SCHEDULE 14C
SCHEDULE 14C INFORMATION
Information Statement Pursuant to Section 14(c)
of the Securities Exchange Act of
1934 (Amendment No. ____)
Check the appropriate box:
[X] Preliminary Information Statement
[ ] Confidential, for Use of the Commission Only (as permitted by Rule
14c-5(d)(2))
[ ] Definitive Information Statement
Rich Earth, Inc.
- --------------------------------------------------------------------------------
(Name of Registrant As Specified In Its Charter)
Payment of Filing Fee (Check the appropriate box):
[ ] No fee required.
[X] Fee computed on table below per Exchange Act Rules 14c-5(g) and
0-11.
1) Title of each class of securities to which transaction applies:
Common Stock, par value $.001
-----------------------------------------
2) Aggregate number of securities to which transaction applies:
20,000,000 shares of common stock
-----------------------------------------
3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which
the filing fee is calculated and state how it was determined):
$0.0003 (One Third of Par Value pursuant to Section 240.0-11(c) and (a)(4).
Company has accumulated capital deficit.)
-----------------------------------------
4) Proposed maximum aggregate value of transaction:
$6,000
-----------------------------------------
5) Total fee paid:
$75
-----------------------------------------
[ ] Fee paid previously with preliminary materials.
[ ] Check box if any part of the fee is offset as provided by Exchange Act Rule
0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
1) Amount Previously Paid:
- - ---------------------------------------------------
2) Form, Schedule or Registration Statement No.:
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3) Filing Party:
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4) Date Filed:
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RICH EARTH, INC.
INFORMATION STATEMENT
SHAREHOLDER MAJORITY ACTION AS OF MAY 4, 2000
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
NOTICE IS HEREBY GIVEN TO ALL SHAREHOLDERS THAT A MAJORITY ACTION OF
SHAREHOLDERS (THE "ACTION") OF RICH EARTH, INC. (THE "COMPANY") WAS TAKEN ON N
MAY 4, 2000 BY THE MAJORITY SHAREHOLDERS IN ACCORDANCE WITH SECTIONS 78.315 AND
78.320, RESPECTIVELY OF THE NEVADA REVISED STATUTES. THESE TEN PERSONS
COLLECTIVELY OWN IN EXCESS OF THE REQUIRED MAJORITY OF THE OUTSTANDING VOTING
SECURITIES OF THE COMPANY NECESSARY FOR THE ADOPTION OF THE ACTION.
1. To approve the amendment of the Articles of Incorporation to:
1. change the name of the company from "Rich Earth, Inc." to "GlobalNet,
Inc."; and
2. to increase the number of directors allowable up to 15;
2. To adopt a stock option plan;
3. To approve the Reorganization Agreement between the Company, GlobalNet
International, Inc. and GN Acquisition Corp.;
4. To elect eleven persons to the Company's Board of Directors to serve
until the next annual general meeting of shareholders and until their
respective successors are elected and qualify; and
5. To approve employment agreements with Messrs. Robert J. Donahue and Colum
Donahue.
SHAREHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON MAY 3, 2000 SHALL BE ENTITLED
TO RECEIPT OF THIS INFORMATION STATEMENT.
BY ORDER OF THE BOARD OF DIRECTORS,
/s/ Xenios Xenopoulos
_________________________________
XENIOS XENOPOULOS, PRESIDENT
Approximate date of mailing: May 9, 2000
RICH EARTH, INC.
ALUMINUM TOWER 5TH FLOOR
2 LIMASSOL AVENUE, 2003 NICOSIA, CYPRUS
INFORMATION STATEMENT FOR SHAREHOLDERS
The Board of Directors of Rich Earth, Inc., a Nevada corporation (the "Company")
is furnishing this INFORMATION STATEMENT to shareholders in connection with a
majority action of shareholders (the "Action") of Rich Earth, Inc. (The
"Company") taken on May 4, 2000, in accordance with sections 78.315 and 78.320,
respectively of the Nevada Revised Statutes. These ten persons collectively own
in excess of the required majority of the outstanding voting securities of the
company necessary for the adoption of the action. The following matters were
approved:
- - certain amendments to the Articles of Incorporation of the Company,
- - a stock option plan,
- - the reorganization agreement between the Company, GlobalNet International,
Inc. and GN Acquisition Corp.,
- - the entering into employment agreements with Messrs. Robert J. Donahue and
Colum Donahue, and
- - electing ten of the eleven persons who are to form the Company's Board of
Directors.
WE ARE NOT ASKING YOU FOR A PROXY AND YOU ARE REQUESTED NOT TO SEND US A PROXY.
PLEASE DO NOT SEND IN ANY OF YOUR STOCK CERTIFICATES AT THIS TIME.
This Information Statement is first being mailed on or about May 9, 2000. This
Information Statement constitutes notice to the Company's stockholders of
corporate action by stockholders without a meeting as required by Chapter 78 of
the Nevada Revised Statutes. This Information Statement is accompanied by the
Company's Annual Report for the fiscal year ended December 31, 1999. The Annual
Report includes the Company's most recent Annual Report on Form 10-KSB which has
been previously filed with the Securities and Exchange Commission.
The date of this Information Statement is May 9, 2000.
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
QUESTIONS AND ANSWERS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
GENERAL INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Outstanding Shares and Voting Rights. . . . . . . . . . . . . . . . . . . . . . . 2
Approval of the Name Change . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Election of New Directors . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
Record Date . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Expenses of Information Statement . . . . . . . . . . . . . . . . . . . . . . . . 3
Interest of Certain Persons in Matters to Be Acted on . . . . . . . . . . . . . . 3
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS . . . . . . . . . . . . . . . . . . 3
AMENDMENT TO ARTICLES OF INCORPORATION. . . . . . . . . . . . . . . . . . . . . . . 4
Name Change . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4
Increase Number of Directors Allowed on Board . . . . . . . . . . . . . . . . . . 4
SUMMARY OF TRANSACTIONS CONTEMPLATED BY THE REORGANIZATION AGREEMENT. . . . . . . . 5
Background of the Reorganization. . . . . . . . . . . . . . . . . . . . . . . . . 5
Reasons for Approval by the Majority Shareholders and Board of Directors. . . . . 5
Accounting Treatment of the Reorganization. . . . . . . . . . . . . . . . . . . . 6
Summary of the Reorganization Agreement . . . . . . . . . . . . . . . . . . . . . 6
Related Transactions. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 7
Material Terms of the Common Stock. . . . . . . . . . . . . . . . . . . . . . . . 8
Summary of Private Placements . . . . . . . . . . . . . . . . . . . . . . . . . . 8
Registration Rights . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9
Summary of Pro Forma Financial Statements . . . . . . . . . . . . . . . . . . . . 10
Risks Related to the Reorganization . . . . . . . . . . . . . . . . . . . . . . . 11
Certain Federal Income Tax Consequences . . . . . . . . . . . . . . . . . . . . . 11
INFORMATION CONCERNING GII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
History of GII. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
General Description of Business of GII. . . . . . . . . . . . . . . . . . . . . . 12
Industry Overview . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
Business Strategy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Description of Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
Sales and Marketing and Distribution. . . . . . . . . . . . . . . . . . . . . . . 14
Target Markets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
GII's Network . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15
Customer Relationship Management. . . . . . . . . . . . . . . . . . . . . . . . . 15
Competition . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Government Regulation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 16
Proprietary Rights. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17
Employees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Facilities. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Selected Financial Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 18
Management Discussion and Analysis of Financial Condition and Results of Operations 18
Risks Related to the Business of GII. . . . . . . . . . . . . . . . . . . . . . . . 19
Forward-looking Statements. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21
ELECTION OF DIRECTORS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 22
Information Concerning Nominees . . . . . . . . . . . . . . . . . . . . . . . . . 22
Executive Compensation. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24
Board of Directors Report on Executive Compensation . . . . . . . . . . . . . . . 25
Stock Options . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Familial Relationships. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
Indemnification . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25
2000 STOCK OPTION PLAN. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Administration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26
Eligibility; Limitations of Options . . . . . . . . . . . . . . . . . . . . . . . 26
Terms and Conditions of Options . . . . . . . . . . . . . . . . . . . . . . . . . 26
Adjustments of Options on Changes in Capitalization . . . . . . . . . . . . . . . 27
Amendment and Termination of the Plan . . . . . . . . . . . . . . . . . . . . . . 28
Federal Income Tax Consequences of Options. . . . . . . . . . . . . . . . . . . . 28
INDEPENDENT ACCOUNTANTS . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 29
WHERE YOU CAN FIND MORE INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . 29
INCORPORATION OF DOCUMENTS BY REFERENCE . . . . . . . . . . . . . . . . . . . . . . 29
EXHIBIT AAMENDMENT TO ARTICLES OF INCORPORATION . . . . . . . . . . . . . . . . . . 30
CERTIFICATE OF AMENDMENTTOARTICLES OF INCORPORATIONOFRICH EARTH, INC. . . . . . . . 31
- -----------------------------------------------------------------------------------
</TABLE>
EXHIBIT A - Amendment to Articles of Incorporation
- Certificate of Amendment to Articles of Incorporation of
Rich Earth, Inc.
EXHIBIT B - Agreement and Plan of Reorganization
EXHIBIT C - Rich Earth, Inc. - Unaudited Proforma Financial Statements
EXHIBIT D - Globalnet International, Inc. - Unaudited Financial Statements
EXHIBIT E - Globalnet, Inc. 2000 Stock Plan
QUESTIONS AND ANSWERS
---------------------
Q: WHAT AM I BEING ASKED TO APPROVE?
A: You are not being asked to approve anything. This Information Statement
is being provided to you solely for your information. Ten shareholders holding
a majority of the outstanding voting common stock of the Company (the
"Majority Shareholders") have already agreed to approve:
- a change in the name of the Company to "GlobalNet, Inc.";
- the reorganization agreement dated March 22, 2000, between the Company,
GlobalNet International, Inc. and GN Acquisition Corp.;
- a stock option plan;
- the election of eleven persons to the Board of Directors of the Company;
and
- entering into employment agreements with Messrs. Robert J. Donahue and
Colum Donahue.
Q: WHY HAVE THE BOARD OF DIRECTORS AND THE MAJORITY SHAREHOLDERS AGREED TO
APPROVE THESE ACTIONS?
A: All of these actions are necessary to accomplish the terms of the
Agreement and Plan of Reorganization (the "Reorganization Agreement") dated as
of March 22, 2000, between the Company, GN Acquisition Corp., a wholly owned
subsidiary of the Company, and GII.
Q: WHAT ARE THE BASIC TERMS OF THE TRANSACTION WITH GII?
A: GII will merge into GN Acquisition Corp., a wholly-owned subsidiary of
the Company. In exchange for all the stock of GII, the shareholders of GII
will receive 20,000,000 shares of in Common Stock of the Company which
represents approximately 67% of the outstanding Common Stock of the Company.
After the transaction is completed, GII will be a wholly owned subsidiary of
the Company and the Company will be controlled by the former shareholders of
GII. You will retain all of your present stockholdings in the Company and are
not required to do anything.
Q: WILL I RECOGNIZE GAIN OR LOSS IN CONNECTION WITH THE TRANSACTION WITH
GII?
A: No. We expect the transaction to qualify as tax-free reorganization for
United States federal income tax purposes.
Q: DO I HAVE APPRAISAL RIGHTS?
A: No. Under Nevada law, which governs the transaction, stockholders of the
Company are not entitled to appraisal rights.
Q: ARE THERE ANY CONDITIONS TO THE TRANSACTION WITH GII?
A: Yes. There are several conditions, including the following:
- the Company must file all reports that it is required to file with the
Securities and Exchange Commission;
- approval of the name change of the Company;
- provision of a bridge loan to GII in the amount of $2,427,198;
- the Company must not have less than $3,572,802 in cash on hand at the time
of Closing;
- adoption of a stock option plan for grant of options for up to 3,000,000
shares;
- employment agreements having been entered into by the Company or it's
proposed subsidiaries with Messrs. Robert J. Donahue and Colum
Donahue;
- resignation of the existing Board of Directors of the Company and the
appointment of eleven nominee directors; and
- a purchase and sale agreement having been entered into by Mr. Robert J.
Donahue and Imperium Capital (USA) Inc.
1
<PAGE>
Q: WHAT BUSINESS IS CONDUCTED BY GII?
A: Established in 1996, GII is a leading provider of high quality Internet
telephony services that enable telecommunications carriers and other
communications service providers to offer international voice, fax and other
value-added applications over the Internet. By outsourcing international
communications services to GII, GII's customers are able to lower costs,
generate new revenue and extend their business into Internet-based services
quickly, while maintaining service quality comparable to that of traditional
voice networks. GII is a development stage company with executive offices at
721 East Madison Avenue, Suite 201, Villa Park, Illinois 60181. GII's main
telephone number is 630-279-1735 and web site address is
www.globalnetinternational.net. (See "GENERAL INFORMATION.")
Q: ARE THERE RISKS INVOLVED IN THE TRANSACTION WITH GII?
A: Yes. After the transaction is completed, the Company's success will be
totally dependent on the success of GII. GII is a development stage company
and has not been profitable since its inception in 1996. There are no
assurances that GII's operations will be profitable after the closing of the
transaction. (See "SUMMARY OF TRANSACTIONS CONTEMPLATED BY THE REORGANIZATION
AGREEMENT - Risks Related to the Reorganization," and "INFORMATION CONCERNING
GLOBALNET INTERNATIONAL, INC. - Risks Related to the Business of GII")
Q: WHEN DO YOU EXPECT TO COMPLETE THE TRANSACTION WITH GII?
A: Within approximately a month after the date of this Information
Statement. As mentioned previously, there are several conditions to the
closing of the transaction.
Q: WHO CAN I CALL WITH QUESTIONS?
A: Please call our legal counsel at 604-659-9188.
