paid and non-assessable stock. Cumulative voting in the election of
directors is not permitted, which means that the holders of a majority of the
issued and outstanding stock of Common Stock represented at any meeting at which
a quorum is present will be able to elect the entire Board of Directors if they
so choose and, in such event, the holders of the remaining shares of Common
Stock will not be able to elect any directors. In the event of liquidation of
the Company, each shareholder is entitled to receive a proportionate share of
the Company's assets available for distribution to shareholders after the
payment of liabilities and after distribution in full of preferential amounts,
if any. All stock of the Company's Common Stock issued and outstanding are
fully-paid and non-assessable. Holders of the Common Stock are entitled to share
pro rata in dividends and distributions with respect to the Common Stock, as may
be declared by the Board of Directors out of funds legally available therefor.
Preferred Stock. No Preferred Stock of the Company is presently issued or
outstanding. The Preferred Stock of the Company may be issued in various series
and shall have preferences as to dividends and to liquidation rights. The Board
of Directors shall establish the specific rights, preferences, voting privileges
and restrictions of such Preferred Stock or any series thereof.
-25-
<PAGE>
PART II
Item 1. Market Price for Common Equity and Related Stockholder Matters.
The Company's Common Stock is quoted at the present time on the
"Over-the-Counter Bulletin Board. The Company's Common Stock commenced trading
in April 1999 at $3.00 per share under the symbol of "FLXM". Quotations reflect
inter-dealer prices, without retail mark-up, mark-down or commission, and may
not represent actual transactions.
High Bid Low Bid
Qtr ended June 30, 1999 $4.50 $3.00
Qtr ended September 30, 1999 $3.375 $2.00
Qtr ended December 31, 1999 $4.875 $4.53
There are approximately 50 holders of the Company's Common Stock. From 1970 to
1984 the Company issued its common stock to various independent contractors and
employees for their services. Presently there are 10,400,000 shares of the
Company's Common Stock outstanding with 20,000,000 common stock authorized. All
of the issued and outstanding stock of the Company's Common Stock were issued
pursuant to an exemption from the registration requirements of the Securities
Act of 1933, as amended.
As of the date of this Form 10-SB, 10,400,000 shares of the Company's Common
Stock are eligible for sale under Rule 144 promulgated under the Securities Act
of 1933, as amended, subject to certain limitations included in said Rule. In
general, under Rule 144, a person (or persons whose stock are aggregated), who
has satisfied a one-year holding period, under certain circumstances, may sell
within any three-month period, a number of stock which does not exceed the
greater of one percent of the then outstanding Common Stock or the average
weekly trading volume during the four calendar weeks prior to such sale. Rule
144 also permits, under certain circumstances, the sale of stock without any
quantity limitation by a person who has satisfied a two-year holding period and
who is not, and has not been for the preceding three months, an affiliate of the
Company.
The Company has not paid any dividends to date and has no plans to do so in the
immediate future.
Item 2. Legal Proceedings.
There is no litigation pending or threatened by or against the Company.
Item 3. Changes in and Disagreements With Accountants on Accounting and
Financial Disclosure.
Not applicable.
Item 4. Recent Sales of Unregistered Securities.
On February 18 1999, the Company sold 300,000 shares of Common Stock at $2.50
per share to the following three accredited investors presented to the Company
by AICH:
John L. Patten 100,000 shares
Kathleen N. Patten 100,000 shares
Benchmark Capital LLC 100,000 shares
This stock was sold at $2.50 based on AICH recommendation as to price per share
for total proceeds in the amount of $750,000.
-26-
<PAGE>
As of April 6, 1999 a private placement was made as a result of immediate short
term bridge financing of $US1,250,000 arranged by AICH. The proceeds were to be
used to make a bid for Newsnet, a company under administration and in the same
business of fax broadcasting. As consideration for providing this facility on
very short notice the Company issued 200,000 shares at $1.25 ($250,000), a
$250,000 discount on fair value, to AICH, the cost of which was to be deducted
from the $1,250,000 proceeds. After lengthy negotiation the Company decided to
withdraw from pursuing the acquisition further and returned the funds to AICH,
although the shares remain issued and outstanding.
Item 5. Indemnification of Directors and Officers.
The Company's by-laws include provisions providing for the indemnification of
officers and directors and other persons against expenses, judgments, fines and
amounts paid in settlement in connection with threatened, pending or completed
suits or proceedings against such persons by reason of serving or having served
as officers, directors or in other capacities, except in relation to matters
with respect to which such persons shall be determined not to have acted in good
faith and in the best interests of the Company. With respect to matters as to
which the Company's officers and directors and others are determined to be
liable for misconduct or negligence, including gross negligence in the
performance of their duties to the Company, Idaho law provides for
indemnification only to the extent that the court in which the action or suit is
brought determines that such person is fairly and reasonably entitled to
indemnification for such expenses which the court deems proper.
Insofar as indemnification for liabilities arising under the 1933 Act may be
permitted to officers, directors or persons controlling the Company pursuant to
the foregoing, the Company has been informed that in the opinion of the U.S.
Securities and Exchange Commission such indemnification is against public policy
as expressed in the 1933 Act, and is therefore unenforceable.
In accordance with the laws of the State of Idaho, the Company's by-laws
authorize indemnification of a director, officer, employee, or agent of the
Company for expenses incurred in connection with any action, suit, or proceeding
to which he or she is named a party by reason of his having acted or served in
such capacity, except for liabilities arising from his own misconduct or
negligence in performance of his or her duty. In addition, even a director,
officer, employee, or agent of the Company who was found liable for misconduct
or negligence in the performance of his or her duty may obtain such
indemnification if, in view of all the circumstances in the case, a court of
competent jurisdiction determines such person is fairly and reasonably entitled
to indemnification.
PART F/S
Financial Statements.
The following financial statements are attached hereto and filed as a part
hereof. See page 23.
1) Table of Contents - Financial Statements
2) Independent Auditors' Report
3) Consolidated Balance Sheet
4) Consolidated Statements of Loss and Comprehensive Loss
5) Consolidated Statements of Changes in Cash Flows
6) Consolidated Statement of Stockholders' Equity
7) Notes to Financial Statements
8) Interim Consolidated Balance Sheet
9) Interim Consolidated Statements of Loss and Comprehensive Loss
10)Interim Consolidated Statements of Changes in Cash Flows
-27-
<PAGE>
11) Notes to Interim Financial Statements
-28-
<PAGE>
PART III
Item 1. Exhibit Index
No. Sequential
Page No.
(3) Certificate of Incorporation and Bylaws
3.1 Certificate of Incorporation and
Amendments Thereto*
3.2 Bylaws*
(10) Material Contracts
10.1 Merger Agreement*
10.2 IPC Information Systems Inc - Distribution Agreement
10.3 Premiere Information Systems Pty Ltd - Heads of Agreement
10.4 Form of Premiere Information Systems Pty Ltd - Wholesale
Agreement (portions of this exhibit are omitted and were filed
with the Securities and Exchange Commission pursuant to the
Company's application requesting confidential treatment in
accordance with Rule 24b-2 as promulgated under the Securities
Exchange Act of 1934, as amended).
10.5 Trend Micro - Partnership Agreement
10.6 Scottish Pacific Business Finance Limited - Undisclosed
Factoring Agreement
(21) List of Subsidiaries*
(27) Financial Data Schedule
27.1 Financial Data Schedule
- ------------------------
*Previously filed.
-29-
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the Registrant has duly caused this amendment to the Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized.
FLEXEMESSAGING.COM, INC.
(Registrant)
Date: March 10, 2000
/S/ Nicholas Bird
------------------------------
Nicholas Bird, President
-30-
<PAGE>
Flexemessaging.com, Inc
REPORT FOR THE YEAR ENDED JUNE 30, 1999
<PAGE>
For financial accounting purposes, as a result of the reverse acquisition by
Flexemessaging.com, Inc. (the "Company") of the business assets of Trade Wind
Communications Limited ("TWC"), consisting of the stock of Trade Wind Group Pty
Ltd., the financial statements presented herein are the consolidated financial
statements of the Company for the year ended June 30, 1999 and June 30, 1998.
The Company has two divisions: Voice and Data Division and FlexiFax Division
operating under the trade name of FlexiFax Global Services. Voice and Data
Systems is a specialist supplier and integrator of voice communication systems
and decision support applications for dealing rooms, emergency services and
other organizations with mission-critical needs. FlexiFax Global Services
operates an enhanced fax broadcast service over a global network. FlexiFax
specializes in quality fax broadcasts generated from customers' desktops for
delivery to any destination in the world.
SCHEDULE A Financial Information
<PAGE>
TO THE SHAREHOLDERS
FLEXEMESSAGING.COM,INC
INDEPENDENT AUDITORS' REPORT
We have audited the accompanying consolidated balance sheet of
Flexemessaging.com,Inc. as of June 30, 1999 and the related consolidated
statements of loss and comprehensive loss, stockholders' equity and cash flows
for the years ended June 30, 1999 and l998. These financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion of these financial statements based on our audits.
We conducted our audits in accordance with Australian generally accepted
auditing standards in the United States. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the consolidated financial position of
Flexemessaging.com,lnc. at June 30, 1999 and the consolidated results of their
operations and their cash flows for the years ended June 30, 1999 and 1998 in
conformity with generally accepted accounting principles in the United States.
The accompanying financial statements have been prepared assuming that the
Company will continue as a going concern. As discussed in Note 1c to the
financial statements, the Company has suffered recurring losses from operations
and has a net working capital deficiency that raise substantial doubt about its
ability to continue as a going concern. Management's plans in regard to these
matters are also described in Note 1c. The financial statements do not include
any adjustments that might result from the outcome of this uncertainty.
Sydney, Australia BDO NELSON PARKHILL
October 27, 1999 CHARTERED ACCOUNTANTS
F-1
<PAGE>
<TABLE>
<CAPTION>
Flexemessaging.com, Inc
Consolidated Balance Sheet
Note 30 June
1999
<S> <C> <C>
Assets $
Current
Cash 2 118,912
Receivables 3 1,899,714
Inventory 4 306,370
Costs on projects not yet billed 456,784
2,781,780
--------------
Capital assets 5 1,010,902
Goodwill 6 9,531
Other 7 20,610
1,041,043
3,822,823
--------------
Liabilities and Shareholders' Equity
Current
Trade Creditors 1,541,309
Sundry creditors and accruals 8 784,269
Customer deposits 248,495
Unearned maintenance revenue 196,882
Current portion of lease obligations 9 31,382
Loans payable 10 74,435
Income taxes payable 111
2,876,883
--------------
Non Current
Non current portion of lease obligations 9 21,777
Employee entitlements payable 131,851
153,628
--------------
Total Liabilities 3,030,511
Shareholders' Equity
Common Stock, $0.001 par value; 20,000,000 shares
Authorized; 10,400,000 shares issued 10,400
Preferred Stock, $0.001 par value; 5,000,000 shares
Authorized; no shares issued -
Additional paid-in capital 4,659,068
Comprehensive income - foreign currency translation 12 138,733
Accumulated deficit (4,015,889)
792,312
3,822,823
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-2
<PAGE>
Consolidated Statements of Loss and Comprehensive Loss
<TABLE>
<CAPTION>
Note 30 June June
1999 1998
$ $
<S> <C> <C>
Revenues 8,873,845 11,103,370
---------------------------------------------------
Less:
Cost of Sales 4,686,123 6,516,246
---------------------------------------------------
Gross Profit 4,187,722 4,587,124
---------------------------------------------------
Operating Expenses
Network operating costs 106,217 116,730
Selling, general and administrative 5,121,234 4,699,497
Depreciation and amortization 486048 451772
Total operating expenses 5,713,499 5,267,999
Loss from Operations (1,525,777) (680,875)
---------------------------------------------------
Other income/(expense)
Interest paid
- leases (1,436) (1,451)
- loans - short term (59,619) (29,983)
- Discount on stock issuance (250,000) -
Interest received 14,631 9,215
---------------------------------------------------
Loss for the year before income tax (1,822,201) (703,094)
---------------------------------------------------
Income tax expense 13 - -
---------------------------------------------------
Net loss (1,822,201) (703,094)
---------------------------------------------------
Other comprehensive (loss)/income, net of tax
Foreign currency translation adjustments (96,431) 211,266
Comprehensive loss (1,918,632) (491,828)
---------------------------------------------------
Net loss per share (0.20) (0.08)
---------------------------------------------------
Weighted average number of shares 9,075,000 8,800,000
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-3
<PAGE>
Consolidated Statements of Changes in Cash Flows
<TABLE>
<CAPTION>
30 June 30 June
1999 1998
- ------------------------------------------------------------------------------------------------------
$ $
----------------------------------------
Cash provided/(used) by:
Operating Activities
Operations
<S> <C> <C>
Net loss for the year (1,822,201) (703,094)
----------------------------------------
Items not involving cash:
Amortization 486,048 451,772
----------------------------------------
Interest expenses related to issuance of
stock at a discount
250,000 -
----------------------------------------
Increase/(decrease) from changes in:
Accounts receivable 224,035 (28,150)
Inventory (39,644) (43,055)
Costs on projects not yet billed 83,921 152,652
Accounts payable and other (1,030,846) 357,100
Accruals
Income taxes (3) (56)
Employee entitlement payable 25,067 (58,918)
(1,823,623) 128,251
----------------------------------------
Investing Activities
Investments in:
----------------------------------------
Capital assets - net (481,852) 21,246
(481,852) 21,246
----------------------------------------
Financing Activities
Loans raised 1,250,000 -
Loans repaid (1,000,000) (319,920)
Loan payable 2,687 71,748
Lease payments (25,183) (81,626)
Proceeds on issue of stock 689,571 -
Contribution of capital 917,435 481,659
1,834,510 151,861
----------------------------------------
(Decrease)/Increase in cash (470,965) 301,358
Cash at beginning of year 589,877 288,519
Cash at end of year 118,912 589,877
----------------------------------------
Supplemental non-cash investing and
financing activities
Capital lease obligations 59,191 -
Interest 61,055 28,532
----------------------------------------
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-4
<PAGE>
Consolidated Statement of Stockholders' Equity
<TABLE>
<CAPTION>
Common Stock
-------------------------
Additional
Shares Amount Paid in Accumulated
Capital Deficit
<S> <C> <C> <C> <C>
Balance, at June 30, 1997 680,800 506,515 1,574,378 (1,490,594)
Contributed capital 481,659
Net loss for the year (703,094)
--------------- ---------------- ----------------------- ----------------------
Balance at June 30, 1998 680,800 506,515 2,056,037 (2,193,688)
--------------- ---------------- ----------------------- ----------------------
Recapitalization on 8,119,200 (497,715) 497,715
February 5, 1999 (see note (a))
--------------- ---------------- ----------------------- ----------------------
Common stock for SVI 500,000 500 (500)
--------------- ---------------- ----------------------- ----------------------
Shares issued to 600,000 600 (600)
AICH for placement
Agreement
--------------- ---------------- ----------------------- ----------------------
Common stock issued on 300,000 300 749,700
March 16, 1999 @ $2.50
per share
Listing costs (60,429)
Attributable
To issuance
Contributed Capital 917,345
On March 31, 1999
--------------- ---------------- ----------------------- ----------------------
Common stock issued 200,000 200 249,800
On June 9, 1999 at
$1.25 per share
--------------- ---------------- ----------------------- ----------------------
Interest expense 250,000
Related to stock
Issued at a discount
--------------- ---------------- ----------------------- ----------------------
Net loss for the year (1,822,201)
--------------- ---------------- ----------------------- ----------------------
Balance, at June 30, 1999 10,400,000 10,400 4,659,068 (4,015,889)
</TABLE>
(a) The recapitilization that occurred on February 5, 1999 was necessary in
order to adjust the issued share capital to 8,800,000 shares. As described in
Note 1 to the financial statements, Flexemessaging.com, Inc. acquired the
business assets of TWC, consisting of the stock of TWG, in exchange for
8,800,000 shares of common stock of Flexemessaging.com, Inc.
F-5
<PAGE>
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Organization
Trade Wind Communications Limited, a Bermudan corporation , listed
on the Canadian Venture Exchange (VSE: TWC) ("TWC") entered into a
business combination agreement ("Merger Agreement") on February 5,
1999 with Flexemessaging.com, Inc. (previously Siler Ventures Inc. ,
"SVI") and Atlantic International Capital Holdings Ltd. ("AICH") to
complete a reverse acquisition of Flexemessaging.com, Inc. and a
financing arrangement of $3,660,000 through the sale of
Flexemessaging.com, Inc. common stock pursuant to an exemption from
the registration requirements of the Securities Act of 1933, as
amended. TWC owned all of the stock in Trade Wind Group Pty Ltd
(TWG) which controlled all the business assets.
On February 5, 1999, SVI entered into an acquisition agreement with
Trade Wind Communications Limited ("TWC"), a Bermudan corporation
listed on the Canadian Venture Exchange, to purchase all of its
business assets, consisting of the stock of Trade Wind Group Pty
Limited ("TWG"), a wholly-owned subsidiary of TWC, incorporated on
September 6, 1988. SVI was a non-operating public shell with no
tangible assets and 500,000 shares of common stock outstanding. This
merger of TWG and SVI (a non-operating public shell with a tangible
asset value of nil) resulted in TWG having actual or effective
operating control of the combined Company after the transaction. As
a result, this transaction has been treated as a capital transaction
in substance, rather than a business combination and has been
accounted for as a reverse acquisition. Any references to past
accomplishments of the Company and its financial information, prior
to the acquisition, relate solely to TWG, as combined, since SVI
(now known as Flexemessaging.com, Inc.) has been inactive for
several years. SVI acquired the assets of TWG in exchange for the
issuance of 8.8 million shares of common stock. This valuation was
based on arms length negotiation driven by ultimate ownership
principles. A forward valuation based on future revenues was
determined and from this capitalization model, the total outstanding
common stock was calculated. Thereafter, the respective equity
ownership positions were negotiated.
Pursuant to the Merger Agreement, the Company entered into an
agreement with Atlantic International Capital Holdings Ltd., a
Bermudan corporation ("AICH"), with the objective of performing two
tasks. First, AICH was to identify an acquisition candidate and
secondly AICH was to arrange for funding for the Company. Pursuant
to that agreement, AICH identified SVI as an acquisition vehicle and
assisted the Company in structuring and concluding the reverse
acquisition In return, the shareholders of SVI were allocated
500,000 of the Company's common stock after it had been
recapitilized. The fair value of the assets and liabilities assumed
in the reverse acquisition were nil. AICH has also assisted the
Company in seeking financing of $3,660,000 through the sale of the
Company's common stock utilizing private placements. AICH has made
an interim placement of 300,000 shares of common stock of
Flexemessaging.com Inc. for $750,000.
Per the Merger Agreement, AICH is expected to place the balance of
the $3,660,000 financing through the sale of Flexemessaging.com,
Inc.'s common stock pursuant to future private placements. As a
condition of the merger agreement with AICH, 600,000 shares of the
Company's common stock were issued to AICH as performance shares for
arranging future financing. These performance shares are subject to
a lockup agreement signed by AICH whereby shares will be released
from the lockup agreement in proportion to the funds raised by AICH,
subject to a minimum of $1 million. The funding minimum was not
raised within the required 70 days as a result of various delays
concerning the merger agreement with the US shell Company, SVI. The
Company has informed its transfer agents, Interstate Transfer
Company, of the restriction and non performance. The treatment of
these performance shares is under review by the board pending the
result of the latest capital raising activity by AICH and remain
subject to possible cancellation if the terms and conditions of the
agreement are not met.
Flexemessaging.com, Inc. is incorporated under the laws of Idaho.
Its stock is traded on the Over the Counter Bulletin Board market,
but is not registered with the US Securities and Exchange Commission
or the securities commission of any state. Included in the issued
stock are 600,000 shares of common stock beneficially owned by AICH.
These shares are held in escrow and will be subject to performance
by AICH under
F-6
<PAGE>
the terms of the Merger Agreement. The performance terms have not
been met and the contract is currently under review by management.
TWC is a holding company that did not carry on any operations. Its
only expenditures were in relation to investor relations and stock
exchange compliance relating to its capital stock on the Canadian
Venture Exchange. As a result, all costs of doing business (i.e.
officer and employee salaries, rent, depreciation, advertising,
accounting, legal, interest expense) have been reflected in the
financial statements of TWG.
TWG's principal activity comprises the manufacture and sale of
telecommunication equipment and the provision of communication
services. The majority of sales to date have been concentrated in
Australia , however with the expansion of its communication services
to Europe and North America, the Company is developing a global
profile.
These financial statements are stated in US dollars and have been
prepared in accordance with generally accepted accounting principles
in United States.
These financial statements present figures for the Company for the
years ended June 30, 1999, and June 30, 1998.
b. Principles of Consolidation
The consolidated accounts comprise the accounts of the Company and
all of its subsidiaries. All material interCompany accounts and
transactions have been eliminated.
c. Going Concern
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business.
F-7
<PAGE>
The Company has incurred cumulative losses to date of $4,015,889
that includes a net loss for the current period of $1,822,201. The
Company anticipates raising additional capital to meet its planned
operational and expansion requirements over the remaining part of
the fiscal year ending June 30, 2000. Should the appropriate level
of funding not become available, then the Company will have to
reduce its costs employed in various areas including its global
expansion activities, network expansion, new channel marketing
initiatives, R&D, sales and general marketing activities to a cost
level which will meet the anticipated cash needs for working capital
and capital expenditure requirements. Thereafter if the Company's
operation does not begin to deliver positive cashflows in amounts
enough to satisfy the Company's requirements then it will be
necessary for the Company to raise additional funds through bank
debt, equity funding, partnering with others to share overheads or
undertake appropriate divestment strategies of certain technologies
for equity or cash, or through other sources of capital. Additional
funding may not be available, or may not be available on terms and
timing acceptable to the Company, which could have a material
adverse effect on the Company's financial position, its overall
business and the result of the Company's operations.
The market for fax and messaging is very competitive and the Voice
and Data business, with its large contracts is very influenced by
the economic conditions pertaining in Australia at the time. The
Company does not expect this to change and in fact expects it to
require even greater effort to overcome in the future. The Company
will therefore continue to have the need for additional funding
until it reaches significant levels of revenue and margin to become
cashflow positive.
d. Goodwill and intangibles
Goodwill is recorded initially at the amount by which the purchase
price for a business or for ownership interest in a controlled
entity exceeds the fair value attributed to its net tangible assets
at date of acquisition. Goodwill is amortized on a straight-line
basis over a period of 10 years. Intangibles represent trademarks
and customer list acquisition. Intangibles are amortized on a
straight-line basis over a period of 5 years.
e. Long-lived Assets
Long-lived assets, consisting principally of capital assets and
goodwill, are reviewed for impairment whenever events or changes in
circumstances indicate that the carrying amount may not be
recoverable. If the sum of the expected future undiscounted cash
flows is less than the carrying amount of the asset a loss is
recognized for the difference between the fair value and the
carrying value.
f. Inventories
Inventories are measured at the lower of cost and net realizable
value. Costs are assigned on a first-in first-out basis and include
direct materials, direct labor and an appropriate proportion of
variable and fixed overhead expenses.
g. Income Tax
The Company accounts for income taxes under an asset and liability
approach that requires the recognition of deferred tax assets and
liabilities for the expected future tax consequences of events that
have been recognized in the Company's financial statements or tax
returns. To the extent it is more likely than not that all of the
Company's deferred tax assets will not be realized a valuation
allowance is recorded to reduce the deferred tax asset to its
estimated Net Realizable Value.
h. Capital Assets
Capital assets are recorded at cost. Amortization is provided on
owned plant and equipment over their estimated useful lives ranging
from 3 to 25 years using either the straight line or diminishing
balance method. Leased assets are amortized over the shorter of the
estimated life of the assets or the term of the lease.
F-8
<PAGE>
i. Research and Development
Research and Development expenditures are expensed as incurred.
j. Employee Benefits
Provision is made in respect of the Company's liability for annual
leave and long service leave at the balance sheet date. Long service
leave is accrued in respect of all employees.
Contributions are made by the Company to an employee superannuation
fund (similar to a defined contribution plan) and are charged as
expenses when incurred. The amount contributed to the fund was
$235,701 (1998: $178,970). The Company has a statutory obligation to
contribute 7% of total remuneration to the employee superannuation
fund. The contributions are paid to externally managed funds. The
Company has no other legal obligation to provide benefits to
employees on retirement.
k. Revenue Recognition
Revenue on projects for the Voice & Data division, which are
completed within one to two months, are recognized upon
installation, or upon delivery when there is a reasonable basis for
estimating that the installation criteria will be met. The
installation criteria involve cut-over or powering the system up to
go live. The costs associated with installation are minimal. All
costs that have not been incurred at the revenue recognition stage
are accrued to ensure proper matching or revenues and expenditure.
There is normally one week between delivery and installation and
historically the Company has not experienced significant delays or
problems with the installations. Contracts exceeding two months are
accounted for on a percentage of completion basis, based on direct
costs. Until revenue recognition occurs, accumulated costs (after
progress billings) are held in Costs on projects not yet billed.
Unearned maintenance revenue represents revenue received in advance
of the period covered by the maintenance agreement. The revenue is
recognized evenly over the period covered by the maintenance
agreement. Sales revenue for the FlexiFax division is recognized
upon successful transmission of fax deliveries.
l. Foreign Currency Transactions and Balances
The financial position and results of operations of the Company are
determined using the Australian dollar as the functional currency.
Assets and liabilities are translated at the exchange rate in effect
at each period end. Amounts on the statement of loss and
comprehensive loss are translated at the average rate of exchange
prevailing during the period. Translation adjustments arising from
the use of different exchange rates from period to period are
included in the comprehensive income account in shareholders'
equity. The gains and losses from foreign currency transactions are
included in net loss.
m. Financial Instruments
The Company's financial instruments consist of cash, receivables,
accounts payable, other loans, and employee entitlements payable.
Unless otherwise noted, it is management's opinion that the Company
is not exposed to significant interest, currency or credit risks
arising from these financial instruments. The fair values of these
financial instruments approximate their carrying values, unless
otherwise noted.
n. Use of Estimates
The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosures of contingent assets and liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could materially differ from these estimates. The assets which
required management to make significant estimates and assumptions in
determining carrying values include plant and equipment and all
other non-current assets.
o. Loss per share
F-9
<PAGE>
Basic earnings per share is computed by dividing the net loss by the
weighted average number of stock of common stock outstanding each
year. Diluted earnings per share is computed in a manner consistent
with that of basic earnings per share while giving effect to all
potentially dilutive common stock equivalents that were outstanding
during the period. For the years ended June 30, 1999 and 1998 there
were no common stock equivalents, therefore both basic and dilutive
earnings per share were the same amounts for both periods. Net loss
per share is calculated assuming recapitalization occurred at the
beginning of the earliest period shown. As the 600,000 shares
directly or indirectly beneficially owned by AICH are performance
based, they have been excluded from the weighted average number of
shares.
p. New Accounting Pronouncements
In April 1998, the American Institute of Certified Public
accountants issued Statement of Position 98-5, "Reporting on the
Costs of Start-Up activities", ("SOP 98-5") which provides guidance
on the financial reporting of start-up costs and organization costs.
It requires costs of start-up activities and organization costs to
be expensed as incurred. SOP 98-5 is effective for fiscal years
beginning after December 15, 1998 with initial adoption reported as
the cumulative effect of a change in accounting principle. Adoption
of this standard will not have a material effect on the financial
statements.
During 1998, the FASB issued SFAS 132, "Employers' Disclosures about
Pensions and Other Post retirement Benefits". This statement revised
employers' disclosures about pension and other post retirement
benefit plans but does not change measurement of recognition of
those plans. SFAS 132 is effective for fiscal years beginning after
December 15, 1998. Adoption of this standard will not have a
material effect on the financial statements.
In June 1998, the Financial Accounting Standards Board issued SFAS
No. 133. "Accounting for Derivative Instruments and Hedging
Activities". SFAS No. 133 requires companies to recognize all
derivatives contracts as either assets of liabilities in the balance
sheet and to measure them at fair value. If certain conditions are
met, a derivative may be specifically designated as a hedge, the
objective of which is to match the timing of gain or loss
recognition on the hedging derivative with the recognition of (i)
the changes in the fair value of the hedged asset or liability that
are attributable to the hedged risk or (ii) the earnings effect of
the hedged forecasted transaction. For a derivative not designated
as a hedging instrument, the gain or loss is recognized in income in
the period of change SFAS No. 133 is effective for all fiscal
quarters of fiscal years beginning after June 15, 2000.
Historically, the Company has not entered into derivatives contracts
either to hedge existing risks or for speculative purposes.
Accordingly, the Company does not expect adoption of the new
standards on January 1, 2000 to affect its financial statements.
q. Risks and Uncertainties
A significant portion of the Company's client base is concentrated
within the financial services industry. An economic downturn in the
financial services industry could have a material adverse effect on
the Company's results of operations.
r. Sale of Accounts Receivable
The Company has adopted SFAS No 125, "Accounting for Transfers and
Servicing of Financial Assets and Extinguishments of Liabilities"
("SFAS 125"), which provides consistent standards for distinguishing
transfers of financial assets that are sales from transfers that are
secured borrowings. The Company has established a factoring line
with Scottish Pacific which enables the Company to sell selected
accounts receivable invoices to the bank with full recourse against
the Company. Pursuant to the provisions of SFAS 125, the Company
reflected the transactions as a sale of assets and established and
established an accounts receivable from Scottish Pacific for the
retained amount less the costs of the transaction and less any
anticipated future loss in the value of the retained asset. The
retained amount is equal to 15% of the total accounts receivable
invoice sold to the bank less 0.7% of the total invoice as an
administrative fee and an annual interest loading of 2% per annum
F-10
<PAGE>
of the total outstanding accounts receivable as a finance fee. The
amount owing to Scottish Pacific as at June 30, 1999 was $74,435 as
compared to $71,748 as at June 30, 1998. See Note 10.