GENERAL INFORMATION
-------------------
OUTSTANDING SHARES AND VOTING RIGHTS
At May 3, 2000 (the "Record Date"), the Company had 9,960,000 shares of Common
Stock, par value $0.001 outstanding. These are the securities that would have
been entitled to vote if a meeting was required to be held. Each share of
Common Stock is entitled to one vote. The outstanding shares of Common Stock at
the close of business on the Record Date for determining stockholders who would
have been entitled to notice of and to vote on the amendments to the Company's
Articles of Incorporation, were held by approximately thirty-six (36)
stockholders of record. In connection with the GII transaction (the
"Reorganization"), the Company and the Majority Shareholders have agreed to
amend the Articles of Incorporation of the Company to change the name of the
Company to GlobalNet, Inc. The Majority Shareholders have agreed by written
consent in lieu of a shareholders meeting to the Reorganization, the adoption of
a stock option plan, and election of directors of the Company. The complete
text of the amendment to the Articles (the "Amendment to the Articles") for the
name change is set forth in Exhibit A to this Information Statement.
Following the name change, the Share certificates you now hold will continue to
be valid. In the future, new Share certificates will contain a legend noting the
change in name or will be issued bearing the new name, but this in no way will
affect the validity of your current Share certificates.
APPROVAL OF THE NAME CHANGE
The proposed change of the Company's name to "GlobalNet, Inc." is intended to
convey more clearly a sense of the Company's business after the acquisition of
GII. Approval of the name change requires the affirmative consent of at least a
majority of the outstanding shares of Common Stock of the Company. Majority
Shareholders holding a total of 5,000,000 shares of Common Stock (50.2%), have
already agreed to this action.
ELECTION OF NEW DIRECTORS
2
<PAGE>
The election of new directors is proposed because of the proposed acquisition by
the former GII shareholders of over 67% of the outstanding common stock of the
Company. The agreement with GII requires that new directors approved by the
former shareholders of GII be appointed and elected to the Board of Directors of
the Company. The Bylaws of the Company give the Board of Directors the authority
to determine the number of directors, to increase or decrease the number of
directors and to fill vacancies or eliminate vacancies by resolution of the
Board of Directors. The Board of Directors has set the current number of
directors at two. The directors must receive a plurality of the votes cast for
director. The Articles of Incorporation of the Company do not allow for
cumulative voting. The Majority Shareholders holding a total of 5,000,000
shares of Common Stock or 50.2% of the outstanding shares of Common Stock have
voted to elect the following persons: Robert J. Donahue, Daniel M. Wickersham,
Colum P. Donahue, Barry Toser, Jonathan Greenhill, Paul Fritz, Richard Wilson,
Myron Gushlak, Carm Adimando, and Robert Kohn.
RECORD DATE
The close of business May 3, 2000, has been fixed as the record date for the
determination of shareholders entitled to receive this Shareholders' Information
Statement.
EXPENSES OF INFORMATION STATEMENT
The expenses of mailing this Information Statement will be borne by the Company,
including expenses in connection with the preparation and mailing of this
Information Statement and all documents that now accompany or may hereafter
supplement it. It is contemplated that brokerage houses, custodians, nominees,
and fiduciaries will be requested to forward the Information Statement to the
beneficial owners of the Common Stock held of record by such persons and that
the Company will reimburse them for their reasonable expenses incurred in
connection therewith.
INTEREST OF CERTAIN PERSONS IN MATTERS TO BE ACTED ON
The Company has loaned GII $2,427,198 in exchange for GII delivering a security
note payable with interest at the rate of 8% per annum. $2,127,198 of the
proceeds of this loan are to be used by GII to fulfill the terms of a transfer
agreement dated March 6, 2000, which was entered into by its predecessor DTA
Communications Network, LLC. with I:Comm Networks, LLC. The remaining $ 300,000
are to be used for working capital purposes of GII and its affiliates.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
-----------------------------------------------
The following table sets forth information concerning the ownership of Common
Stock immediately before and after consummation of the GII transaction, with
respect to shareholders who were known to the Company to be beneficial owners of
more than 5% of the Common Stock as of May 3, 2000, and officers and directors
of the Company before and after the Reorganization individually and as a group.
Unless otherwise indicated, the beneficial owner has sole voting and investment
power with respect to such shares of Common Stock.
<TABLE>
<CAPTION>
SHARES BENEFICIALLY OWNED(1) PERCENT OF VOTING STOCK(1)
------------------------------ -----------------------------
NAME AND ADDRESS OF BENEFICIAL BEFORE AFTER BEFORE AFTER
OWNER REORGANIZATION REORGANIZATION REORGANIZATION REORGANIZATION
- ---------------------------------------- -------------- -------------- --------------- ---------------
<S> <C> <C> <C> <C>
Sandra Lausen
102 East Third Street
Yuma, AZ 85364 . . . . . . . . . . . . . 600,000 600,000 6.0% 1.93%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Gary Hancey
8587 Snowville Drive
Sandy, UT 84094. . . . . . . . . . . . . 600,000 600,000 6.0% 1.93%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Joe Murphy
5821 Emigration Canyon
Salt Lake City, UT 84108 . . . . . . . . 800,000 800,000 8.0% 2.57%
- ---------------------------------------- -------------- -------------- --------------- ---------------
3
<PAGE>
Molloy Porter
P.O. Box 1306
Payson, AZ . . . . . . . . . . . . . . . 800,000 800,000 8.0% 2.57%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Keith Patterson
1487 East Thistle Downs Dr.
Sandy, UT 84092. . . . . . . . . . . . . 600,000 600,000 6.0% 1.93%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Xenios Xenopoulous(2)
Aluminum Tower 5th Floor
2 Limassol Avenue, 2003 Nicosia, Cyprus. 160,000 160,000 1.6% 0.51%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Robert J. Donahue(3)(4)(5) . . . . . . . 0 9,891,511 0% 32.97%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Daniel M. Wickersham(3)(4) . . . . . . . 0 250,000 0% 0.83%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Colum P. Donahue(3)(4) . . . . . . . . . 0 2,226,345 0% 7.42%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Barry Toser(3)(4). . . . . . . . . . . . 0 250,000 0% 0.83%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Richard Wilson(3)(4) . . . . . . . . . . 0 0 0% 0%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Jonathan Greenhill(3)(5)
555 Fifth Avenue, 18th Flr.
New York, NY 10017 . . . . . . . . . . . 0 25,000 0% 0.08%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Paul Fritz(3)(4) . . . . . . . . . . . . 0 1,296,845 0% 4.32%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Myron Gushlak(3)(6)
1626 Pinecrest Drive
West Vancouver, BC V7S 3H3 . . . . . . . 0 0 0% 0%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Carm Adimando(3)
47 Cherry Gate Lane
Turnbull, CT 06611 . . . . . . . . . . . 0 175,000 0% 0.58%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Robert H. Kohn(3)
1 Arbor Lane, P.O. Box 529
Pebble Beach, CA 93953 . . . . . . . . . 0 0 0% 0%
- ---------------------------------------- -------------- -------------- --------------- ---------------
Directors and Officers as a Group(7) . . 160,000 14,364,701 1.6% 46.90%
- ---------------------------------------- -------------- -------------- --------------- ---------------
<FN>
1. The above table does not include any shares of Common Stock which are or become issuable on the
exercise of stock options or warrants.
2. Mr. Xenopoulos holds his shares in the Company in the name of Deremie Enterprises Limited. a Cyprus
incorporated company. Mr. Xenopolous is the sole director, officer and stockholders of Deremie
Enterprises Limited.
3. Is expected to be an Officer, Director or 5% shareholder of the Company after the Reorganization
4. The address for this party is: 721 East Madison Avenue, Suite 201, Villa Park, Illinois 60181.
5. Jonathan Greenhill, is a member of Greenhill Partners, P.C., the shares reflected on this table
will be held by Greenhill Partners, P.C.
6. Does not take into consideration the Shares of Common Stock in which Mr. Donahue has agreed to sell
to Mr. Gushlak.
7. All future and past directors stockholdings are included here.
</TABLE>
4
<PAGE>
AMENDMENT TO ARTICLES OF INCORPORATION
--------------------------------------
NAME CHANGE.
The proposed amendment to the Company's Articles of Incorporation will cause the
Company to change the name of the Company to "GlobalNet, Inc." On filing of the
Amendment to the Articles of Amendment with the Nevada Secretary of State, the
name change will be effective, and each certificate representing shares of
Common Stock outstanding immediately prior to the name change will be deemed
automatically without any action on the part of the shareholders to represent
the same number of shares of Common Stock after the name change.
INCREASE NUMBER OF DIRECTORS ALLOWED ON BOARD.
Article Five of the current Articles of Incorporation of the Company allows the
Board of Directors to consist of one (1) to nine (9) members, as determined from
time to time by the then existing Board of Directors. The proposed amendment
will increase the number of members allowable to fifteen (15) members. The
actual number of members on the Board of Directors will remain the sole
discretion of the then existing Board of Directors. This amendment will become
effective on filing the Amendment to the Articles of Incorporation with the
Nevada Secretary of State.
The complete text of the Amendments to the Articles of Incorporation is set
forth in Exhibit A to this Information Statement.
SUMMARY OF TRANSACTIONS CONTEMPLATED BY THE REORGANIZATION AGREEMENT
--------------------------------------------------------------------
The Board of Directors of the Company has unanimously approved the Agreement and
Plan of Reorganization ("Reorganization Agreement") dated March 22, 2000, among
the Company, GN Acquisition Corp., a wholly owned subsidiary of the Company, and
GII, which provides for or requires completion of the following series of
transactions as conditions to consummation of the Reorganization:
- - the Company becomes current in the filing of reports under the Securities
Exchange Act of 1934;
- - change the name of the Company to GlobalNet, Inc.;
- - the private placement sale of 600,000 shares in the Common Stock of the
Company raising an aggregate total of $6,000,000 immediately prior to the
Closing of the Reorganization Agreement;
- - the issuance of 20,000 shares of Common Stock of the Company for each
share of GII common stock issued and outstanding for a total issuance of
20,000,000 shares of Common Stock of the Company to the shareholders of
GII;
- - the resignation of the current directors and officers of the Company; and
- - the appointment of eleven new directors of the Company.
A majority of the Company's shareholders have agreed by way of a majority action
of shareholders to approve the above transactions as well as the proposed change
of the Company's name to "GlobalNet, Inc."
In addition, on or after the Closing of the Reorganization, it is expected
(though not a condition to closing the Reorganization) that the Company will
close a second private placement of Common Stock. (See "SUMMARY OF TRANSACTIONS
CONTEMPLATED BY THE REORGANIZATION AGREEMENT - Summary of Private Placements.")
BACKGROUND OF THE REORGANIZATION
The Company was formed originally in October, 1988, to engage in investment and
business development operations related to mineral research and exploration.
The Company's attempts to enter this field were not successful and all attempts
to engage in business ended before January of 1994, and the Company became
dormant. Since that date the Company has had no operating assets or ongoing
business and has been engaged in searching for an appropriate business
opportunity for the shareholders. During 1999 and 2000, management of the
Company reviewed various business plans and chose to pursue the acquisition of
GII due to its growth opportunity.
5
<PAGE>
In January to March, 2000, management of GII was seeking additional equity
funding in order to fully implement their business and marketing plan for the
expansion of their business. Messrs. Bob Donahue, President of GII, and
Jonathan Greenhill, counsel to GII, commenced discussions with Mr. Myron
Gushlak, an associate of Mr. Xenios Xenopoulos who is the sole director of the
Company, in February 2000, by submitting to Messrs. Gushlak and Xenopoulos
information on GII and a proposed plan of reorganization. The same persons
together with Cummings and Lockwood, special legal counsel of GII and Alixe
Cormick of Venture Law Corporation, legal counsel of the Company, negotiated
that plan of reorganization which eventually became the Reorganization Agreement
and was signed by the parties as of March 22, 2000.
REASONS FOR APPROVAL BY THE MAJORITY SHAREHOLDERS AND BOARD OF DIRECTORS
The Board of Directors has given careful consideration to the Reorganization,
the existing business operations of GII, the future business potential and plans
of GII, the current book value of the Company, the interest of shareholders of
the Company, and the risks of the Reorganization to the existing shareholders.
Based on the foregoing considerations, the Board of Directors together with the
Majority Shareholders believe that the transactions contemplated by the
Reorganization Agreement, including the name change, adoption of a stock option
plan and entering into certain employment agreements, are fair and in the best
interests of the Company.
The Majority Shareholders believe that the Company will benefit from the
Reorganization, with an immediate impact being the significant new operations
and revenues, assets, and shareholders' equity, as well as giving the Company
the ability to expand the operations of GII based on the funding through the
private placement(s).
ACCOUNTING TREATMENT OF THE REORGANIZATION
On Closing of the Reorganization, based on management's consultation with the
auditors for the Company, Andersen, Andersen & Strong, of Salt Lake City, Utah
and the auditors of GII, KPMG LLP, whose office is located in Chicago, Illinois,
it appears that the proper accounting treatment is a so-called "reverse
acquisition," whereby GII will account for the transaction as a purchase of the
Company. GII is deemed to be the "acquirer" due to the common shareholders of
GII ultimately controlling the reorganized company.
SUMMARY OF THE REORGANIZATION AGREEMENT
The following contains, among other things, a summary of the material features
of the Reorganization Agreement. This Summary does not purport to be complete
and is subject in all respects to the provisions of, and is qualified in its
entirety by reference to, the executed Agreement and Plan of Reorganization a
copy of which is attached hereto as Exhibit B.
GENERAL TERMS. The Company, GII and certain shareholders of GII have entered
into an Agreement and Plan of Reorganization which provides that subject to the
meeting of certain conditions, the Company will issue twenty-thousand shares of
Common Stock with a restrictive legend for each share of GII common stock to the
former shareholders of GII, for an aggregate total of twenty million shares, in
exchange for all of the outstanding capital stock of GII. After the closing of
the Reorganization, GII will be a wholly-owned subsidiary of the Company and the
ownership of the Company will be controlled by the former shareholders of GII.