F-11
<PAGE>
<TABLE>
<CAPTION>
30 June
1999
- ---------------------------------------------------------------------------------------------------
$
-------------------
NOTE 2: CASH
<S> <C>
Cash at bank and on deposit 111,293
Cash on hand 7,619
118,912
-------------------
NOTE 3: RECEIVABLES
Trade debtors 1,744,978
Allowance for doubtful debts (86,812)
Other debtors 241,548
1,899,714
-------------------
NOTE 4: INVENTORY
Raw material 176,711
Finished goods 129,659
306,370
-------------------
NOTE 5: CAPITAL ASSETS
(a) Plant and Equipment - at cost 1,692,447
Furniture and Fittings - at cost 552,206
Motor Vehicles - at cost 85,084
Leasehold improvements - at cost 333,970
Less accumulated amortization (1,703,491)
960,216
-------------------
(b) Leased
Leased Motor Vehicles -
Capitalized leased assets 219,941
Less accumulated amortization (169,255)
50,686
-------------------
Total
Cost 2,883,648
Less accumulated amortization (1,872,746)
Cost less accumulated amortization 1,010,902
-------------------
NOTE 6: GOODWILL
Goodwill 103,614
Less accumulated amortization (94,083)
9,531
-------------------
NOTE 7: OTHER NON CURRENT ASSETS
Trademarks 26,412
Less accumulated amortization (5,802)
20,610
-------------------
</TABLE>
F-12
<PAGE>
<TABLE>
<CAPTION>
30 June
1999
- --------------------------------------------------------------------------------------------------------
$
-----------------
NOTE 8: SUNDRY CREDITORS AND ACCRUALS
<S> <C>
Sundry creditors and accruals 584,162
Employee entitlements 200,107
784,269
-----------------
NOTE 9: LEASE LIABILITIES
(a) Finance Leasing Commitments
-----------------
Payable
- not later than one year 31,492
- later than one year but not later than 2 years 11,948
- later than 2 years but not later than 3 years 9,932
- later than 3 years but not later than 4 years -
- later than 4 years but not later than 5 years -
Minimum lease payments 53,372
-----------------
Less future finance charges 213
Total lease liability 53,159
Current portion 31,382
Non-current portion 21,777
53,159
-----------------
Finance lease liabilities are
collateralized by the underlying lease
assets
(b) Operating Lease Commitments
Non-cancelable operating leases
contracted for but not capitalized in
the accounts
Payable
- not later than one year 352,599
- later than one year but not later than 2 years 445,832
- later than 2 years but not later than 3 years 11,805
- later than 3 years but not later than 4 years -
- later than 4 years but not later than 5 years -
810,236
Rent expense incurred for the year ended
June 30, 1999 was $435,496 (1998: $324,419)
-----------------
</TABLE>
F-13
<PAGE>
NOTE 10: LOANS PAYABLE
In September 1997, the Company arranged an unlimited working capital-based
facility with Scottish Pacific Business Finance Limited ("Scottish Pacific")in
respect of the Australian domiciled customers of FlexiFax Global Services. In
accordance with Scottish Pacific lending criteria, this facility has been
secured by a charge over the assets of Trade Wind Marketing Pty Ltd (a wholly
owned subsidiary of Trade Wind Group Pty Ltd) as well as guarantees by Trade
Wind Group Pty Ltd and its subsidiaries. Interest is charged at the highest of
the prevailing rates of either Westpac Banking Corporation, Australia and New
Zealand Banking Group Limited or National Australia Bank Limited plus a margin
of 2%. The prevailing interest rate at June 30, 1999 was 10.93% (1998: 11.06%).
The original term of this agreement was for a 12 month period with automatic
renewals. This agreement may be terminated by Scottish Pacific by giving one
month's notice or by the Company giving three month's notice.
As of April 6, 1999 a private placement was made as a result of immediate short
term bridge financing of $US1,250,000 arranged by AICH. The proceeds were to be
used to make a bid for Newsnet, a company under administration and in the same
business of fax broadcasting. As consideration for providing this facility on
very short notice the Company issued 200,000 shares at $1.25 ($250,000), a
$250,000 discount on fair value, to AICH, the cost of which was to be deducted
from the $1,250,000 proceeds. The shares were issued at $1.25 as compared to a
previous placement price per share of $2.50 and $4.00 as quoted on the OTCBB as
of the date of issue. After lengthy negotiation the Company decided to withdraw
from pursuing the acquisition and the funds were returned to AICH as per the
agreement. As AICH provided the necessary funding, the shares were issued on
June 9, 1999.
NOTE 11: CONTRIBUTED CAPITAL
In the past, loans were payable to Trade Wind Communications Limited. These
loans were unsecured and did not attract interest or have timetables for set
repayment. All loans have been forgiven at certain times. The forgiveness has
been reflected in paid-in capital.
NOTE 12: COMPREHENSIVE INCOME - FOREIGN CURRENCY TRANSLATION
In accordance with SFAS 130, the accumulated comprehensive income comprises the
following:
Accumulated comprehensive income
Balance at beginning of year 235,164
Foreign currency translation adjustments (96,431)
--------
Balance at end of year 138,733
NOTE 13: INCOME TAX EXPENSE
Estimated tax losses available to the Company to be carried forward to future
years amount to $5,975,184 (1998: $4,057,173). These losses are not subject to
an expiry date, however, the benefits of these losses will only be obtained if:
(a) the Company derives future assessable income of a nature and of an
amount sufficient to enable the benefit from the deduction for the loss
to be realized;
(b) the Company continues to comply with the conditions for deductibility
imposed by law; and
(c) no change in tax legislation adversely affect the Company in realizing
the benefit from the deduction for the loss.
Differences between the effective income tax rate and the statutory income tax
rate were primarily the result of the valuation allowance, which fully reserved
the net deferred tax asset. The net deferred tax asset arose primarily from the
taxable losses generated during the years ended June 30, 1992 through June 30,
1999.
F-14
<PAGE>
F-15
<PAGE>
NOTE 14: SEGMENTED FINANCIAL INFORMATION
The Company operates two business divisions, Voice and Data Systems and FlexiFax
Global Services. Voice and Data Systems is a specialist supplier and integrator
of voice communications systems and decision support applications for dealing
rooms, emergency services dispatch and similar operations. FlexiFax Global
Services operates an enhanced fax broadcast system. It is not considered
necessary to show geographic segmented financial information as revenues
generated from countries other than Australia [30] are not considered
significant and represent less than 10% of total revenue. The accounting
principles used to report the segment amounts is the same as that used to report
the financial statements. Segmented financial information for these two
divisions follows:
For the year ending June 30, 1999
<TABLE>
<CAPTION>
Voice and FlexiFax Head Office Consolidated
Data
<S> <C> <C> <C> <C>
Revenue 5,426,815 3,447,030 - 8,873,845
Amortization 126,159 304,409 55,480 486,048
Segment operating profit/(loss) 101,925 (1,368,978) (258,724) (1,525,777)
Identifiable assets 2,365,313 1,248,780 208,730 3,822,823
For the year ending June 30, 1998
Revenue 7,640,378 3,462,992 - 11,103,370
Amortization 107,558 289,536 54,678 451,772
Segment operating profit/(loss) 133,024 (625,520) (188,379) (680,875)
Identifiable assets 3,098,631 1,252,369 252,626 4,603,626
</TABLE>
NOTE 15: EVENTS SUBSEQUENT TO BALANCE SHEET DATE
On August 30, 1999, the Company through AICH, has made an offering of 500,000
common shares at $3.75 per share for the raising of net proceeds of $1,725,000
by way of private placement. This offering is being made pursuant to the limited
and private offering exemption set forth in Rule 506 of Regulation D under the
US Securities Act of 1933, as amended ("the Act"), and comparable exemptions
from registration under applicable state securities laws. Accordingly, the
securities to be offered will not be and have not been registered under the Act
and may not be offered or sold in the U.S. absent registration or an applicable
exemption from registration.. The securities will be offered only to investors
who are accredited investors (as that term is defined in Regulation D of the
Securities Act). The Offering has no aggregate minimum purchase requirement.
This offering is to close 180 days from the offering date or until all shares
are sold whichever is the earlier. To date no shares have been subscribed to
under this offering.
As of July 1999, AICH has advanced bridge financing in the sum of $499,500, in
return for an unsecured promissory note on the Company. The loan bears interest
at the rate announced, from time to time, by Nationsbank N.A. as its prime rate,
plus 200 basis points, per annum. Interest is calculated on the basis of a
360-day year, but only to the extent that the unpaid principal remains
outstanding. Interest accrues and is payable from the day that the Company
receives net proceeds of not less than $1,500,000 from the above-mentioned
private placement. The promissory note is to be repaid on the later of
commencement of trading of securities of the Company on the American
F-16
<PAGE>
Stock Exchange, NASDAQ or another exchange acceptable to the Company, or
December 21, 1999. The note may be prepaid at any time without penalty or
premium.
On August 16, 1999, the Company filed a Form 10SB with the US Securities and
Exchange Commission to become a reporting entity as of October 15, 1999.
F-17
<PAGE>
Flexemessaging.com, Inc
REPORT FOR THE PERIOD ENDED DECEMBER 31, 1999
F-18
<PAGE>
Flexemessaging.com, Inc.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
Note Unaudited
31 December
1999
- -------------------------------------------------------------------------------- -------------- --------------------------
Assets $
Current
<S> <C>
Cash 217,525
Receivables 2,767,835
Inventory - Raw materials 142,369
Inventory - Finished goods 163,251
Costs on projects not yet billed 278,445
--------------------------
3,749,425
--------------------------
Capital assets 438,225
Goodwill 3,805
Other 25,745
Liabilities and Shareholders' Equity
Current
Trade Creditors 2,171,288
Sundry creditors and accruals 1,007,855
Customer deposits 272,188
Unearned maintenance revenue 213,407
Current portion of lease obligations 31,071
Loan payable on securitization of debt 106,089
Non Current
Non current portion of lease obligations 21,561
Loans payable 2 757,695
Employee entitlements payable 138,098
917,354
--------------------------
Total Liabilities 4,719,252
--------------------------
Shareholders' Equity
Common Stock, $0.001 par value; 20,000,000 shares 10,400
Authorized; 10,400,000 shares issued
Preferred Stock, $0.001 par value; 5,000,000 shares -
Authorized; no shares issued
Additional paid-in capital 4,525,393
Comprehensive income - foreign currency translation 3 181,532
Accumulated deficit (5,399,377)
--------------------------
(682,052)
--------------------------
4,037,200
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial
F-19
<PAGE>
statements.
F-20
<PAGE>
Consolidated Statements of Loss and Comprehensive Loss
<TABLE>
<CAPTION>
Note Unaudited Unaudited Unaudited Unaudited
Three months ended Three months ended Six months ended Six months ended
31 December 31 December 31 December 31 December
1999 1998 1999 1998
- ------------------------------------------------------------------------------------------------------------------------------------
$ $ $ $
<S> <C> <C> <C> <C>
Sales 3,950,865 1,815,329 6,028,155 4,296,269
Less:
Cost of Sales 2,553,135 1,021,128 3,602,655 2,359,504
------------------------------------------------------------------------------
Gross Profit 1,397,730 794,201 2,425,500 1,936,765
Operating Expenses
Network operating costs 18,574 27,140 42,405 55,826
Selling,general and administrative 1,424,742 1,043,562 2,778,730 2,169,056
Depreciation and amortization 134,707 120,689 244,600 227,806
Restructuring Costs 725,735 - 725,735
------------------------------------------------------------------------------
Total operating expenses 2,303,758 1,191,391 3,791,470 2,452,688
------------------------------------------------------------------------------
Loss from Operations (906,028) (397,190) (1,365,970) (515,923)
Other income/(expense)
Interest paid
- loans - short term (14,698) (16,903) (25,712) (25,308)
Interest received 6,882 4,747 8,194 6,882
------------------------------------------------------------------------------
Loss for the year before income tax (913,844) (409,346) (1,383,488) (534,349)
Income tax expense - - - -
------------------------------------------------------------------------------
Net loss (913,844) (409,346) (1,383,488) (534,349)
Other comprehensive income, net of tax
Foreign currency translation adjustments 13,458 17,287 42,799 19,516
------------------------------------------------------------------------------
Comprehensive loss (900,386) (392,059) (1,340,689) (514,833)
Net loss per share (0.09) (0.05) (0.13) (0.06)
Weighted average number of shares 10,400,000 8,800,000 10,400,000 8,800,000
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-21
<PAGE>
Consolidated Statements of Changes in Cash Flows
<TABLE>
<CAPTION>
Unaudited Unaudited
Six months ended Six months ended
31 December 31 December
1999 1998
Cash provided/(used) by: $ $
Operating Activities
Operations
<S> <C> <C>
Net loss for the year (1,383,488) (534,349)
Items not involving cash:
Amortization 244,600 227,806
Write down of network equipment 419,418
Changes in operating assets and liabilities:
Accounts receivable (868,121) 387,727
Inventory 750 (57,232)
Costs on projects not yet billed 178,339 343,677
Accounts payable and other 893,783 (1,464,691)
accruals
Income taxes (111) 1
Employee entitlement payable 6,247 7,705
----- -----
(508,583) (1089,356)
Investing Activities
Investments in:
Capital assets - net (41,951) (119,083)
-------- ---------
(41,951) (119,083)
Financing Activities
Loans raised 757,695 -
Loan payable on securitization of debt 31,654 (1,761)
Lease payments (6,527) (7,275)
Contribution of capital - 681,635
Distributions (133,675) -
--------- -
649,147 672,599
(Decrease)/Increase in cash 98,613 (535,840)
Cash at beginning of year 118,912 589,877
Cash at end of year 217,525 54,037
Supplemental non-cash investing and financing activities
Capital lease obligations - -
Interest 25,712 25,308
</TABLE>
The accompanying summary of significant accounting policies and notes form an
integral part of these financial statements.
F-22
<PAGE>
Notes on the Financial Statements
- --------------------------------------------------------------------------------
NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
a. Interim Financial Statements
The Consolidated interim financial statements included herein are
stated in US dollars and have been prepared by the Company, without
audit, in accordance with accounting principles generally accepted
in the United States and pursuant to the rules and regulations of
the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting principles
have been condensed or omitted pursuant to such rules and
regulations, although the Company believes that the disclosures are
adequate to make the information presented not misleading.
These statements reflect all adjustments, consisting of normal
recurring adjustments which, in the opinion of management, are
necessary for fair presentation of the information contained
therein. It is suggested that these Consolidated interim financial
statements be read in conjunction with the financial statements of
Flexemessaging.com, Inc. for the year ended June 30, 1999 and notes
thereto included in the Company's registration on Form 10-SB. The
Company follows the same accounting principles in preparation of
interim reports.
Results of operations for the interim periods are not indicative of annual
results.
b. Organization
Trade Wind Communications Limited, a Bermudan corporation , listed
on the Canadian Venture Exchange (VSE: TWC) ("TWC") entered into a
business combination agreement ("Merger Agreement") on February 5,
1999 with Flexemessaging.com, Inc. (previously Siler Ventures Inc. ,
"SVI") and Atlantic International Capital Holdings Ltd. ("AICH") to
complete a reverse acquisition of Flexemessaging.com, Inc. and a
financing arrangement of $3,660,000 through the sale of
Flexemessaging.com, Inc. common stock pursuant to an exemption from
the registration requirements of the Securities Act of 1933, as
amended. TWC owned all of the stock in Trade Wind Group Pty Ltd
(TWG) which controlled all the business assets.
On February 5, 1999, SVI entered into an acquisition agreement with
Trade Wind Communications Limited ("TWC"), a Bermudan corporation
listed on the Canadian Venture Exchange, to purchase all of its
business assets, consisting of the stock of Trade Wind Group Pty
Limited ("TWG"), a wholly-owned subsidiary of TWC, incorporated on
September 6, 1988. SVI was a non-operating public shell with no
tangible assets and 500,000 shares of common stock outstanding. This
merger of TWG and SVI (a non-operating public shell with a tangible
asset value of nil) resulted in TWG having actual or effective
operating control of the combined Company after the transaction. As
a result, this transaction has been treated as a capital transaction
in substance, rather than a business combination and has been
accounted for as a reverse acquisition. Any references to past
accomplishments of the Company and its financial information, prior
to the acquisition, relate solely to TWG, as combined, since SVI
(now known as Flexemessaging.com, Inc.) has been inactive for
several years. SVI acquired the assets of TWG in exchange for the
issuance of 8.8 million shares of common stock. This valuation was
based on arms length negotiation driven by ultimate ownership
principles. A forward valuation based on future revenues was
determined and from this capitalization model, the total outstanding
common stock was calculated. Thereafter, the respective equity
ownership positions were negotiated.
Pursuant to the Merger Agreement, the Company entered into an
agreement with Atlantic International Capital Holdings Ltd., a
Bermudan corporation ("AICH"), with the objective of performing two
tasks. First, AICH was to identify an acquisition candidate and
secondly AICH was to arrange for funding for the Company. Pursuant
to that agreement, AICH identified SVI as an acquisition vehicle and
assisted the Company in structuring and concluding the reverse
acquisition In return, the shareholders of SVI were offered 500,000
of the Company's common stock. The fair value of the assets and
liabilities assumed in the reverse acquisition were nil. AICH has
also assisted the Company in seeking financing of $3,660,000 through
the sale of the Company's common stock utilizing private placements.
AICH has made an interim placement of 300,000 shares of common stock
of Flexemessaging.com, Inc. for $750,000.
F-23
<PAGE>
Per the Merger Agreement, AICH is expected to place the balance of
the $3,660,000 financing through the sale of Flexemessaging.com,
Inc.'s common stock pursuant to future private placements. As a
condition of the merger agreement with AICH, 600,000 shares of the
Company's common stock were issued to AICH as performance shares for
arranging future financing. These performance shares are subject to
a lockup agreement signed by AICH whereby shares will be released
from the lockup agreement in proportion to the funds raised by AICH,
subject to a minimum of $1 million. The funding minimum was not
raised within the required 70 days as a result of various delays
concerning the merger agreement with the US shell Company, SVI. The
Company has informed its transfer agents, Interstate Transfer
Company, of the restriction and non performance. The treatment of
these performance shares is under review by the board pending the
result of the latest capital raising activity by AICH and remain
subject to possible cancellation if the terms and conditions of the
agreement are not met.
Flexemessaging.com, Inc. is incorporated under the laws of Idaho.
Its stock is traded on the Over the Counter Bulletin Board market,
but is not registered with the US Securities and Exchange Commission
or the securities commission of any state. Included in the issued
stock are 600,000 shares of common stock beneficially owned by AICH.
These shares are held in escrow and will be subject to performance
by AICH under the terms of the Merger Agreement. The performance
terms have not been met and the contract is currently under review
by management.
TWC is a holding company that did not carry on any operations. Its
only expenditures were in relation to investor relations and stock
exchange compliance relating to its capital stock listed on the
Canadian Venture Exchange. As a result, all costs of doing business
(i.e. officer and employee salaries, rent, depreciation,
advertising, accounting, legal, interest expense) have been
reflected in the financial statements of TWG.
TWG's principal activity comprises the manufacture and sale of
telecommunication equipment and the provision of communication
services. The majority of sales to date have been concentrated in
Australia , however with the expansion of its communication services
to Europe and North America, the Company is developing a global
profile.
These financial statements are stated in US dollars and have been
prepared in accordance with generally accepted accounting principles
in United States.
These unaudited financial statements present figures for the
Company for the three and six months ended December 31, 1999, and
1998.
F-24
<PAGE>
c. Going Concern
The accompanying financial statements have been prepared on a going
concern basis, which contemplates the realization of assets and the
satisfaction of liabilities and commitments in the normal course of
business.
The Company has incurred cumulative losses to date of $5,399,377
which includes a net loss (after extraordinary items) for the
current period of $1,383,488. The Company anticipates raising
additional capital to meet its planned operational and expansion
requirements over the remaining part of the financial year ending
June 30, 2000. Should the appropriate level of funding not become
available, then the Company will have to reduce its costs employed
in various areas including its global expansion activities, network
expansion, new channel marketing initiatives, R&D, sales and general
marketing activities to a cost level which will meet the anticipated
cash needs for working capital and capital expenditure requirements.
Thereafter if the Company's operation does not begin to deliver
positive cashflows in amounts enough to satisfy the Company's
requirements then it will be necessary for the Company to raise
additional funds through bank debt, equity funding, partnering with
others to share overheads or undertake appropriate divestment
strategies of certain technologies for equity or cash, or through
other sources of capital. Additional funding may not be available,
or may not be available on terms and timing acceptable to the
Company, which could have a material adverse effect on the Company's
financial position, its overall business and the result of the
Company's operations.
The market for fax and messaging is very competitive and the Voice
and Data business, with its large contracts is very influenced by
the economic conditions pertaining in Australia at the time. The
Company does not expect this to change and in fact expects it to
require even greater effort to overcome in the future. The Company
will therefore continue to have the need for additional funding
until it reaches significant levels of revenue and margin to become
cashflow positive.
d. Loss per share
Basic earnings per share is computed by dividing the net loss by the
weighted average number of stock of common stock outstanding each
year. For the six months ended December 31, 1999 and 1998 there were
no common stock equivalents. Net loss per share is calculated
assuming recapitalization occurred at the beginning of the earliest
period shown.
NOTE 2: LOANS PAYABLE
AICH as Agent, has advanced bridge financing in the sum of $499,500,
in return for an unsecured promissory note over Flexemessaging.com,
Inc. The loan bears interest at the rate announced, from time to
time, by Nationsbank N.A. as its prime rate, plus 200 basis points,
per annum. Interest is calculated on the basis of a 360-day year,
but only to the extent that the unpaid principal remains
outstanding. Interest accrues and is payable from the day that the
Company receives net proceeds of not less than $1,500,000 from the
offering described in Note 5. The promissory note is to be repaid on
the later of commencement of trading of securities of the Company on
the American Stock Exchange, NASDAQ or another national exchange
acceptable to the Company, or December 21, 1999. The note may be
prepaid at any time without penalty or premium.
The balance of the loan funds are unsecured with no fixed terms of
repayment and do not attract interest.
F-25
<PAGE>
NOTE 3: COMPREHENSIVE INCOME - FOREIGN CURRENCY TRANSLATION
In accordance with SFAS 130, the accumulated comprehensive income comprises the
following:
Accumulated comprehensive income
Balance at beginning of period 138,733
Foreign currency translation adjustments 42,799
-------
Balance at end of period 181,532
NOTE 4: SEGMENTED FINANCIAL INFORMATION
The Company operates two business divisions, Voice and Data Systems and FlexiFax
Global Services. Voice and Data Systems is a specialist supplier and integrator
of voice communications systems and decision support applications for dealing
rooms, emergency services dispatch and similar operations. FlexiFax Global
Services operates an enhanced fax broadcast system. It is not considered
necessary to show geographic segmented financial information as revenues
generated from countries other than Australia are not considered significant and
represent less than 10% of total revenue. The accounting principles used to
report the segment amounts is the same as that used to report the financial
statements. Segmented financial information for these two divisions follows:
For the six months ended December 31, 1999
<TABLE>
<CAPTION>
Voice and Data FlexiFax Head Office Consolidated
<S> <C> <C> <C> <C>
Revenue 4,229,231 1,798,924 - 6,028,155
----------------- --------------------------------------------------------
Amortization 62,720 168,380 13,500 244,600
----------------- --------------------------------------------------------
Segment operating profit/(loss) 100,841 (1,303,102) (163,709) (1,365,970)
----------------- --------------------------------------------------------
Identifiable assets 3,151,820 651,169 234,211 4,037,200
----------------- --------------------------------------------------------
For the six months ended December 31, 1998
Revenue 2,705,828 1,590,441 - 4,296,269
----------------- --------------------------------------------------------
Amortization 57,806 164,765 5,235 227,806
----------------- --------------------------------------------------------
Segment operating profit/(loss) (72,175) (403,443) (40,305) (515,923)
----------------- --------------------------------------------------------
Identifiable assets 1,839,389 1,205,656 259,360 3,304,405
----------------- --------------------------------------------------------
</TABLE>
NOTE 5: EVENTS SUBSEQUENT TO BALANCE SHEET DATE
On August 30, 1999, the Company through AICH, has made an offering of 500,000
common shares at $3.75 per share
F-26
<PAGE>
to raise net proceeds of $1,725,000 by way of private placement. This offering
is being made pursuant to the limited and private offering exemption set forth
in Rule 506 of Regulation D under the US Securities Act of 1933, as amended
("the Act"), and comparable exemptions from registration under applicable state
securities laws. Accordingly, the securities to be offered will not be and have
not been registered under the Act and may not be offered or sold in the U.S.
absent registration or an applicable exemption from registration. The securities
will be offered only to investors who are accredited investors (as that term is
defined in Regulation D of the Securities Act). The Offering has no aggregate
minimum purchase requirement. This offering is to close 180 days from the
offering date or until all shares are sold whichever is the earlier. To date no
shares have been subscribed for in this offering.
NOTE 6: RESTRUCTURING COSTS
One of the core management objectives has been to re-position the Company more
towards a broad based messaging service and away from the heavy relaince on fax
running on a proprietary fax network. This plan would involve the closure of the
existing proprietary fax network and the cessation of use of the related network
equipment and resources.
In connection with this plan the Company signed an agreement on December 2,
1999, with Premiere, a subsidiary of Premiere Technologies Inc., a
communications company based in Atlanta, Georgia whereby the Company would
outsource the delivery of its fax traffic to the Premiere network. In addition
the customer bases in the UK, Canada, USA, Switzerland and Singapore will now be
serviced by Premiere Technologies Inc. with the company receiving commission on
revenues generated for the next 24 months.
As a result, with effect from December 1, 1999 all expenses in respect of
network operations (leased network backbone circuit expenses, facilities
management, software and hardware expenses and maintenance, network staff
resources) will not be continued.
The costs and liabilities of this plan includes
<TABLE>
<CAPTION>
Expensed Applied against Payments Balance
related asset Dec 31, 1999
<S> <C> <C> <C> <C>
Assumed obligations on closed network operations 188,723 (50,116) 138,607
Severance and other employee costs(3 employees) 117,594 (19,500) 98,094
Impairment loss on network equipment 419,418 (419,418) - -
725,735 (419,418) (69,616) (236,701)
</TABLE>
Accrued liabilities for network operations in the amount of $138,607 as of
December 31, 1999 relate to termination costs of contracts and other contractual
agreements with third parties.
Estimated severance and other employee costs in the amount of $98,094 as of
December 31, 1999 relate to estimated severance for terminated employees.
Employee groups affected include management and network support personnel. As of
December 31, 1999 the accrual related to one senior employee.
The impairment loss on network equipment relates to network equipment that is to
be abandoned or otherwise disposed of. These assets are no longer being used in
the continued operations of the Company.
On December 16, 1999 Trade Centre Systems Holdings Pte Ltd ("TCSH"), an
indirectly wholly owned subsidiary of the Company, operating in Singapore
entered into an agreement with Jebsen and Jessen Communications Pte Ltd ("J&J").
Under the agreement TCSH has transferred its Voice & Data business to J&J in
return for revenue based commissions on sales and maintenance through to October
31, 2000. This agreement relates to the transfer/disposal of a geographical
portion of a segment and does not constitute a discontinued operation. This
transfer will not have a material impact on the performance of the Company as
the anticipated commission revenue stream represents less than 5% of the
Company's total revenues.
F-27
CONFIDENTIAL
CONFIDENTIAL
DISTRIBUTOR AGREEMENT
BETWEEN
IPC INFORMATION SYSTEMS INC.
AND
TRADE WIND MARKETING PTY LTD
FOR
THE DISTRIBUTION OF PRODUCTS IN THE
TERRITORY OF AUSTRALIA
AGREEMENT REFERENCE:
IPC/D/ASPAC/08/99
<PAGE>
CONFIDENTIAL
CONTENTS
Preamble and Recitals
Clauses 1. Definitions
2. Term
3 Appointment
4. Relationship of the Parties
5. The Products
6. Prices and payment
7. Ordering procedure and Conditions of Sale
8. Minimum Sales Figure
9. Intellectual Property Rights
10. Use of Trade Marks and trade names
11. Intellectual Property Rights Indemnity
12. Termination/Expiration
13. Confidentiality
14. Force Majeure
15. Distributor Indemnity
16. Limitation of Liability
17. Insurance
18. General
19. Applicable Law and Jurisdiction
Schedules 1. The Products
2. Distributor's Obligations
3. IPC Information Systems Inc.'s Obligations
4. IPC Information Systems Inc.'s Conditions of Sale
5. Training
6. Repair Return Procedure
7. Software License
<PAGE>
CONFIDENTIAL
AGREEMENT FOR THE DISTRIBUTION OF PRODUCTS
THIS AGREEMENT is made on the 30th day of August, 1999
BETWEEN
IPC INFORMATION SYSTEMS INC., a company incorporated under the laws of Delaware,
USA whose principal office is at 81 Pine Street, New York, New York, 10005
hereinafter referred to as "IPC Information Systems Inc."
AND
TRADE WIND MARKETING PTY LTD ACE 052 100 455, trading as TRADE CENTRE PRODUCTS a
company having its registered office at Level 27 Grosvenor Place, 225 George
Street, Sydney NSW 2000, Australia hereinafter referred to as "the Distributor".
WHEREAS
1. IPC Information Systems Inc. is engaged in the promotion, sale, lease
and licensing of certain telecommunications equipment including those
that are detailed in Schedule 1 hereto (hereinafter, the "Products").
2. The Distributor is engaged in the business of sales, installation,
maintenance of and support services for computer communications
products in Australia and wishes to sell the Products in the Territory
(as hereinafter defined).
3. While retaining its right to sell the Products both directly to
customers and, at its option, through other distributors in the
Territory, and to provide them with installation, maintenance and
support services in the Territory, IPC Information Systems Inc. wishes
to appoint the Distributor, subject to the terms, conditions and
schedules of this Agreement, to be a non-exclusive distributor for the
promotion, marketing, sale and general support of the Products as
detailed in Schedule 1 in the Territory.
NOW THEREFORE IT IS HEREBY AGREED as follows:
1 DEFINITIONS
1.1 In addition to those words and phrases defined elsewhere within this
Agreement, the following words shall be construed as having the
following respective meanings:
"Agreement" means the terms and conditions set out
in this document as it may be amended
from time to time in accordance with
Clause 18.6 hereof, including any
schedules and annexes hereto and any
other document expressly incorporated
into this Agreement;
<PAGE>
CONFIDENTIAL
"Confidential Information" means any information in whatever form
recorded in writing, electronically or
otherwise which is designated in
writing by either party as being
confidential or which by its nature is
confidential including, without
limitation, information in respect of
the parties' business affairs or plans,
and for the avoidance of doubt, in the
case of IPC Information Systems, Inc.,
Confidential Information includes
information relating to Equipment or
Software, Intellectual Property Rights,
Documentation, financial data, business
plans, marketing strategies and other
competitively sensitive information,
information relating to customers and
contractual information, including the
terms of this Agreement;
"COP" means Carriage and Insurance Paid as
defined in the International Chamber of
Commerce Incoterms 1990 Edition;
"Equipment" means the hardware forming a part of
the Product, for which the Distributor
takes title and sells onto customers in
the Territory, as well as all spare,
replacement and maintenance parts and
supplies purchased from IPC Information
Systems, Inc. used in connection with
such Equipment;
"Initial Term" means the duration of the Agreement
prior to any extension and without
prejudice to any other term or
condition within this Agreement, as set
out in Clause 2. 1;
"Intellectual Property Rights" means patents, Trade Marks, service
marks, design rights (whether
registrable or otherwise), applications
for any of the foregoing, copyright,
know-how, trade secrets, trade or
business names and other similar rights
or obligations, whether or not
registrable, either in the United
States of America or the Territory;
"IPC Group Company" means any company which
controls or is controlled, directly or
indirectly, by IPC Information Systems
Inc. whether through the holding or
controlling of a majority of voting
rights or the right to appoint or
remove a majority of the board of
directors or otherwise;
"Minimum Sales Figure" means the amount specified in Clause 8
which represents the minimum value of
the orders to be placed by the
Distributor with IPC Information
<PAGE>
CONFIDENTIAL
Systems Inc. for the Products as
detailed in Clause 8 herein;
"Notice Date" means the day on which notice of
termination of this Agreement is given
by either party to the other pursuant
to this Agreement, and in the event
this Agreement is terminated
automatically without the requirement
for advance notice, "Notice Date" shall
mean the date of termination;
"Party", "Parties" means IPC Information Systems Inc. or
its permitted successor and the
Distributor as parties to this
Agreement, individually or together as
the case may be;
"Prices" means the charges for the Products
levied by IPC Information Systems Inc.
on the Distributor;
"Products" means the product or products as
specified in Schedule 1, which the
Distributor will promote, sell, install
and maintain and generally support
under the terms of this Agreement,
consisting of Equipment and Software.
"Purchase Order" means a formal written order request
from the Distributor in accordance with
IPC Information Systems Inc.'s
Conditions of Sale, which shall become
an order between the Parties upon its
formal acceptance by IPC Information
Systems Inc.;
"Software" means any set of one or more computer
programs which is composed of routines,
subroutines, concepts, processes,
algorithms, formulas, ideas, or
know-how, all of which are,
confidential and proprietary to IPC
Information Systems Inc. and/or its
suppliers and may consist of (i) IPC
Information Systems Inc. or third-party
proprietary operating system or
proprietary application Software either
embedded in memory circuits within the
associated Equipment or provided to
Distributor on physical media; or (ii)
third-party operating system or
application Software which is
distributed to Distributor by IPC
Information Systems Inc. on physical
media " shrink-wrapped" by the
manufacturer. The term Software shall
also include (i)corrections, patches,
updates or revisions to Software
originally distributed; and (ii)
Software documentation which consists
of publications in human readable form
supplied with Software to explain the
construction, operation, and/or use of
the Software by Distributor or
customers. All Software
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distributed under this Agreement shall
be subject to the terms of Clause 9 and
the Software License set forth in
Schedule 7 hereto.
"Territory" means Australia.
"Trade Marks" means, without limitation, all
trade marks, service marks, trade
names, logos and the get up and trading
style of "IPC Information Systems Inc."
or any IPC Group Company as used in
connection with the Products and
related packaging, whether registered
or not;
1.2 Any reference in this Agreement to day(s), month(s) or year(s) shall be
construed as Gregorian calendar day(s), month(s) or year(s).
1.3 The headings in this Agreement are for convenience only and shall not
affect its interpretation.
1.4 Any reference in this Agreement to the plural shall include the
singular and vice versa.
1.5 Any reference in this Agreement to Clauses and Schedules are to Clauses
and Schedules hereto which together form an integral part of this
Agreement.
2 TERM
2.1 This Agreement shall commence on the date first mentioned above and,
subject to Clause 2.2 hereof, shall continue for an Initial Term of
twenty-four (24) calendar months. Thereafter, unless sooner terminated
in accordance with Clause 2.2 hereof, the duration of this Agreement
shall continue until such time as either party terminates this
Agreement by giving to the other party written notice of termination
which shall become effective sixty (60) calendar days after the Notice
Date.
2.2 This Agreement may only be terminated in the following
circumstances:2.2.1 Upon expiry of the Initial Term if either
party has given written notice of termination at least sixty
(60) calendar days prior to the expiration date of the Initial
Term, or at any time after expiry of the Initial Term upon sixty
(60) calendar days' prior written notice as provided in Clause
2.1 above; and If IPC Information Systems Inc. for a continuous
period of Ninety Days refuses to accept correctly submitted
Purchase Orders for Products or refuses to provide quotations
for Products, the Distributor shall have the right to terminate
this Agreement by giving not less than sixty (60) days' notice
in writing to IPC Information Systems Inc.
2.2.2 Pursuant to the provisions of Clauses 3, 8 and 12 below.
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3. APPOINTMENT
3.1 IPC Information Systems Inc. hereby appoints the Distributor on a
non-exclusive basis as IPC Information Systems Inc.'s distributor for
sale, installation and servicing of the Products in the Territory in
accordance with the terms and conditions of this Agreement and in such
capacity the Distributor shall perform the obligations as detailed in
this Agreement.
3.2 IPC Information Systems Inc. retains its right at all times to sell the
Products and anyother products or services in the Territory and to have
such delivered, installed, tested, maintained and supported, either:
(i) directly itself or by and through any other IPC Group Company;
or by
(ii) any third party/parties that IPC Information Systems Inc. may
appoint for that purpose
Provided only Than IPC Information Systems Inc. shall provide the
Distributor reasonable notice (not less that 60 days) of it's intention
to so do and provide the distributor the opportunity to negotiate an
alternative course of action, BUT nothing herein shall restrict its
rights to do so in any way or create any liability whatsoever of IPC
Information Systems Inc. to the Distributor.
(iii) Should either of the above options occur then IPC Information
Systems Inc. will discuss and review the following with the
Distributor.
a) Minimum Sales Figure
b) Clause 3.6
c) Expenditure incurred by the Distributor in respect to clauses
3.7, 3.8, 10.1.5 and 12.3.
3.3 Nothing herein confers any right upon the Distributor itself to appoint
(or to purport that it has appointed) any third party as a distributor
or sub-distributor of the Products in the Territory.
3.4 The Distributor warrants on a continuing basis throughout the term of
this Agreement that it is a registered legal entity in the Territory,
that it has the legal capacity and authority to enter into this
Agreement, and that it has validly and effectively executed and
delivered this Agreement.
3.5 The Distributor shall:
3.5.1 comply with all applicable laws and regulations in respect of
the import, distribution, installation, connection and
maintenance of the Products and the performance of the
Distributor's obligations hereunder, and the Distributor shall
indemnify IPC Information Systems Inc. against any liability
resulting from its failure to comply with such laws and
regulations;
3.5.2 not by itself or with others engage or participate in any
illegal, deceptive, misleading or unethical practices
including, but not limited to a practice which may result in
the disparagement of the Products or IPC Information Systems
Inc. or engage or participate in other practices which may be
detrimental to the Products, IPC Information Systems Inc. or
the public interest; and
3.5.3 provide IPC Information Systems Inc., at its request, with a
copy of audited or certified financial statements of
Distributor, including a balance sheet, income statement and
statement of changes in financial position, for the most
recent fiscal year of Distributor, together with unaudited
financial statements on a quarterly basis; and
3.5.4 permit IPC Information Systems Inc. and its authorized agents
at all reasonable times and with prior notice to enter any of
the Distributor's premises for the purpose of ascertaining
that Distributor is complying with its obligations under this
Agreement.
3.6 For as long as this Agreement remains in effect, and for a period of
one (1) year following the termination of this Agreement for any
reason, Distributor shall not, without the prior written consent
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of IPC Information Systems Inc., directly or indirectly, (i) own or
operate any business or engage in any activities relating to the
distribution or manufacture of telephone systems that compete with its
activities hereunder; or (ii) become interested as principal, owner,
shareholder, partner or agent of any person, firm, corporation or
entity engaged therein. Distributor acknowledges that any breach of
this provision by Distributor may result in irreparable injury to IPC
Information Systems Inc. and, therefore, that in addition to all other
remedies provided by law, IPC Information Systems Inc. shall be
entitled to both temporary and permanent injunctions and such other and
further equitable relief as may be available to prevent a breach or
threatened breach of this provision.
3.7 The Distributor shall obtain promptly, at its expense, all necessary
licences, certificates, permits, approvals, or other documents
(collectively, "Licenses") as may be required by any applicable laws
and regulations (i) for the enforceability of this Agreement, including
without limitation the performance of all of the Distributor's
obligations under this Agreement and the enforcement of IPC Information
Systems Inc.'s rights hereunder, and (ii) in order for the Products to
be imported into, sold and operated within the Territory. To the
maximum extent possible, such Licenses shall be issued in the name of
IPC Information Systems Inc. or another IPC Group Company designated by
IPC Information Systems Inc. The cost of obtaining all necessary
Licences shall be borne by the Distributor. The Distributor shall
provide IPC Information Systems Inc. with copies of all such documents
upon request.
3.8 IPC Information Systems Inc. shall upon request by the Distributor
provide reasonable technical assistance in obtaining any necessary
Licenses. However no action or inaction by IPC Information Systems Inc.
shall diminish the responsibility of the Distributor to acquire all
necessary Licences in respect of all the Products and, should the
Distributor fail to do so within sixty (60) days after the effective
date of this Agreement, or within sixty (60) days after any requirement
for a new or amended License come into effect, as the case may be, IPC
Information Systems Inc. shall be entitled to terminate the Agreement
with immediate effect without liability of IPC Information Systems Inc.
to the Distributor and without prejudice to any other remedies IPC
Information Systems Inc. may have under this Agreement.
3.9 The Distributor shall inform IPC Information Systems Inc. as soon as
reasonably possible of any change to any laws and regulations governing
the import, distribution, installation, connection or maintenance of
the Products within the Territory, as well as of any change (or likely
anticipated change) to any Licenses affecting any such matters. Where
any withdrawal or suspension of any Licences is caused by any action or
inaction of the Distributor, IPC Information Systems Inc. shall be
entitled to terminate the Agreement with immediate effect without there
being any liability of IPC Information Systems Inc. to the Distributor
and without prejudice to any other remedies IPC Information Systems
Inc. may have under this Agreement.
3.10 IPC Information Systems Inc. shall upon request by the Distributor
consider reasonable modifications to the Products required to meet
applicable laws or regulations in the Territory. If in the sole
discretion of IPC the additional cost or difficulty of modification is
such that the distribution of some or all of the Products in the
Territory is commercially adversely affected, IPC Information Systems
Inc. shall be entitled to (i) amend the Agreement to exclude the
affected Products, or (ii) terminate this Agreement with immediate
effect, in either case without any liability of IPC Information Systems
Inc. to the Distributor.
3.11 The day to day performance of IPC Information Systems Inc.'s
obligations under this Agreement shall be performed either by IPC
Information Systems Inc. itself or by and through any IPC Group Company
as IPC Information Systems Inc. may from time to time determine. Such
shall include any obligation arising under any Purchase Order.
4 RELATIONSHIP OF THE PARTIES
4.1 The Distributor agrees that it is an independent contractor fully
responsible for its acts, omissions or defaults (including those of its
employees, subcontractors or agents) and the Distributor hereby
indemnifies IPC Information Systems Inc. against any loss suffered or
liabilities or expenses incurred by IPC Information Systems Inc. or any
IPC Group Company as a result of such acts,
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CONFIDENTIAL
omissions or defaults. The Distributor agrees that in all
correspondence and other dealings relating directly or indirectly to
the Products supplied under this Agreement it shall clearly indicate
that it is acting as a distributor and it shall not hold itself out as
being part of IPC Information Systems Inc. or any other IPC Group
Company, or as an employee, agent, representative, partner, or part of
a joint venture with IPC Information Systems Inc. In particular, the
Distributor shall not use any IPC Information Systems Inc. trademark in
or on its letterhead or company stationery, without prior written
permission from IPC Information Systems Inc.
4.2 The Distributor has no authority or power to bind or contract or
negotiate in the name of or to incur any debt. or other obligation on
behalf of or create any liability against IPC Information Systems Inc.
in any way or for any purpose. The Distributor shall transact all
business pursuant to this Agreement on its own behalf and for its own
account.
4.3 If the Distributor comprises more than one legal person all agreements
with IPC Information Systems Inc. shall be joint and several.
5. THE PRODUCTS
5.1 IPC Information Systems Inc. reserves the right at any time to change
the specification or design of any of the Products. In such event, IPC
Information Systems Inc. will provide the Distributor, as soon as
reasonably practicable and prior to shipment of the Products, with
written notice of any changes made to the specification or design of
the Products. The Distributor undertakes to advise IPC Information
Systems Inc. as soon as reasonably possible of the effect of any such
changes on any License that may have been granted relating to the
distribution of the Products in the Territory. IPC Information Systems
Inc. shall not be under any obligation to make any changes to the
Products previously shipped or sold to the Distributor.
5.2 IPC Information Systems Inc. will use its reasonable endeavours not to
change specification or design of any Products that have already been
ordered by the Distributor pursuant to the procedure detailed herein,
unless such changes are, in IPC Information Systems Inc.'s opinion
essential, as determined in IPC Information Systems Inc.'s sole
discretion. In such circumstances and to the extent reasonably possible
IPC Information Systems Inc. shall use its reasonable endeavours to
effect such changes without materially diminishing the performance of
the Products.
5.3 The timing and introduction of any new product into the Territory shall
be in IPC Information Systems Inc.'s sole discretion and there shall be
no legal obligation upon IPC Information Systems Inc. to introduce any
new product into the Territory, notwithstanding that the same may
already have been introduced elsewhere. The Distributor agrees that it
will distribute all such new product unless it can obtain the agreement
of IPC Information Systems Inc. that there are sound reasons why such
new product should not be introduced into the Territory. Subject to
agreement to distribute the new product the Distributor shall promptly
acquire the necessary Licenses as are required in the Territory for
such new product and shall in addition conduct market research as
acceptable and reasonable for the new product in the Territory as may
be requested by IPC Information Systems Inc.
5.4 Upon the inclusion of any new product into this Agreement, IPC
Information Systems Inc. shall have the right to make reasonable
amendments to Schedule 1, the Minimum Sales Figure, and any other
amendments which may be necessary or appropriate as a result of such
inclusion.
6 PRICES AND PAYMENT
6.1 Subject to Clauses 6.2 and 6.3 below all Purchase Orders for the
Products shall be subject to the Prices as applicable at the date the
Purchase Order is accepted by IPC Information Systems Inc. Prices
quoted by IPC Information Systems Inc. shall remain valid for
acceptance, subject to all terms, conditions and assumptions detailed
in IPC Information Systems Inc.'s quotations, for a period of ninety
(90) days from the date of such quotation. Any quotation of which the
validity has expired shall be subject to further confirmation or
amendment by IPC Information Systems Inc.
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6.2 Unless and until advised by IPC Information Systems Inc., Prices for
the Products will be based on delivery CIP. Prices will exclude
value-added tax and all and any local taxes and duties, all of which
shall be for the sole account of the Distributor.
6.3 Payment for the Products shall be made by the Distributor in US Dollars
unless otherwise agreed on a case by case basis in writing by IPC
Information Systems Inc. Without prejudice to any other rights and
remedies, if the Distributor fails to pay for the Products in full by
the due date, IPC Information Systems Inc. may, without incurring any
liability whatsoever to the Distributor, refuse to deliver further
Products under that or any other Purchase Order (notwithstanding that
the due date for delivery of such Products may have arrived) until full
payment is made.
6.4 IPC Information Systems Inc. shall have the option to decide on a case
by case basis whether it is most appropriate to that particular sale to
accept payment against invoice or on other terms deemed appropriate by
IPC Information Systems Inc. due to the Distributor's financial
condition, payment history or other factors, including requiring
payment through an irrevocable letter of credit payable to a clearing
bank to be approved by IPC Information Systems Inc. with IPC
Information Systems Inc. clearly named as beneficiary. All and any
costs arising from any letters of credit or other alternative payment
arrangements shall be borne by the Distributor.
6.5 Payment is to be made, for new systems, as follows unless an
alternative agreement is made with IPC Information Systems Inc. prior
to acceptance of a Purchase Order.
20% of amount on placement of order
50% on complete shipment of order.
30% upon final acceptance by the customer or within 30 days of
being brought into service, whichever is sooner.
7. ORDERING PROCEDURE AND CONDITIONS OF SALE
7.1 The Distributor may request IPC Information Systems Inc. to provide a
written quotation for supply of the Products at any time. IPC
Information Systems Inc. reserves the right not to submit a quotation.
Refusal to provide a quotation will be taken into consideration by IPC
Information Systems Inc. when reviewing the Minimum Sales Figure.
7.2 The Distributor shall submit all Purchase Orders in writing. Purchase
Orders are subject to IPC Information Systems Inc.'s specific written
acceptance, except where the Purchase Order is an acceptance by the
Distributor of IPC Information Systems lnc.'s written quotation in all
respects as provided pursuant to Clause 7.1 above. IPC Information
Systems Inc. will inform the Distributor whether or not it will accept
the Purchase Order as soon as is reasonably practicable. If IPC
Information Systems Inc. accepts the Purchase Order, it will send the
Distributor a written acceptance stating the Distributor's Purchase
Order number, the price, the delivery date and this Agreement number.
Refusal to accept an order will be taken into consideration by IPC
Information Systems Inc. when reviewing the Minimum Sales Figure. No
Purchase Order may provide for delivery of the Product after notice of
termination of this Agreement has been given by either party, and if
notice of termination is given by either party at a time when any
Purchase Orders are outstanding, IPC Information Systems, Inc. shall
have the option to cancel any or all such outstanding Purchase Orders
by notice to Distributor.
7.3 All Purchase Orders submitted by the Distributor shall state the
following:
(i) Products model(s);
(ii) the quantities ordered;
(iii) the requested dates of availability;
(iv) the destination of the Products;
(v) reference to this Agreement number;
(vi) the method of shipment; and
(vii) the company's VAT (or taxation registration) number (where
applicable).
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7.4 Orders for the Product which are accepted by IPC Information Systems
Inc. shall be subject to IPC Information Systems Inc.'s Conditions of
Export Sale current at the time of acceptance of the Purchase Order.
IPC Information Systems Inc.'s Conditions of Sale shall override any
contrary or additional conditions proposed by the Distributor unless
agreed in advance in writing by IPC Information Systems Inc. for a
particular order. In the event that any contrary or additional
conditions are included in any Purchase Order, such shall be invalid
and shall not apply to IPC Information Systems Inc.
7.5 IPC Information Systems Inc.'s Conditions of Sale current at the
commencement of this Agreement are set out in Schedule 4. IPC reserves
the right to revise such Conditions of Sale from time to time and in
such even IPC shall provide to the Distributor a copy of the revised
Conditions of Sale which shall be substituted for current Schedule 4 at
IPC's option. In the event of any conflict between IPC Information
Systems Inc.'s Conditions of Sale and this Agreement, the then-current
Conditions of Sale shall prevail. For the purposes of this Agreement
each Purchase Order placed with IPC Information Systems Inc. by the
Distributor shall constitute a separate sale and contract in its own
right. Notwithstanding the termination of any Purchase Order this
Agreement shall remain in full force and effect until such time as the
Agreement has either expired or has been terminated in accordance with
the provisions herein.
7.6 The Distributor shall, upon signature of a contract or order for the
Products with a customer, provide IPC Information Systems Inc. if
reasonably so requested with a copy of the same.
8. MINIMUM SALES FIGURE
8.1 The Distributor shall purchase from IPC Information Systems Inc. during
the first twelve-(12) months of this Agreement, and thereafter during
each successive twelve (12) month period, quantities of the Products
equal to or greater than the respective applicable Minimum Sales Figure
amounts specified in Clauses 8.4 and 8.5.
8.2 For the purpose of determining the Distributor's performance in meeting
its obligations under Clause 8.1, an executed Purchase Order for the
Product shall constitute a purchase on the date of IPC Information
Systems Inc.'s acceptance of the Purchase Order. However, any Purchase
Order which is subsequently canceled for whatever reason shall not
contribute to the Minimum Sales Figure, and the actual sales figure
achieved by the Distributor shall be adjusted by the amount with which
any Purchase Order is subsequently increased or reduced in value for
whatever reason.
8.3 In the event that the Distributor fails to achieve the Minimum Sales
Figure applicable to any period under this Agreement, IPC Information
Systems Inc. may, at its discretion on written notice terminate this
Agreement for the Distributor's default.
8.4 The Minimum Sales Figure for the first twelve (12) month period of the
term of this Agreement is US Two Million Dollars ($2M.). This and all
subsequent Minimum Sales Figures are to be expressed in US Dollars and
exclude all taxes, duties and transportation costs.
8.5 Not less than sixty (60) days before the end of the period specified in
Clause 8.1 and each period of twelve (12) months thereafter during the
term of this Agreement, the parties shall co-operate in good faith to
agree a new minimum sales figure which shall constitute the Minimum
Sales Figure for the succeeding twelve (12) months. Both parties shall
use their reasonable efforts to mutually agree the Minimum Sales
Figure. However if after a period of thirty (30) days the parties fail
to agree then IPC Information Systems Inc. reserves the right, at its
discretion, either to specify the Minimum Sales Figure for the
Distributor or to terminate this Agreement.
9. INTELLECTUAL PROPERTY RIGHTS
9.1 All Intellectual Property Rights in
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i) the Products;
ii) all documents and manuals supplied with the Products;
iii) the Software; and,
iv) all Trade Marks,
shall remain the absolute property of IPC Information Systems Inc. or
its licensors. No licence or other right is granted except as expressly
set out in this Agreement.
[NOTE: SOFTWARE LICENSING PROVISIONS ARE
SUBJECT TO REVISION BY IPC]
9.2 Upon payment in full of the applicable Purchase Price for Equipment and
Software, and subject to the terms of this Agreement and in particular
the Software License in Schedule 7 hereto, IPC Information Systems Inc.
grants to the Distributor:
9.2.1 a paid-up, non-exclusive, non-transferable personal licence to
use, solely in conjunction with the purchased Equipment, any
Software supplied to Distributor by IPC Information Systems
Inc. for such purpose, on the terms contained in Schedule 7,
Software License; and
9.2.2 a paid-up, non-exclusive, non-transferable license to grant
non-exclusive sublicenses of the right to use Software solely
in conjunction with the purchased Equipment, conditioned upon
the Distributor's obtaining from end user Customers an
executed End-User Software Sublicense in the form and
containing all the terms and conditions of the Software
License in Schedule 7.]
9.3 In addition to the Software described in clause 9.2 above, IPC
Information Systems Inc. may provide to the Distributor, on physical
media "shrink-wrapped" by the manufacturer, third-party operating
system or applications software. The license allowing the end-user to
use such shrink-wrapped Software is an agreement between the
manufacturer and the end-user, is contained within the shrink-wrap and
is activated when the end-user opens the shrink-wrap.
9.4 The Distributor is not permitted to:
i) modify, adapt, enhance or otherwise alter the Products or
their shape, appearance or technical specification; or
ii) gain access to, install, maintain or modify the Software or
attempt to do so
except as expressly set out in prior written instructions of IPC
Information Systems Inc.
9.5 Distributor's obligations under this Clause 9 and the Software License
in Schedule 7 shall survive the expiration or termination of this
Agreement, regardless of the reason for such expiration or termination.
10 USE OF TRADE MARKS AND TRADE NAMES
10.1 The Distributor undertakes that:
10.1.1 in all respects it shall strictly comply with IPC Information
Systems Inc.'s written instructions concerning the use of
Trade Marks on or in connection with the Products, and in
connection therewith the Distributor shall not display or use
the Trade Marks in any manner without the prior written
approval of IPC Information Systems Inc.;
10.1.2 it shall not without IPC Information Systems Inc.'s prior
written agreement, use any other trade marks on or in
connection with the Products and shall not remove, alter or
conceal any of IPC Information Systems Inc.'s Trade Marks;
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10.1.3 it shall not apply to the Products any other matter in writing
that is likely to injure the reputation of the Trade Mark so
long as any of the Trade Marks remain on the Products;
10.1.4 it will give notice of the undertakings in Clauses 10.1.1,
10.1.2 and 10.1.3 above to any purchaser of the Products from
it and it will require such purchaser to give notice in
writing of those undertakings to anyone to whom that purchaser
may supply the Products;
10.1.5 it shall not register or apply to register any Trade Mark or
another word or device likely to be confused with them without
first obtaining prior written approval from IPC Information
Systems Inc., provided however that the Distributor shall upon
the request of IPC Information Systems Inc. assist IPC
Information Systems Inc. in obtaining and maintaining
registrations of the Trade Marks and in maintaining the
validity and enforceability of the Trade Marks in the
Territory, and in connection therewith the Distributor will at
the request of IPC Information Systems Inc. execute such
registered user agreements or license agreements relating to
the Trade Marks in the Territory as IPC Information Systems
Inc. may reasonably request; and
10.1.6 Following delivery of notice of termination of this Agreement
it shall cease using any of the Trade Marks save as permitted
in Clause 10.2 below.
10.2 Following delivery of notice of termination of this Agreement and for
such period as the Distributor is permitted by the terms of this
Agreement to complete the distribution of any stock of Products then
held by it:
10.2.1 subject to all the terms of this Agreement the Distributor
shall be permitted to continue to use on or in connection with
the Product those Trade Marks applied by IPC Information
Systems Inc. to the Products; and
10.2.2 the Distributor shall cease all other use of the corporate
mark and logo of IPC Information Systems Inc. or any IPC Group
Company and shall cease immediately to represent that it is an
authorised distributor of IPC Information Systems Inc. or make
any similar representation.
11 INTELLECTUAL PROPERTY RIGHTS INDEMNITY
11.1 IPC Information Systems Inc. shall, to the extent provided in this
Clause 11, indemnify the Distributor against all claims and proceedings
arising from infringement (or alleged infringement) of any Intellectual
Property Rights enforceable in the Territory or the United States of
America arising in connection with the distribution of the Products by
the Distributor in accordance with this Agreement. As a condition of
this indemnity the Distributor shall:
i) notify IPC Information Systems Inc. promptly in writing of any
allegation of infringement;
ii) make no admission relating to the infringement; and
iii) allow IPC Information Systems Inc. to conduct all negotiations
and proceedings and give IPC Information Systems Inc. all
reasonable assistance.
11.2 If at any time any allegation of infringement of such patent, design or
copyright is made, IPC Information Systems Inc. will to whatever limit
is practicable at its own expense (i) procure for the Distributor the
right to continue its activities under this Agreement, (ii) modify the
Products so as to avoid the infringement, or (iii) replace the Products
with non-infringing goods provided that any such modification or
replacement does not adversely affect the Products' performance in a
material respect.
11.3 The indemnity referred to above will not apply to any infringement or
alleged infringement:
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i) occasioned by the Distributor's or its customers' use of any
of the Products or any part thereof in combination with
equipment and/or software not supplied by IPC Information
Systems Inc. for use with such Products, or
ii) caused or contributed to by any specification issued by the
Distributor or its customer; or
iii) caused or contributed to by any act or omission of the
Distributor or its customer.
The Distributor shall indemnify IPC Information Systems Inc. in
proportion to the relative causation by the Distributor against all
claims and proceedings arising from any infringements incurred in
connection the matters described in this Clause 11.3.
11.4 The indemnity referred to in Clause 11.1 above shall be subject to the
extent of the indemnity being limited to one million ($1,000,000) US
Dollars in respect of all settlements or claims and proceedings in any
period of twelve (12) calendar months.
11.5 The indemnity referred to in Clause 11.1 above states IPC Information
Systems Inc.'s entire liability in respect of any infringement or
alleged infringement of third party intellectual property rights and is
in lieu of and replaces all other warranties in that respect including
implied warranties.
12 TERMINATION/EXPIRATION
12.1 Either party shall have the right by giving thirty (30) days' written
notice to the other to terminate this Agreement forthwith if the other
party commits:
12.1.1 a material or persistent breach of any term of this Agreement
and (if that breach is capable of remedy) fails to remedy such
a breach within thirty (30) days or such longer period as the
parties may mutually agree; or
12.1.2 any act of bankruptcy or compounds with its creditors; or a
petition or receiving order in bankruptcy is presented or made
against the other party; or a petition for an administration
order is presented in relation to the other party; or a
resolution or petition to wind up the other party is passed or
presented (otherwise than for reconstruction or amalgamation)
or a receiver or administrative receiver is appointed (or the
equivalent in all cases of any such event in the jurisdiction
of such other party); or
12.1.3 if a force majeure event as described in Clause 14 shall have
occurred and shall persist for a continuous period of three
months or for periods aggregating three months or more in any
six month period.