Before or after the Closing, the Company intends to issue approximately
1,200,000 shares of Common Stock in connection with the sale of units to
investors in two private placement transactions (the "Private Placements"). The
Company anticipates selling 600,000 Units in the first Private Placement and
600,000 units in the second Private Placement. Each unit in the first Private
Placement consists of one share and one-half share purchase warrant ("
Warrant") at a price of $10.00 per unit. Each whole Warrant is exerciseable for
one additional share of Common Stock of the Company for six months from the date
of purchase at a price of $15.00 per share. In connection with the first
Private Placement the Company has agreed to provide LCP Capital Corp., a
registered securities broker-dealer in the State of New York, a 300,000 share
purchase warrants with each warrant exerciseable for one share of Common Stock
of the Company for a six month period at a price of $15.00 per share. Each unit
in the second Private Placement consists of one share and one share purchase
warrant ("Warrant") at a price of $10.00 per unit. Again, each whole Warrant is
exerciseable for one additional share of Common Stock of the Company for six
months from the date of purchase at a price of $15.00 per share.
The exact number of shares to be issued in the Private Placements will be
determined by the Board of Directors of the Company with written consent of GII.
If 1,200,000 units are sold, there will be aggregate proceeds of $12,000,000,
6
<PAGE>
and maximum net proceeds to the Company of $11,990,000 after payment of
expenses. The Private Placements will be made only to Accredited Investors as
defined in Regulation D of the Securities Act of 1933, as amended (the "1933
Act"). The Company has received all subscription agreements and $4,500,000 in
funds in connection with the first Private Placement. No assurances can be
given that the Company will be successful in completing the Private Placements
or, if completed, they will be completed on the terms described above.
On completion of the Reorganization and the Private Placements, the ownership of
the Common Stock by (i) the current shareholders of GII, as a group, (ii) the
current Rich Earth shareholders, as a group, and (iii) the investors in the
Private Placements, as a group, is estimated to be as follows:
<TABLE>
<CAPTION>
GROUPS OF SHAREHOLDERS COMMON STOCK % OWNED
- ------------------------------ ------------ --------
<S> <C> <C>
GII Shareholders . . . . . . . 20,000,000 64.2%
- ------------------------------ ------------ --------
Rich Earth Shareholders. . . . 9,960,000 32.0%
- ------------------------------ ------------ --------
Private Placement Shareholders 1,200,000 3.8%
- ------------------------------ ------------ --------
TOTAL OF ALL SHAREHOLDERS. . . 31,160,000 100.0%
- ------------------------------ ------------ --------
<FN>
1. Assuming placement of 1,200,000 units and prior to the
exercise of any associated warrants.
</TABLE>
The above table does not include any shares of Common Stock which are or become
issuable on the exercise of stock options or warrants. If all of such
options/warrants are exercised, the ownership of the Common Stock is estimated
to be as follows:
<TABLE>
<CAPTION>
GROUPS OF SHAREHOLDERS COMMON STOCK % OWNED
- ------------------------------ ------------ --------
<S> <C> <C>
GII Shareholders . . . . . . . 20,000,000 61.8%
- ------------------------------ ------------ --------
Rich Earth Shareholders. . . . 9,960,000 30.8%
- ------------------------------ ------------ --------
Private Placement Shareholders 2,400,000 7.4%
- ------------------------------ ------------ --------
TOTAL OF ALL SHAREHOLDERS. . . 32,360,000 100.0%
- ------------------------------ ------------ --------
<FN>
1. Assuming placement of 1,200,000 units and exercise of all warrants.
2. Currently there are no stock options issued and outstanding.
</TABLE>
CLOSING. Closing is scheduled to take place at such time as agreed by the
parties but in any event may not occur earlier than 20 days following notice to
shareholders under this Information Statement as prescribed by Section 14C of
the Securities Exchange Act of 1934 (the "Act").
CONDITIONS FOR CLOSING. The obligation of each of the parties to consummate the
Reorganization is subject to the following conditions, among others:
- - the Company is current in all reports required to be filed under the
Securities Exchange Act of 1934, as amended;
- - the Reorganization Agreement, name change, stock option plan and
employment agreements have been approved by the holders of common stock of
the Company;
- - the issuance of 20,000 shares of Common Stock of the Company for each
share of GII common stock issued and outstanding for a total issuance of
20,000,000 shares of Common Stock of the Company to the shareholders of
GII;
- - the resignation of the current directors and officers of the Company; and
- - the appointment of eleven new directors of the Company; and
- - at least 100% of the holders of common stock of GII have executed the
Reorganization Agreement.
TERMINATION; WAIVERS. The Reorganization may be terminated at any time prior to
the Closing by:
7
<PAGE>
- - mutual consent of the parties, or
- - by GII or the Company if the other party is in material breach of any
representation, warranty, covenant or agreement contained in the
Reorganization Agreement, or
- - by either party if the conditions to the obligations of such party to
consummate the Reorganization have not been satisfied, or waived by
July 1, 2000.
Each party may, by a written instrument, waive or extend the time for Closing or
performance of any of the obligations of the other party pursuant to the
Reorganization.
REGULATORY APPROVALS. No approvals by any governmental authority are required
in order to complete the Reorganization
RELATED TRANSACTIONS
EMPLOYMENT AGREEMENTS. In connection with the Reorganization Agreement, the
Company has agreed to enter into two one-year employment agreements with Messrs.
Bob Donahue and Colum Donahue. Each agreement becomes effective on the closing
of the merger. The terms of the employment agreements are set out in more
detail under "Election of Directors - Executive Compensation" in this
Information Circular.
STOCK PURCHASE AGREEMENT. As a part of the Reorganization, Imperium Capital
(USA), Inc. has entered into an agreement with Mr. Robert Donahue to purchase a
certain number of the Shares of Common Stock of the Company to be received by
Mr. Donahue on Closing of the Reorganization for an aggregate amount of
$1,500,000. Imperium Capital (USA), Inc. is obligated to acquire these shares
from Mr. Donahue within 30 days of the Reorganization being completed.
BRIDGE LOAN. On March 22, 2000, the parties executed a bridge note under which
GII borrowed $2,427,198 from the Company. The principal amount of the note is
due May 31, 2000 and will accrue interest at the rate of 8% per annum. Payment
of the note will be extended to September 22, 2000, if the Reorganization
Agreement is terminated by the Company. GII has used $2,127,198 of the proceeds
of this loan to fulfill the terms of a transfer agreement dated March 6, 2000,
which was entered into by its predecessor DTA Communications Network, LLC. with
I:Comm Networks, LLC. The remaining $ 300,000 are to be used for working
capital purposes of GII and its affiliates.
MATERIAL TERMS OF THE COMMON STOCK
The authorized common stock of the Company consists of 100,000,000 shares of
$0.001 par value stock. As of May 3, 2000, there were 9,960,000 shares issued
and outstanding. At the closing of the Reorganization, 20,000,000 shares will be
issued in exchange for all of the issued and outstanding shares of GII. On
completion of the Reorganization and the Private Placements (assuming 1,200,000
units are sold in the Private Placements), 31,160,000 shares of Common Stock
will be outstanding.
The holders of shares of Common Stock are entitled to one vote for each share
held of record on each matter submitted to shareholders. Shares of Common Stock
do not have cumulative voting rights for the election of directors. The holders
of shares of Common Stock are entitled to receive such dividends as the Board of
Directors may from time to time declare out of funds of the Company legally
available for the payment of dividends. The holders of shares of Common Stock do
not have any preemptive rights to subscribe for or purchase any stock,
obligations or other securities of the Company and have no rights to convert
their Common Stock into any other securities.
On any liquidation, dissolution or winding up of the Company, holders of shares
of Common Stock are entitled to receive pro rata all of the assets of the
Company available for distribution to shareholders.
The foregoing summary of the material terms of the capital stock of the Company
does not purport to be complete and is subject in all respects to the provisions
of, and is qualified in its entirety by reference to, the provisions of the
Articles of Incorporation of the Company, as amended by the Amendment to the
Articles attached hereto as Exhibit A.
8
<PAGE>
SUMMARY OF PRIVATE PLACEMENTS
TERMS OF PRIVATE PLACEMENTS. The Company is conducting a Private Placement of
an estimated 1,200,000 shares of Common Stock in connection with the sale of
units to investors in two private placement transactions (the "Private
Placements"). The Company anticipates selling 600,000 Units in the first
private placement and 600,000 units in the second private placement. Each unit
in the first Private Placement consists of one share and one-half share purchase
warrant (" Warrant") at a price of $10.00 per unit. Each whole Warrant is
exerciseable for one additional share of Common Stock of the Company for six
months from the date of purchase at a price of $15.00 per share. In connection
with the first Private Placement the Company has agreed to provide LCP Capital
Corp., a registered securities broker-dealer in the State of New York, a 300,000
share purchase warrants with each warrant exerciseable for one share of Common
Stock of the Company for a six month period at a price of $15.00 per share.
Each unit in the second private placement consists of one share and one share
purchase warrant ("Warrant") at a price of $10.00 per unit. Again, each whole
Warrant is exerciseable for one additional share of Common Stock of the Company
for six months from the date of purchase at a price of $15.00 per share. The
Company may, in its discretion, close the Private Placement at any time after
600,000 units are sold. The Private Placement will be open until May 31, 2000.
The closing of the Private Placement is conditioned on the closing of the
purchase of GII.
USE OF PROCEEDS. There is a minimum of 600,00 units which must be sold and the
closing of the Reorganization is contingent on closing the 600,000 units of the
Private Placements. The net proceeds available to the Company from the sale of
the Common Stock, assuming expenses of $10,000, will be $5,990,000 if 600,000
units are sold. The estimated use of proceeds will be as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
---------- -----------
<S> <C> <C>
Bridge Loan to GII . . . . . . . . . . $2,427,198 40.52%
- -------------------------------------- ---------- -----------
Professional Fees. . . . . . . . . . . $ 400,000 6.68%
- -------------------------------------- ---------- -----------
Equipment. . . . . . . . . . . . . . . $ 463,000 7.73
- -------------------------------------- ---------- -----------
Salaries & Hiring Additional Personnel $1,200,000 20.03%
- -------------------------------------- ---------- -----------
Sales & Marketing. . . . . . . . . . . $ 500,000 8.35%
- -------------------------------------- ---------- -----------
Working Capital. . . . . . . . . . . . $ 999,802 16.69%
- -------------------------------------- ---------- -----------
TOTAL:. . . . . . . . . . . . . . . . $5,990,000 100%
- -------------------------------------- ---------- -----------
</TABLE>
Assuming that 1,200,000 of units are sold (assuming the first and second Private
Placement are completed) and that the expenses will remain $10,000, the
estimated use of net proceeds of $11,990,000 from both Private Placements will
be as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
----------- -----------
<S> <C> <C>
Bridge Loan to GII. . . . . $ 2,427,198 20.24%
- --------------------------- ----------- -----------
Professional Fees . . . . . $ 400,000 3.34%
- --------------------------- ----------- -----------
Equipment . . . . . . . . . $ 5,000,000 41.70%
- --------------------------- ----------- -----------
Hiring Additional Personnel $ 1,200,000 10.00%
- --------------------------- ----------- -----------
Sales & Marketing . . . . . $ 500,000 4.17%
- --------------------------- ----------- -----------
Working Capital . . . . . . $ 2,462,802 20.55%
- --------------------------- ----------- -----------
TOTAL: . . . . . . . . . . $11,990,000 100%
- --------------------------- ----------- -----------
</TABLE>
9
<PAGE>
Although the Company intends to utilize the proceeds of the Private Placements
as disclosed above, the Company's Board of Directors will have complete
discretion as to the final use of proceeds and the appropriateness of:
- - key-man life insurance,
- - obtaining officer and director liability insurance,
- - employment contracts with executive officers,
- - indemnification contracts, and
- - incentive plans to award executive officers and key employees.
No assurances can be given that the decisions will lead to agreements that are
on terms advantageous to the Company. Pending the above uses, the Company
intends to invest the net proceeds from this Offering in short-term, interest
bearing, investment grade securities.
RESTRICTIONS ON RESALE. All shares and warrants issued in connection with the
Private Placements are considered restricted securities and cannot be sold to
the public for a period of one year from the date of purchase or until the
securities are qualified under a registration statement registering the resale
of the securities.
REGISTRATION RIGHTS
The Company has agreed to register for resale with the Securities and Exchange
Commission the following shares of Common Stock issued in connection with the
Reorganization and the Private Placements:
- - shares to be issued in connection with the two Private Placements;
- - shares issuable on exercise of certain warrants of the Company to be
granted to investors in connection with the two Private Placements;
and
- - shares issued to the stockholders of GII in connection with the Closing of
the Reorganization.
SUMMARY OF PRO FORMA FINANCIAL STATEMENTS
The following unaudited pro forma financial information for the Company is based
on the historical financial statements of the Company (which appear in the
Annual Report to Stockholders which accompanies this Information Statement) and
of GII (which are attached to this Information Statement as Exhibit D) and has
been prepared on a pro forma basis to give effect to the Reorganization under
the purchase method of accounting, as if the transaction had occurred at May 9,
2000, for each operating period presented. The pro forma information was
prepared based on certain assumptions described below and may not be indicative
of results that actually would have occurred had the Reorganization occurred at
the beginning of the last full fiscal year presented or of results which may
occur in the future. The unaudited pro forma consolidated financial data and
accompanying notes should be read in conjunction with the annual financial
statements and notes thereto of GII appearing at Exhibit D in this Information
Statement.
The unaudited pro forma consolidated balance sheet as of December 31, 1999,
presents the financial position of the Company as if the Reorganization had
occurred had been closed on that date and was prepared utilizing the audited
balance sheets as of December 31, 1999, of the Company and the unaudited balance
sheets of GII's predecessor DTA Communications Network, LLC. The pro forma
consolidated statements of operations data presented assumes the Reorganization
occurred at the beginning of the periods presented. It should not be assumed
that the Company and GII would have achieved the unaudited pro forma
consolidated results if they had actually been combined during the periods
shown.
The Reorganization is expected to be accounted for as a purchase. The common
shareholders of GII will receive 20,000 shares of Common Stock for each share of
GII common stock resulting in the current stockholders of GII acquiring
approximately 67% of the outstanding Common Stock of the Company excluding the
Private Placement shares to be issued.