12.2 IPC Information Systems Inc. shall also have the right by giving
written notice to the Distributor to terminate this Agreement in the
circumstances detailed elsewhere in this Agreement forthwith and if:
12.2.1 there is an actual or threatened material change in the
ownership or control of the Distributor, or a material change
in its assets or transfer of a material portion of its assets
or business; or
12.2.3 the Distributor shall cease to function as a going concern or
to conduct its operation in the ordinary course of business
either generally or in any part of the Territory; or
12.2.4 the Distributor shall or shall threaten or attempt to sell,
assign, delegate or transfer any part of its rights or duties
under this Agreement without the prior written consent of IPC
Information Systems Inc.; or
12.2.5 there is any breach or threatened breach of Clauses 9, 10, 13
or the Software License.
12.3 The expiry or termination of this Agreement shall be without prejudice
to the rights of the parties accrued up to the date of such expiry or
termination or to the survival of those rights and obligations
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of the parties which are by their nature intended to survive expiry or
termination of this Agreement. The Distributor agrees that regardless
of the reason for termination of this Agreement, it shall not be
entitled, upon termination or expiration, to payment or compensation of
any kind upon such termination or expiration for (i) Distributor' s
prior efforts in promoting or creating goodwill for the Products or IPC
Information Systems Inc.; (ii) any of Distributor' s costs incurred in
the performance of this Agreement; (iii) any of Distributor, s costs
incurred as a result of termination; or (iv)any loss of profit and/or
potential profit caused by such termination.
12.4 Upon expiry or termination of this Agreement:
12.4.1 the Distributor shall discontinue using any of the Trademarks
or other intellectual property rights relating to the Product
and shall cease to distribute or otherwise deal with the
Product and shall not represent that it is an authorised
distributor of IPC Information Systems Inc.; and
12.4.2 the Distributor shall, within seven (7) days after the Notice
Date and at IPC Information Systems Inc.'s option, either
return or destroy all Software, documents, technical
information and any other data including any copies made of
the same (other than standard correspondence, letters and the
like) which have been supplied to it by IPC Information
Systems Inc. and are still in its possession or under its
control; provided that IPC Information Systems Inc. may
authorise the Distributor to retain any information which is
essential for the sale of unsold stock not repurchased
pursuant to Clause 12.5 below. An officer of the Distributor
shall, within the said seven (7) days, furnish IPC Information
Systems Inc. with a certificate certifying that the
Distributor has complied with its obligations in this Clause
12.4.2;
12.4.3 all orders for Products not already delivered as of the Notice
Date shall at the option of IPC Information Systems Inc. be
canceled;
12.4.4 all outstanding unpaid invoices in respect of the Products
shall become immediately due and payable as of the Notice
Date; and
12.4.5 the Distributor shall execute and deliver as promptly as
practicable following the Notice Date all documents reasonably
required by IPC Information Systems Inc. to accomplish and
evidence complete termination of this Agreement.
12.5 Within seven (7) calendar days after the Notice Date the Distributor
shall deliver to IPC Information Systems Inc.:
(i) a complete list of the customers of all Products and their
addresses, contact personnel and contact information;
(ii) a complete list of IPC Products, spare parts and other
associated inventory which are in the Distributor's stock,
including the part number, description of the item, quantity
held, dates of purchase and "landed cost" (i.e., net price
paid by the Distributor together with transportation costs and
customs duties paid by the Distributor in respect thereof),
which list shall separately list and identify unused and used
inventory; and
(iii) complete copies of all executory contracts relating to the
sale, installation or service of IPC Products, i.e., those
that have not been fully performed and completed as of the
Notice Date.
12.6 IPC Information Systems Inc. shall, within thirty (30) days after the
Distributor delivers the information described in Clause 12.5, have the
option to repurchase some or all of the Products in Distributor's
inventory. For Products that can be sold as new merchandise, the
repurchase price shall be based upon the " landed cost" . For Products
that cannot be sold as new merchandise, the repurchase price shall be
agreed upon by the parties. IPC Information Systems Inc.'s
determination with respect to classification of Products as "new" shall
be final. Distributor agrees to deliver such Products to IPC
Information Systems Inc. to such destination designation by IPC
Information Systems Inc. within ten (10) days after IPC Information
Systems Inc. has given Distributor notice
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of its exercise of such option, and the price therein specified shall
be paid, at IPC Formation Systems Inc., sole option, in cash or as a
credit against any indebtedness then owing by Distributor to IPC
Information Systems Inc. within ten (10) days after such delivery.
12.7 Within thirty (30) days after the Distributor delivers the information
described in Clause 12.5, the Distributor shall, at IPC Information
Systems Inc.'s request and sole discretion, use its best efforts to
effect an assignment or novation to IPC Information Systems Inc. or to
a person or persons designated by IPC Information Systems Inc. such of
Distributor's then existing and executory quotations, proposals and
contracts relating to the sale, installation or service of Products as
specified by IPC Information Systems Inc. in a written notice to the
Distributor. In order to facilitate such assignment or novation,
Distributor shall cause its contracts with its Customers to contain a
provision permitting the assignment or novation thereof to IPC
Information Systems Inc. or to IPC Information Systems Inc.' s designee
upon termination or expiration of this Agreement. IPC Information
Systems Inc. and the Distributor shall deliver a joint notice of such
assignment/nova/ion to all such customers in a form prepared by IPC
Information Systems Inc., and IPC Information Systems Inc. and
Distributor shall enter into any formal deeds or agreements deemed by
IPC formation Systems Inc. to be necessary or appropriate to effect
such assignment/nova/ion. Where there are either pre-payments or
amounts owing in respect of such executory contracts, IPC Information
Systems Inc. and the Distributor shall make a financial settlement at
the time of assignment/nova/ion.
12.8 In the event IPC Information Systems Inc. exercises its options under
Clauses 12.6 and/or 12.7, the sales, assignments/novations and payments
shall occur on a date designated by IPC Information Systems Inc. as
promptly as practicable after Distributor's compliance with Clause
12.5, and the Agreement shall be deemed terminated from and after that
date.
13. CONFIDENTIALITY
13.1 The parties agree to keep confidential any Confidential Information
supplied or disclosed to them by the other party or whenever obtained
under or in connection with this Agreement and shall not use or
disclose such information or any part of it to any person without prior
written consent.
13.2 The Distributor agrees to use any Confidential Information supplied or
disclosed to it by IPC Information Systems Inc. solely for the purpose
of the promotion and distribution of the Products.
13.3 In particular, the Distributor acknowledges that:
i) the Software,
ii) the ideas, principles and algorithms which underlie or are
contained within the Software and including any interface
information or information required for interoperability and,
iii) the operating manuals or other associated documentation
supplied with the Products
are all Confidential Information and valuable trade secrets of IPC
Information Systems Inc. and its licensors.
13.4 The restrictions in this Clause 13 shall not apply to information
which:
13.4.1 is in the public domain otherwise than by breach of this
Agreement;
13.4.2 was previously in the possession of the receiving party and
which was not acquired directly or indirectly from the
disclosing party;
13.4.3 is lawfully obtained from a third party who is free to
disclose the same; or
13.4.4 the receiving party is obliged by a court order to disclose.
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13.5 Where disclosure of information to a third party (including but not
limited to the Distributor's customers, employees and agents) is
necessary for the performance by the Distributor of its obligations
hereunder, the Distributor shall, prior to any such disclosure, procure
that such persons are bound by the provisions of this Clause 13 and, if
requested by IPC Information Systems Inc., shall obtain duly binding
undertakings from such persons in favour of IPC Information Systems
Inc.
to this effect.
13.6 If the Distributor becomes aware of any breach of confidence by any of
its customers, employees, and agents, it shall promptly notify IPC
Information Systems Inc. and give IPC Information Systems Inc. all
reasonable assistance in connection with any proceedings IPC
Information Systems Inc. may institute against any such persons.
13.7 Distributor acknowledges that any breach or threatened breach of this
Clause 13 may result in irreparable harm to IPC Information Systems
Inc. In that event, the Distributor agrees that in addition to all
other remedies provided by law, LPC Information Systems Inc. shall be
entitled to both temporary and permanent injunctions and further
equitable relief as may be available to prevent a breach or threatened
breach of this provision.
13.8 The obligations of the parties contained in this Clause shall continue
in force for a period of five (5) years from the date of expiry or
termination of this Agreement.
14 FORCE MAJEURE
14.1 Neither Party shall be liable for any breach of this Agreement (other
than the failure to pay money amounts owing) due to any cause beyond
its reasonable control including but not limited to: Act of God,
insurrection or civil disorder, war (whether declared or not) or
military operations, national or local emergency, acts or omissions of
government, highway authority or other competent authority, its
compliance with any statutory obligation or an obligation under a
statute, industrial disputes of any kind (whether or not involving
either party's employees), fire, lightning, explosion, flood,
subsidence, weather of exceptional severity, acts or omissions of
persons for whom neither Party is responsible (including, in
particular, telecommunication service providers).
14.2 If either Party is affected by a Force Majeure event, it will
immediately notify the other Party and shall take all reasonable steps
to alleviate the effects of such event.
15. DISTRIBUTOR'S INDEMNITY
15.1 Because IPC Information Systems Inc. will have no contractual
relationship with any customers to whom the Distributor sells the
Products, the Distributor undertakes to make appropriate arrangements
with such customers to ensure that the provisions of Clauses 9, 10, 11
and 13 have effect as between the Distributor and its customers and to
use its best endeavours to ensure that any such terms are enforced. The
Distributor agrees to indemnify IPC Information Systems Inc. against
all loss and damage resulting from the failure of any such customer to
observe any of these requirements.
15.2 The Distributor hereby agrees to indemnify IPC Information Systems Inc.
against all costs, claims, demands, actions and proceedings which may
be brought against IPC Information Systems Inc. by any third party
(other than such as may relate to (i) an Intellectual Property
infringement to which Clause 11 applies or (ii) any liability assumed
by IPC Information Systems Inc. in accordance with Clause 16) arising
out of or in connection with the performance or non-performance by
Distribution of its obligations under this Agreement.
16 LIMITATION OF LIABILITY
16.1 IPC Information Systems Inc. accepts liability for its own negligence
to the extent stated in Clause 11 and this Clause 16, but not
otherwise. Except where expressly contained in this Agreement IPC
Information Systems Inc. has no obligation duty or liability in
contract, tort (including negligence) or otherwise.
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16.2 IPC Information Systems Inc. does not exclude or restrict liability for
death or personal injury resulting from its own negligence.
16.3 In any event IPC Information Systems Inc.'s liability in contract, tort
(including negligence) or otherwise arising by reason of or in
connection with this Agreement or howsoever otherwise shall be limited
to two million US Dollars ($2,000,000).
16.4 In any event in no circumstances shall IPC Information Systems Inc. be
liable in contract, tort (including negligence) or otherwise for loss
(whether direct or indirect) of profits, business or anticipated
savings, or for any indirect or consequential loss or damage whatever.
16.5 Each provision of this Clause 16 is to be construed as a separate
limitation applying and surviving even if for any reason one or other
of the said provisions is inapplicable or held unreasonable in any
circumstances and shall remain in force notwithstanding
17 INSURANCE
17.1 The Distributor shall at its own expense effect and maintain in place
throughout the duration of this Agreement such insurance as it deems
appropriate in respect of its obligations under this Agreement but such
insurance which shall be on a claims occurring basis shall include as a
minimum:
a) workman's compensation insurance to comply with the
requirements of any Government legislation; and,
b) public liability insurance in respect of bodily injury and
damage to property with an indemnity limit of not less than
two million US Dollars ($2,000,000).
The Distributor shall ensure that each subcontractor used in relation
to this Agreement shall similarly effect and maintain insurance of the
type referred to above.
17.2 The Distributor shall at IPC Information Systems Inc.'s request provide
evidence to IPC Information Systems Inc.'s reasonable satisfaction that
such insurance has been obtained and is in place. Should IPC
Information Systems Inc. not be satisfied that such insurance is in
place then IPC Information Systems Inc. may arrange appropriate
insurance cover against any risk to which such failure may occur. All
and any premiums for such insurance shall be to the sole account of the
Distributor.
17.3 The Distributor shall notify IPC Information Systems Inc. as soon as it
becomes aware of any event arising in connection with this Agreement
which the Distributor believes may give rise to any claim under any
insurance policy falling within the terms of this Clause 17.
17.4 The provisions of this Clause 17 shall not be deemed in any way to
limit the Distributor's liability under this Agreement.
18 GENERAL
18.1 Entire Agreement
This Agreement constitutes the entire understanding between the parties
on the subject of the Distributor relationship and supersedes all prior
agreements and understandings between the parties, whether written or
oral, relating to the subject matter.
18.2 Invalidity
If any provision of this Agreement is found to be invalid or
unenforceable by a court having jurisdiction of the matter, the
invalidity or unenforceability of the provisions shall not affect the
valid and enforceable provisions of this Agreement. The parties shall
endeavour to replace any invalid or unenforceable provisions in such a
way that the new clause shall differ as little as possible from the
scope and intention of the invalid or unenforceable provisions, taking
into account the object and the purpose of this Agreement. If such
mutual Agreement cannot be reached within sixty
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(60) days after such finding of invalidity or unenforceability, either
Party shall have the right to terminate the Agreement forthwith on
thirty (30) days' written notice.
18.3 Assignment
Neither party shall be entitled to assign or otherwise delegate its
rights and obligations under this Agreement without the prior written
consent of the other party except that the Distributor agrees that IPC
Information Systems Inc. may assign or novate such rights and
obligations to any IPC Group Company or to any company where IPC
Information Systems Inc. has effective control.
18.4 Waiver
Failure or neglect by either party to enforce any of the provisions of
this Agreement shall not be construed nor shall be deemed to be a
waiver of such party's rights nor prejudice such party's rights to take
subsequent action.
18.5 Authentic Text
The text of this Agreement in the English language is the authentic
text and any difficulties or uncertainties in interpretation arising
shall be solved solely by reference to this text.
The notes and marginal terms, clause and sub-clause headings in this
Agreement shall not be deemed to be part thereof nor affect the meaning
or interpretation of this Agreement.
In the event of any conflict between the Schedules attached to this
Agreement and the Agreement, the latter shall prevail.
18.6 Amendment
This Agreement may only be amended in writing duly signed by both
parties. Any such amendment will only come in to force when both
parties have agreed and signed a variation to this Agreement.
18.7 Notices
Any notice required to be served on one party by the other shall be
given by personal delivery or sent by registered international airmail
with postage prepaid, recognized international courier service, or
facsimile transmission to the party to be notified at the address set
out below (or such other address as the addressee shall have for the
time being notified to the party giving notice):
For IPC Information Systems Inc.:
The Finance Director
IPC INFORMATION SYSTEMS INC.
81 Pine Street
New York, NY 10005
USA
Facsimile No.: +1 (212) 248-1520
For the Distributor:
The Marketing Director
Trade Wind Marketing Ply Ltd.
Level 27 Grosvenor Place
225 George Street
Sydney
New South Wales 2000
Australia
Facsimile No: +61-2-9250-8890
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Any such notice shall be deemed to be given, in the case of hand
delivery or recognized international courier service, upon receipt; in
the case of electronic facsimile, upon receiving confirmation by the
sending machine of receipt at the designated facsimile number, and in
the case of in the case of airmail, seven (7) days after dispatch.
19 APPLICABLE LAW AND JURISDICTION
19.1 The construction, validity and performance of this Agreement shall be
governed in all respects by the substantive law of the State of New
York, USA applicable to agreements to be made and performed therein.
The parties hereby submit to the nonexclusive jurisdiction of the
courts of the State of New York and the federal courts of the USA
located therein.
19.2 Arbitration
(a) Any bona fide dispute arising out of or relating to this
Agreement or the breach, termination or validity thereof,
which has not been resolved within sixty (60) days of notice
thereof by the party claiming a dispute, shall be finally
settled by arbitration conducted in accordance with the
International Arbitration Rules of the American Arbitration
Association by three independent and impartial arbitrators, of
whom each party shall appoint one.
(b) The place of arbitration shall be the State of New York,
County of New York, U.S.A. and all proceedings shall be in
English. The arbitration shall be governed by the substantive
law of the State of New York, exclusive of its conflict of
laws rules, and the law applicable to the arbitration
procedure shall be the United States Arbitration Act, 9 U.S.C.
Section 1 et seq. Judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction
thereof.
(c) The parties agree that (i) the award of the arbitrators shall
be the sole and exclusive remedy between them regarding any
claims, counterclaims, issues or accountings presented or pled
to the arbitrators; that is shall be made and shall promptly
be payable in U.S. dollars free of any tax, deduction or
offset; and that any costs, fees, or taxes, incident to
enforcing the award shall, to the maximum extent permitted by
law, be charged against the party resisting such enforcement;
and (ii) the procedures specified in this Article 19.2 shall
be the sole and exclusive procedures for the resolution of
disputes between the parties arising out of or relating to
this Agreement; provided however, that a party may seek a
preliminary injunction, attachments or other provisional
judicial relief if such action is necessary to avoid
irreparable damage or to preserve the status quo. Despite such
action, the parties will continue to participate in good faith
in the procedures specified in this Article 19.2.
IN WITNESS whereof the Parties have caused this Agreement to be executed on the
date first written above.
On behalf of : IPC INFORMATION SYSTEMS INC.:
Signed by : /s/ S.E. Phillips
----------------------
Name : S.E. Phillips
Title: : MANAGING DIRECTOR ASIA/PACIFIC
------------------------------
On behalf of : TRADE WIND MARKETING PTY LTD.
-----------------------------
Signed by : /s/ A.C. Walton
-----------------------------
Name : A.C. Walton
-----------------------------
Title : DIRECTOR
-----------------------------
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SCHEDULE 1 TO THE AGREEMENT
THE PRODUCTS
The following is the range of Products that IPC Information Systems Inc. will
make available to the Distributor for sale in the Territory under this
Agreement.
Within the table below, items 1 to 3 inclusive are Hardware including operating
Software and item 4 is Software.
1. Switches 3. Peripherals
Alliance 100, 200 & 300 Cleardeal 8 channel & 4 channel
MX Bridge Range of Products
Nice Voice Recorders
2. Consoles 4. Software
MX Tradephone CTI Suite of Products
Slimline Control/Pagination Module
Classic Control/Pagination Module
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SCHEDULE 2 TO THE AGREEMENT
DISTRIBUTOR'S OBLIGATIONS
The Distributor undertakes to perform the following obligations in accordance
with this Agreement. This listing is not intended to be exclusive but to set
operational standards to be followed. The activities detailed in this Schedule
are in addition to any other obligations as detailed elsewhere in this
Agreement.
A. SALES ADMINISTRATION AND MARKETING
1. On the first working day of each quarter, to provide a month by month
forecast of prospects and orders for the subsequent six (6) months. In
addition to these forecasts, the Distributor shall at the same time
supply to IPC Information Systems Inc. a written monthly report
detailing:
- sales prospects and sales achieved/orders received by the
Distributor; - market intelligence and, in particular,
competitors activities, and market sizepenetrat ion;
- win/loss sales reports (loss reports to include reason for
loss and details of the once prospective customer);
- customer complaints, praise and enquiries;
- location and use of any of the Products sold in connection
with this Agreement, including any physical moves or changes
in use;
- the numbers and nature of repairs and other after sales
services provided by the Distributor;
- inventory of stock of the Products held by the Distributor as
appropriate;
- if applicable, suggested Products enhancements;
- if applicable, advice regarding local law, environmental
conditions, safety standards, business practices and all other
necessary approvals which might affect the sales of the
Products or their use including, but not limited to, those
approvals required for network connection of the Products;
- any other information relating to the Products, customers or
the performance of this Agreement which is likely to be of
benefit to either IPC Information Systems Inc., the
Distributor or their customers.
2. To identify to IPC Information Systems Inc. at the commencement of this
Agreement (and subsequently at the start of each twelve (12) month
period subsequent to the initial twelve month duration of the
Agreement) the respective annual sales target.
3. To consult with and obtain the prior written authorization of IPC
Information Systems Inc. in the event of any customer requirement which
in any way is not expressly covered by the specific terms and
conditions of this Agreement. IPC Information Systems Inc.'s
authorization shall be obtained prior to any representation,
undertaking or opinion which is not expressly permitted by the terms
and conditions of this Agreement, being given either orally or in
writing by the Distributor to any third party or customer.
4. To provide, upon reasonable request, copies to IPC Information Systems
Inc. of bids, quotations and tenders relating to the Products as
submitted by the Distributor to any potential customer.
5. To fund visits to IPC Information Systems Inc.'s premises in the United
States of America, or an alternative suitable location, for its staff
to attend sales reviews, at least on an annual basis.
6. To hold at the Distributor's premises and at the Distributor's expense
facilities and Products, based upon an agreed Product demonstration
list, to demonstrate the operation of the Products to potential
customers. The Distributor, when requested by IPC Information Systems
Inc. or a third party, shall provide at the Distributor's expense a
demonstration of the Products at the Distributor's premises.
7. To nominate a named room manager who shall have specific responsibility
for customer demonstrations and demonstration room management.
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8. As appropriate to the market in the Territory, to translate and print
local language versions of all product information including literature
describing the Products as well as user guides and associated
documentation. The Distributor shall do this at its own expense.
9. To procure and maintain mobile demonstration equipment at the
Distributor's expense for demonstrating the Products at third party
premises or sites should IPC Information Systems Inc. or such third
party request such a demonstration or should IPC Information Systems
Inc. request that the Distributor perform such a demonstration at a
trade show or some other promotional event.
10. To advertise and promote the Products at the Distributor's expense and
in such a manner and through such a media as shall increase the sale of
the Products in the Territory provided that the text of all proposed
advertising and promotional material shall be subject to IPC
Information Systems Inc.'s prior approval. The Distributor shall hold a
marketing budget and agree a marketing plan for the sale of the
Products with IPC Information Systems Inc. at the commencement of this
Agreement and thereafter at the start of each twelve (12) month period
following the initial twelve (12) month duration of this Agreement.
B. SALES PRACTICE
1. To ensure that all efforts and resources are applied as necessary in
order to exceed the sales targets and volumes agreed between the
Distributor and IPC Information Systems Inc. To take a flexible
approach to pricing, particularly in the case of IPC Information
Systems Inc.'s global customers, and reflecting the competitive nature
of both the worldwide and local markets.
2. To conduct sales presentations as and when requested by IPC Information
Systems Inc. or a third party.
3. To refrain from establishing or maintaining branches or distribution
depots for the sale of the Products outside the Territory except as
otherwise might be formally agreed in writing between the Distributor
and IPC Information Systems Inc. separate to and outside this
Agreement. However, the Distributor undertakes to notify IPC
Information Systems Inc. promptly of any opportunities arising for the
supply of the Products - or any related items or service - to a third
party in any area outside the Territory which is not covered by this
Agreement.
4. To ensure that all the sales staff of the Distributor involved in the
sale of the Products are dedicated to the distribution of the Products,
are trained to the standard required by and agreed with IPC Information
Systems Inc., consisting of individuals with a skill set to fit IPC
Information Systems Inc.'s current range of Products and other
products. Such individuals must have a sufficient understanding of the
English language and other local languages to enable them to perform
the Distributor's obligations hereunder.
5. To demonstrate to IPC Information Systems Inc. the potential to
distribute additional and future products and services, not limited to
the Product range detailed herein.
6. To provide IPC Information Systems Inc. with local quotations for
installation activities at rates which the Distributor can demonstrate
are competitive in the Territory.
7. To agree with IPC Information Systems Inc. a service plan for use with
IPC Information Systems Inc.'s global customers in the Territory,
holding quarterly reviews with those customers and providing IPC
Information Systems Inc. with regular feedback through the use of
customer questionnaires and the like.
C. CUSTOMER SERVICE
1. To operate during local business hours (08.00-17.00) a service centre
with a 'help desk' to act as a central point of contact for fault
reporting and to designate a named single point of contact for
installation and warranty services to be provided by the Distributor.
This help desk shall consist of an acceptable fault tracking system.
Such point of contact and all other installation and support staff
shall be suitably trained, qualified and experienced to ensure that all
support services shall be
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performed in a timely and efficient manner to the customers' complete
satisfaction. Escalation procedures shall be established for both
technical and managerial contact, within and outside of local office
hours.
2. To deliver and install the Products on customers' premises in
accordance with standards defined by IPC Information Systems Inc. To
perform pre-agreed acceptance tests. To provide and perform first line
maintenance cover and support for the Products in order to fulfil
warranty obligations and continuing maintenance cover if included by a
customer in their order. The Distributor shall provide all tools
(including standard computer based project management tools, such as
"Microsoft Project") necessary to perform these services.
3. To provide project management, installation (at pre-agreed prices),
and, if ordered under a separate agreement, maintenance and support for
IPC Information Systems Inc.'s customers in the Territory.
4. To maintain adequate levels of stock of the Products, replacement parts
therefor and recommended test equipment as may be necessary to meet
demand for the Products or as may be prescribed by IPC Information
Systems Inc. from time to time and as detailed in section D of this
Schedule 2.
5. To provide on site customer training, to the satisfaction of IPC
Information Systems Inc. and all customers, in order to ensure the
ability of customers to maintain and use the Products effectively.
6. As detailed in Clause 3 of this Agreement, to obtain all necessary
Licenses in the name of IPC Information Systems Inc. to the extent
possible, and if any are obtained in the name of the Distributor, they
shall be transferred to IPC Information Systems Inc. if permitted by
local law upon termination or expiry of this Agreement .
7. To maintain in a format advised by IPC Information Systems Inc. a
record of faulty parts and their replacements (whether replaced under
warranty or maintenance provisions) supplied to and returned from
customers and to supply a copy of this record to IPC Information
Systems Inc. with the monthly report previously referred to in Section
Al above.
8. To conduct site and room surveys and produce comprehensive reports room
plans and project plans as may be required by IPC Information Systems
Inc. at the time of receiving the Distributor's Purchase Order or
thereafter.
9. To process and subsequently project manage customer orders, Purchase
Orders placed by the Distributor in relation to this Agreement and this
Agreement itself in order to ensure both customer satisfaction and
compliance with the terms, conditions and Schedules of this Agreement
and any related order.
10. To promptly bring to IPC Information Systems Inc.'s attention any
claims or lawsuits (actual or potential) which come to the
Distributor's attention which concern alleged infringements of any
improper or wrongful use of IPC Information Systems Inc.'s intellectual
property rights or other intellectual property rights used in respect
of the Products.
11. To ensure that the environmental conditions at the customer's premises
where the Products are to be kept are in accordance with those as
detailed in any manuals and user guides as may be provided by IPC
Information Systems Inc. or as otherwise advised in writing by IPC
Information Systems Inc.
12. To nominate and make available a sufficient number of suitably
qualified and experienced personnel for attendance on the IPC
Information Systems Inc. training courses, detailed in Schedule 5, to
enable the Distributor to fulfil its obligations under this Agreement
for installation, maintenance and support for customers in the
Territory. The Distributor is to ensure thereafter that an adequate
number of fully trained personnel are available at any one time to
perform the Services to meet customer demand.
13. To carry out all Software and other Product upgrades as requested by
IPC Information Systems Inc.
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14. To obtain acceptance certificates from all customers and promptly
provide IPC Information Systems Inc. with a copy of the same.
D. SPARES HOLDING
1. IPC Information Systems Inc. shall recommend appropriate spares
holdings that the Distributor will be required to procure to support
customers on a case by case basis at the time the configured Products
are defined and the quotation submitted to the Distributor for those
Products.
2. Spares can be purchased from IPC Information Systems Inc. at the then
current Distributor list price which is issued separately. Orders for
spare and replacement parts shall be subject to a minimum order value
of $500.
Repair Costs
3. Faulty parts not covered under the terms of IPC Information Systems
Inc.'s warranty that are to be repaired under the repair return
procedure described in Schedule 6 (section B) to this Agreement shall
be repaired by IPC Information Systems Inc. at the then current repair
price list.
4. Subsequent to the warranty period the distributor is to pay to IPC 2%
of the CIF figure for all goods provided to the distributor. This
figure is to be pro-rated in 4 quarters for systems in warranty and is
payable on the 1st October annually.
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SCHEDULE 3 TO THE AGREEMENT
IPC INFORMATION SYSTEMS INC.'S OBLIGATIONS
Subject to and in accordance with this Agreement, IPC Information Systems Inc.
shall perform those obligations as detailed below as well as such other
obligations of IPC Information Systems Inc. as detailed within this Agreement
where the same are not mentioned below.
A. SALES ADMINISTRATION AND MARKETING
1. To provide agreed quotations as reasonably requested by the Distributor
and subject to acceptance of Purchase Orders to supply quantities of
the Products, at the quoted valid Prices. To use its reasonable
endeavours, where applicable, to provide market entry pricing, if such
is a new Territory from IPC Information Systems Inc.'s perspective and
to provide the Distributor with packaged pricing models where such are
developed by IPC Information Systems Inc. Prices will normally be
provided in US Dollars - if IPC Information Systems Inc. agrees to
provide Prices in other currencies IPC Information Systems Inc.
reserves the right to revise the same to reflect fluctuations in
relevant exchange rates.
2. To supply to the Distributor, at valid quoted Prices, the volume of
spare and replacement parts of the Products as the Distributor may
order necessary to meet the service needs of the Distributor's
customers in the Territory, such volume being previously agreed between
the Distributor and IPC Information Systems Inc.
3. To agree with the Distributor an annual marketing plan which shall
contain relevant details of joint strategy and details of agreed
actions to be performed by the Parties during the course of the
following twelve (12) month period.
4. To provide Product brochures, news of Product updates and results of
relevant market surveys (if any) as may apply to the Territory. IPC
Information Systems Inc. shall also assist the Distributor, to the
extent it is reasonably able to do, with the development of the
Distributor's own market communication plans.
5. To share sales information from other territories to the extent that
the same are relevant to the Territory to support local sales, to use
its reasonable endeavours to leverage local business from IPC
Information Systems Inc.'s global customers as might be present in the
Territory and to visit the Territory from time to time to participate
in sales review meetings and to assist with specific and pre-agreed
major sales.
6 At IPC Information Systems Inc.'s discretion and subject to a minimum
of two (2) working days notice, to provide specialist sales support in
the Territory upon the request of the Distributor and at the
Distributor's expense. Such expense to the Distributor shall comprise
the travel, accommodation and subsistence costs of any specialist staff
provided by IPC Information Systems Inc. to render such support and any
additional materials provided.
7. Where IPC Information Systems Inc. determines that assistance is
reasonably required by the Distributor with (i) the installation and
commissioning of the Products at the first two (2) customer sites in
the Territory; (ii) the installation and commissioning of new products
or significant changes made to the Products; or (iii) subsequent to (i)
and (ii), then IPC Information Systems Inc. shall, subject to the
Distributor paying IPC Information Systems Inc. its quoted charges for
the provision of such assistance, use its reasonable endeavours to
provide such assistance.
8. Where a customer requires provision of IPC Information Systems Inc.
involvement in training and such has been pre-agreed with IPC
Information Systems Inc., IPC Information Systems Inc. will use its
reasonable endeavours to assist, subject to the customer agreeing in
writing to paying IPC Information Systems Inc.'s charges for the same.
9. To provide, at the Distributor's request and expense, any of the
Products for trials at a customer's premises for a minimum period of
three (3) months. Such an arrangement shall be subject to IPC
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Information Systems Inc.'s agreement on a case by case basis and shall
not constitute a sale for the purposes of establishing whether agreed
volumes of sales have been achieved.
B. SUPPORT
1. To provide a third-line support help desk which can be called by the
Distributor during normal office hours as follows: 08.30 to 17.00 US
time Monday to Friday, excluding public and bank holidays. Priority
levels of reported faults shall be determined by IPC Information
Systems Inc. according to the following:
Emergency - service critical
High - service affecting
Medium - non-service affecting
Enquiry -
Between the hours of 08.30 - 17.00 US time Monday to Friday excluding US public
holidays the IPC Information Systems Inc. help desk can be contacted on:
Tel: +1 (203) 339-7189
Outside these hours a voicebank facility is available. The Distributor should
leave a message giving the person's name, Distributor's name, telephone number,
customer's name and a brief description of the problem. The on-call engineer
will be paged and will respond as soon as reasonably possible.
Between the hours of 17.00 - 08.30 US time Monday to Friday and all day Saturday
and Sunday the IPC Information Systems Inc. voicebank can be contacted on:
Tel: +1 (203) 339-7189
All times quoted are US Eastern Standard Time. The Distributor must make
allowance for changing to US Eastern Daylight Savings Time and any local
deviations.
2. To provide agreed training at IPC Information Systems Inc.'s expense
and at a place nominated by IPC Information Systems Inc., to key
technical and sales personnel of the Distributor as detailed in
Schedule 5.
3. To provide the Distributor with such quantities of technical
information written in the English language as IPC Information Systems
Inc. determines is necessary to enable the Distributor to promote and
support sales of the Products in the Territory.
4. To provide advice in regards to room configuration and site
requirements.
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SCHEDULE 4 TO THE AGREEMENT
IPC INFORMATION SYSTEMS INC.'S CONDITIONS OF SALE
The following are IPC Information Systems Inc.'s Standard Conditions as of the
date of signature of this Agreement. IPC Information Systems Inc. reserves the
right to amend these without prior notice.
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Conditions for the Export Sale of Equipment
1. Definitions and Application
"IPC Information Systems Inc." means IPC Information Systems Inc.
"Contract" means these conditions.
"Customer" means Trade Wind Marketing Pty Ltd.
"Equipment" means the things sold or supplied by IPC
Information Systems Inc. to the Customer
under the Contract and includes any
software.
"IPC Group Company" means any company which
directly or indirectly controls or is
controlled by IPC Information Systems, Inc.,
whether through the holding or controlling
of a majority of the voting rights or the
right to appoint or remove a majority of the
board of directors, or otherwise.
2. Content of Contract
2.1 No variation of these Conditions will have effect unless agreed in
writing by IPC Information Systems Inc. and the Customer. These
Conditions will not be varied or replaced by any contract terms
proposed by the Customer.
2.2 No employee of IPC Information Systems Inc. or its agents has authority
to make any warranty, statement or promise concerning the Equipment
except in writing signed by a duly authorised employee of IPC
Information Systems Inc.
2.3 Except where the Customer relies on IPC Information Systems Inc.'s
written advice, it is the Customer's responsibility to satisfy itself
as to the suitability of the Equipment for its needs.
2.4 IPC Information Systems Inc. may make minor alterations to the
specification of the Equipment which do not affect the Equipment's
performance.
3. Consents: Installing The Equipment; Access; Use Of Agent
3.1 This paragraph 3 applies only if the Customer requires installation of
the Equipment.
3.2 The Customer will at its own expense, and in advance of any
installation work:
(a) obtain all necessary consents for the installation and use of the
Equipment, including consents for any necessary alterations to
buildings;
(b) ensure that any floor loading limits will not be exceeded;
(c) provide suitable accommodation, foundations and environment for the
Equipment; including all necessary bunking, conduits and cable trays;
(d) provide electric power needed by IPC Information Systems Inc. in
installing, testing and maintaining the Equipment;
(e) provide a suitable and safe working environment for IPC Information
Systems Inc. personnel and those of its agents;
(f) take up or remove, in time to allow IPC Information Systems Inc. to
carry out installation, any fitted or fixed floor coverings, ceiling
tiles, suspended ceilings and partition covers, and carry out
afterwards any making good or decorator's work required.
3.3 Employees of IPC Information Systems Inc. will observe the Customer's
reasonable site regulations previously advised in writing to IPC
Information Systems Inc. In the event of any conflict between such site
regulations and these Conditions the latter will prevail.
3.4 The Customer will provide IPC Information Systems Inc. at all
reasonable times with full and convenient access to the Customer's and
other premises for the purposes of carrying out IPC
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Information Systems Inc.'s obligations under this Contract. IPC
Information Systems Inc. will normally carry out work during its usual
working hours but may, on reasonable notice, require the Customer to
provide access at other times. At the Customer's request IPC
Information Systems Inc. may agree, exceptionally, to work outside
usual working hours; the Customer will pay IPC Information Systems
Inc.'s reasonable charges for complying with such request.
3.5 At its discretion IPC Information Systems Inc. may employ an agent or
agents to fulfil its obligations in relation to installation.
4. Connection to Network
Installation of the Equipment under this Contract does not include
connection to a telecommunications network. Where the Equipment is to
be connected to a telecommunications network or circuit run by IPC
Information Systems Inc. or a third party, it is the Customer's
responsibility to arrange for such connection to be made, to pay any
connection charge and to comply with any conditions relating to
connection.
5. Delivery and Acceptance
5.1 IPC Information Systems Inc. will deliver the Equipment CIP Incoterms
1990 Edition.
5.2 Where the Equipment is to be delivered or ready for service by a date
specified by the Customer or by IPC Information Systems Inc., such date
is to be treated as an estimate only and IPC Information Systems Inc.
will not have any liability to the Customer for failure to meet that
date.
5.3 If IPC Information Systems Inc. is delayed in or prevented from
delivering or installing the Equipment by any date specified under
paragraph 5.2 due to any delay or default on the part of the Customer,
IPC Information Systems Inc. may (in addition to any other remedies) on
written notice to the Customer, add to the Contract price a reasonable
sum in respect of any additional costs it incurs.
5.4 Where the Equipment is installed under this Contract, but not
otherwise, IPC Information Systems Inc. will carry out any tests
necessary to ensure that the Equipment is in working order. Acceptance
of the Equipment by the Customer will take place on the Acceptance Date
which will be the earlier of:
(a) the date when IPC Information Systems Inc. notifies the
Customer that the Equipment has been made available to the
Customer; or
(b) the date when the Customer begins to use the Equipment.
5.5 Minor faults which do not affect the Equipment's performance will not
prevent the Equipment from being accepted by the Customer, but IPC
Information Systems Inc. will remedy such minor faults within a
reasonable time.
6. Ownership and Risk
6.1 The risk of loss or damage to the Equipment will pass to the Customer
at the time and point defined in Incoterms 1990, as specified in
paragraph 5.1.
6.2 Ownership of the Equipment, excluding any software, will pass to the
Customer on payment of the Contract price in full. At all times before
payment in full:
(a) the Equipment will stand in the Customer's books in the name
of IPC Information Systems Inc.;
(b) the Customer will take appropriate steps to notify third
parties of IPC Information Systems Inc.'s interest in the
Equipment.
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6.3 In the event of threatened seizure of the Equipment, or of appointment
of a receiver or liquidator, or any other event entitling IPC
Information Systems Inc. to terminate this Contract under paragraph 13
the Customer will immediately notify IPC Information Systems Inc. and
IPC Information Systems Inc. will be entitled to enter the Customer's
premises and repossess the Equipment.
7. Limited Warranty
7.1 Subject to the provisions of this paragraph 7, IPC Information Systems
Inc. warrants that each item of Equipment purchased by Distributor will
conform to its written specifications and will be free from defects in
materials and workmanship for a period of twelve (12) months (or any
other period notified to the Customer by IPC Information Systems Inc.)
from the Acceptance Date (the "Warranty Period"). If IPC Information
Systems Inc. is notified of a warranty claim during the Warranty
Period, IPC Information Systems Inc. will replace or (at its option)
repair the faulty part free of charge, provided that:
(a) the Equipment has been properly kept, installed, tested, used
and maintained in strict accordance with the manufacturer's or
IPC Information Systems Inc.'s instructions, if any, and has
not been modified except with IPC Information Systems Inc.'s
prior written consent;
(b) the fault is not due to damage (including lightning and
electrical damage), interference with or maintenance of the
Equipment by persons other than IPC Information Systems Inc.
or its agents;
(c) the fault is not due to a fault in a design or configuration
provided by the Customer.
7.2 This warranty does not cover fair wear and tear.
7.3 In the case of Equipment capable of being removed by the Customer, the
Customer will be required to return faulty Equipment to IPC Information
Systems Inc. freight prepaid. IPC Information Systems Inc. will replace
or repair the faulty Equipment and send back it back to the Customer
freight prepaid.
7.4 IPC Information Systems Inc. does not warrant that any software
supplied under this Contract will be free of all faults or that its use
will be uninterrupted, but IPC Information Systems Inc. will remedy
defects which significantly impair performance within a reasonable
time.
7.5 At its discretion IPC Information Systems Inc. may employ an agent or
agents to fulfil its obligations under this guarantee.
7.6 IPC Information Systems Inc. may make a reasonable charge in respect of
any visit or attempt, at the Customer's request, to repair the
Equipment where either no fault is found to exist, or the fault is not
covered by this warranty.
7.7 THE FOREGOING WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES EXPRESS OR
IMPLIED, INCLUDING BUT NOT LIMITED TO ANY IMPLIED WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE. IPC INFORMATION
SYSTEMS INC. ' S SOLE OBLIGATION AND DISTRIBUTOR'S SOLE AND EXCLUSIVE
REMEDY FOR A BREACH OF THIS AGREEMENT OR OF ANY WARRANTY GRANTED HERE
UNDER SHALL, AT IPC INFORMATION SYSTEMS INC. ' S SOLE OPTION AND
EXPENSE, BE LIMITED TO THE REPAIR OR REPLACEMENT OF THE DEFECTIVE OR
NON-CONFORMING PRODUCT. NO AGENT OR EMPLOYEE OF IPC INFORMATION SYSTEMS
INC. IS AUTHORIZED TO EXTEND ANY REPRESENTATION OR WARRANTY BEYOND THAT
EXPRESSLY PROVIDED HEREIN. THIS WARRANTY SHALL BE SUBJECT TO IPC
INFORMATION SYSTEMS INC. ' S CONFIRMATION OF THE ALLEGED DEFECT OR
NON-CONFORMITY AND DOES NOT INCLUDE AND IPC INFORMATION SYSTEMS INC.
DISCLAIMS ANY LIABILITY FOR ANY LABOR OR PARTS REQUIRED TO REPAIR OR
REPLACE ANY PART OR COMPONENT OF A PRODUCT OR SYSTEM IF SUCH REPAIR OR
REPLACEMENT IS REQUIRED AS A RESULT OF ANY FORCE MAJEURE EVENT, OR
ATTACHMENT, ALTERATION, MISUSE, TAMPERING, ACCIDENT, OR ABUSE OF THE
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PRODUCTS BY DISTRIBUTOR, CUSTOMER OR ANY THIRD PARTY. ANY SUCH EVENT
OR ACTION SHALL VOID IPC INFORMATION SYSTEMS INC.'S WARRANTY GRANTED
HEREUNDER.
7.8 Distributor shall be responsible for that portion of any warranty it
grants to any Customer without IPC Information Systems Inc.' s prior
written approval which exceeds, whether in time or in scope, that
provided to Distributor by IPC Information Systems Inc. under the terms
of this Agreement. Distributor shall indemnify and hold harmless IPC
Information Systems Inc. for any and all losses, damages, expenses and
costs, including attorneys' fees, which arise from or relate to any
claims, actions or proceedings brought by or threatened to be brought
by any Customer in connection with such extended warranties.
8. Software and Documentation
[NOTE: THESE PROVISIONS ARE SUBJECT TO REVISION]
8.1 This paragraph 8 does not apply to the extent that it is inconsistent
with any separate software licence, sublicense or agreement made
between the Customer and (i) any IPC Group Company, (ii) any
Distributor of IPC Products, or (iii) any third party licenser of
software provided in connection with the sale, installation, operation
or maintenance of Products.
8.2 The intellectual property rights in all software, operating manuals,
documents, drawings and information ("the Intellectual Property")
supplied to the Customer remain IPC Information Systems Inc.'s property
or that of IPC Information Systems Inc.'s licensor.
8.3 IPC information Systems Inc. grants the Customer a non-exclusive
non-transferable licence or sublicense to use the Intellectual Property
for the purpose of using the Equipment and for no other purpose. Any
Intellectual Property supplied to the Customer must not be copied,
disclosed or used (except for the purpose for which they are supplied)
without IPC Information Systems Inc.'s written consent.
8.4 The Customer must:
(a) not reproduce the software except to the extent strictly
necessary for proper use of the Equipment and for back-up
purposes, any such permitted reproduction being solely in
object code form;
(b) keep the Intellectual Property in confidence; any disclosure
of it by the Customer is to be made in confidence and only to
the extent strictly necessary for the proper use of the
Equipment. The Customer is responsible for ensuring that such
disclosure does not lead to a breach of this paragraph.
8.5 The Customer must not make modifications to the Software without IPC
Information Systems Inc.'s prior written consent. The intellectual
property rights, including copyright, in any permitted modifications
will vest in IPC Information Systems Inc.
8.6 The Customer agrees to sign any agreement reasonably required by the
owner of intellectual property in the software supplied to the Customer
under this Contract for the protection of that Software.
9. Indemnity
9.1 Subject to the provisions of this paragraph 9, IPC Information Systems
Inc. will indemnify the Customer against all claims and proceedings
arising from infringement(or alleged infringement) of any patent,
design or copyright enforceable in the United States of America, by
reason of the Customer's use or possession of the Equipment. As a
condition of this indemnity the Customer will:
(a) notify IPC Information Systems Inc. promptly in writing of any
allegation of infringement;
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(b) make no admission relating to the infringement; and
(c) allow IPC Information Systems Inc. to conduct all negotiations
and proceedings and give IPC Information Systems Inc. all
reasonable assistance.
9.2 If at any time an allegation of infringement of such patent, design or
copyright is made, IPC Information Systems Inc. may at its own expense
(i) procure for the Customer the right to continue to use the
Equipment, (ii) modify the Equipment so as to avoid the infringement,
or (iiI) replace the Equipment with non-infringing goods, provided that
any such modification or replacement does not affect the Equipment's
performance in a material respect.
9.3 The indemnity in paragraph 9.1 does not apply to infringements
occasioned by the Customer's use of the Equipment in conjunction with
other apparatus or software not supplied by IPC Information Systems
Inc.; nor to infringements occasioned by designs or specifications made
by the Customer. The Customer will indemnify IPC Information Systems
Inc. against claims, proceedings and expenses arising from such
infringements.
9.4 The indemnity referred to in paragraph 9.1 above shall be subject to
the extent of the indemnity being limited to one million ($1,000,000)
US Dollars in respect of all settlements or claims and proceedings (i)
in any period of twelve (12) calendar months or (ii) which relate to
the same or similar facts or events.
9.5 The indemnity referred to in paragraph 9.1 above states IPC Information
Systems Inc.'s entire liability in respect of any infringement or
alleged infringement of third party intellectual property rights and is
in lieu of and replaces all other warranties in that respect including
implied warranties.
10. Charges And Payment
10.1 IPC Information Systems Inc. will invoice the Customer on the Delivery
Date (CIP Incoterms 1990 Edition. The Customer will pay within 30 days
of the invoice date. IPC Information Systems Inc. may charge daily
interest on late payments at a rate equal to 4% per annum above the
Base Lending Rate of Bank of New York.
10.2 Unless otherwise stated, prices and charges are in US Dollars, for
delivery to the point mentioned in 5.1. They do not include Value Added
Tax which will be added if appropriate. They include packing to IPC
Information Systems Inc.'s normal export standards.
10.3 Payment will be in US Dollars to IPC Information Systems Inc.'s
nominated bank account in the United States of America unless otherwise
agreed in writing.
10.4 IPC Information Systems Inc. will be entitled to maintain an action for
the price of the Equipment at any time after payment becomes due even
though ownership of the Equipment has not passed to the Customer.
11. Limitation of Liability
11.1 IPC Information Systems Inc. accepts liability for faults in the
Equipment and for IPC Information Systems Inc.'s own negligence, but
only to the extent stated in paragraph 7 and this paragraph 11. Except
where expressly contained in these Conditions IPC Information Systems
Inc. has no obligation, duty or liability in contract, tort (including
negligence) or otherwise.
11.2 IPC Information Systems Inc. does not exclude or restrict its liability
for death or personal injury resulting from its negligence.
11.3 IPC Information Systems Inc.'s liability to the Customer in contract,
tort (including negligence) or otherwise arising in connection with
this Contract is limited to US $1,000,000.
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11.4 IPC Information Systems Inc. will not be liable to the Customer in
contract, tort (including negligence) or otherwise for any loss
(whether direct or indirect) of profits, business, or anticipated
savings, or for any indirect or consequential loss or damage whatever.
11.5 Each provision of this paragraph 11 limiting or excluding liability
operates separately in itself and survives independently of the others.
12. Matters beyond IPC Information Systems Inc.'s reasonable control
IPC Information Systems Inc. is not liable for any breach of this
Contract caused by matters beyond IPC Information Systems Inc.'s
reasonable control, including Acts of God, fire, lightning, explosion,
war, disorder, flood, industrial disputes (whether or not involving IPC
Information Systems Inc.'s employees), weather of exceptional severity
or acts of local or central Government or other authorities.
13. Termination
13.1 IPC Information Systems Inc. has the right to terminate this Contract
without notice and claim for any resulting losses and expenses if the
Customer:
(a) commits a breach of this Contract or any other contract with
IPC Information Systems Inc., that is capable of remedy, and
fails to remedy the breach within a reasonable time after
written notice to do so; or
(b) commits an irremediable breach of this Contract or any other
contract with IPC Information Systems Inc.; or
(c) is the subject of a bankruptcy order, or becomes insolvent, or
makes any arrangement or composition with or assignment for
the benefit of its creditors, or if any of its assets are the
subject of any form of seizure, or goes into liquidation,
either voluntary (otherwise than for reconstruction or
amalgamation), or compulsory, or has a receiver or
administrator appointed over its assets, or any similar event
occurs under the laws of the jurisdiction where the Customer
was incorporated.
13.2 If IPC Information Systems Inc. delays in acting upon a breach of this
Contract by the Customer that delay will not be regarded as a waiver of
that breach. If IPC Information Systems Inc. waives a breach of this
Contract by the Customer, that waiver is limited to that particular
breach.
14. Export Control
14.1 The Customer may receive equipment, software, services, technical
information, training materials or other technical data ("the
Controlled Supplies") which, because of their origin or otherwise are
subject to the United States of America export control regulations or
the laws or regulations of another country. In such case, provision of
the Controlled Supplies shall be conditional upon the parties obtaining
and providing all necessary consents. The parties shall provide
reasonable assistance to each other to obtain such consents.
14.2 The Customer agrees to comply with any applicable export or re-export
laws or regulations, including obtaining written authority from the US
government if the Customer intends at any time to re-export any items
of US origin to any proscribed destination.
15. Assignment
Neither the Customer nor IPC Information Systems Inc. may assign or
transfer any of their rights or obligations under this Contract,
without the written consent of the other, save that IPC Information
Systems Inc. may without consent assign or transfer its rights or
obligations to any IPC Group Company or to any company where an IPC
Group Company has effective control.
16. Applicable Law, Jurisdiction and Arbitration
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16.1 The construction, validity and performance of this Contract shall be
governed in all respects by the substantive law of the State of New
York, USA applicable to agreements to be made and performed therein.
The parties hereby submit to the nonexclusive jurisdiction of the
courts of the State of New York and the federal courts of the USA
located therein.
16.2 Any bona fide dispute arising out of or relating to this Contract or
the breach, termination or validity thereof, which has not been
resolved within sixty (60) days of notice thereof by the party claiming
a dispute, shall be finally settled by arbitration conducted in
accordance with the International Arbitration Rules of the American
Arbitration Association by three independent and impartial arbitrators,
of whom each party shall appoint one.
16.3 The place of arbitration shall be the State of New York, County of New
York, U.S.A. and all proceedings shall be in English. The arbitration
shall be governed by the substantive law of the State of New York,
exclusive of its conflict of laws rules, and the law applicable to the
arbitration procedure shall be the United States Arbitration Act, 9
U.S.C. Section 1 et seq. Judgment upon the award rendered by the
arbitrators may be entered by any court having jurisdiction thereof.
16.4 The parties agree that (i) the award of the arbitrators shall be the
sole and exclusive remedy between them regarding any claims,
counterclaims, issues or accountings presented or pled to the
arbitrators; that is shall be made and shall promptly be payable in
U.S. dollars free of any tax, deduction or offset; and that any costs,
fees, or taxes, incident to enforcing the award shall, to the maximum
extent permitted by law, be charged against the party resisting such
enforcement; and (ii) the procedures specified in this paragraph 16
shall be the sole and exclusive procedures for the resolution of
disputes between the parties arising out of or relating to this
Contract; provided however, that a party may seek a preliminary
injunction, attachments or other provisional judicial relief if such
action is necessary to avoid irreparable damage or to preserve the
status quo. Despite such action, the parties will continue to
participate in good faith in the procedures specified in this paragraph
16.
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SCHEDULE 5 TO THE AGREEMENT
TRAINING
1. Providing the Distributor makes a minimum of three (3) of its staff
available, IPC Information Systems Inc. shall make available to the
Distributor three (3) places on a training course, at a place to be
designated by IPC Information Systems Inc., but normally within the
United States of America, free of charge covering (i) an initial
introductory training course when the parties enter into this Agreement
and (ii) for each new product range introduced into the Territory for
distribution by the Distributor. All costs for wages, travel and
subsistence for the Distributor's staff shall be payable by the
Distributor and not IPC Information Systems Inc.
2. IPC Information Systems Inc. shall make available two (2) places on a
sales training course to be held at a place to be designated by IPC
Information Systems Inc. in the United States of America. All costs for
wages, travel and subsistence for the Distributor's staff shall be
payable by the Distributor and not IPC Information Systems Inc.
3. Any courses subsequently required by the Distributor, including but not
limited to refresher training and any training that the parties agree
shall take place in the Territory shall be chargeable (trainer's fees,
travel, subsistence and accommodation) by IPC Information Systems Inc.,
payable by the Distributor.
4. Only personnel proficient and suitably qualified to enable an
understanding of the basic principles underlying such product
installation, maintenance and support training shall be permitted to
attend.
5. All training shall be in the English language and all documentation
provided shall be in English. If any interpreter is required by IPC
Information Systems Inc., provision shall be the sole responsibility of
the Distributor.
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SCHEDULE 6 TO THE AGREEMENT
REPAIR RETURN PROCEDURE
1. Introduction
1.1 When it is necessary to return any item of the Products supplied by IPC
Information Systems Inc. the following "Repair Return Procedure" shall
be followed. This procedure covers the standard exchange and return
service.
1.2 The Distributor shall order such spares stockholding as recommended by
IPC Information Systems Inc. for the purpose of ensuring that its
maintenance support obligations to the customer are met.
2. Procedures for return of Products
2.2 Prior to shipment of any item for maintenance exchange, the Distributor
shall send a Maintenance Exchange Request (MEX Request) to IPC
Information Systems Inc. by fax on XXXXX detailing the following
information:
a) The Distributor's MEX account number
b) The IPC Information Systems Inc. partcode and description
c) Name of site and customer
d) Quantity of replacements required
e) The Distributor's fault label reference
f) The proposed shipping details
g) Serial number of the Product
2.2 The faulty Product shall be returned to:
IPC INFORMATION SYSTEMS INC.
[Address]
2.3 All Products returned must be properly packaged to prevent any damage
in transit and have enclosed a fault label in a format to be provided
by IPC Information Systems Inc. The information regarding the fault
supplied on the fault label by the Distributor must be sufficient to
enable the repair to be investigated evaluated.
2.4 Full and complete shipping documents must be enclosed with the
equipment returns comprising:
a) Packing list
b) Pro-forma invoice
c) MEX reference number
d) Fault label for each item
e) Copy of the MEX Request
2.5 The Distributor shall be responsible for all insurance and
transportation costs and customs duties that may be thereby incurred
and suffer the risk of loss or damage to the Products whilst in
transit.
3. Exchange and Return Service
3.1 On receipt of faulty Products from the Distributor at the address
specified in paragraph 2.2 (properly packaged and with all appropriate
documentation as required herein) IPC Information Systems Inc. will,
subject as herein provided, use its reasonable endeavours to deliver
replacement equipment CIP (Incoterms 1990) to the port of import in the
Territory, for collection by the Distributor, within 30 days from such
receipt.
3.2 Any Products (or any parts of a Product) returned to IPC Information
Systems Inc. under these exchange and return arrangements shall (upon
replacement) become the property of IPC Information
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Systems Inc. and the Distributor warrants either that it shall have a
free and unencumbered title to such Products or (where the equipment is
leased or charged) that it shall have obtained all necessary consents
to part with possession and give good title to such equipment to IPC
Information Systems Inc.
4. IPC Information Systems Inc. Warranty on Replacement Products
4.1 If, during the period of three (3) months (or such other period as IPC
Information Systems Inc. and the Distributor may agree in writing) from
when replacement Products leave IPC Information Systems Inc.'s
warehouse for delivery CIP to the Distributor, or within the original
warranty period, whichever is the greater, IPC Information Systems Inc.
is notified of a fault in the replacement Products, IPC Information
Systems Inc. will replace (or at its option) repair the faulty part
free of charge provided that :
4.1.1 the Products have been properly installed, tested kept, used
and maintained in strict accordance with the manufacturers or
IPC Information Systems Inc.'s instructions (if any) and has
not been modified except with IPC Information Systems Inc.'s
prior consent;
4.1.2 the fault is not due to accidental or wilful damage (including
lightning) or any damage caused by mains electrical surges or
failures or electromagnetic interference.
4.2 It will be the Distributor's responsibility to return faulty equipment
to IPC Information Systems Inc. at the address specified in paragraph
2.2 at its own expense (in accordance with Clause 2 to this Schedule 6)
unless IPC Information Systems Inc. agrees otherwise.
4.3 As it is not possible for Software to be tested in every possible
permutation IPC Information Systems Inc. does not warrant that Software
supplied in replacement Products will be free of all faults or that its
use will be uninterrupted but defects which significantly impair
performance will be remedied under this warranty.
4.4 Where applicable IPC Information Systems Inc. does not warrant or
accept liability for calibration of replacement Products nor for the
provision, procurement or replacement of test certificates.
4.5 The parties may, at their discretion (but without absolving themselves
from any contractual responsibility) appoint an agent, agents or
sub-contractors to perform their respective obligations under this
paragraph 4.
5. Return of Replacement Products to the Distributor
5.1 IPC Information Systems Inc. will notify the Distributor as soon as
replacement Products are sent out from IPC Information Systems Inc.'s
warehouse at ________________________.
5.2 IPC Information Systems Inc. will package all replacement Products and
send them CIP (Incoterms 1990) to the port of import in the Territory.
5.3 IPC Information Systems Inc. will supply a packing list (of the
Products) and a shipping invoice.
6. Charges for Replacement Products
6.1 The charges for replacement Products will be the rates set by IPC
Information Systems Inc. from time to time.
6.2 New Product (spares) prices and the repair prices if issued by IPC
Information Systems Inc. will apply for a period of 12 months from the
date of their formal issue within IPC Information Systems Inc., (not
necessarily 12 months from the date of this Agreement). Thereafter such
prices may be revised by IPC Information Systems Inc. from time to
time, IPC Information Systems Inc. giving at least 3 months written
notice to the Distributor.