The unaudited pro forma consolidated results are based on estimates and
assumptions, which are preliminary and have been made solely for the purposes of
developing such pro forma information. The unaudited pro forma consolidated
results are not necessarily an indication of the results that would have been
achieved had such transactions been consummated as of the dates indicated or
that may be achieved in the future.
The unaudited pro forma combined results should be read in conjunction with the
historical consolidated financial statements and notes thereto set forth herein,
and other financial information pertaining to the Company and GII, including
"Management's Discussion and Analysis of Financial Condition and Results of
10
<PAGE>
Operations" for each of the Company and GII. Pro forma financial information is
set forth in greater detail in the Pro Forma Financial Statements beginning on
Exhibit C of this Information Statement.
<TABLE>
<CAPTION>
FOR THE PERIOD ENDED
PRO FORMA INCOME STATEMENT: DECEMBER 31, 1999
(STATED IN THOUSANDS)
-----------------
<S> <C>
Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 27,474
Cost of Revenues. . . . . . . . . . . . . . . . . . . . . . . . . . $ 26,587
Gross Profit. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 887
Other Income and Expenses . . . . . . . . . . . . . . . . . . . . . ($2,618)
Net Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . ($1,731)
Net Income (Loss) Per Share . . . . . . . . . . . . . . . . . . . . ($0.058)
AS OF
PRO FORMA BALANCE SHEET: DECEMBER 31, 1999
-----------------
Total Assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 6,416,475
Total Liabilities . . . . . . . . . . . . . . . . . . . . . . . . . $ 5,416,475
Stockholders' Equity. . . . . . . . . . . . . . . . . . . . . . . . ($1,778,127)
Book Value Per Share. . . . . . . . . . . . . . . . . . . . . . . . ($0.059)
</TABLE>
RISKS RELATED TO THE REORGANIZATION
YOU WILL SUFFER IMMEDIATE AND SUBSTANTIAL DILUTION OF YOUR PERCENTAGE EQUITY AND
VOTING INTEREST. We will issue 20,000,000 shares of common stock to the
stockholders of GII. The 20,000,000 shares would represent approximately 67% of
the number of shares of common stock outstanding as of May 9, 2000.
Accordingly, the Reorganization will have the effect of substantially reducing
the percentage equity and voting interest held by each of our stockholders.
THE GII STOCKHOLDERS MAY BE ABLE TO SIGNIFICANTLY INFLUENCE US FOLLOWING THE
SHARE ISSUANCE. The substantial ownership of common stock by the GII
stockholders after the Closing of the Reorganization will provide them with the
ability to exercise substantial influence in the election of directors and other
matters submitted for approval by Company's stockholders. Following the closing
of the Reorganization, the ownership of common stock by the GII stockholders,
including those who will become directors and/or executive officers of the
Company, will represent approximately 67% of the outstanding shares of the
Company on May 9, 2000. This concentration of ownership of the Compan's common
stock may make it difficult for other stockholders of the Company to
successfully approve or defeat matters which may be submitted for stockholder
action. It may also have the effect of delaying, deterring or preventing a
change in control of the Company without the consent of the GII stockholders. In
addition, sales of common stock by the GII stockholders to a third party may
result in a change of control of the Company.
THE COMBINED COMPANY MAY BE UNABLE TO OBTAIN REQUIRED ADDITIONAL CAPITAL. As
indicated in the risk factors relating to GII below, the combined company will
need to raise up to $6 million in a combination of debt and equity securities to
have sufficient working capital to run and grow the business through December
31, 2000. Should the combined company be unsuccessful in its efforts to raise
additional capital, it will be required to curtail its plans or it may be
required to cut back or stop operations. There can be no assurance that the
combined company will raise additional capital or generate cash from operations
sufficient to meet its obligations and planned requirements.
WE MAY NOT BE ABLE TO SUCCESSFULLY INTEGRATE GII INTO OUR OPERATIONS. The
integration of GII into our operations involves a number of risks, including:
- - difficulty integrating GII's operations and personnel;
- - diversion of management attention;
- - potential disruption of ongoing business;
- - inability to retain key personnel; and
- - impairment of relationships with employees, customers or vendors.
11
<PAGE>
Failure to overcome these risks or any other problems encountered in connection
with the Reorganization or other similar transactions could reduce the value of
the Reorganization to us. This could reduce the value of the Company common
stock.
WE MAY LOSE RIGHTS UNDER CONTRACTS WITH CUSTOMERS AND OTHER THIRD PARTIES AS A
RESULT OF THE REORGANIZATION. GII has numerous contracts with suppliers,
customers, licensors, licensees and other business partners. The Share Issuance
may trigger requirements under some of these contracts to obtain the consent,
waiver or approval of the other parties. If we cannot do so, we may lose some of
these contracts or have to renegotiate the contracts on terms that may be less
favorable. In addition, many of these contracts have short terms or can be
terminated following a short notice period. Loss of these contracts would reduce
our revenues and may, in the case of some contracts, affect rights that are
important to the operation of our business.
CERTAIN FEDERAL INCOME TAX CONSEQUENCES
The following discussion is limited to the material federal income tax
consequences of the proposed reorganization and does not discuss state, local,
or foreign tax consequences or all of the tax consequences that might be
relevant to an individual shareholder of the Company. The Company has not
sought an opinion as to the tax consequences of the Reorganization, however, the
Company believes that the Reorganization will qualify for federal income tax
purposes as a tax free reorganization under Section 368(a)(1)(B) of the Internal
Revenue Code of 1986, as amended (the "Code"). As such, the Company will not
recognize a gain or loss as a result of the Reorganization. Nor will the
stockholders of the Company recognize a gain or loss.
YOU ARE URGED TO CONSULT YOUR OWN TAX ADVISOR AS TO SPECIFIC TAX CONSEQUENCES TO
YOU BY THE REORGANIZATION INCLUDING TAX RETURN REPORTING REQUIREMENTS AND THE
APPLICABILITY AND EFFECT OF FEDERAL, STATE, LOCAL, FOREIGN, AND OTHER APPLICABLE
TAX LAWS.
INFORMATION CONCERNING GII
--------------------------
HISTORY OF GII
The business of GII was established in 1996 by Robert Donahue under the name DTA
Communications Network, LLC., a private Illinois corporation The DTA
Communications Network, LLC. became GII in March 2000. GII has one wholly owned
subsidiary GlobalNet, LLC, a private Illinois corporation. GII's predecessor
was formed to capitalize on the growth of the Internet as a communications tool
by commercially offering IP telephony network and application services in and
between Mexico and United States in partnership with Protel SA, a licensed
Mexican telecommunications carrier. GII expanded its services to Guatemala
through an interconnect agreement with Protel SA. GII has also recently added
Alestra SA de CV (AT & T) and MarCatel as Mexican partners.
GENERAL DESCRIPTION OF BUSINESS OF GII
GII provides Internet Protocol (IP) telephony services, that enables
telecommunication carriers and other communication service providers to offer
international transmission of voice, data traffic and other value added
applications over the Internet. IP telephony is the real time transmission of
voice communications in the form of digitized "packets" of information over the
public Internet or a private network, similar to the way in which e-mail and
other data is transmitted. By outsourcing international communications services
to GII, customers are able to lower costs, generate new revenue and extend their
business into Internet-based services quickly while maintaining service quality
comparable to that of traditional voice networks. These customers include
traditional, local, international and wholesale long distance companies and
competitive local exchange carriers, as well as new telecommunications service
providers.
INDUSTRY OVERVIEW
CONVERGENCE OF GLOBAL TELECOMMUNICATIONS AND DATA SERVICES. Over the past
decade the telecommunications industry has grown at a rapid rate in all market
segments. Factors contributing to this boom include domestic and international
deregulation, technological development, lower cost network deployment and the
globalization of business. Wholesale telecommunications service revenue was
approximately $37 billion in 1998. According to Phillips Group-Info Tech, an
industry research firm, this market is projected to grow to approximately $100
billion by 2003.
12
<PAGE>
The volume on data networks has grown at an even faster rate. This growth has
been driven by several factors, including technological innovation, high
penetration of personal computers and, in particular, by the rapid expansion of
the Internet as a global medium for communications, information and commerce.
International Data Corporation, a market research firm, estimates that the
number of Internet users worldwide will grow from approximately 142 million in
1998 to approximately 399 million in 2002. This increase in data traffic has
necessitated additional data network capacity and quality. As a result,
businesses have invested billions of dollars in order to meet this need.
We believe that such transformations will spur the creation of new applications
such as email, Internet usage, unified messaging, Web hosting, broadband
broadcasts, e-commerce and IP Telephony. This will drive the need for
application service providers to offer applications to business and customers
who cannot afford to own the necessary applications themselves.
NETWORK INFRASTRUCTURE. The basic technology of traditional telecommunications
is designed for slow mechanical switches. Communications over the traditional
telephone network are routed through circuits which must dedicate resources to
each call until the call ends, regardless of whether anyone is actually talking
on the circuit. This circuit-switching technology incurs a significant cost per
call and does not efficiently support the integration of voice with data
services.
Data networks, however, were designed for electronic switching. They break the
data stream into small, individually addressed packages of data which are routed
independently of each other from the origin to the destination.
Therefore, they do not require a fixed amount of bandwidth to be reserved
between the origin and destination of each call. This allows multiple voice or
voice and data calls to be pooled, resulting in these networks being able to
carry more calls with an equal amount of bandwidth.
THE EMERGENCE OF IP TELEPHONY. Frost & Sullivan, a consulting and research
firm, expects voice over internet protocol (VoIP) technology or IP Telephony to
be the most significant development in the telecommunications industry since
wireless technology. Industry revenues are anticipated to grow from under $2
billion in 1999 to over $10 billion by 2005. IP Telephony consists of both
traditional and enhanced voice and fax services, including the addition of
interactive voice capability to web sites, among others. IP Telephony serves
both the extensive market of existing phone users and the expanding market of
computer users.
IP Telephony based on Internet protocols emerged in 1995, with the invention of
a personal computer program that allowed the transport of voice communications
over the Internet via a microphone connected to a personal computer. Initial
sound quality was poor and the service required that both parties to the
conversation use personal computers instead of telephones. In 1996, the advent
of the gateway for the first time offered anyone with access to a telephone the
ability to complete calls on the Internet. A gateway facilitates Internet
transport of telephone services traditionally carried over the traditional
telephone network.
ADVANTAGES OF IP TELEPHONY. IP Telephony is expected to make networks long
distance telephone calls transported over the Internet less expensive than
similar calls carried over the traditional telephone network primarily because
the cost of using the Internet is not determined by the distance those calls
need to travel. Also, routing calls over the Internet is more cost-effective
than routing calls over the traditional telephone network because the technology
that enables Internet telephony is more efficient than traditional telephone
network technology. The greater efficiency of data networks creates cost savings
that can be passed on to the consumer in the form of lower long distance rates.
BUSINESS STRATEGY
GII's goal is to be the leading provider of Internet-based voice and fax
services. In order to achieve this goal we intend to:
- - Establish strategic partnerships with in-country qualified service
providers in target countries;
- - Provide bilateral voice, fax, and enhanced services between the partner
network and GII's backbone network;
- - Aggressively grow traffic levels to gain market penetration, customer base
and revenue growth;
- - Deploy GII's private IP backbone network to strategic partners and with
GII's strategic partners to convert legacy systems to an IP based platform
within the country.
- - Work with strategic partners to deploy an application service provider
("ASP") suite of products across the end to end IP network;
- - Provide customers and affiliates with direct access to GII's 24/7 high
tech call center;
- - Continue to provide leadership in the development of industry standards
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- - Deliver additional IP communication services over GII's private IP
backbone and public Internet.
GII has assembled a very experienced telecommunications management team to
implement this strategy.
DESCRIPTION OF SERVICES
GII provides Internal Protocol (IP) based network and application services .
This is achieved by using public Internet and private IP based networks allowing
a low transport to match the small competitors while enabling an enhanced
product set offered by large carriers.
Currently GII provides bilateral voice, fax and enhanced services between the
partner network and GII's backbone network. The backbone network is managed
from a United States based network operations center (NOC) which will be fully
operational in the fourth quarter of 2000. GII also provides customers with an
Application Service Provider (ASP) suite of products including voice, data,
Internet services & the delivery of IP based content applications across the
end-to-end IP network thus giving Internet Service Provider (ISP) the ability to
bring voice and data products to its customers and to buy Internet connectivity
from a single source. GII has built a reliable, private network utilizing voice
over Internet Protocol (VoIP).
Utilizing an IP based technology and platform, GII is able to intermix voice,
data, Internet and multimedia efficiency and transport this mix over a single
delivery system enabling GII to apply Quality of Service (QoS) to each of its
products.
A description of services offered by GII include the following:
- - INTERNATIONAL WHOLESALE MINUTES. GII offers international wholesale
network transmission service to the U.S. based on Tier 1, 2, and 3
carriers, including MCI WorldCom, Sprint, Teleglobe, Qwest and Global
Crossing via the GlobalNet International Network. GII's network
partners provide high quality termination facilities in each of GII's
Global POPs.
- - BI-DIRECTIONAL SWITCHED VOICE, FAX AND ENHANCED SERVICES. GII will route
traffic from each of its partner countries on a worldwide basis.
- - PREPAID CARDS. GII offers prepaid card services at competitive rates.
This service is distributed to the end user via wholesale
agents/distributors and retail distribution points.
- - PACKET DATA SERVICE. GII packet data services include frame relay and
ATM, and are offered as an access product to interface with GII's IP based
backbone infrastructure. Network-to-Network and User-to-Network
Interfaces, for sites not directly served by the Company's backbone,
making connecting any location both easy and affordable.
- - VIRTUAL PRIVATE NETWORKS (VPNS). GII's VPN data service offers the
benefits of a private network (security, controlled performance) with the
advantages of public networks (flexibility, scalability, redundancy, load
sharing, performance, lower costs).
- - MULTIMEDIA TRANSPORT. Stable video transport can be delivered using GII's
packet data products.
- - IP SERVICES. Voice, fax, and video over IP, international extranet and
intranet virtual private networks (VPNs) are offered.