6.3 All charges are exclusive of VAT, other applicable sales taxes and
duties.
<PAGE>
CONFIDENTIAL
6.4 Upon payment of the extended warranty amount, then all items will be as
per warranty.
7. Payment Terms
7.1 IPC Information Systems Inc. will invoice the Distributor annually on
the 1st October for the following year's extended warranty period.
7.2 Invoices shall be paid by the Distributor to IPC Information Systems
Inc. in US Dollars within 30 days of the date of the invoice.
8. Damaged/Incomplete Product Returns
8.1 If Products are returned to IPC Information Systems Inc. (whether or
not under IPC Information Systems Inc. warranty) without a fault label
or without adequate details on a fault label, or are returned damaged,
incorrectly packaged or incomplete (meaning component parts have been
removed or modified by the Distributor or the Distributor's customer
without prior written consent from IPC Information Systems Inc.) then
any warranty is automatically invalidated.
8.2 Replacement Products shipped to the Distributor pursuant to paragraph
8.1 of this Schedule 6 will be charged at the then current price.
9. Substitute Products
9.1 IPC Information Systems Inc. reserves the right to replace faulty
Products with replacement products which do not have an identical
specifications provided that the replacement product is of a similar
quality and has a similar performance capability.
<PAGE>
CONFIDENTIAL
SCHEDULE 7 TO THE AGREEMENT
SOFTWARE LICENSE
Subject to the terms contained in this Software License, IPC Information Systems
Inc. grants to Licensee a nonexclusive, perpetual, non-transferable, paid-up
license (I)to use the Software furnished pursuant to the Agreement which is
proprietary to IPC Information Systems Inc. or its suppliers, contained as an
integral part of the Products; and (2) to install and use each item of Software
not an integral part of the Products; and (3) to use the associated
documentation. Licensee is granted no title or ownership rights in or to the
Software, which rights shall remain with IPC Information Systems Inc. or its
suppliers.
IPC Information Systems Inc. considers the Software to contain Intellectual
Property Rights and other proprietary and Confidential Information of IPC
Information Systems Inc. and/or its suppliers. Such rights and Information
include, without limitation thereto, the specific design, structure and logic of
individual Software programs, their interactions with other portions of
Software, both internal and external, and the programming techniques employed
therein. In order to protect those rights and maintain the confidential and
proprietary status of the information contained within the Software, the
Software is being delivered to Licensee in object code form only. IPC
Information Systems Inc. or its suppliers holding any intellectual property
rights in the Software, and/or any third party owning any intellectual property
rights in software from which the Software was derived, are intended third party
beneficiaries of this Software License. All grants of rights to use intellectual
property intended to be accomplished by this Software License are explicitly
stated and no additional grants of such rights shall be inferred or created by
implication.
Licensee shall:
X hold the Software in confidence for the benefit of IPC Information
Systems Inc. and/or its suppliers;
X keep a current record of the location of each copy of the Software made
by Licensee;
X affix to each copy of Software made by it, in the same form and
location, a reproduction or the copyright notices, trademarks and all
other proprietary legends and/or logos of IPC Information Systems Inc.
and/or its suppliers, appearing on the original copy of such Software
delivered to Licensee, and retain the same without alteration on all
original copies;
X destroy the Software and all copies at such time as Licensee chooses to
permanently cease using it.
Licensee shall not:
X use the Software (i) for any purpose other than Licensee' s own
internal business purposes and (ii) other than as provided by this
License;
X allow anyone other than Licensee' s employees and agents to have
physical access to the Software;
X make any copies of the Software, except such limited number of object
code copies in machine readable form only as may be reasonably
necessary for execution or archival purposes;
X make any modifications, enhancements, adaptations or translations to or
of the Software;
X attempt to reverse engineer, disassemble, reverse translate, decompile,
or in any other manner decode the Software in order to derive the
source code form or for any other reason.
Licensee may assign collectively its rights under this Software License to any
subsequent owner of the Products, but not otherwise. No such assignment shall be
valid until Licensee (a) has delegated all of its obligations under this
Software License to the assignee; (b) has obtained from the assignee an
unconditional written assumption of all such obligations; (c) has provided IPC
Information Systems Inc. a copy of such assignment, delegation and assumption;
and (d) has transferred physical possession of all Software and all associated
documentation to the assignee and destroyed all of Licensee' s archival copies.
Except as provided above, neither this Software License nor any rights acquired
by Licensee through this Software License are assignable. Any attempt at
assignment of rights and/or transfer of Software which do not strictly comply
with the terms herein shall be void and conclusively presumed a material breach
by Licensee.
IPC Information Systems Inc. warrants that the Software as delivered shall be of
good quality and workmanship for a period of twelve (12) months from the
Acceptance Date. EXCEPT FOR THE LIMITED WARRANTY SET FORTH HEREIN, THE SOFTWARE
IS PROVIDED "AS-IS" AND WITHOUT
<PAGE>
CONFIDENTIAL
WARRANTY OR INDEMNITY OF ANY KIND OR NATURE. IPC INFORMATION SYSTEMS INC.
SPECIFICALLY DISCLAIMS AND BUYER SPECIFICALLY WAIVES ALL WARRANTIES EXPRESSED OR
IMPLIED, INCLUDING BUT NOT LIMITED TO IMPLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE SOFTWARE OR DEFECTS IN THE
TAPE, DISKETTE OR OTHER PHYSICAL MEDIA AND DOCUMENTATION, OPERATION OF THE
SOFTWARE, AND ANY PARTICULAR APPLICATION OF USE OF THE SOFTWARE. LICENSEE
ACKNOWLEDGES THAT THIS LIMITATION OF WARRANTIES WAS A MATERIAL FACTOR IN THE
ESTABLISHMENT OF THE PURCHASE PRICE OF THE PRODUCTS, WHICH PRICE INCLUDES THE
LICENSE FEE.
REGARDLESS OF WHETHER ANY REMEDY HEREUNDER FAILS OF ITS ESSENTIAL PURPOSE, IPC
INFORMATION SYSTEMS INC. SHALL NEVER BE LIABLE ON ACCOUNT OF ANY CLAIM OR CAUSE
OF ACTION OF ANY KIND INCLUDING BUT NOT LIMITED TO TORT, CONTRACT, STRICT
LIABILITY, BREACH OF CONTRACT, BREACH OF WARRANTY OR OTHERWISE, UNDER THIS
SOFTWARE LICENSE OR OTHERWISE TO OR THROUGH LICENSEE FOR INDIRECT,
CONSEQUENTIAL, EXEMPLARY, INCIDENTAL OR PUNITIVE DAMAGES, INCLUDING BUT NOT
LIMITED TO LOSS OF BUSINESS OR BUSINESS INFORMATION, BUSINESS INTERRUPTION, LOST
PROFITS OR OTHER ECONOMIC DAMAGE, EVEN IF IT HAS BEEN ADVISED OF, HAD REASON TO
KNOW, SHOULD HAVE KNOWN OR KNEW OF THE POSSIBILITY OF SUCH DAMAGES. LICENSEE
ACKNOWLEDGES THAT THE FOREGOING SENTENCE REFLECTS AN INFORMED, VOLUNTARY
ALLOCATION BETWEEN THE PARTIES OF THE RISKS (KNOWN AND UNKNOWN) THAT MAY EXIST
IN CONNECTION WITH THIS SOFTWARE LICENSE, THAT SUCH VOLUNTARY RISK ALLOCATION
WAS A MATERIAL PART OF THE BARGAIN BETWEEN THE PARTIES AND THAT THE ECONOMIC AND
OTHER TERMS OF THIS LICENSE WERE NEGOTIATED AND AGREED TO BY THE PARTIES IN
RELIANCE ON SUCH VOLUNTARY RISK ALLOCATION.
NOTWITHSTANDING ANYTHING HEREIN TO THE CONTRARY, IPC INFORMATION SYSTEMS INC.' S
SOLE LIABILITY AND LICENSEE'S SOLE AND EXCLUSIVE REMEDY UNDER THIS WARRANTY WILL
BE IPC INFORMATION SYSTEMS INC. ~ S USE OF REASONABLE EFFORTS TO CORRECT ERRORS
IN THE SOFTWARE OR, IN IPC INFORMATION SYSTEMS INC. ~ S SOLE DISCRETION, TO
REFUND THAT PORTION OF THE PURCHASE PRICE, AS DEPRECIATED ON LICENSEE' S BOOKS,
APPLICABLE TO THE PORTION OF THE SOFTWARE WHICH IS DEFECTIVE.
All Software corrective revisions generally adopted by IPC Information Systems
Inc. during the Warranty Period shall be provided to Licensee at no cost. All
Software enhancements (Upgrades) developed by IPC Information Systems Inc.
during the Warranty Period shall be made available to Licensee at IPC
Information Systems Inc.' s current list price.
In the event of a breach of this Software License by Licensee, Licensee shall be
deemed to have agreed that remedies available at law may not be adequate to
protect the interests of IPC Information Systems Inc. and/or IPC Information
Systems Inc.'s suppliers who may be entitled to equity jurisdiction of the
courts.
HEADS OF AGREEMENT
Premier Information Systems Pty Limited
Trade Wind Marketing Pty Ltd
(on behalf of Flexifax Global Services)
PARTIES: Premiere Information Systems Pty Limited A.C.N. 001 722 292 (formerly
Xpedite International) ("PremInfo") and Trade Wind Group Pty Ltd (A.C.N. 052 100
455 ) ("TWM") and its subsidiaries, including Flexifax Global Services
BACKGROUND
A. This Heads of Agreement represents the agreed understanding between the
parties concerning a new Strategic Partnership in respect of the
products and services herein described.
B. TWM, through its Flexifax Global Services activity teas built up a fax
and email broadcast business and delivers its traffic over a global
network. This network incorporates remote nodes in a number of major
cities around the world.
C. Premlnfo has built a global network, also with nodes located around the
world, to deliver its services which include fax broadcast, fax merge
email broadcast and many other products and services.
PURPOSE AND SCOPE
The Parties wish to enter into a Strategic Partnership whereby the two
operations are integrated to the extent that the TWM traffic is delivered over
the PremInfo global network thus providing gains in efficiency and economies of
scale to the benefit of both parties.
The integration of the operations will enable each party to offer the other its
range of products & services on an agreed wholesale basis. This will allow the
parties to concentrate on, and grow; their core businesses. These products and
services will cover fax broadcast, computer to fax, fax merge, email broadcast,
voicemail, teleconferencing and any other service that may be available from the
parties and of use to customers of the parties
/S/ /S/
/S/
<PAGE>
Heads of Agreement Premlnfo and TWM
INTENTIONS
A. As part of this Strategic Partnership a Wholesale Agreement will be
entered into by the parties for delivery of traffic over the PremInfo
global network with PremInfo being the global network provider for all
fax services and the preferred supplier for other enhanced messaging
services to TWM.
B. Each party will, wherever practical, make access available to the
others clients special saleable features. These features will be
offered on a wholesale basis between the parties with billing being
presented by the party holding that client account.
C. It is the intention under this Strategic Partnership that applications
and TWM specialist services will be developed. For instance, TWM
intents to build up a Media and Database activity which it will make
available as a service to' PremInfo clients.
D. It is expressly agreed that TWM can be free to further develop and add
integrated features to its own front end technology. This will be to
incorporate additional or separate services in co operation with other
'channel partnering' arrangements it may have.
E. TWM has a Voice and Data activity dealing in call centres and such
like. It is the intention under this agreement to make TWM and PremInfo
products and services available to TWG call centre customers.
GENERAL
Customer Migration
That TWM will migrate all its current traffic over to the PremInfo network. This
will be achieved by TWM giving to PremInfo the communication protocols its front
end or Gateway currently uses to transfer traffic via the Tandem. PremInfo will
then prepare a software application that will convert the information into the
PremInfo format suitable for traffic distribution via its own network. The
conversion will take into account customer specific defaults such as 'fine' mode
etc. These conversions will also cover requests for 'statue' reports from
clients and will facilitate an audit trail from TWM to PremInfo. Full details of
the customer migration will be Prepared and agreed to by both parties in the
form of a migration plan.
TWM will have the option of using its own or existing technology, specifically
via the `Flexifax Gateway', or using the PremInfo client interface to deliver
traffic to PremInfo. PremInfo will work with TWM to provide the PremInfo
interface with the TWM 'look and feel' after discussions and agreement with TWM.
PremInfo will
/s/ /s/
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Page 2
<PAGE>
Heads of Agreement Premlnfo and TWM
provide the necessary software tools and resources to enable TWM to do this in
future.
Billing
The existing clients of PremInfo and TWM and any new clients as notified to
PremInfo will halve billing data sent to them by TWM Premlnfo will deliver call
details to TWM in an agreed soft formatas detailed in the Wholesale Agreement.
TWM will be responsible for invoicing and for bill collection for its registered
clients.
PremInfo to provide daily traffic statistics to TWM.
TWM will pay PremInfo the cost of delivery within invoice. Research &
Development 60 days of the date of the invoice.
Research and Development
Subject to further definitive discussions it is also agreed that the Strategic
Partnership agreement will give TWM access to PremInfo local R&D at agreed rates
per hour. Similarly TWM will give PremInfo access to R&D time at agreed rates
per hoar. In this way product development and enhancements can be implemented
for the benefit of both parties. To this end PremInfo and TWM agree to make
available the necessary software tools and resources to enable the other to
`badge' the products.
Tariffs.
1. Traffic Originating in Australia
1.1 Delivery within Australia
The initial agreed tariffs are based on TWM's termination mix and volume
provided to PremInfo by TWM.
For total minutes/month of 1,300,000 - average domestic price A$0.155 For total
minutes/month of 1,300,001 or more- average domestic price A$0.152
1.2 For international traffic - as per wholesale price list to be agreed
2. Traffic Originating outside Australia
2.1 New Zealand and Singapore. PremInfo to provide wholesale rates through
Premiere Technologies Inc's. operating companies in these areas - to be agreed
2.2 Existing TWM traffic originating from London, Switzerland and Vancouver.
PremInfo to coordinate wholesale rates thorough Premlnfo operating companies in
these areas or sale of the current minutes as soon as possible.
Territories
/s/ /s/
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Page 3
<PAGE>
Heads of Agreement Premlnfo and TWM
This agreement covets originated traffic from customers in Australia, New
Zealand.
Under this Strategic Partnership, TWM may start up a similar activity in any
other country and establish local access to that countries local node and
receive the appropriate wholesale tariffs for that country. The levels and
arrangement will be determined by each country's arrangement. This agreement
also provides for access to each party's products and services internationally
at wholesale rates to be agreed from time to time and location to location.
TWM currently has originated traffic from Vancouver, London and Switzerland. The
parties agree to determine how this traffic is going to be handled.
Staffing
As a result of this Strategic Partnership there will be some staff
rationalisation in TWM PremInfo agrees to help find TWM staff made redundant
alternative employment where possible with PremInfo or with organisations they
have close relationships with.
Timing and implementation
The parties agree that the migration process must be completed quickly to
minimise the time that the two networks are operating in parallel but with
reduced traffic for TWM The parties agree that an implementation plan must be
established and put in place within four days of signing TWM his Heads of
Agreement The Parties agree to use their best endeavours to migration all
customers within four weeks of finalising the wholesale agreement.
Approval
This Strategic Partnership agreement is subject to board approvals by Trade Wind
Group Pty Ltd. Flexemessaging.com, Inc. and Trade Wind Communications Limited.
/s/ /s/
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Page 4
WHOLESALE AGREEMENT
DATED: 1999
BETWEEN
TRADE WIND MARKETING PTY LIMITED
("TWM")
AND
PREMIERE INFORMATION SERVICES PTY LIMITED
("Premiere")
<PAGE>
TABLE OF CONTENTS
Clause Page No.
1.0 RECITALS
2.0 PURPOSE AND SCOPE
3.0 DEFINITIONS AND INTERPRETATION
3.1 Definitions
3.2 Interpretation
4.0 DUTIES OF TWM
5.0 DUTIES OF PREMIERE.
6.0 CHARGES
7.0 BILLING
8.0 PAYMENT
9.0 INTELLECTUAL PROPERTY
10.0 TERM
11.0 TERMINATION
12.0 NON-COMPETITION
13.0 GST
14.0 DISPUTE RESOLUTION
15.0 FORCE MAJEURE
16.0 RESTRICTION OF USE OF TANDEM
17.0 SEVERABILITY
18.0 CONFIDENTIALITY
19.0 ASSIGNMENT
20.0 SECURITY
21.0 COSTS
22.0 LAW
23.0 NOTICES
SCHEDULE 1 - SERVICES
SCHEDULE 2 - CHARGES
SCHEDULE 3 - SERVICE LEVEL AGREEMENT
SCHEDULE 4 - BILLING OBLIGATIONS
<PAGE>
WHOLESALE AGREEMENT
PARTIES: Trade Wind Marketing Pty Ltd ACN 052 100 455, of 27th Floor,
Grosvenor Place, 225 George Street, Sydney, NSW, 2000 ("TWM")
AND: PREMIERE INFORMATION SYSTEMS PTY LIMITED, ACN 001 722 292 of
Level 5, 120 Sussex Street Sydney, NSW, 2000 ("Premiere")
1.0 RECITALS:
1.1 The Parties have signed a Heads of Agreement dated 7th
September, 1999 under which they agree to form a
strategic partnership concerning the sales and
provision of certain enhanced fax and messaging
services, and to enter into a Wholesale Agreement for
the delivery of certain traffic generated by TWM's
customers via the Premiere global network.
1.2 This Agreement is the Wholesale Agreement referred to
in the Heads of Agreement.
2.0. PURPOSE AND SCOPE
Premiere is a provider of broadcast faxing and other enhanced
fax or messaging services more fully described in Schedule 1
(the "Services"). TWM wishes to supply its customers generating
certain traffic in Australia with the Services by sending its
fax traffic (and, at its sole discretion, other enhanced
messaging traffic) through the Premiere network. Premiere has
agreed to enter into this Agreement with TWM.
3.0 DEFINITIONS AND INTERPRETATION
3.1 Definitions
In this Agreement:
" Agreement" means this Agreement, including its Schedules, as
varied from time to time in accordance with its terms;
`Confidential Information" of a party includes all information
marked as confidential by that party or any of its Related
Bodies Corporate or which the recipient knows or ought
reasonably to be aware is confidential (regardless of its form
and whether the other party becomes aware of it before or after
the date of the Agreement) but excludes information that is
public knowledge otherwise than as a result of a breach of the
obligations of confidentiality under this Agreement;
"Commencement Date" means the date of execution of this
Agreement;
"Computer System" means the computer system comprising physical
equipment, system and application software utilised by TWM and
any replacement computer system used by TWM from time to time;
<PAGE>
"Customer" means a customer of TWM which acquires any of the
Services;
"Equipment" means the computer hardware and software specified
in Schedule 1;
"GST, GST Law" and other terms used in this clause which have
definitions in the A New Tax System (Goods and Services Tax)
Act 1999 have the meanings provided in those definitions and
any other applicable legislation and any ruling whether binding
or non-binding;
"Insolvency Event" means any of the following events;
(a) a receiver, manager, liquidator, provisional liquidator,
receiver and manager, trustee, administrator, controller
or similar officer is appointed in respect of any asset
of either party;
(b) either party becomes, is, or is deemed under any
applicable law to be insolvent or unable to pay its
debts as they fall due;
(c) any writ of execution, garnishee order, injunction, or
similar order, attachment, distress or other process is
made, levied or issued against or in relation to any
asset of either party.
"Intellectual Property Rights" means all intellectual property
rights including (but not limited to) copyright, trade mark,
design, patent, circuit layout rights, trade secrets,
confidential information or other proprietary rights, or an
rights to registration of such rights whether created before or
after the date of this Agreement.
"Related Body Corporate" has the meaning given in sections 9 of
the Corporations Law.
"Service Level Agreement" means the Service Level Agreement set
out in Schedule 3, as amended and updated from time to time.
"Service" means the telecommunications and related services set
out in Schedule 1, as varied from time to time in accordance
with this Agreement.
"Special Products" means but is not limited to the TWM front
end and Gateway technology providing special messaging services
and enhancements through which TWM customer traffic is directed
and as a result provides enhancements, value added services and
features etc and is enhanced with added features/services from
time to time.
"Software" means the computer software referred to in Schedule
1 and any upgrades, variations or amendments of that software.
"$" means the lawful currency of the Commonwealth of Australia
"Tandem Switch" refers to TWM's system by which it receives and
transmits fax broadcasts and point to point traffic on behalf
<PAGE>
of its customers and constitutes separately the hardware and
licensed Flexifax application software that enables the switch
to be used for the Flexifax fax distribution purpose.
3.2 Interpretation
In this Agreement:
headings are for convenience only and do not affect
interpretationand unless the context indicates a contrary
intention:
(a) words denoting the singular number include the plural
and vice versa; words denoting individuals include
corporations and vice versa; and words denoting any
gender include all genders;
(b) references to clauses and Schedules are references to
clauses and Schedules of this Agreement;
(c) references to this Agreement and any deed, agreement or
instrument will be deemed to include references to this
Agreement and the deed, agreement or instrument as
amended, novated, supplemented, varied or replaced from
time to time;
(d) references to any party to this Agreement include its
successors or permitted assigns;
(e) references to any legislation or to any section or
provision thereof includes any statutory modification
or reenactment, any substituted statutory provision,
and ordinances, bylaws, regulations and other statutory
instruments issued under them; and
(f) references to currency are to Australian dollars.
4.0 DUTIES OF TWM
TWM will be responsible for:
(a) selling, marketing (in some cases jointly) and
promoting the Services, including TWM services it has
developed using its own front end and Gateway
technology ("Special Products");
(b) ongoing account management all of the TWM Customer
accounts;
(c) providing customer telephone service and technical
support services in accordance with the Service Level
Agreement which will be entered into by the parties on
terms to be agreed by the parties (the "Service Level
Agreement") and for informing its own customers that
they should amend their lists, where there have been
reports of unwelcome call numbers, when requested to do
so;
(d) invoicing the TWM Customers and collecting payments in
accordance with invoices from those Customers;
(e) providing installation, training and support services
for the Services' applications to its own staff and
customers; and
<PAGE>
(f) integrating Web based products and gateway with the
Premiere system in conjunction with Premiere and tools
provided by Premiere with each party bearing its own
costs, or as otherwise reasonably agreed by the
Parties.
(g) TWM may enhance its Special Products and provide
additional services to TWM customers in anyway it sees
fit. Premiere will be offered badging rights to
appropriate Special Products under mutually agreed
terms.
5.0 DUTIES OF PREMIERE
Premiere will be responsible for:
(a) providing TWM with the Services in accordance with the
Service Level Agreement and tools to allow TWM to
rebadge the service if required under mutually agreed
terms. (b) providing TWM with accurate billing data in
accordance with clause 7 of this Agreement;
(c) maintaining the enhanced fax and messaging network
(which includes network reliability, speed and capacity
and all associated integrating software) in accordance
with the Service Level Agreement which will be entered
into by parties on terms to be agreed by the parties;
(d) providing daily and monthly operations reports which
include information such as customer's monthly usage,
traffic profiles and other relevant operational data in
accordance with the Service Level Agreement;
(e) providing customer telephone service and technical
support services at its cost in accordance with the
Service Level Agreement;
(f) providing Premiere staff members to assist in the
co-ordination and the implementation of the migration
process, at its own cost;
6.0 CHARGES
(a) The charges current on the date of this Agreement are
set out in Schedule 2 (the "Charges"). Premiere will
not increase the Charges for the first 12 months of
this Agreement. The charges shall be reviewed every six
months in good faith and when applicable adjusted to
take into account trends in telecommunications industry
tariffs in Australia. If the revised charges are not
acceptable to TWM then TWM will be able to terminate
this agreement giving 90 days notice of intention to do
so.
(b) The charges are based upon Australian originated
traffic. It is agreed that TWM can start other similar
operations under similar Strategic Partnership
arrangements with other Premiere organisations. Under
this Agreement Premiere will assist in these
discussions with the local Premiere organisation.
<PAGE>
7.0 BILLING
1. Premiere will send to TWM raw billing files for the
Services provided by Premiere for the previous week each
Friday. This will be sent before 10 a.m. for processing
by TWM. An additional billing file to cover the last few
days of the month is to be sent before 10am on the day
following the last day of the month.
2. At the end of each month, Premiere will issue an invoice
to TWM, in a form set agreed by the parties, for Charges
relating to the Services provided by Premiere to TWM in
the preceding month. This will include an invoice to
TWM, in a form set agreed by the parties, for Charges
relating to the Services provided by Premiere to TWM in
the preceding month on the first day of the following
month
8.0 PAYMENT
Except to the extent that TWM has disputed an amount in an
invoice, TWM must pay the Charges on each invoice provided by
Premiere within 60 days from the date of the invoice.
9.0 INTELLECTUAL PROPERTY
Each party will retain all right, title and interest to any
intellectual property which that party deploys or makes
available to the other party pursuant to this Agreement.
10.0 TERM
The term of this Agreement will be for an initial period of 12
months(the "Initial Period") which can be extended once for a
further 12 months by agreement between the parties, . Three
months notice to be given by TWM should it not wish to extend
the Agreement beyond the Initial period.. After expiry of the
Initial Period, or any extension, this Agreement will continue
until terminated.
11.0 TERMINATION
Either party may terminate this Agreement:
(i) if the other party materially breaches any
provision of this Agreement or the Service Level
Agreement and does not rectify the breach within
28 days of being notified of the breach.
(ii) if an insolvency event occurs (for example, a
Court orders that a party be wound up) in
relation to the other party;
(iii) If either party gives six months notice to the
other that it wishes to terminate this
Agreement;
<PAGE>
(iv) if there is a total and irreparable failure of
the Equipment which is caused by something that
is beyond the reasonable control and without the
fault or negligence of Premiere
(v) Should there be a change in management or
operational control of TWM or Premiere then TWM
has the right to amend or terminate this
agreement
12.0 NON-COMPETITION
(a) [Redacted]
(b) [Redacted]
(c) Premiere shall be the exclusive fax delivery provider
of the Enhanced Fax Services to TWM customers for the
duration of the Agreement.
(d) Premiere acknowledges that TWM customers will at all
times remain TWM customers even if they are directly
using the Services .
13.0 GST
Notwithstanding any other provision of this Agreement, if
Premiere becomes liable for any amounts of GST on any supplies
made under or in connection with this Agreement then;
(a) Premiere may increase the amounts otherwise payable by
TWM under this Agreement by the amount of the GST; and
<PAGE>
(b) Premiere will provide TWM with a tax invoice which will
enable TWM, where entitled under the GST law, to claim
an input tax credit for TWM's acquisition of that
supply; and
14.0 DISPUTE RESOLUTION
14.1 If any dispute or difference arises between TWM and
Premiere out of or in connection with the performance
of this Agreement or the Services, but not relating to
any question arising from obligations of
confidentiality, either party must give the other
written notice of such dispute within 28 days. The
parties agree that they will make every reasonable
effort to resolve the difference in a commercially
reasonable and amicable way within 45 days of receipt
of notice of the dispute under this clause.
14.2 If resolution under clause 14.1 cannot be reached, a
meeting will be held within 15 days between the
relevant managers of the parties to agree appropriate
corrective actions to be implemented within an agreed
timeframe which is not to exceed 30 days.
14.3 If resolution cannot be reached under clause 14.2, a
meeting will be held between the respective Chief
Executive Officer ( or his or her delegate) of each
party to agree appropriate corrective actions to be
implemented within an agreed timeframe which is not to
exceed 30 days.
14.4 If resolution cannot be reached under clause 14.3, the
parties may jointly appoint an independent expert to
resolve the dispute. If the parties cannot agree on a
suitable independent expert, then either party may
request the President of the NSW Bar Association at
that time to appoint a barrister of not less than 10
years standing to act as an expert and determine the
appropriate corrective action to be implemented within
an agreed timeframe.
14.5 Notwithstanding this clause 14, either party may
commence court proceedings relating to any such dispute
or may properly seek urgent interlocutory relief
without complying with this clause 14
15.0 FORCE MAJEURE
15.1 Neither party shall be liable for any default or delay
in the performance of its obligations under this
Agreement to the extent that such default or delay is
caused, directly or indirectly, by fire, flood,
earthquake, elements of nature or acts of God, acts of
war, terrorism, riots, civil disorders, rebellions or
revolutions, strikes, lockouts, or any other cause
beyond the reasonable control of such party
(individually each being a "force majeure" event),
provided such default or delay could not have been
prevented by reasonable precautions.
<PAGE>
15.2 In such event, the non-performing party will be excused
from any further performance or observance of the
obligations so affected for as long as such
circumstances prevail. Any party so delayed in its
performance will immediately notify the other by
telephone, to be confirmed in writing five calender
days following the inception of such delay, and
describe at a reasonable level of detail the
circumstances causing such delay.
15.3 Premiere warrants that it has implemented a Y2K plan to
minimise the impact, if any, from the 'millenium bug'
and that alternative plans are also in place should
problems, failures or delays occur with any of its
carriers or service providers but does not warrant
against the impact third party suppliers and customers
may have on Premiere's ability to provide the services
due to their systems not being Y2K compliant Premiere
will not be held liable for losses incurred by TWM or
other parties due to problems that occur as a result of
suppliers and customers not being Y2K compliant or
experiencing Y2K related problems.
16.0 RESTRICTION OF USE OF TANDEM HARDWARE AND SOFTWARE
16.1 TWM agrees not to sell, gift or bequeath the right,
license or other entitlement to use the Flexifax Tandem
application software, or means by which TWM has in the
past been legally entitled to use the Tandem switch and
its Flexifax Tandem application software to any person,
business or body corporate for the duration of this
Agreement.
16.2 TWM may at its sole discretion keep, use or dispose of
the Tandem switch hardware and other parts of its
original network.
17.0 SEVERABILITY
If any part of the Agreement is held to be void, invalid or
otherwise unenforceable, it will be deemed to be severed from
this Agreement and the remainder of this Agreement will
continue in full force and effect.
18.0 CONFIDENTIALITY
Neither party will make a public announcement or disclose to
any person details of the discussions between the parties and
the terms of this Agreement unless it first consults with and
obtains the written agreement of the other party (which
agreement will not be unreasonably withheld), provided that:
(a) following such consultation, no party shall be entitled
to withhold agreement in the case of a public
announcement or notification where and to the extent
that that party is required by law or the listing
requirements of any stock exchange; and
<PAGE>
(c) a party is entitled to make such disclosures to the
directors, secretaries, professional advisers and
bankers of that party so long as the party uses all
reasonable endeavours to ensure that the matters
disclosed are kept confidential.
19.0 ASSIGNMENT
Neither party may assign its rights or obligations under this
Agreement without the prior written consent of the other, whose
consent shall not be unreasonable withheld
20.0 SECURITY
It is agreed that for the first twelve months of this agreement
that the registered customer base of Flexifax can be used as
security against unpaid invoicing triggered under clause 10
(ii) in the event that TWM is unable to rectify any
indebtedness after being given 60 days to do so. The value of
this customer base is to be calculated based upon one and a
half times the total annualised revenue based on carried
traffic under this agreement generated from the total customer
base by Flexifax and will be purchased in full by Premiere and
a portion used to offset the debt. This calculation will be
based upon the total annualised TWM customer revenue calculated
from the average of the Flexifax monthly customer revenue
figures of the previous three operational months seasonally
adjusted. Any surplus after repayment of debt is to be returned
immediately to TWM.
21.0 COSTS
Except as otherwise agreed in writing by the parties, each
party shall bear its own costs and expenses in connection with
action taken by it in relation to this Agreement.
22.0 LAW
This Agreement is governed by the laws of New South Wales and
each of the parties submit to the jurisdiction of the Courts in
that State.
23.0 NOTICES
(a) All notices and other communications required or
permitted to be given or served under this Agreement
may be delivered by hand, by pre--paid post or by
facsimile as follows:
<PAGE>
To: The Company Secretary
Trade Wind Marketing Pty Limited
Address: 27th Floor, Grosvenor Place
225 George Street
SYDNEY NSW 2000
Fax: (02) 9250 8890
To: The Company Secretary
Premiere Information Systems Pty Limited
Address: Level 5, 120 Sussex Street
SYDNEY NSW 2000
Fax: (02) 9338 0193
(b) Notices shall be deemed to have been received, in the
case of personal delivery, on the day of delivery, in
the case of posting by pre-paid post, on the second day
after posting, and in the case of a facsimile, on the
day immediately following the date of despatch and
confirmation of the answerback code of the receiving
party's machine.
<PAGE>
DATED: 1999
SIGNED for and on behalf of )
Trade Wind Marketing Pty Limited )
ACN 052 100 455 by )
..................................
In the presence of: ) (Signature)
.....................................................
(Signature of Witness)
.....................................................
(Name of Witness in Full)
SIGNED for and on behalf of )
PREMIERE INFORMATION SYSTEMS )
PTY LIMITED ACN 001 722 292 by )
..................................
In the presence of: ) (Signature)
.....................................................
(Signature of Witness)
.....................................................
(Name of Witness in Full)
Partnership Agreement
Trend Micro Australia Pty Ltd
Flexemessaging.com Inc
(on behalf of Trade Wind Group and Flexifax Global Services)
Parties: Trend Micro Australia Pty Ltd A.C.N 077 055 817 and Flexemessaging.com
Inc on behalf of Trade Wind Group Pty Ltd A.C.N. 003 607 074 and its
subsidiaries including Flexifax Global Services.
Background
A. This Partnership Agreement represents the agreed understanding
between the parties concerning Flexifax through traffic on the
Flexemessaging Gateways which will be swept for viruses on a
continuous basis by a resident Trend Micro anti virus
application
B. Flexemessaging.com, through its messaging activity has built
up a fax and email broadcast service and delivers traffic
through ISPs and Carriers. A significant and growing
percentage of this traffic is being sent in the form of
emails.
C. Trend Micro has developed anti virus software that has been
designed to perform a continuous scan for viruses on traffic
being processed by Gateways, servers and similar applications
Purpose and Scope
The parties wish to enter into a Partnership Agreement whereby Flexemessaging
customer traffic is scanned and cleared of viruses in return for every message
being sent out by email from the Gateway being stamped with an acknowledgment to
Trend Micro.
The specific points in this agreement are:-
1. Trend Micro will supply, free of charge, its Trend Micro Anti Virus
software (Application name)and assist to install it into the
Flexemessaging Gateways. There are currently three such Gateways
operating. Additional copies will be installed free of charge whenever the
number of Gateways increases. The cost of recoding the Gateway to install
the Trend Micro will be born by Flexemessaging. The costs of installation
of the application and reporting set up will be born by Trend Micro.
2. In return for Trend Micro providing its antivirus software free of charge
to Flexemessaging, Flexemessaging will stamp each outgoing message with an
agreed statement crediting Trend Micro for the antivirus scan and removal.
3. Trend Micro undertakes to keep the antivirus software updated on a
priority basis. These software upgrades and updates will be done by Trend
Micro on an automatic basis. Trend Micro will provide a reporting system
that will alert the sender and Flexemessaging whenever a virus is detected
or suspected. The form of this reporting to be mutually agreed and may
alter from time to time.
4. It is agreed that Flexemessaging can copy across the Trend Micro
applications for maintenance, hardware change out or Flexemessaging
application upgrade purposes without charge. Trend Micro will leave
procedures if necessary as to how this is to be accomplished.
5. Trend Micro and Flexemessaging agree to jointly or separately issue press
releases concerning this Partnership from time to time.
Agreement
This agreement will initially last for two years and will automatically extend
thereafter unless terminated by either party giving 4 months notice.
The effective start date of this agreement is the date on which fully working
Trend Micro applications are installed and working satisfactorily on the
Gateways and accepted as being so by both parties.
Signed by an authorised officer of each company
/s/ N R Bird /s/ Mark Micallef
N R Bird Mark Micallef
CEO Sales Manager Australia
Flexemessaging.com Inc Trend Micro Australia Pty Ltd
SCOTTISH PACIFIC
BUSINESS FINANCE PTY LTD ACN 008 636 388
Subsidiary of Bank of Scotland
[LOGO]
Undisclosed Factoring Agreement
Member of Factors Chain International.
<PAGE>
-2-
CONTENTS
OVERVIEW
A. SALE OF DEBTS I
1 You Sell Trading Debts We Specify
2 You Must Give Us Details etc. Relating to Transferred Debts
3 Approved and Disapproved Debts
4. Purchase Price of the Transferred Debts
5 When You Are Entitled to the Purchase Price
6 You Are Also Entitled to Excess on Approved Debts
7 Your Further Transfer Obligations
B. DEALING WITH THE DEBTS 3
8 You Will be Our Collecting Agent
9 Collecting Transferred Debts and Our Obligations to Report
10 You Must Not Deal with Transferred Debts
11. Legal Proceedings
12 What Happens if Approved Debts Not Paid?
13. Re-transfer of Disapproved Debts
14 You Must Indemnify Us Against Loss
C. OUR CHARGES 6
15. We are Entitled to an Administration Charge
16. We May Adjust the Administration Charge
17. We May Be Entitled to a Discount Charge
18. We are Entitled to a Charge for Old Debts
I9. Minimum Administration Charge
20 Other Charges
D. CONTROL ACCOUNT AND PAYMENTS 7
21 We Will Maintain a Control Account
22 Payments By You and Us
23 We Can Set-off Money You Owe Us
24 We May Withhold Payment
E. YOUR WARRANTIES AND OTHER OBLIGATIONS 8
25. Your Warranties in Relation to the Transferred Debts
26. Your Other Warranties
27 Your Record Keeping Obligations etc.
28. Your Other Obligations
F. VARYING AND ENDING AGREEMENT 12
29. We May Vary this Agreement
30 Ending this Agreement
31. Effect of this Agreement Ending
32. We Will Re-transfer Remaining Debts
33. Compensation on Ending of this Agreement
G. MISCELLANEOUS 13
34. Miscellaneous Charges and Interest
35. Reimbursement of Payments
36. Assignment and Agency
37. Specimen Signatures etc.
38. Waiver, Consents and Approvals
39. Power of Attorney
40. Notices and Service
41. Governing Law and Courts
42. Evidence
43. Joint and Several Liability
44. Authority to Fill in Blanks, Entire Agreement and Severability
45. Legal and Financial Advice
46. Extended Obligations
47. Special Provisions
H. INTERPRETATION AND DEFINITIONS 17
48. Interpretation
49. Definitions
SCHEDULE 20
<PAGE>
-3-
OVERVIEW
Under this agreement, we will provide factoring facility to you. We purchase
debts owed to you. Those debts arise from you selling goods or providing
services. We specify which debts we will purchase. They called transferred
debts. We normally specify the transferred debts by a general description which
includes future debts. How much we pay, and when we pay, depend on whether we
have classified the debt as an approved debt or a disapproved debt.
This diagram is an example of a typical arrangement where the debt is an
approved debt
[graphic omitted]
The arrangement has many features. Three are of particular interests:
o You can receive payment much earlier than would otherwise be possible.
For an approved debt, the purchase price is an agreed percentage
(generally 80%) of the face value of the debt. We will pay the purchase
price an agreed time after the debt arises, but you can call for it to
be paid early. You then pay a discount charge. If we receive more than
the purchase price in payment of the debt, that excess is paid to you.
The purchase price for a disapproved debt is the amount we receive in
payment of the debt.
o You will generally retain contact with the debtor. That means you are
responsible for collecting the debt on our behalf. While the debtor may
draw the cheque in your favour, the debtor must post it to our post
office box.
o We provide regular reports to you accounting for your dealings with us
and a monthly aged listing of transferred debts.
This overview is only a summary of some features of the actual factoring
agreement. You should read the following pages carefully. They set out the terms
of the agreement.
<PAGE>
UNDISCLOSED FACTORING AGREEMENT
This is an agreement between us, Scottish Pacific Business Finance Ply Ltd. and
you, the person named in item 1(c).
A. SALE OF DEBTS
1. You Sell Trading Debts We Specify
1.1 You transfer to us completely and unconditionally all Trading debts
owed to you that we specify to you. You do so in return for us paying
you $1.00 (which you acknowledge you have received), entering into this
agreement with you, and for other valuable consideration.
1.2 We may specify both existing and future debts by type or general
description. We may, from time to time, vary our specification.
1.3 Debts in existence when specified become ours immediately. Debts which
do not exist when specified become ours immediately they come into
existence.
2. You Must Give Us Details etc. Relating to Transferred Debts
2.1 You must promptly give us any details we ask for in relation to
+transferred debts. You must give us the details in the form we
require.
2.2 You must also promptly give us each of the following:
o a duplicate of each Invoice.
o any information you have in relation to the validity of the
+transferred debt; the creditworthiness of the +debtor; any
dispute or possible dispute about the +transferred debt, the
+contract or, the +goods or +services, and anything else that
might affect the collection of the +transferred debt or its
value to us.
o any original or copy documents or information we ask for in
respect of the +transferred debt, the transfer of the
+transferred debt, the +contract, the +goods or +services, you
or the +debtor.
o any proof we ask for that the +goods have been accepted by the
+debtor or the +services have been provided to the +debtor to
the satisfaction of the +debtor, and any documents evidencing
your or the +debtor's compliance with the +contract.
o any proof of transfer of a +transferred debt that we ask for.
2.3 You must give us each of those things as soon as possible. But the
duplicate Invoice must, in any event, be delivered at least fourteen
days before the +debtor is due to pay.
2.4 You must do anything which we ask to enable us to verify the
+transferred debts. We may, in your name, verify a +transferred debt
with the +debtor.
3. Approved and Disapproved Debts
Each +transferred debt is an Approved debt, unless we decide to
classify it as a Disapproved debt. We have a discretion to classify any
+transferred debt as a Disapproved debt at any time (including during
the twenty-four hour period referred to in clause 5.1), and to
reclassify it as an Approved debt. We do not have to give vou notice of
any of those decisions.
* Each reference lo an item means the relevant item in the schedule, see clause
48.3
+See definitions on pages 17 - 19
<PAGE>
-2-
4. Purchase Price of the Transferred Debts
4.1 The purchase price for an +approved debt is the percentage stated in
item 2 (or a different percentage that we decide on at any time at our
discretion) of the balance of the +net value of the +transferred debt,
less any allowances, discounts and credits we allow. The purchase pace
for a +disapproved deb, is the amount of cleared funds we actually
receive in payment of the debt.
4.2 If we decide to decrease the percentage, you are entitled to give us
notice, within seven days after we advise you of the decrease, that you
are ending the agreement. If you do, the percentage will not be
decreased. The agreement will end at the end of the period stated in
item 3(c). That period commences on the day you give notice.
5. When You Are Entitled to the Purchase Price
5.1 You are entitled to payment of the purchase price of an +approved debt
on the day before the Recourse date. You may, however, call for early
payment of the purchase price - by one payment or a number of payments
at any time twenty-four hours after you deliver the relevant +invoices
to us. If that is on a day that our +principal office is not open for
business, you will instead be entitled to payment at the same time on
the next business day. If you call for early payment more than once in
any week, we may, at our discretion, aggregate payments so that payment
is not made more than once in any week. We are entitled to a discount
charge under clause 17 if the purchase price is paid early.
5.2 You are entitled to payment of the purchase price of a +disapproved
debt when, and to the extent that, we receive cleared funds in payment
of the debt. You will be entitled to that amount by the end of the
period specified in item 6 after the day we received the cleared funds.
5.3 If we classify an +approved debt as a +disapproved debt, we are
immediately entitled to any part of the purchase price we have paid you
for that debt that is in excess of the amount we have received from the
+debtor for that debt. You are entitled to any balance of the purchase
price of that +disapproved debt in accordance with clause 5.2.
6. You Are Also Entitled to Excess on Approved Debts
If the +debtor pays more for an +approved debt than we have paid you
for it, you are entitled to the excess, to no more than the +net value,
when we have received cleared funds in payment of the debt. You will be
entitled to that amount by the end of the period specified in item 6
after the day we received the cleared funds.
7. .Your Further Transfer Obligations
7.1 If we ask you to, you must do anything necessary to perfect a transfer
of a Transferred debt to us together with the benefit of any related
+guarantee or +security interest. That may include a transfer at law.
7.2 If, for any reason, a Transferred debt does not become ours, you must
do anything we ask at any time to make it become ours.
<PAGE>
-3-
B. DEALING WITH THE DEBTS
8. You Will be Our Collecting Agent
8.1 You will be our collecting agent for the purpose of collecting and
enforcing payment of +transferred debts. The terms of your appointment
are as follows:
(a) You must promptly and efficiently carry out those tasks, free
of any charge to us and in accordance with any directions
which we may give.
(b) You must endorse each +invoice with a notice, in a form we
specify from time to time, which directs the +debtor to send
the payment to our post office box number.
(c) You must use all reasonable endeavours to ensure that the
+debtor pays a +transferred debt by drawing a cheque payable
to you which the debtor posts to our post office box number
(d) Within seven days after the commencement of each month, you
must deliver to us a statement showing, as at the end of the
previous month, the +transferred debts owing by each +debtor
and the period for which the debt has been outstanding and an
aged payables ledger. Each must be in a form approved by us.
Within those seven days, you must also give us copies of any
other records, reports and statements concerning the
+transferred debts or the +debtors which we require.
(e) If, contrary to clause 8.1(c), you receive money, cash,
cheques, money orders, negotiable instruments or other
instruments comprising a payment on account of a Transferred
debt you must immediately deliver them to us in the identical
form that you received it. Instead of delivering those things
to us you must, if we require it, deposit the money, cash,
cheques, money orders, negotiable instruments and other
instruments into a bank account specified by us.
(f) Unless you have our consent, you must not issue a receipt or a
statement, to any +debtor in relation to any +transferred
debt.
(g) Unless you have our consent, you have no authority to release
or compound any +transferred debt or to claim to do so, or to
do anything or not do anything, or permit something to be done
or not done, which results, or may result, in a right to
recover any +transferred debt or right in respect of or under
any +transferred debt being prejudiced or affected.
(h) You must tell us immediately a +debtor claims to be entitled
to an allowance, discount or credit.
8.2 We may, at our discretion, withdraw your authority under clause 8.1 by
giving you notice. We may do so either completely, or in relation to
any particular +transferred debt or +debtor, or in relation to any type
of +transferred debts or +debtors. We may, at our discretion. restrict
your authority or change your authority in any way by giving you
notice.
8.3 We may open any mail addressed to you which we receive. We may keep
anything which relates substantially to a +transferred debt. As the
+transferred debts belong to us, you irrevocably authorise us and each
of our +authorised officers to cash cheques, money orders, negotiable
instruments and other Instruments, even though they may be drawn in
your favour, and to retain the proceeds.
9. Collecting Transferred Debts and Our Obligations to Report
9.1 If we believe it is appropriate for the purpose of collecting
+transferred debts, we will mail a monthly statement to +debtors. So
long as your authority has not been withdrawn under clause 8.2 and we
have not given notification under clause 9.2, the monthly statement
will be sent on your letterhead and will ask the +debtor to pay by
drawing a cheque in your favour and then posting it to our post office
box number.
9.2 We may notify any +debtor that a debt has been transferred to us if we,
in our discretion, consider it is necessary or desirable to do so. We
do not have to notify you. We may direct the +debtor to pay the
See clause 9.1
See definitions on pages 17 - 19
<PAGE>
-4-
+transferred debt to us or to any other person. If we ask you to, you
must give notice to a +debtor that a debt has been transferred to us.
We may require you to endorse any +invoice which we specify with a
notice of transfer in a form we specify. If we ask you to, you must
direct a +debtor to pay a +transferred debt to us or to any other
person. You irrevocably authorise us and each of our +authorised
officers to give a notice or direction of that type to a +debtor on
your behalf.
9.3 If we withdraw your authority, you must stop collecting all
+transferred debt and you must not get or attempt to get payment to you
of any +transferred debts. If your authority is only partially
withdrawn, or you are advised that a +debtor has been notified of the
transfer of a +transferred debt:, or we have requested that you direct
a +debtor to pay a +transferred debt to us, you must stop collecting
the +transferred debts and you must not get or attempt to get payment
to you of the +transferred debts. In each case, you must still
immediately deliver to us, in the identical form you received it, the
money, cash, cheques, money orders, negotiable instruments and other
instruments comprising a payment on account of a +transferred debt
which you receive, see Item 9 of schedule.
9.4 If clause 9.3 applies we have the sole right to collect and enforce
payment of the relevant +transferred debts and you must do anything we
require to help us to collect them We may collect those +transferred
debts in the way we think appropriate. We may give time for payment, or
release or compromise any of those +transferred debts as we think fit.
If we do, that does not prejudice our rights under this agreement or
confer any right on you.
9.5 You must, at your expense, promptly mail invoices, unless we advise you
that we wish to mail them. You must tell us immediately a +debtor
claims to be entitled to an allowance, discount or credit.
9.6 We will maintain a debtors' ledger in relation to +transferred debts.
9.7 We will give you a statement each +month containing an aged analysis of
the amounts owed by each +debtor, and any money we receive in relation
to +transferred debts.
10. You Must Not Deal with Transferred Debts
Because the +transferred debts belong to us, you must not
(a) collect or enforce payment of any +transferred debts, or
attempt to do so, except in accordance with your authority.
(b) create or attempt to create a +security interest over any of
them, or deal or attempt to deal with any of them in any way.
(c) attempt to get a +debtor to pay anything in respect of any
+transferred debt to you or anyone else except us, except in
accordance with your authority.
(d) adjust (whether by giving allowances, discounts, credits or in
any other way), litigate, enforce compromise, set-off or
discharge any +transferred debt, or allow anything to happen
which might put someone else in the position of being able to.
(e) issue credit notes in respect of a +transferred debt without
our approval. If we give approval, you issue the note on our
behalf. We may give approval in relation to a specific debt or
by a general description of the extent of your authority. We
may, at our discretion, change or revoke that authority. You
must report on the credit notes which are issued in the way we
require.
11. Legal Proceedings
11.1 We are entitled at our discretion, to commence legal proceedings in
relation to a +transferred debt. We may conduct the proceedings in your
name. We may settle any claim by or against us or you on any terms we
think fit.
+See definitions on pages 17 - 19
<PAGE>
-5-
11.2 You may ask us to commence legal proceedings to recover a Transferred
debt. We may agree to do so if you give us security that we are
satisfied with in relation to the costs of those proceedings and the
possibility of an adverse result. If you do not provide that security,
or if proceedings have not been commenced within fourteen days after
you have provided it, you may ask us to re-transfer the debt. If you do
that, you must repay the amount we paid you for the debt, less anything
we have received in relation to it. When you repay that amount, the
debt is re-transferred to you without the need for any document to
effect the re-transfer. We will formally re-transfer it to you, at your
expense, if you ask us to. We warrant that, on re-transfer, you will
obtain the same title (if any) as we receive. However, we give no
warranty as to the validity, enforceability or amount of the debt.
11.3 If we ask you to, you must, at your expense, make available to us any
books, documents or other evidence we reasonably require in relation to
any proceedings concerning a Transferred debt, or proceedings under
this agreement, a +contract or a related agreement. You must also
attend, and get other people to attend, to give evidence in those
proceedings
12. What Happens if Approved Debts Not Paid?
If, by the Recourse date, we have not received cleared funds on account
of an +approved debt at least equal to the amount we paid you for the
Approved debt, you must pay us the shortfall. You will then be entitled
to anything which the +debtor pays after the +recourse date in respect
of that debt. You will be entitled to that amount by the end of the
period specified in item 6 after the day we receive the cleared funds.
However, you must continue to deliver to us money, cash, cheques, money
orders, negotiable instruments and other instruments comprising a
payment on account of that debt in the identical form that you received
it.
13. Re-transfer of Disapproved Debts
We are entitled, at our discretion, to re-transfer a +disapproved debt
to you at any time. If we decide to retransfer the debt, we will
formally re-transfer it to you, at your expense, if you ask us to. We
warrant that on re-transfer you will obtain the same title (if any) we
received. However, we give no warranty as to the validity,
enforceability or amount of the debt.
14. You Must Indemnify Us Against Loss
14.1 You must continuously, both during and after this agreement,
immediately indemnify us against expenses or losses of any kind that we
may incur in relation to any failure by you to perform your obligations
under this agreement or in relation to a Transferred debt. This
includes a loss which we incur by a +debtor making a claim for which we
may be liable; or because we hand over a payment which we have received
from you, a +guarantor or a +debtor (irrespective of whether we were
obliged to hand over the payment); or on account of duties, forwarder's
fees, storage charges, shipping charges, sales or excise taxes, import
duties or other expenses; or in connection with the transfer of a
Transferred debt to us; or as a result of the breach, inaccuracy or
non-observance of your warranties under this agreement
14.2 You must also continuously, both during and after this agreement,
immediately indemnify us against any expense or loss of any kind that
we may incur in relation to proceedings begun by us under clause 11.
C. OUR CHARGES
15. We are Entitled to an Administration Charge
15.1 We are entitled to an administration charge in relation to all
Transferred debts when you give, or should give, the relevant +invoice
to us. This charge is calculated by multiplying the +net value of those
debts by the percentage stated in item 4(a).
+See definitions on pages 17 - 19
<PAGE>
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15.2 If we, in our discretion, withdraw your authority under clause 8.1 the
administration charge payable by you under clause 15.1 will increase.
The charge will then be calculated by multiplying the +net value of the
+transferred debts by the percentage stated in item 4(b)
15.3 In addition to the administration charge payable under clause 15.1 we
are entitled to an additional administration charge in relation to
Transferred debts which exist at the date of this agreement. This
charge is calculated by multiplying the +net value of those debts by
the percentage stated in item 4(c).
16. We May Adjust the Administration Charge
16.1 We are entitled to adjust the administration charge in order to achieve
our +expected rate of return in relation to Transferred debts. This may
be necessary, for example, if:
o the average +net value of the debts (excluding debts existing
at the commencement of this agreement) during any period of
thirty days is less than the amount stated in item 4(d),
o the number of your +debtors is more than the number stated in
item 4(e), or
o the number of days your ledger turns is more than the number
stated in item 4(f).
16.2 We must give you notice of that adjustment. The adjustment takes effect
on the date and in the manner stated in the notice.
17. We are Entitled to a Discount Charge
17.1 A discount charge is payable by you if we pay you early under clause 5.
1.
17.2 The charge is calculated by multiplying the daily balance of the amount
paid by us on account of the purchase price of the debt (less anything
we have received in relation to that debt) by the daily equivalent of
the +prevailing rate. The charge is calculated from the day the first
early payment is made until the +recourse date. We are entitled to the
discount charge daily or, at our election on a less frequent basis.
18. We May Be Entitled to a Charge for Old Debts
We are entitled to a charge for old debts if we, in our discretion,
withdraw your authority under clause 8.1. That charge applies in
relation to each Transferred debt for which we have not received
cleared funds in payment of the debt on or before the +recourse date.
The charge is calculated by multiplying the +net value of the debt by
the percentage stated in item 4(h). The charge is calculated, and we
are entitled to it, on the day after the Recourse date and on the last
day of each subsequent month.
19. Minimum Administration Charge
19.1 If the total of our administration charges under clause 15 in any
period of twelve +months is less than the amount stated in item 4(i) as
our estimated administration costs, we may adjust the administration
charge for the twelve +months following that period. We must give you
notice in writing of the adjustment.
19.2 We are entitled. as a liquidated sum, to the difference, during the
twelve +months preceding the giving of that notice, or any lesser
period we choose, between our estimated administration costs, and the
administration charges we have actually become entitled to, for the
relevant period.
20. Other Charges
We may also be entitled to fees, charges and interest under clause 34.
+See definitions on pages 17 -19
<PAGE>
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D. CONTROL ACCOUNT AND PAYMENTS
21. We Will Maintain a Control Account
21.1 We will maintain a control account in relation to the following:
o any money we or you become entitled to under this agreement.
o the purchase price for an +approved debt which you may ask us
to pay early under clause 5.1.
o any money you pay us or we pay you.
21.2 Each +month, we will send you a statement of the control account. You
will not be entitled to claim that there is an error in the statement
unless you notify us about it in writing within twenty-one days after
the date of the statement.
22. Payments By You and Us
22.1 You must pay money to which we are entitled by providing us with
cleared funds without any deduction at all. You must pay us at our
+principal office immediately the money is due.
22.2 Payment is made by us when we draw a cheque in your favour or initiate
an electronic funds transfer to your nominated account.
23. We Can Set-off Money You Owe Us
23.1 Against any money that we or an +entity which is +related to us owe
you, we are entitled to set-off any money that you or an +entity which
is +related to you owe us or an +entity which is related to us. This
includes money owed contingently or prospectively. It includes money
which is owed under the control account or on any other account or
basis. If an amount owed cannot be immediately ascertained, we are
entitled to make a reasonable estimate.
23.2 If you owe money to any of us and you are entitled to call for an early
payment of the purchase price under clause 5.1, we may, at our
discretion, treat you as if you had called for early payment. We may
act-off the money you owe us against that purchase price.
24. We May Withhold Payment
24.1 In any of the following circumstances, we may withhold any payment
which is due to you:
o you have not complied and continue not to comply with any of your
obligations under this agreement, even if the obligation is of a
non-monetary nature.
o any of the circumstances referred to in clause 30.2 are subsisting (or
may occur simply through the passing of time or after the giving of
notice).
o we have given you notice under clause 30 that this agreement is to end.
24.2 If we have received a payment and we believe that there may be a risk
of us having to hand over that payment, then we may withhold the
corresponding payment under clauses 5.2 or 6 until we, in our
discretion, consider that there is no longer a risk. The indemnity in
clause 14.1 continues even if we do not withhold payment or decide to
release a previously withheld payment.
# See clauses S.3, 11.2, 12. Id, 15, 17, J8. 19, 33, 3', 35 and 39
* See clauses S.1. 5.2, 6 and 12
+See definitions on pages 17 - 19
<PAGE>
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E. YOUR WARRANTIES AND OTHER OBLIGATIONS
25. Your Warranties in Relation to the Transferred Debts
25.1 In relation to each Transferred debt, you warrant each of the
following, unless you advise us otherwise ire writing when or before
the relevant duplicate +invoice is delivered to us:
(a) the details you give of the debt and the +goods or +services
are correct.
(b) the currency of payment is Australian dollars and the +goods
were sold by you and accepted by a person in Australia or the
Services were performed by you in Australia.
(c) you have performed all obligations required for the
enforcement of the debt.
(d) the debt is valid and enforceable for the full face value less
only an allowance, discount or credit shown on the +invoice;
and the +debtor is liable to pay that amount in full by the
+recourse date. or the date for payment specified on the
+invoice, if that is earlier; and the debt is not disputed, of
voidable, and is not subject to any conditions of any type
which might affect its collection.
(e) there are no contra accounts, set-offs, counterclaims or
deductions allowable or enforceable in relation to the debt or
the +debtor and the debt does not arise from any form of
progress claim.
(f) the debt has arisen in the ordinary course of your business as
described in item l(d), and results from an actual and bona
fide sale of +goods, or performance of +services, in the
ordinary course of that business.
(g) you have an unqualified right to transfer the debt to us; we
will obtain a valid and unencumbered title to the debt under
this agreement in accordance with the laws specified in item
8, and the +debtor will pay the debt in full by the Recourse
date, or by the date for payment specified on the +invoice, if
that is earlier.