- - DEDICATED INTERNET ACCESS. Dedicated Internet connectivity through GII's
in-country partners for resale to ISPs as their primary or secondary feed
and to telecom carriers within the country who wish to provide Internet
services to their customers. Customers of the ISP or telecom carrier will
purchase either dedicated or dial-up access, which will be supported at
the ISP/carrier level.
- - WEB HOSTING. Provided space on GII's severs to support hosting for
customers who either do not have their own capability or who would prefer
to have their site hosted in the United States. GII will also provide
mirrored Web hosting to the partner's customers. Mirrored hosting is a
service enabling an Internet Web site to be hosted at multiple locations,
providing redundancy and backup if the customer's primary site is
unavailable.
- - ELECTRONIC COMMERCE. Business to business products. GII will acquire the
licenses and rights to provide these products from their authors and
publishers, on a private label or re-branded basis. Examples include
Enterprise Resource Planning (ERP), Billing Systems, Secure Document
Transport, Purchasing and Provisioning and Call Center Support.
- - ON-NETWORK APPLICATIONS. GII will offer business support and ERP
application software, hosted on either a GII or in-country partner's
server. Depending on customer need, these products may also include data
warehousing.
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- - CULTURE BASED PORTALS. GII will provide culture based or ethnic Internet
portals to United States communities made up of expatriates from the
countries where the GII's network services are offered. Within the
different portals envisioned, these communities will be offered
information in their native language along with various products such as
the GII calling card and Internet telephony.
SALES AND MARKETING AND DISTRIBUTION
SALES STRATEGY. GII's sales efforts target strategic partners in Latin America,
Asia and the Pacific Rim where the economies are booming and where there are
large influxes of immigration to the United States. The country market
penetration strategy used successfully in Mexico and Guatemala will be used in
other countries. GII uses the following criteria to establish joint ventures
with qualified partners in other countries:
- - sustained growth;
- - deregulating telecom market;
- - burgeoning expatriate population in the United States;
- - established and experienced Internet Service Provider (ISP) or a
traditional telecom carrier (with the proper in-country licenses and
access to distribution facilities);
- - sales and support organization; and
- - an existing customer base.
GII's sales force is frequently supplemented by senior members of management.
Senior management will attract partners to GII through their reputations in the
industry and through their industry relationships. Sales representatives are
assigned specific accounts based on their level of experience, location and the
quality of the relationship between the representative and the customer. Staff
is compensated based in large part on incentive-based goals and measurements. In
addition to GII's marketing and sales staff, GII relies on it's executive and
operations personnel, including the staff of GII's 24-hour- a- day, 7-day-a-week
network operations center, to identify sales opportunities within existing
customer accounts and to provide quality customer service.
MARKETING STRATEGY. GII's primary marketing and sales support is centralized
and directed from GII's headquarters in Villa Park, Illinois. GII has a
full-time staff dedicated to it's marketing efforts. The marketing and sales
support staff are charged with implementing our marketing strategies,
prospecting and producing sales presentation materials and proposals.
GII typically meets potential affiliates at Internet voice trade shows and
seminars we conduct on Internet telephony. Potential customers are located
through directed sales calls by it's sales personnel and at telephony trade
shows. GII also maintain an Internet web site which, among other things,
provides information to prospective customers and partners concerning the
technical and other requirements for becoming a part of GII.
GII also maintain an Internet web site which, among other things, provides
information to prospective customers and partners concerning the technical and
other requirements for becoming a part of GII.
TARGET MARKETS
Based on factors such as political climate, bureaucracy, language, customs,
monetary units, bandwidth availability, service offerings, economic climate and
countries contributing to United States immigration, GII has identified the
following primary markets for its products:
LATIN AMERICA. The fastest growing Latin American Internet markets are
expected to be Brazil and Mexico, followed by Columbia, Argentina and
Venezuela. GII's strategic partnership with Protel has already allowed for
rapid entrance into this market.
ASIA-PACIFIC. The Yankee Group, a research firm, estimates that Internet
use in Asia is expected to reach 12% of the population, or nearly 374
million people by the end of 2005. Japan, Singapore, Hong Kong, Malaysia,
China, India and Pakistan are all target markets for GII.
China, Pakistan, Mexico, Brazil, Argentina and Guatemala have all signed
contracts with GII to send voice, data, and fax traffic to and from these
countries.
GII'S NETWORK
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GII has established facilities in the U.S., Mexico and Guatemala and has
arrangements with affiliates outside of these countries to place and complete
telephone calls on its network in over 200 countries worldwide.
GII's network allows its customers to capitalize on the convergence of voice and
data networks. The network interfaces with the public Internet using dedicated
lines and alternative channels of transport. It is actively managed around the
clock by a Network Operations Center.
GII provides its customers with the cost efficiencies of private data networks
and the global reach of the Internet. It offers an intelligent platform from
which to offer fast delivery of additional value-added services and
applications. GII intends to continue rapid deployment of its network on a
global basis by taking advantage of the economies of IP based networks and the
opportunities presented in the chosen markets
Since it was first introduced in 1998, network usage grew over 500%. Growth
projects for end of year 2000 show continued impressive growth of more than 250%
over year-end 1999.
CUSTOMER RELATIONSHIP MANAGEMENT
GII recognizes that effective customer care is critical in today's competitive
environment. Excellence in customer care directly translates into vendor
loyalty and customer longevity. GII is committed to building a foundation of
systems and technology that provides ease of access for customers. GII also
carefully selects business partners with an established history and strong
infrastructure of operational support tools required to meet customer needs.
These partners share GII's sales and marketing expertise, and its commitment to
customer care. GII will support its in-country partners with industry
specialists, each experienced in supporting and directing channel sales
activities in Latin America, Asia and Pacific Rim. GII will insure that all
in-country personnel have the training needed to effectively market to the
target customer.
GII offers customers a 24/7 help desk service through personal and electronic
contact options. A high-tech call center with integrated Web connectivity will
be co-located with the Network Operations Center. GII's intent is to show
customers that GII is listening to their issues and is committed to resolving
their problems.
COMPETITION
The long distance telephony market and the Internet telephony market are highly
competitive. There are several large and numerous small competitors. The
principal competitive factors in the Internet Telephony market include price,
quality of service, breadth of geographic presence, customer service,
reliability, network size and capacity and the availability of enhanced
communications services.
INTERNET PROTOCOL AND INTERNET TELEPHONY SERVICE PROVIDERS. During the past
several years, a number of companies have introduced services that make Internet
telephony or voice services over the Internet available to businesses and
consumers. In addition to GII, AT&T Jens (a Japanese affiliate of AT&T),
deltathree.com (a subsidiary of RSL Communications), I-Link, iBasis, Inc.
(formerly known as VIP Calling), ICG Communications, IPVoice.com, ITXC Corp.
Net2Phone, Inc., and OzEmail (which was acquired by MCI WorldCom), provide a
range of voice over the Internet services. These companies offer PC-to-phone or
phone-to-phone services that are similar to what GII offers.
TELECOMMUNICATIONS COMPANIES AND LONG DISTANCE PROVIDERS. A number of
telecommunications companies, including AT&T, Deutsche Telekom, Level Three, MCI
WorldCom and Qwest Communications, currently maintain, or plan to maintain, data
networks to route the voice traffic of other telecommunications companies. These
companies, which tend to be large entities with substantial resources, generally
have large budgets available for research and development, and therefore may
further enhance the quality and acceptance of the transmission of voice over the
Internet.
SOFTWARE/HARDWARE PROVIDERS. GII also competes with companies which produce
software and other computer equipment that may be installed on a user's computer
to permit voice communications over the Internet. The quality of communications
with these products tend to be poor as they tend to use public Internet for the
transmission of communication traffic. They also tend to require each user to
have compatible software and hardware equipment. These companies include
VocalTec, Netspeak and e-Net.
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Many of GII's competitors have substantially greater financial, technical and
marketing resources, larger customer bases, longer operating histories, greater
name recognition and more established relationships in the industry than we
have. As a result, certain of these competitors may be able to adopt more
aggressive pricing policies which could hinder GII's ability to market GII's
Internet-based voice services. We believe that GII's key competitive advantages
are GII's ability to deliver reliable, high quality voice service over the
Internet in a cost-effective manner and the size and rapid growth of GII's
network. We cannot provide assurances, however, that this advantage will enable
us to succeed against comparable service offerings from GII's competitors.
GOVERNMENT REGULATION
GOVERNMENT REGULATION
REGULATION OF IP TELEPHONY - GENERAL. GII is a multinational telecommunications
company subject to applicable laws and regulations in each of the jurisdictions
in which it provides services. GII may also be affected indirectly by the laws
of other jurisdictions that affect foreign carriers with which GII does
business. Telephone service provided through the use of the Internet and
private IP networks is a recent market development which we believe is currently
permitted under United States law, however, some foreign countries have laws or
regulations that may prohibit voice communications over the Internet.
REGULATION OF IP TELEPHONY - UNITED STATES. The Federal Communications
Commission (FCC) regulates communications, including information services and
telecommunication services. Currently, Internet and IP Telephony services are
not regulated by the FCC or any state agencies. We believe that the IP
communications services that we provide constitute information services as
opposed to the more highly regulated telecommunication services.
If the FCC were to determine that providers of Internet and IP telephony
services are subject to FCC regulations as telecommunications services, the FCC
may require these providers to be subject to traditional common carrier
regulation, make universal service contributions, and/or pay excess charges. It
is also possible that the FCC may adopt a regulatory framework other than
traditional common carrier regulations which would apply to Internet and IP
telephony providers. If any such regulations are adopted by the FCC, these
regulations could materially adversely affect our business, financial condition,
operating results and future prospects. We cannot guarantee that GII's services
will not be regulated in the future.
State regulatory authorities may also retain jurisdiction to regulate the
provision of intrastate Internet and IP telephony services. Several state
regulatory authorities have initiated proceedings to examine the regulation of
such services. As well, in September 1998, two regional Bell operating
companies advised Internet and IP telephony providers that they will impose
excess charges on Internet and IP telephony traffic at some point in the future.
Increased United States regulation of the Internet may slow its growth,
particularly if other governments follow suit, which may negatively impact the
cost of doing business over the Internet and materially adversely affect our
business, financial condition, results of operations and future prospects.
Portions of our operations may still be subject to state or federal regulation,
including regulation governing universal service funding, disclosure of
confidential communications, copyright and excise tax issues.
REGULATION OF TELEPHONY SERVICES - INTERNATIONAL. The regulatory treatment of
Internet and IP telephony outside of the United States varies widely from
country to country. A number of countries that currently prohibit competition in
the provision of voice telephony may also prohibit Internet and IP telephony.
Other countries permit but regulate Internet and IP telephony. Some countries
will evaluate proposed Internet and IP telephony service on a case-by-case basis
and determine whether it should be regulated as a voice service or as another
telecommunications service. Finally, in many countries, Internet and IP
telephony has not yet been addressed by legislation or regulatory action.
We may be subject to regulations in some foreign jurisdictions, or we may be
prohibited from providing our services or conducting our business in these
foreign jurisdictions. Our failure to qualify as a foreign corporation in a
jurisdiction in which we are required to do so or to comply with foreign laws
and regulations could materially adversely affect our business, financial
condition, operating results and future prospects, including the possibility of
subjecting us to taxes and penalties and/or by precluding us from, or limiting
us in enforcing contracts in such jurisdictions. This holds true of our
partners as well. We cannot be certain that our partners either are currently
in compliance with any such requirements, will be able to comply with any such
requirements, and/or will continue to be in compliance with any such
requirements. The failure of our partners to comply with such requirements could
materially adversely affect our business, financial condition, operating results
and future prospects.
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Recently, IP Telephony service of one of our competitors was blocked in certain
countries in Asia and the Middle East by government-controlled
telecommunications companies. The Israel Minister of Communications has
recently sent another competitor a letter requesting that it cease and desist
terminating calls over the Internet in Israel. Although we have not received
any similar notices from these regulators and we do not know specifically how
these competitors operate in such countries or why they received such notices,
there can be no assurance that such regulators or any other regulator may not
block our service or send us similar cease and desist orders in the future.
PROPRIETARY RIGHTS
The Company and GII regards their intellectual property rights, such as
copyrights, trademarks, trade secrets, practices and tools, as important to the
success of the combined company. To protect their intellectual property rights,
the Company intends to rely on a combination of trademark and copyright law,
trade secret protection and confidentiality agreements and other contractual
arrangements with their employees, affiliates, clients, strategic partners,
acquisition targets and others. Effective trademark, copyright and trade secret
protection may not be available in every country in which the combined company
intends to offer its services. The steps taken by the Company or GII to protect
their intellectual property rights may not be adequate, third parties may
infringe or misappropriate the combined company's intellectual property rights
or the combined company may not be able to detect unauthorized use and take
appropriate steps to enforce its rights. In addition, other parties may assert
infringement claims against the combined company. Such claims, regardless of
merit, could result in the expenditure of significant financial and managerial
resources. Further, an increasing number of patents are being issued to third
parties regarding Internet telephony processes. Future patents may limit the
combined company's ability to use processes covered by such patents or expose
the combined company to claims of patent infringement or otherwise require the
combined company to seek to obtain related licenses. Such licenses may not be
available on acceptable terms. The failure to obtain such licenses on acceptable
terms could have a negative effect on the combined company's business.
The Company believes that GII's products, trademark, and other proprietary
rights do not infringe on the proprietary rights of third parties.
EMPLOYEES
As of May 9, 2000, GII had sixteen (16) full time employees and one (1)
part-time employee. The Company anticipates that the development of its
business will require the hiring of additional employees. None of the Company's
current employees are covered by any collective bargaining agreement and the
Company has never experienced a work stoppage. The Company considers its
employee relations to be good. The Company believes its future success will
depend in large part on its continuing ability to attract, train and retain
highly skilled technical, sales, marketing and customer support personnel.
FACILITIES
The Company corporate headquarters is located in a 3,500 square foot ("sf")
facility at 721 East Madison Avenue, Suite 201, Villa Park, Illinois 60181. This
facility's lease, has expired and is currently rented on a month to month basis
with a base monthly rent of $4,000. The Company also rents 800 sf of office
space in Marietta, Georgia on a month to month basis with a base monthly rent of
$570 and houses Gateway equipment in the following locations:
- - San Antonio, Texas - three year lease expiring May 1, 2001 for 6,000 sf at
$4,500 per month;
- - Nuevo Laredo, Mexico - one year lease expiring July 15, 2000 for 500 sf at
$1,950 per month;
- - Monterrey, Mexico - one year lease expiring July 15, 2000 for 500 sf at
$2,100 per month;
- - Mexico City, Mexico - one year lease expiring August 14, 2001 for 1,000 sf
at $ 2,500 per month.
All leases noted above are automatically renewed for additional term unless
cancelled by GII in writing.
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SELECTED FINANCIAL DATA
The following selected financial data is obtained from the unaudited financial
statements of GII's predecessor DTA Communications Network, LLC., as of December
31, 1999, 1998 and 1997, which are included elsewhere in Exhibit D to this
Information Statement. The selected financial data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and the Financial Statements and attached financial notes. Audited
financial statements for GII are expected to be ready for filing at the time of
Closing the Reorganization Agreement.
<TABLE>
<CAPTION>
GII FOR YEAR ENDED
12/31/99 12/31/98 12/31/97
----------- ---------- ----------
<S> <C> <C> <C>
Revenue. . . . . . . . . . 25,618,203 4,046,246 792,654
----------- ---------- ----------
Operating Expenses . . . . 27,462,532 4,157,736 1,048,736
----------- ---------- ----------
Gross Profit (Loss). . . . (1,844,329) (111,490) (256,736)
Other Expenses . . . . . . 62,059 182,850 0
Net Income (Loss). . . . . (1,906,388) (294,340) (256,082)
Total Assets . . . . . . . 6,605,400 210,692 211,517
Total Current Liabilities. 5,819,641 761,114 0
</TABLE>
MANAGEMENT DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
RESULTS OF OPERATIONS. Planned principal operations of GII commenced in 1996,
however, to this date GII has received limited revenues. In June 1975, the
Financial Accounting Standards Board, in its Statement No. 7, set forth
guidelines for identifying an enterprise in the development stage and the
standards of financial accounting and reporting applicable to such an
enterprise. In the opinion of the Company, GII and its activities from its
inception through December 31, 1999 fall within the referenced guidelines.
Accordingly, the Company has reported GII's activities in accordance with the
aforesaid Statement of Financial Accounting Standards No. 7.
During the years ended December 31, 1999 and 1998 and 1997, GII sustained a net
loss of approximately $1,906,388, $ 294,340, and $ 256,082, respectively. These
losses are expected to continue for a presently undetermined time. The Company's
losses in 1999, independent of GII, were minimal due to lack of business
operations.
SALES AND REVENUES. GII has derived (or intends to derive) revenues generally
from sale of the products described herein. In order to increase revenue, GII
has entered into distribution agreements with Protel and other
telecommunications companies who have established distribution into target
markets. GII intends to establish a sales and marketing organization and attempt
to develop strategic partner relationships with national companies and expand
advertising and promotion. No assurances can be given that GII will be
successful in these efforts.
LIQUIDITY AND CAPITAL RESOURCES. As of December 31, 1999, GII had net
stockholders' deficit of $ 2,987,684, accumulated losses during the development
stage of $1,906,388 and a working capital deficit of $3,663,967. There can be
no assurance that GII will be able to continue as a going concern or achieve
material revenues or profitable operations. GII is dependent on the proceeds of
the Private Placement(s) and sufficient cash flow from operations to meet its
short-term and long-term liquidity needs. GII may require additional financing
beyond the proceeds received in the Private Placements depending on the number
of securities sold in the Private Placements and the amount of revenue derived
from operations. In this event, no assurances can be given that such financing
will be available in the amount required or, if available, that it can be on
terms satisfactory to GII.
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The maximum proceeds of the Private Placements are intended to be used to
provide GII with the necessary capital to maintain and expand its operations for
a period of 12 months when GII expects to achieve significant cash flow from
operations, although no assurances can be given in this regard.
YEAR 2000 UPDATE. Even though the date is now past January 1, 2000 and GII has
not experienced any immediate adverse impact on GII's operations from the
transition to the Year 2000, GII cannot provide complete assurance that GII's
operations have not been affected in a manner that is not yet apparent or that
will arise in the future. In addition, computer programs that were date
sensitive to the Year 2000 may not have been programmed to process the Year 2000
as a leap year, and any negative consequential effects remain unknown. As a
result, GII will continue to monitor GII's Year 2000 compliance and the Year
2000 compliance of GII's agents. However, GII anticipates no Year 2000 problems
that are reasonably likely to have a material adverse effect on GII's
operations.
RISKS RELATED TO THE BUSINESS OF GII
The following is a summary of some of the risk factors which may have an impact
on the GII's business efforts:
GII HAS A LIMITED OPERATING HISTORY IN A NEW AND RAPIDLY CHANGING INDUSTRY.
GII's predecessor DTA Communications Network, LLC commenced offering IP based
network and application services in 1996. Accordingly, GII has only a limited
operating history on which an evaluation of its prospects can be made. Such
prospects must be considered in light of the substantial risks, expenses and
difficulties encountered by new entrants into the Internet based voice service
industry. Significant on-going risks include GII's ability to:
- - expand its subscriber base and increase subscriber revenues,
- - compete favorably in a highly competitive market,
- - access sufficient capital to support its growth,
- - recruit, train and retain qualified employees,
- - introduce new products and services, and
- - upgrade network systems and infrastructure.
GII cannot be certain that it will successfully address any of these risks. In
addition, its business is subject to general economic conditions, which may not
be favorable for GII's business in the future.
GII HAS NOT BEEN PROFITABLE AND EXPECT FUTURE LOSSES. GII incurred net losses
of approximately $1,906,388 for its fiscal year ended December 31, 1999. GII
has not achieved profitability in any quarterly or annual period since inception
and expects to continue to incur net losses for the foreseeable future.
Although revenues have grown in recent quarters, GII cannot be certain that it
will be able to sustain these growth rates or that it will obtain sufficient
revenues to achieve profitability. Even if GII does achieve profitability, it
cannot be certain that it can sustain or increase profitability on a quarterly
or annual basis in the future. GII expects that costs and expenses will
continue to increase in future periods, which could negatively affect future
operating results.
GII COULD BE REQUIRED TO CUT BACK OR STOP ITS OPERATIONS IF IT IS UNABLE TO
OBTAIN NEEDED FUNDING. GII will need to raise additional capital to run its
business, repay indebtedness incurred in connection with upgrading its
facilities, fund anticipated expansions and meet pre-existing cash obligations
through the end of the third quarter of 2000. Should GII be unsuccessful in its
efforts to raise capital, it will be required to curtail its expansion plans or
it may be required to cut back or stop operations. There can be no assurance
that GII will raise additional capital or generate funds from operations
sufficient to meet its obligations and planned requirements.
A MARKET FOR GII'S SERVICES MAY NOT DEVELOP. It is uncertain whether a market
will develop for GII's IP communications services. The IP communications market
is new and rapidly evolving. GII's ability to sell it's services to end users
may be inhibited by, among other factors, the reluctance of some end users to
switch from traditional communications carriers to IP communications carriers
and by concerns with the quality of Internet and IP telephony and adequacy of
security in the exchange of information over the Internet. End users in markets
serviced by recently deregulated telecommunications providers are not familiar
with obtaining services from competitors of these providers and may be reluctant
to use new providers, such as GII's. GII's ability to increase revenues from
enhanced IP communications services depends on the migration of traditional
telephone network traffic to GII's IP network. GII will need to devote
substantial resources to educate end users about the benefits of IP
communications solutions in general and GII's services in particular. If end
users do not accept GII"s enhanced IP communications services as a means of
sending and receiving communications GII will not be able to increase the number
of paid users or successfully generate revenues in the future.
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A SIGNIFICANT PORTION OF GII'S REVENUES ARE BASED ON SALES TO ITS LARGEST
CUSTOMERS AND ITS REVENUES COULD DECLINE AS A RESULT OF THE LOSS OF THESE
CUSTOMERS. GII's three largest customers as a group accounted for approximately
96% and 91% of GII's net revenues for fiscal 1998 and 1999, respectively.
Although GII cannot assure you that its principal customers will continue to
purchase products from it at past levels, GII expects a significant portion of
its revenue will continue to be concentrated within a small number of customers.
The loss of, or significant reduction of, purchases by one or more of these
customers could have a material adverse effect on GII.
IF GII FAILS TO CREATE AND MAINTAIN STRATEGIC RELATIONSHIPS WITH INTERNATIONAL
CARRIERS ITS REVENUES WILL DECLINE. GII's success depends in part on its ability
to maintain and develop relationships with international carriers. The quality
of these relationships and the ability of these carriers to market services
effectively directly affects GII's revenue. GII has been pursuing joint ventures
and business opportunities with new and emerging carriers in foreign markets.
These transactions commonly involve certain risks, including, among others, that
a strategy or business direction change from a major carrier could have a
significant short term impact on GII's revenue. The new and emerging carriers
may not acquire as much business as projected due to market competition or other
factors, which could lead them to reduce their business with GII. If GII is not
able to find suitable carriers operating in attractive markets, it may not be
able to enter those markets on a cost-effective basis.
DECREASING TELECOMMUNICATIONS RATES MAY DIMINISH OR ELIMINATE THE COMPETITIVE
PRICING ADVANTAGE OF IP TELEPHONY COMMUNICATION SERVICES. Decreasing
telecommunications rates may diminish or eliminate the competitive pricing
advantage of our enhanced IP communications services and carrier transmission
services. International and domestic telecommunications rates have decreased
significantly over the last few years in most of the markets in which GII
operates, and GII anticipates that rates will continue to be reduced in all of
the markets in which GII does business or expect to do business. Users who
select IP communications services to take advantage of the current pricing
differential between traditional telecommunications rates and IP telephony rates
may switch to traditional telecommunications carriers as such pricing
differentials diminish or disappear, and GII will be unable to use such pricing
differentials to attract new customers in the future. In addition, GII's ability
to market it's carrier transmission services to telecommunications carriers
depends on the existence of spreads between the rates offered by GII and the
rates offered by traditional telecommunications carriers, as well as a spread
between the retail and wholesale rates charged by the carriers from which GII
obtains wholesale service. Continued rate decreases will require GII to lower
it's rates to remain competitive and will reduce or possibly eliminate GII's
gross profit from it's carrier transmission services. If telecommunications
rates continue to decline, GII may lose users for it's enhanced IP
communications services and carrier transmission services.
RAPID TECHNOLOGICAL CHANGE IN TELECOMMUNICATIONS INDUSTRY COULD REDUCE THE
DEMAND FOR GII'S SERVICES. The telecommunications industry is subject to rapid
and significant changes in technology that may adversely affect the continued
use of IP telephony services. In addition, widely accepted standards have not
yet developed for the technologies GII uses. GII expects that new services and
technologies will emerge in the market in which GII competes. These new
services and technologies may be superior to the services and technologies that
GII uses, or these new services may render GII's services and technologies
obsolete. To be successful, GII must adapt to rapidly changing market by
continually improving and expanding the scope of services it offers and by
developing new services and technologies to meet customer needs. GII's success
will depend, in part, on GII's ability to license leading technologies and
respond to technological advances and emerging industry standards on a
cost-effective and timely basis. GII will need to spend significant amounts of
capital to enhance and expand it's services to keep pace with changing
technologies. GII cannot predict the likelihood of these changes and cannot
assure you that any technological changes will not materially and adversely
affect GII's business and operating results.
GII'S BUSINESS IS EXPOSED TO REGULATORY, POLITICAL AND OTHER RISKS ASSOCIATED
WITH INTERNATIONAL BUSINESS. GII conducts a significant portion of its business
outside the U.S. and accordingly derives a portion of its revenues and accrues
expenses in foreign currencies. Fluctuations in foreign currency exchange rates
may affect GII's results of operations and the value of GII's foreign assets,
which in turn may adversely affect reported earnings and the comparability of
period-to-period results of operations. Changes in currency exchange rates may
affect the relative prices at which GII and foreign competitors sell products in
the same market. In addition, changes in the value of the relevant currencies
may affect the cost of items required in GII's operations. Accordingly, GII's
results of operations may be materially affected by international events and
fluctuations in foreign currencies. GII does not employ foreign currency
controls or other financial hedging instruments.
GII's international operations and business expansion plans are also subject to
a variety of government regulations, currency fluctuations, political
uncertainties and differences in business practices, staffing and managing
foreign operations, longer collection cycles in certain areas and potential
21
<PAGE>
changes in tax laws. Governments may adopt regulations or take other actions,
including raising tariffs, that would have a direct or indirect adverse impact
on GII's business opportunities within such governments' countries. Furthermore,
from time to time, the political, cultural, and economic climate in various
national markets and regions of the world may not be favorable to its operations
and growth strategy.
EXTENSIVE REGULATION-REGULATORY MATTERS COULD IMPACT ON GII'S ABILITY TO CONDUCT
BUSINESS. Existing and future governmental regulation may substantially affect
the way in which GII conducts business and the procedural and substantive
regulatory requirements with which it must comply. These regulations may
increase the cost of doing business or may restrict the way in which GII offers
products and services. There is no way to predict the future regulatory
framework of the IP telephony business. These regulations are summarized in more
detail in the section entitled "Regulation."
THE LOSS OF KEY PERSONNEL COULD WEAKEN GII'S TECHNICAL AND OPERATIONAL
EXPERTISE, DELAY ENTRY INTO NEW MARKETS AND LOWER THE QUALITY OF ITS SERVICE.
GII's success depends on the continued efforts of its senior management team and
its technical, marketing and sales personnel. GII also believes that to be
successful it must hire and retain highly qualified engineering personnel.