(h) the +goods purchased by the +debtor are in accordance with the
+contract, are the items describer in the +invoice and have
been delivered to and accepted by the +debtor; or the
+services have been performed in accordance with the +contract
to the satisfaction of the +debtor and are those described in
the +invoice.
(i) you have paid on time all fees, duties, taxes and charges to
enable the +goods to be delivered to the +debtor or the
+services to be performed.
(j) you have complied with all laws relating to the debt, the
+goods or Services and their delivery of performance.
(k) you have done nothing which could make us liable in respect of
the debt, the +goods or +service; or the +contract.
(1) the proper law of the +contract and the debt is the law of the
place specified in item 8.
(m) you have disclosed in full your trading terms relating to the
debt and the +contract, and you will not attempt to waive or
modify them, or extend the time for payment.
(n) the duplicate of the +invoice for the debt given to us under
clause 2.2 is exactly the same as the +invoice given to the
debtor; and the +invoice is dated no earlier than the date the
+goods an accepted by the +debtor or performance of the
+services is completed and no later than fourteen days after
that date.
(o) immediately before the +goods relating to the debt were sold
to the +debtor, you had good and unencumbered title to them
and none of your suppliers or other persons will have any
claim to any +goods or the proceeds of sale of any +goods; and
there is no requirement that the proceeds of sale of any of
the +goods be held (on trust or otherwise) for or be paid to a
supplier or other person.
(p) you have disclosed to us, and have preserved, any Security
interest or +guarantee granted or arising to better secure
payment of the debt.
(q) the +debtor has an established place of business, is not an
Associate of yours, and has no rich which would reduce the
+net value of the debt.
+See definitions on pages 17 - 19
<PAGE>
-9-
25 2 In relation to each +transferred debt, you agree that:
(a) each warranty under clause 25.1 will remain accurate in every
respect.
(b) you will immediately give us any information you obtain in
relation to the validity of the debt, the creditworthiness of
the +debtor; any dispute or possible dispute about the debt,
the +contract, or the +goods or +services; and anything else
that might affect the collection of the debt, or its value to
us.
(c) you will perform all obligations imposed on you in respect of
the debt, whether the obligations arise by agreement or under
any law.
(d) you will deal with each payment you receive strictly in
accordance with clauses 8 and 9.
26. Your Other Warranties
You also warrant to us each of the following:
(a) you have disclosed to us in writing all your existing
+financial indebtedness. all +security interests over any of
your assets, and all +guarantees which you have given.
(b) you will not incur any further +financial indebtedness, create
any further +security interests, or allow any further
+financial indebtedness or +security interests to continue,
without obtaining our consent.
(c) you are and will remain solvent, and you do not have, and will
not have. any creditors account (except one we approve) which
is more than 120 days overdue.
(d) you have paid, and will pay on time, any tax payable by you in
respect of your business activities or your employees or
contractors, and you will lodge all tax returns on time.
(e) you will not do any of the following without our consent:
(i) lend any money or arrange to lend money to anyone, or
give a +guarantee.
(ii) anything which may make you liable to a third party,
except in relation to goods or services supplied to
you or work done for you in the ordinary course of
your business as described in item I (d).
(iii) become liable to pay for goods or services before the
goods are delivered or the services are performed.
(iv) sell +goods on approval, with any right of return, or
on consignment
(v) retain or attempt to retain title to any +goods.
(vi) allow payment to be made to you in the case of a
+transferred debt over a period which is more than
the period referred to in clause 25. l(d).
(vii) allow payment to be made to you in the case of a debt
which is not a +transferred debt later than 120 days
after the end of the +month in which the debt arose.
(viii) subscribe for, or take an option on, share or loan
capital of any type, or agree to do so.
(f) you have the power to enter into this agreement and perform your
obligations under it, and will continue to have that power.
(g) your entering into this agreement and the performance of your
obligations under it will not breach any other agreement binding on you
or any other person or breach any lay.
(h) you do not act and will not act as the trustee of any trust (whether
under a trust deed, will, deed of settlement or other instrument, or a
trust arising by law or implication), except a trust specified in item
7.
(i) all +invoices you use and your terms of trade for the sale of +goods or
the provision of +services are, and will be, in a form approved by us.
+See definitions on pages 17 - 19
<PAGE>
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(j) each of your obligations under this agreement is and will
continue to be valid, binding and enforceable.
(k) you enter into this agreement wholly for business or
investment purposes.
27. Your Record Keeping Obligations etc.
27.1 You must keep proper and accurate books of account in accordance with
the law and applicable accounting standards. In addition, you must make
an appropriate entry in your records immediately after the sale of a
Transferred debt.
27.2 You must, at your expense, allow us to inspect any records, including
books, accounts, ledgers and any other documents. This includes any
records that relate to a Transferred debt, a +debtor, +goods,
+services, or taxes. We are entitled to copy anything we want to, and
to take a printout of any records on computer; and to take possession
of the relevant documents to do so. We are entitled to take possession
of records relating exclusively to Transferred debts. If any relevant
records are not in your possession or under your control, you must do
everything that is necessary to enable us to inspect and copy them and,
where appropriate, take possession of them. The records must not be
removed from the address specified in item 1(c) without our approval.
27.3 You must give us a copy of your accounts, including your balance sheet,
your trading and profit and loss accounts, any other accounts we
require, and any related information we ask for. You must give all of
them in the form and with the detail we require whenever we ask you to.
In any event, you must give us a copy of them, as at the date specified
in item 5(a), for the preceding period specified in item 5(b).
Thereafter, you must give a copy of them to us as at the end of each
successive period specified in item 5(b). In each case, you must give
them to us no more. than 20 days after the end of the period to which
they relate.
27.4 If we ask you to, your accounts must be audited by a person registered
as an auditor under section 1280 of the Corporations Law. If you do
not, we may appoint an auditor to audit the accounts at your expense.
27.5 You must give us, within thirty days after we ask for it, a statement
setting out all your outstanding liabilities, including contingent
liabilities. as at the date we specify.
27.6 The documents to be given under clauses 27.3 and 27.5 must each be
certified as being accurate and complete by you or, if you are a
Corporation, by two directors, or by one director and a company
secretary. If we ask you to, you must cause each +associated company to
do the things that you are required to do under this clause 27 in
relation to records and accounts.
28. Your Other Obligations
28.1 You must co-operate fully with us to help us obtain the benefits we
seek under this agreement. You must follow any procedures which we set
from time to time for the performance of this agreement. These
procedures may include requirements concerning notices of transfer of
Transferred debts and the provision of proof that the +goods have been
accepted by the +debtor or the Services performed to the satisfaction
of the +debtor
28.2 You must immediately give us a list of your bank accounts. If you do
not already have a bank account you must open one and give us the
details. You must not open any other bank account without our consent.
If we ask you to, you must also give us a signed letter in a form
approved by us for each of your bank accounts. asking the bank to pay
us any money it receives for that account directly from a +debtor.
28.3 You must inform us and keep us informed of:
(a) the name and registered address of your +entity or any +entity
in which you or, if you are a "corporation, any of your
directors or shareholders has a direct or indirect interest,
except through
+See definitions on page sl7 - 19
<PAGE>
-11-
a shareholding of less than 5% of the issued shares of a
+corporation listed by the Australian Stock Exchange Limited.
(b) any partial or total change in ownership, control or
shareholding in you or by you in any +entity, except a change
of less than 5% in your shareholdings in a +corporation listed
by the Australian Stock Exchange Limited.
(c) the names of your Associated companies, and corporations which
become or cease to be your Associated companies.
(d) any change in the nature of your business, or in your auditor
or external accountants; and, if you are a Corporation, any
change in your directors, company secretary, or public
officer; and, if you are a partnership, any change in the
identity of the partners.
28.4 If you are a Corporation, you must cause any new shareholder and
director to execute any documents we require to better secure the
performance of this agreement. This may include a guarantee and
indemnity of your obligations both before and after the change. If you
are a partnership, you must cause any new partner to sign a document
that we require to bind that partner to this agreement.
28.5 You must immediately tell us in writing:
(a) if a Corporation becomes or ceases to be +related to you.
(b) if an Associate of yours becomes a +debtor.
(c) of the terms upon which goods, or materials which may become
+goods or which may be incorporated into +goods, are supplied
to you. You must obtain any waiver or variation in relation to
those terms that we ask you to.
(d) if something has happened which may affect your warranties or
obligations, or which may give us the right to terminate this
agreement under clause 30.2.
28.6 You must transfer to us, in the form we require, your insurance
policies relating to Transferred debts and the +goods.
28.7 If you do not perform any of your obligations under this agreement, we
may, at our discretion, remedy the default, in whole or in part. You
must pay to us on demand any sum which we see fit to pay in relation to
the default.
F. VARYING AND ENDING AGREEMENT
29. We May Vary this Agreement
We may vary this agreement after the end of the period stated in item
3(b) by giving you one +month's notice of the variation. The variation
will take effect at the end of the notice period. However, you will be
entitled to give us notice within seven days after the date of our
notice that you are ending the agreement. If you do, the agreement will
not be varied. Instead, it will end at the end of the period stated in
item 3(c) from the day you gave notice.
30. Ending this Agreement
30.1 After the end of the period stated in item 3(b):
o we can end this agreement by giving you one +month's notice;
o you can end this agreement by giving us the period of notice
stated in item 3(c). If, after you give us this notice, we
agree to you not paying us on time the amount we are, or would
become, entitled to under clause 31.1 (a), your notice is to
be treated as not having been given.
+See definitions on pages 17 - 19
<PAGE>
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30.2 However, we may end this agreement either:
o immediately, without notice; or
o at the end of any period we, in our discretion, specify in a
notice to you,
if we believe that any of the following has occurred or is the case
(whether it is within your control or not and without the necessity for
any notice from us):
(a) you fail to pay on time any money due under this agreement.
(b) you fail to comply with any other obligation under this
agreement or any other agreement with us or Andy +corporation
which is +related to us, and we believe:
(i) that the failure cannot be remedied, or
(ii) that the failure can be remedied, but you do not do
so within seven days after the failure happens.
(c) a representation or warranty by you under this agreement or
any other agreement with us or any Corporation which is
+related to us is not true or is misleading in any material
respect.
(d) any part of this agreement is unenforceable.
(e) your business changes from that described in item l(d) or the
volume of that business changes substantially.
(f) you or any other person breach any obligation under the
+debenture deed.
(g) you or a +guarantor breach any obligation under or in relation
to any +security interest, any +guarantee, a Transferred debt,
the transfer of a Transferred debt, the Contract or a +debtor.
(h) any of our payments to you is not used in the ordinary course
of your business as described in item l(d).
(i) you deal or claim to deal in any way with the proceeds of a
Transferred debt, except within the terms of your appointment
as our collecting agent under clause 8. This means, for
example, that we may end this agreement if you deposit the
money in your bank account.
(j) any of the adverse events referred to in the +debenture deed
as an Event of Default or Potential Event of Default happens.
30.3 Even if we have given you a period of notice to end this agreement
under clause 30.2, we are entitled during that period, at our
discretion, to end this agreement immediately, without nonce, if we
consider it prudent to do so.
31. Effect of this Agreement Ending
31.1 When this agreement ends:
(a) all +approved debts will be regarded as Disapproved debts, and
you must immediately pay to us all money to which we are
entitled.
(b) we will give you a statement of the amount owing which may, if
we choose, take into account any set-off rights we have.
(c) the transfer of Transferred debts continues until we are
satisfied that all of your liabilities to us have been
discharged, and that there is no risk of us having to hand
over any payments you, a +debtor, a +guarantor, or any other
person has made to us. Those debts will be regarded as
Disapproved debts.
(d) we can still rely on, and you must continue to comply with,
the provisions of this agreement until all money which you owe
us has been paid and there is no risk of us having to hand
over any payments you, a Debtor, a +guarantor, or any other
person has made to us.
+See definitions on pages 17 - 19
<PAGE>
-13-
31.2 The liability referred to in clause 31.1(c) includes the charges which
we are entitled to under clauses 15 and 34 in respect of the
+disapproved debts referred to in clause 31. I (c).
32. We Will Re-transfer Remaining Debts
When we are satisfied that your liability has been discharged and that
there is no risk of us having to hand over any payment you, a +debtor,
a +guarantor, or any other person, has made to us, we will, at your
expense, retransfer any remaining Transferred debts to you. We warrant
that, on re-transfer, you will obtain the same title (if any) we
received. However, we give no warranty as to the validity,
enforceability or amount of the debt.
33. Compensation on Ending of this Agreement
You acknowledge that, to carry out our part of the bargain, we will
incur substantial overhead costs, including employment, rental,
equipment and finance facility costs. Consequently, if the agreement
ends because of one of the circumstances set out in clause 30.2, we are
entitled, as a liquidated sum, to the amount stated in item 4(i). If
the agreement ends for some other reason (except by you ending it under
clauses 4.2 or 29), we are entitled, as a liquidated sum, to the
difference, during the twelve +months preceding the agreement ending,
or any lesser period we choose, between the amount stated in item 4(i)
and the administration charges we have actually become entitled to
under clause 15 for the relevant period.
G. MISCELLANEOUS
34. Miscellaneous Charges and Interest
34.1 We are immediately entitled to payment by you, without demand, of all
costs, charges and expenses we incur in relation to this agreement, and
in administering it and enforcing it. "Administering it" includes
taking a transfer of Transferred debts and re-transferring them to you.
It also includes receiving and recovering money owed in respect of the
Transferred debts, receiving and paying money under this agreement, and
the issue and conduct of legal proceedings, whether in your name or our
name, against a +debtor.
34 2 In the case of legal expenses, our entitlement is on a full indemnity
basis for whatever expenses we agree to pay.
34.3 The costs, charges and expenses include postage, telephone and courier
bags at our standard rates; bank, wire and electronic transfer charges,
financial institutions duty, bank accounts debits tax, stamp duty,
transaction duty and penalties, registration fees and charges for any
credit checks.
34.4 If you fail to pay any amount on the due date for payment, you must pay
interest on that amount from the date payment should have been made
until it is paid. The rate of interest is the +prevailing rate. We will
calculate the interest daily. You must pay it on demand. We may add any
overdue interest to the amount you owe. You will then be liable for
interest on the total amount.
35. Reimbursement of Payments
35.1 If, for any reason, we become liable to pay any amount that you, a
+debtor, a +guarantor or any other person has paid to us, you must pay
that amount to us.
35.2 If we pay an amount on the basis of a document (including a cheque,
money order, negotiable instrument or other instrument) which is
subsequently dishonoured, you must pay us that amount (together with
all associated costs, including legal costs, which we have incurred).
+See definitions on pages 17 - 19
<PAGE>
-14-
36. Assignment and Agency
36.1 We are entitled to assign this agreement or any of our rights or
obligations under it. You may only do so with our written consent.
36.2 We are entitled to appoint someone else to act on our behalf or to
represent us in relation to anything we are entitled to do, or you are
under an obligation to do, under this agreement.
37. Specimen Signatures etc.
You must give us specimen signatures of the people who are authorised
to sign documents on your behalf. If you are a Corporation, you must
give us a a copy of the board resolution authorising them. You must
inform us immediately of any change in the authorised people, and give
us specimen signatures of any people newly authorised, together with,
if you are a Corporation, a copy of the relevant board resolution. A
request for early payment under clause 5.1 does not have to be made in
writing and does not have to be made by a person authorised to sign
documents.
38. Waiver, Consents and Approvals
38.1 If we waive a breach by you of a term of this agreement or release you
from an obligation under it, that does not amount to a waiver of any
later breach or a release from any other obligation. Nor does it imply
that we consent to any later breach. To be effective, a waiver or
release by us must be in writing, and must be signed by us or one of
our +authorised officers.
38.2 No delay or failure by us in exercising any right, privilege or option
will operate as a waiver of that or any other right, privilege or
option.
38.3 Where this agreement requires that we consent to something or approve
of something, our prior written consent or approval is required. The
consent or approval must be signed by us or by one of our +authorised
officers. We are entitled to give or withhold our consent or approval
at our discretion. We may give our consent or approval on any
conditions we like.
38.4 We do not have to give you any reasons for decisions which we may make
under this agreement.
39. Power of Attorney
39.1 You irrevocably appoint us, each of our +authorised officers, and any
solicitor acting on our behalf, jointly and severally, as your
attorneys for signing any documents and doing anything necessary to
give effect to this agreement; to transfer a Transferred debt to us; to
perfect a security; to make an arrangement or compromise; to take or
defend legal proceedings (in your name or otherwise); to endorse a
cheque, money order, negotiable instrument or other instrument; to
effect a legal assignment; and to do anything necessary for us to stand
in your place in respect of all Transferred debts. You also appoint the
attorneys to open and deal with all mail addressed to you, to deal with
money and cheques, money orders, negotiable instruments and other
instruments in relation to any debt; to endorse your name upon any
notes, acceptances, cheques, drafts, money orders, negotiable
instruments, other instruments and other evidence of payment of
Transferred debts; to deposit or collect them; to endorse any bills of
lading, other shipping documents or any insurance documents; to
discharge a debt you owe to someone else; and to give a direction
contemplated by clause 9.2.
39.2 If an attorney discharges a debt you owe, we are entitled to immediate
payment of the relevant amount from you. An attorney is not liable to
you for anything done by the attorney.
+See definitions on pages 17 - 19
<PAGE>
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40. Notices and Service
40.1 A notice or demand from us to you must be in writing and be signed by
us, one of our +authorised officers, or someone else authorised to act
on our behalf. It may be served by giving it to you, by sending it to
you by telex, cable or facsimile transmission, or by posting it in a
pre-paid envelope to you at the address stated in item l(c), the
address of your registered office, or your business address last known
to us. A notice or demand sent by cable is to be treated as having been
received by you when it is left at any of those places. A notice or
demand sent by telex is to be treated as having been received by you
when we receive your answerback code at the end of the transmission. A
notice or demand sent by facsimile transmission to your last known
number is to be treated as having been received by you when we receive
an error free transmission report. A notice or demand sent by post is
to be treated as having been received by you the day after it is
posted. Nothing in this clause 40. l affects our right to serve process
in any other way permitted by law.
40.2 Service is effective even if you or one of your partners is dead,
incompetent, absent from the jurisdiction, under external
administration, in receivership, in the course of liquidation, or wound
up. It is effective despite anything else, as well. Service on one of
you is service on all of you.
40.3 A notice from you to us must be in writing and signed by you, by an
officer of yours or someone claiming to be an officer of yours, or by a
person authorised under clause 37. You must deliver the notice to us at
our +principal office.
40.4 A specification under clause l may be oral and may be given to you or
to anyone who is, or claims to be, an officer, employee or agent of
yours, or a person authorised under clause 37. If you are a
partnership, the notice may be given to any partner or to anyone who
is, or claims to be, an officer, employee or agent of the partnership,
or a person authorised under clause 37.
41. Governing Law and Courts
This agreement is governed by the law of the State or Territory stated
in item 8. You submit to the nonexclusive jurisdiction of the courts
having jurisdiction in that State or Territory.
42. Evidence
42 1 A certificate signed by us or one of our +authorised officers in
relation to an amount owing or anything arising out of this agreement
is conclusive evidence of that thing, except in the case of obvious
error. You will not object to the admissibility of such a certificate
in any legal proceedings.
42.2 A decision by a court or arbitrator (however described) in any action
between all or any of you or us, on the one hand, and any +debtor, on
the other hand, in relation to any matters concerning the validity or
enforceability of any Transferred debt or its amount or balance, is
conclusive evidence of those matters unless the decision is quashed or
altered on appeal.
43. Joint and Several Liability
If you comprise more than one person, each of you is bound by this
agreement jointly and severally.
44. Authority to Fill in Blanks, Entire Agreement and Severability
44. l You irrevocably authorise us to fill in any blanks in the schedule.
+See definitions on pages 17 - 19
<PAGE>
-16-
44.2 By signing this agreement you acknowledge that it contains all the
terms of the agreement between you and us with respect to the
transactions contemplated by this agreement, except where it is
expressly stated that additional terms will apply, and except for other
documents we are both parties to. You are not entitled to rely on
representations made by us or any of our officers, agents or employees,
whether oral or in writing, prior to this agreement. This agreement may
only be varied by a document signed by us and you.
44.3 If any clause or any part of any clause of this agreement is invalid or
unenforceable, it is to be treated as not being part of the agreement.
44.4 This agreement may be executed in any number of counterparts. All
counterparts taken together will constitute the one instrument.
45. Legal and Financial Advice
You acknowledge that you have had the opportunity to take independent
legal and financial advice about your rights and obligations under this
agreement, and that we relied on this acknowledgment in entering into
this agreement. We make no representations as to any taxation or other
consequences which this agreement may have for you.
46. Extended Obligations
46.1 If you are a trustee, you are bound by this agreement both in your own
right and as a trustee.
46.2 If this agreement imposes an obligation on you not to do something, you
must make sure that no-one else does it either.
46.3 If this agreement imposes an obligation on you to do something, you
must make sure that everyone does anything that is necessary for you to
do that thing.
47. Special Provisions
The provisions (if any) in item 9 prevail over anything in this
agreement that is inconsistent with them. to the extent of the
inconsistency.
H. INTERPRETATION AND DEFINITIONS
48. Interpretation
48.1 In this agreement, the table of contents and headings are for ease of
reference only and do not affect the interpretation of it. The overview
is not part of this agreement and does not affect the interpretation of
it.
48.2 Words implying the singular include the plural and vice versa.
48.3 A reference to an item means an item in the schedule.
48.4 A reference to law includes a statute, regulation, statutory instrument
and rule of common law or equity and any official directive.
48.5 A reference to cleared funds means immediately available funds which
the recipient is able to deal with without limitation as the absolute
owner.
48.6 Where this agreement refers to our discretion, that means our absolute
unfettered discretion.
+See definitions on pages 17 - 19
<PAGE>
-17-
48.7 A reference to the Corporations Law or a provision or it includes a
modification or re-enactment of it, a provision substituted for it and
a regulation or statutory instrument issued under it.
48.8 Reference to any thing includes the whole and each part of it. The word
"including" when used to introduce an item does not limit the meaning
of the words to which the item relates to items of a similar kind.
49. Definitions
Approved Debt means a +transferred debt which has not been disapproved by us
under clause 3.
Associate includes an Associated company, and any partner, director, shareholder
or employee of you or any of your +associated companies. It also includes any
spouse, child, parent or sibling of you or any of those persons, and the manager
or trustee of any trust that is +related to you, and the trustee of a
discretionary trust of which you or any of the other persons referred to in this
definition is a beneficiary.
Associated Company means a +corporation which is a +subsidiary of you, of which
you are a +subsidiary, to which you are +related, which has control of you,
which is controlled by you, or which is controlled by a person which also
controls you. A +corporation is also an associated company if it holds, directly
or indirectly, voting shares that are more than 5% of your issued share capital;
or if you hold, directly or indirectly, voting shares that are more than 5% of
its issued share capital. A +corporation is also an associated company if any of
those conditions applied at any time during the previous year.
Authorised Officers means each of our directors and secretaries, each person
whose title includes "manager", "assistant manager", "secretary" or
"accountant", and each person that we advise you is an authorised officer.
Contract means the contract (whether in writing or otherwise) for the sale of
+goods or performance of +services.
Corporation means a corporation as defined in the Corporations Law, but includes
an exempt body as defined by section 66A of the Corporations Law.
Debenture Deed means any document under which you, or you and another person,
give us a +security interest for the performance of this agreement.
Debtor means the person who is liable, or who should be liable, to pay a
+transferred debt.
Disapproved Debt means a +transferred debt which has been disapproved by us
under clause 3.
Entity includes a natural person, firm, partnership, joint venture, society,
trust (in each case whether or not having separate legal personality) and
Corporation, and any other legal entity under any law.
Expected Rate of Return means the return we expect to make on +transferred debts
after taking into account all the direct and indirect costs we incur in relation
to dealing with those debts, including the cost of funds to purchase them.
Financial Indebtedness means any indebtedness in respect of money borrowed or
raised, and any financial accommodation of any kind. The indebtedness may be
present or future. It may be actual or contingent. It includes the following:
(a) a +guarantee, negotiable instrument, other financial instrument, or
discounting arrangement.
(b) an interest, gold or currency exchange, hedge or other arrangement,
including a swap, option, futures contract, exchange agreement and
purchase agreement.
(c) the par value, premium and dividend (whether declared or not, and
whether there are sufficient funds for payment or not) of a share or
stock which is redeemable or subject to a +guarantee.
+See definitions on pages 17 - 19
<PAGE>
-18-
(d) indebtedness which applicable accounting standards would require to be
capitalised on a balance sheet.
(e) the deferred purchase price of an asset, service or work done, and any
related obligation.
(f) an obligation to deliver goods or other property, or perform services
or work, that have been paid for in advance by a financier or in
relation to another financing transaction.
Goods, in relation to a +transferred debt, means the property sold, or which
should have been sold, by you to the +debtor, the sale of which gave rise to, or
should have given rise to, the debt.
Guarantee means a guarantee, indemnity, guarantee and indemnity, letter of
credit, legally binding letter of comfort or suretyship, or any other obligation
(including an irrevocable offer) of any kind at all, whatever its nature or
title. It must be one under which the +guarantor is to pay, purchase, +provide
funds, or to be responsible in any other way for any of the following:
(a) an obligation or indebtedness of another person.
(b) a dividend, distribution, capital or premium on shares, stock or other
interests.
(c) the insolvency or financial condition of another person.
Guarantor means a person who has provided, or should have provided a +guarantee
in our favour in relation to your obligations under this agreement.
Invoice, in relation to a +transferred debt, means the document addressed by you
to the +debtor which evidences that debt and specifies the +goods sold or
+services performed for which the +debtor is to pay and the terms of payment.
Month means calendar month.
Net Value means the gross amount charged (including any tax or charge), less any
allowances, discounts or credits allowed to the +debtor before the transfer of
the debt to us.
Percentage, where it refers to an annual percentage rate, means a rate
calculated on the basis of a 365 day year.
Prevailing Rate means the annual +percentage which we decide is equal to the sum
of the rate specified in item 4(j) and the highest of the prevailing prime rates
of Westpac Banking Corporation, Australia and New Zealand Banking Group Limited
and National Australia Bank Limited. We are entitled to adjust that rate (or the
way it is calculated) if we consider this necessary in order to achieve our
+expected rate of return.
Principal Office means our principal address specified in item l(b), or any
substitute address which we specify
Provide Funds means provide funds by advance of money, by purchase of or
subscription for shares or other securities, by purchase of assets, rights or
services, and by any other means.
Recourse Date, in relation to a +transferred debt, means the day which is the
number of days specified in item 4(g) from the end of the +month in which the
+transferred debt arose.
Related, in relation to a corporation, means a related body corporate within the
meaning of section 50 of the Corporations Law, but on the basis that
"subsidiary" has the meaning given below and "body corporate" includes any
+entity.
Security Interest includes any kind of oral or written mortgage, pledge, lien,
charge. encumbrance, hypothecation, security interest, preferential interest or
any other arrangement having substantially the same economic effect; and any
right of, or arrangement with, a creditor to have its claims satisfied in
priority to other creditors with, or from the proceeds of, any asset. It also
includes retention of title and a deposit of money by way of security. However,
it does not include a charge or lien arising in favour of a government
department or agency by operation of statute, unless there is a default in
payment of money secured by that charge or lien.
+See definitions on pages 17 - 19
<PAGE>
-19-
Services, in relation to a +transferred debt, means the services performed or
work done, or which should have been performed or done, by you for the +debtor,
the performance of which gave rise to, or should have given rise to, the debt.
Subsidiary, in relation to a Corporation, means a subsidiary within the meaning
of section 46 of the Corporations Law, However, an +entity is also a subsidiary
of an +entity if it is controlled by that +entity. In addition, a trust may be a
subsidiary (in which case, a unit or other beneficial interest Is to be regarded
as a share); and an +entity may be a subsidiary of a trust if it would have been
a subsidiary if that trust were a Corporation.
Trading Debt means an existing or future right to receive payment for +goods
sold by you and accepted by the purchaser or an existing or future right to
receive payment for +services which have been performed by you. Trading debt
includes all other rights which you may have in respect of any such transaction
and in respect of any +goods which are the subject of any such transaction; and
interest and costs recoverable from the +debtor. However, it does not include a
right to payment under a transaction which was not at arm's length; or which was
with an +associate of yours. It also does not include sales based on letters of
credit (other than standby letters of credit), cash against documents, or any
kind of sales for cash. The name or style under which you were trading and
whether the debt actually arose in the course of the business referred to in
item I (d), is irrelevant.
Transferred Debt means a +trading debt which you transfer or should transfer to
us.
+See definitions on pages 17 - 19
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
COMPANY'S FORM 10SB AMENDMENT FOR THE SIX MONTH PERIOD ENDED JUNE 30, 1999 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> JUN-30-2000
<PERIOD-START> JUL-01-1999
<PERIOD-END> DEC-31-1999
<CASH> 217,525
<SECURITIES> 0
<RECEIVABLES> 2,767,835
<ALLOWANCES> 86,812
<INVENTORY> 305,620
<CURRENT-ASSETS> 3,749,425
<PP&E> 438,225
<DEPRECIATION> 0
<TOTAL-ASSETS> 4,037,200
<CURRENT-LIABILITIES> 3,801,898
<BONDS> 0
0
0
<COMMON> 10,400
<OTHER-SE> 0
<TOTAL-LIABILITY-AND-EQUITY> 4,037,200
<SALES> 6,028,155
<TOTAL-REVENUES> 6,028,155
<CGS> 3,602,655
<TOTAL-COSTS> 3,602,655
<OTHER-EXPENSES> 3,791,470
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> (25,712)
<INCOME-PRETAX> (1,383,488)
<INCOME-TAX> 0
<INCOME-CONTINUING> (1,383,488)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (1,383,488)
<EPS-BASIC> (0.13)
<EPS-DILUTED> (0.13)
</TABLE>