Competition in the recruitment of highly qualified personnel in the
telecommunications industry is intense. Hiring employees with the skills and
attributes required to carry out its strategy can be time consuming. GII may not
be able to retain or successfully integrate existing personnel or identify and
hire additional qualified personnel. If GII loses the services of key personnel
or is unable to attract additional qualified personnel, its business could be
materially and adversely affected. GII does not have key-man life insurance. GII
initiates and maintains its relationships with foreign carriers in its targeted
markets through the combined efforts of its senior management team. GII believes
that its success in entering into operating agreements with its foreign partners
is due largely to its reputation along with personal relationships which its
senior management team have developed with the appropriate officials at foreign
carriers.
FORWARD-LOOKING STATEMENTS
Certain statements included in this Information Statement regarding the Company
and GII which are not historical facts are forward-looking statements, including
the information provided with respect to the future business operations and
anticipated agreements and projects of the Company and GII after the
Reorganization. These forward-looking statements are based on current
expectations, estimates, assumptions and beliefs of management; and words such
as "expects," "anticipates," "intends," "plans," "believes," "estimates" and
similar expressions are intended to identify such forward-looking statements.
These forward-looking statements involve risks and uncertainties, including, but
not limited to, the success of GII's sales strategies, market acceptance of
GII's products and services, GII's ability to obtain a larger number and size of
contracts, the timing of contract awards, work performance and customer
response, the impact of competitive products and pricing, and technological
developments by GII's competitors. Accordingly, actual results may differ
materially from those expressed in the forward-looking statements.
ELECTION OF DIRECTORS
---------------------
Because the current officers of the Company will resign their positions with the
Company at the closing of the Reorganization and the eleven new directors will
be elected by the stockholders pursuant to this Information Statement, all of
the information set forth in this Section regarding the "Election of Directors"
pertains to those executives of GII who will become directors and officers of
the Company on the closing of the Reorganization. Information regarding the
current officers and directors of the Company is set forth in the Company's
Annual Report for 1999, which accompanies this Information Statement.
INFORMATION CONCERNING NOMINEES
The following nominees of GII and Mr. Gushlak are expected to become executive
officers and directors of the Company at the closing of the Reorganization.
22
<PAGE>
<TABLE>
<CAPTION>
NAME AGE EXPECTED POSITION WITH COMPANY
- -------------------- --- --------------------------------------------------------------
<S> <C> <C>
Robert J. Donahue. . 60 President, Chief Executive Officer and Director
- -------------------- --- --------------------------------------------------------------
Daniel M. Wickersham 54 Executive Vice President, Chief Operating Officer and Director
- -------------------- --- --------------------------------------------------------------
Colum P. Donahue . . 26 Vice President of Network Operations and Director
- -------------------- --- --------------------------------------------------------------
Barry Toser. . . . . 42 Senior Vice President of Sales and Marketing, and Director
- -------------------- --- --------------------------------------------------------------
Jonathan Greenhill . 46 Director and General Counsel
- -------------------- --- --------------------------------------------------------------
Paul Fritz . . . . . 58 Director
- -------------------- --- --------------------------------------------------------------
Richard Wilson . . . 57 Director
- -------------------- --- --------------------------------------------------------------
Myron Gushlak. . . . 30 Director
- -------------------- --- --------------------------------------------------------------
Carm Adimando. . . . 55 Director
- -------------------- --- --------------------------------------------------------------
Robert H. Kohn . . . 42 Director
- -------------------- --- --------------------------------------------------------------
</TABLE>
The following describes the principal occupation of each officer and director of
the Company for the previous five years:
ROBERT J. DONAHUE - PRESIDENT, CHIEF EXECUTIVE OFFICER AND DIRECTOR. Mr.
Donahue founded GlobalNet in 1996, and has been serving as CEO and President
since that time. His career began in 1961 in the defense unit of GTE Automatic
Electric, where he was introduced to various aspects of telecommunications. In
1977, Mr Donahue became Vice President of United Telephone. That same year, he
founded Donahue Telecom Associates Inc. and his experience in the international
telecommunications arena began. That enterprise provided customized telecom
consulting services to major multinational corporations. In 1986, Mr. Donahue
founded Standard Telecom, Inc., which served as a major rebiller for
telecommunications giants including Sprint and AT&T, and was one of the original
fifteen charter members of the TRA. In 1995, Mr. Donahue founded DTA
Communications Networks, LLC ("DTA"), now merged with GlobalNet, which provided
international transport and billing services. Mr. Donahue graduated from Loras
College in 1961, has been married for 34 years and has 5 children.
DANIEL M. WICKERSHAM - EXECUTIVE VICE PRESIDENT AND CHIEF OPERATING OFFICER.
Mr. Wickersham joined the Company in January 2000 with more than 30 years of
telecommunications industry experience. He brings international and domestic
hands-on expertise in telecommunication and information technology, ranging from
engineering, operating and business management to sales/marketing. Previously,
Mr. Wickersham was President and COO of WorldPort Communications, Inc. He is
known for his business development and revenue generating skills, which are a
product of his strong global industry relationships. Telecommunication network
accomplishments include Tenneco, U.S. Army, several Bell Operating Companies and
a number of local cable organizations. Mr. Wickersham holds a BS in Engineering
and a MBA in Engineering Management and has successfully completed the Executive
Management Program at Rice University. In parallel with his civilian
accomplishments, Mr. Wickersham recently retired from the U.S. Army Active
Reserve as a Lieutenant Colonel with over 30 years of continuous combined Active
and Active Reserve service. His career was mostly comprised of service as a
Signal Corp Officer with a specialty in Telecommunications and Information
Management.
COLUM P. DONAHUE - VICE PRESIDENT OF NETWORK OPERATIONS. Mr. Donahue began his
career in telecommunications with DTA Communications Network, LLC, now merged
with GlobalNet. Starting in technical support, Mr. Donahue gained hands-on
experience in every aspect of telecom business. He was responsible for the
start-up activities and service coordination of new and existing international
networks. Mr. Donahue was also responsible for establishing new customers,
arranging for network interconnection and negotiating international carrier
rates. In his position at GlobalNet as Vice President of Network Operations,
Mr. Donahue supervises and directs all network support activities in the U.S.
and abroad, including the design and implementation of the GlobalNet Networks
Operations Center. Mr. Donahue holds a BA in Business Management from the
University of Wisconsin.
BARRY TOSER - SENIOR VICE PRESIDENT OF SALES AND MARKETING. Mr. Toser joined
the Company in March 2000 with more than twenty years experience in the
telecommunications arena. Previously, Mr. Toser was Vice President of Global
Carrier Services for Destia Communications where he successfully expanded the
Company's operations in North America and Europe. In that capacity, he was
responsible for the sales and support efforts of more than twenty people in the
U.S. and Europe. Prior to this, Mr. Toser was Vice President and General
Manager for AlphaNet Telecom, a carrier-to-carrier VoIP organization based in
Toronto, Canada. Mr Toser also serviced as Vice President of U.S. Sales for
23
<PAGE>
Teleglobe International in 1996-1997. While at Teleglobe, Mr. Toser directed
the sales and service responsibilities for all wholesale, commercial, and
Regional Bell Operating Company accounts. Before joining Teleglobe, Mr. Toser
directed sales, marketing and customer retention activities for Cable and
Wireless, Inc. from 1987 through 1995. Mr. Toser holds a BA from the University
of Maryland.
JONATHAN GREENHILL - BOARD OF DIRECTORS AND GENERAL COUNSEL. Mr. Greenhill is a
partner and principal in the New York firm of Greenhill Partners, P.C.,
specializing in commercial transactions, litigation, and insurance defense. Mr.
Greenhill was admitted to practice in New York and in U.S. District court for
the southern and Eastern Districts of New York (1981) and the U.S. Court of
Appeals, 4th Circuit (1996). Prior to entering private practice, Mr. Greenhill
served for a decade in the U.S. Foreign Service, as a Political and Economic
officer, in Latin America and Europe, and was Assistant Director of the Public
Affairs Program at the University of Denver. Mr. Greenhill graduated from the
Johns Hopkins University (B.A., 1976), New York University (M.P.A. with
Distinction, 1978) and the University of Denver College of Law (J.D., 1980). He
is a member of the Association of the Bar of the City of New York, the American
Bar Association, the Loss Executives Association and the Johns Hopkins Alumni,
New York Board of Directors. He is fluent in Spanish and French.
PAUL FRITZ - BOAR OF DIRECTORS. Mr. Fritz is the founder, Chairman and
President of Chicago Consolidated Communications, Chicago, Illinois. His
company is one of the leading distributors of voice and data equipment for
Lucent Technologies. Chicago Consolidated Communications, markets, installs and
maintains systems throughout the country. Mr. Fritz has held positions with
Rolm/IBM Corporation as Vice President of Marketing, Nortel as Director of Sales
and marketing positions with Ameritech.
RICHARD WILSON - BOARD OF DIRECTOR. Mr. Wilson is Persident of REW &
Associates, a consulting firm that specializes in international carriers, both
foreign and domestic. From 1993 to 1996, he was Vice President of Acquisitions
for Midcom, a $200,000,000 provider of long distance services. Mr. Wilson was
founder of Feek's Telcom and sold this company to McCaw Communications. He has
also held management positions for Communications Network, Inc. and Motorola.
Mr. Wilson was one of the founders and has been Chairman/Board of Directors of
the Telecommunications Resellers Association (TRA) and a past President of TRA.
He attended Central Missouri State University.
MYRON GUSHLAK - BOARD OF DIRECTORS. Mr. Gushlak currently serves as Managing
Director of Imperium Capital. A San Francisco based private venture capital
Company that provides financing and ongoing management to technology companies,
with a specific focus on the media/entertainment and telephony. Accomplishments
include the initial funding and public listing of Emusic.com, the leading
provider of downloadable music; the initial funding and public listing of
netValue Holdings, Inc., a leading public internet incubator, and the initial
funding and public listing of GlobalNet, one of the largest North American based
VoIP providers. He also is a co-founder and on the board of directors of
Laugh.com, Sticky Networks, a multilayer search tool company founded by the
former CEO of Infoseek; and, is on the board of advisors of netValue Holdings,
Inc. Also, Mr. Gushlak sits on the board of directors of Netmaster, Inc. a
Canadian based Linux software company. Prior to this, he was a Broker at one of
Canada's largest Independent brokerage firms.
CARM ADIMANDO - BOARD OF DIRECTORS. Carm Adimando is Chairman and President of
CARMCO Investements, LLC. Mr. Adimando is also Chairman of Cordillers Asset
Management, a money management firm in Denver, Co. Mr. Adimando retired from
Pitney Bowes in 1996 where he had been Vice President. Treasurer and Chief
Financial Officer. Prior to joining Pitney Bowes, Mr. Adimando held positions
with American Airlines, Burndy Corporation, Deloitte, Haskins & Sells and Morgan
Guaranty Trust. He is a member of the Board of Directors of Sensory Science,
Inc. and Counsel Press, LLC. He is on the Board of Oversees of the University
of Connecticut of Business and the Board of Regents of Sacred Heart University.
He is also on the Advisory Board for the Franciscan Friars of the Atonement and
Board of Directors of St. Vincent's Hospital Foundation, Fairfield, CT.
ROBERT H. KOHN - BOARD OF DIRECTORS. Mr. Kohn is a co-founder and Chairman of
the Board of Emusic. Prior to 1998, he was Vice President, Business Development
and General Counsel of Pretty Good Privacy, Inc., a developer and marketer of
Internet encryption and security software. From 1987 until 1996, he was Senior
Vice President of Corporate Affairs of Borland International, a software
company. Mr. Kohn served as chief legal counsel for Ashton-Tate Corporation and
as an attorney for Ruden & Richman, and entertainment law firm whose clients
included Frank Sinatra, Liza Minelli, Cher and Warner Brothers Music. He was
also an Associate Editor of the Entertainment Law Reporter, for which he
continues to serve as a member of the Advisor Board. A Member of the California
Bar Association, Mr. Kohn co-authored Kohn on Music Licensing, a treatise on
music industry laws for lawyers, music publishers and songwriters. Mr. Kohn is
also and adjunct Professor of Law at the Monterey College of Law, where he
teaches Corporate Law.
24
<PAGE>
EXECUTIVE COMPENSATION
Directors are permitted to receive fixed fees and other compensation for their
services as directors, as determined by the Board of Directors. No amounts have
been paid to directors of the Company in such capacity since inception.
GII paid Mr. Robert J. Donahue received a salary of $ 207,000 and $ 189,000 for
1999 and 1998, respectively in his capacity as President and Chief Executive
Officer. Mr. Colum Donahue received a salary of $ 38,000 and $ 13,319 for 1999
and 1998, respectively for acting as Vice President of Network Operations. All
other directors received no salary. From time-to-time over the past few years,
GII has accrued salaries of its executive officers. At January 31, 2000, such
arrears total approximately $ 175,000.
During the period from inception to December 31, 1999, no cash compensation was
paid to any of the directors of GII for serving in such capacity. GII's Board of
Directors has complete discretion as to the appropriateness of:
- - key-man life insurance,
- - obtaining officer and director liability insurance,
- - employment contracts with and compensation of executive officers and
directors,
- - indemnification contracts, and
- - bonuses and incentive plans to award executive officers and key employees.
The following table sets forth the annual salary for each executive officer of
the Company which will be in effect as of the Closing of the Reorganization:
<TABLE>
<CAPTION>
ANNUAL SALARY
NAME OFFICE 2000 (PROJECTED)(1)
- --------------------- ------------------------------------------------- --------------------
<S> <C> <C>
Robert J. Donahue . . President, Chief Executive Officer $ 230,000(2)
- --------------------- ------------------------------------------------- --------------------
Daniel M. Wickersham. Executive Vice President, Chief Operating Officer $ 200,000
- --------------------- ------------------------------------------------- --------------------
Colum P. Donahue. . . Vice President of Network Operations $ 150,000(2)
- --------------------- ------------------------------------------------- --------------------
Barry Toser . . . . . Senior Vice President of Sales and Marketing $ 150,000
- --------------------- ------------------------------------------------- --------------------
Vacancy to be filled. Senior V.P. and Chief Financial Officer $ 225,000
- --------------------- ------------------------------------------------- --------------------
<FN>
(1) The definitive compensation of the Company's officers will be determined by the Board
of Directors of the Company.
(2) As a term of the Reorganization Agreement the Company will enter into employment
agreements with Messrs. Robert J. Donahue and Colum P. Donahue who are considered key
persons to the success of the business.
</TABLE>
As a term of the Reorganization Agreement the Company intends to enter into
employment agreements with Mr. Robert J. Donahue as Chief Executive Officer and
President, and Colum P. Donahue as Vice President of Network Operations for a
term commencing on Closing of the Reorganization and continuing until January 1,
2001, unless otherwise terminated pursuant to the terms of their individual
employment agreements. The Company expects it will also enter into an employment
contract with Mr. Dan Wickersham as Executive Vice President, Chief Operating
Officer. Pursuant to these Agreements, Mr. R.J. Donahue is to be paid a base
salary of $230,000 per annum, Mr. Donahue a base salary of $150,000 per annum
and Mr. Wickersham a base salary of $200,000 per annum. Each will also be
entitled to the following: major medical health benefits equivalent to that
provided to the officers in GII; indemnification from any claim or law suit
which may be asserted against him when acting in their official capacity for GII
provided that said indemnification is not in violation of any federal or state
law or rule or regulation of the Securities and Exchange Commission; and options
to purchase up to purchase shares of the Common Stock of the Company. Each
employment agreement also contains certain provisions with respect to
disability, termination, confidentiality and non-competition.
BOARD OF DIRECTORS REPORT ON EXECUTIVE COMPENSATION
25
<PAGE>
The Board of Directors of GII has been composed of Robert J. Donahue, Chairman
of the Board, Chief Financial Officer, Treasurer, Jonathan Greenhill,
Secretary, Colum Donahue, Barry Toser, Richard Wilson, and Paul Fritz.
The Company's Board of Directors, which will include Robert J. Donahue, Daniel
M. Wickersham, Colum P. Donahue, Barry Toser, Michael Karnes, Jonathan
Greenhill, Paul Fritz, Richard Wilson, Myron Gushlak, Carm Adimando, and Robert
Kohn, will be responsible for reviewing and determining the annual salary and
other compensation of the executive officers and key employees of the Company.
The goals of the Company are to align compensation with business objectives and
performance and to enable the Company to attract, retain and reward executive
officers and other key employees who contribute to the long-term success of the
Company. The Company provides base salaries to its executive officers and key
employees sufficient to provide motivation to achieve certain operating goals.
Although salaries are not specifically tied to performance, incentive bonuses
are available to certain executive officers and key employees. In the future,
executive compensation may include without limitation cash bonuses, stock option
grants and stock reward grants. In addition, the Company may set up a pension
plan or similar retirement plans.
STOCK OPTIONS
There are currently no stock options outstanding. The Board of Direction and
Majority Shareholders have adopted and approved an incentive stock option plan
(the "Plan") providing for the granting of stock options to officers, directors,
employees and key consultants of the Company and its subsidiaries or affiliates.
It is expected that this stock option plan will be registered on Form S-8 with
the Securities and Exchange Commission. (See "2000 STOCK OPTION PLAN" for
further details.)
FAMILIAL RELATIONSHIPS
Messrs. Bob Donahue and Colum Donahue are father and son respectively.
INDEMNIFICATION
Article Fifteen of the Company's Certificate of Incorporation provides for it to
indemnify any and all directors and officers whom it shall have power to
indemnify under Section 78.751 of the Nevada Revised Statutes from and against
any and all of the expenses, liabilities or other matter referred to in or
covered by such section, and the indemnification provided for herein shall not
be deemed exclusive of any other rights to which the persons so indemnified may
be entitled under any By-Law, agreement, vote of shareholders or disinterested
directors or otherwise, both as to action in his official capacity and as to
action in another capacity by holding such office, and shall continue as to a
person who has ceased to be a director of officer and shall inure to the
benefits of the heirs, executors and administrators of such a person. The
Company has been advised that it is the position of the SEC that insofar as the
foregoing provisions may be invoked to disclaim liability for damages arising
under the Securities Act, that such provisions are against public policy as
expressed in the Securities Act and are therefore unenforceable.
2000 STOCK OPTION PLAN
----------------------
GENERAL.
The Board of Directors and Majority Shareholders have adopted and approved a
stock option plan (the "Plan"). The purpose of the Plan is to enable the Company
to offer it's officers, directors, employees and consultants and advisors
performance-based incentives and other equity interests in the Company, thereby
attracting, retaining, and rewarding such personnel. The Company believes that
increased share ownership by such persons more closely aligns stockholder and
employee interests by encouraging a greater focus on the profitability of the
Company. There is reserved for issuance under the Plan an aggregate of 3,000,000
shares of Common Stock. All of such shares may, but need not, be issued pursuant
to the exercise of incentive stock options. Options granted under the Plan may
be either "incentive stock options," as defined in Section 422 of the Internal
Revenue Code of 1986, as amended (the "Code"), or non-statutory stock options.
In addition, awards of or rights to purchase shares of the Company's Common
Stock ("Stock Rights") may be granted under the Plan. A copy of the Plan is
attached as Exhibit E.
ADMINISTRATION.
The Plan will be administered by the Board of Directors or a committee appointed
by the Board of Directors (the "Administrator"). The Administrator, subject to
the terms and conditions of the plan, has authority to:
26
<PAGE>
- - select the persons to whom options and Stock Rights are to be granted;
- - determine the number of shares of Common Stock to be covered by each
option and Stock Right granted;
- - approve forms of option agreement for use under the Plan;
- - determine the terms and conditions of any option or Stock Right;
- - reduce the exercise price of any option or Stock Right if the fair market
value of the Common Stock covered by such Option or Stock Right has
declined since the date the option or Stock Right was granted;
- - institute an option exchange program;
- - interpret the Plan and awards granted under the Plan;
- - prescribe, amend and rescind rules and regulations relating to the Plan or
sub-plans established for the purpose of qualifying for preferred tax
treatment under foreign tax laws;
- - modify or amend each option or Stock Right issued;
- - allow Optionees to satisfy withholding tax obligations by electing to have
the Company withhold from the shares to be issued on exercise of an
option or Stock Right that number of shares having a fair market value
equal to the amount required to be withheld;
- - authorize any person to execute on behalf of the Company any instrument
required to effect the grant of an option or Stock Right previously
granted by the Administrator; and
- - make all other determinations and take all other actions necessary or
advisable for the administration of the Plan.
All decisions, interpretations and other actions of the Administrator are final
and binding on all holders of options and Stock Rights.
ELIGIBILITY; LIMITATIONS OF OPTIONS.
Non-statutory stock options and Stock Rights may be granted under the Plan to
employees, directors and consultants of the Company or any parent or subsidiary
of the Company. Incentive stock options may be granted only to employees. As
discussed above, Section 162(m) of the Code places limits on the deductibility
for federal income tax purposes of compensation paid to certain executive
officers of the Company. In order to preserve the Company's ability to deduct
the compensation income associated with options granted to such persons, the
Plan provides that no employee may be granted, in any fiscal year of the
Company, options to purchase more than 1,000,000 shares of Common Stock plus
options to purchase up to an additional 1,000,000 shares of Common Stock in
connection with such employee's initial commencement of service to the Company.
TERMS AND CONDITIONS OF OPTIONS.
Options granted under the Plan are subject to additional terms and conditions
under the individual option agreement. These terms and conditions include:
- - EXERCISE PRICE. The Administrator will determine the exercise price of
options granted at the time of grant. The exercise of an incentive stock option
may not be less than 100% of the fair market value of the Common Stock on the
date such option is granted; provided, however, the exercise of an incentive
stock option granted to a 10% stockholder may not be less than 110% of the fair
market value of the Common Stock on the date such option is granted. The fair
market value of the Common Stock is generally determined with reference to the
closing sale price for the Common Stock (or the closing bid if no sales were
reported) on the last market trading day prior to the date the option is
granted. The exercise price of a non-statutory stock option may be determined by
the Administrator, provided however, the exercise price of a nonstatutory stock
option intended to qualify as "performance-based compensation" within the
meaning of Section 162(m) of the Code may not be less than 100% of the fair
market value of the Common Stock on the date of grant.
- - EXERCISE OF OPTION. The Administrator determines when options become
exercisable, and may in its discretion, accelerate the vesting of any
outstanding option.
- - FORM OF CONSIDERATION. The means of payment for shares issued on exercise
of an option is specified in each option agreement. The Plan permits payment to
be made by cash, check, promissory note, other shares of Common Stock of the
Company (with some restrictions), cashless exercise, a reduction in the amount
of any Company liability to the optionee, any other form of consideration
permitted by applicable law, or any combination thereof.
27
<PAGE>
- - TERM OF OPTION. The term of an incentive stock option may be no more than
ten years from the date of grant; provided that in the case of an incentive
stock option granted to a 10% stockholder, the term of the option may be no more
than five years from the date of grant. No option may be exercised after the
expiration of its term.
- - TERMINATION OF EMPLOYMENT. If an optionee's employment, directorship or
consulting relationship terminates for any reason (other than death or
disability), then all options held by the optionee under the Plan expire on the
earlier of (i) the date set forth in his or her notice of grant or stock option
agreement or (ii) the expiration date of such option. To the extent the option
is exercisable at the time of such termination, the optionee may exercise all or
part of his or her option at any time before termination.
- - PERMANENT DISABILITY; DEATH. If an optionee's employment, directorship or
consulting relationship terminates as a result of permanent and total disability
(as defined in the Code) or death, then all options held by such optionee under
the Plan will generally expire on the earlier of (i) twelve months from the date
of termination of optionee's employment or (ii) the expiration date of the
option. The optionee or, if applicable, the executor or other legal
representative of the optionee's estate may exercise all or part of the
optionee's option at any time before such expiration to the extent that the
option was exercisable at the time of termination of employment.
- - NON-TRANSFERABILITY OF OPTIONS. Options granted under the Plan generally
are not transferable other than by will or the laws of descent and distribution,
and may be exercised during the optionee's lifetime only by the optionee.
- - VALUE LIMITATION. If the aggregate fair market value of all shares of
Common Stock subject to an optionee's incentive stock option which are
exercisable for the first time during any calendar year exceeds $100,000, the
excess portion of such option will be treated as a non-statutory stock option.
- - OTHER PROVISIONS. The stock option agreement may contain other terms,
provisions and conditions not inconsistent with the Plan as may be determined by
the Administrator.
STOCK RIGHTS. A Stock Right may award the recipient Common Stock or may give the
recipient the right to purchase Common Stock. Shares received or purchased
pursuant to a Stock Right are subject to a restricted stock agreement between
the Company and the recipient. Unless the Administrator determines otherwise,
the restricted stock agreement will give the Company a reacquisition option
exercisable on the voluntary or involuntary termination of the recipient's
employment or consulting relationship with the Company for any reason (including
death and disability). The acquisition price for any shares reacquired by the
Company will be the original price paid by the recipient, if any. The
reacquisition option lapses at a rate determined by the Administrator. A Stock
Right and the stock acquired (while restricted) is generally nontransferable
other than by will or the laws of descent and distribution.
ADJUSTMENTS OF OPTIONS ON CHANGES IN CAPITALIZATION.
In the event that the stock of the Company changes by reason of any stock split,
reverse stock split, stock dividend, combination, reclassification or other
similar changes in the capital structure of the Company effected without the
receipt of consideration, appropriate adjustments will be made in the number and
class of shares of stock subject to the Plan, the number and class of shares of
stock subject to any option or Stock Right outstanding under the Plan, and the
exercise price of any such award. In the event of a liquidation or dissolution,
any unexercised options will terminate. The Administrator may, in its
discretion, provide that each optionee will fully vest in and have the right to
exercise the optionee's option or Stock Right as to all of the optioned stock,
and shall release all restrictions on any restricted stock prior to the
consummation of the liquidation or dissolution. In the event of a merger, sale
or reorganization of the Company into another corporation that results in a
change of control of the Company, options that would have become vested within
18 months after the closing date of the merger transaction will accelerate and
become fully vested on the closing of the transaction. In the event of a change
of control transaction, any other outstanding options that are not accelerated
would be assumed by the successor company or an equivalent option would be
substituted by the successor company. If any of these options are not assumed or
substituted, they would terminate.
AMENDMENT AND TERMINATION OF THE PLAN.
The Administrator may amend, alter, suspend or terminate the Plan, or any part
of the Plan, at any time and for any reason. No such action by the Board or
stockholders may alter or impair any option or Stock Right previously granted
under the Plan without the written consent of the optionee/recipient. Unless
terminated earlier, the Plan will terminate ten years from the date of its
approval by the stockholders or the Board, whichever is earlier.
28
<PAGE>
FEDERAL INCOME TAX CONSEQUENCES OF OPTIONS
INCENTIVE STOCK OPTIONS. An optionee who is granted an incentive stock option
does not generally recognize taxable income at the time the option is granted or
on its exercise, although the exercise may subject the optionee to the
alternative minimum tax. On a disposition of the shares more than two years
after grant of the option and one year after exercise of the option, any gain or
loss is treated as long-term capital gain or loss. If these holding periods are
not satisfied, the optionee recognizes ordinary income at the time of
disposition equal to the difference between the exercise price and the lower of:
- - the fair market value of the shares at the date of the option exercise; or
- - the sale price of the shares.
Any gain or loss recognized on such a premature disposition of the shares in
excess of the amount treated as ordinary income is treated as long-term or
short-term capital gain or loss, depending on the holding period. A different
rule for measuring ordinary income on such a premature disposition may apply if
the optionee is an officer, director, or 10% stockholder of the Company. The
Company is entitled to a deduction in the same amount as the ordinary income
recognized by the optionee.
NON-STATUTORY STOCK OPTIONS. An optionee does not recognize any taxable income
at the time he or she is granted a non-statutory stock option. On exercise, the
optionee recognizes taxable income generally by the excess of the then fair
market value of the shares over the exercise price. Any taxable income
recognized in connection with an option exercise by an employee of the Company
is subject to tax withholding by the Company. The Company is entitled to a
deduction in the same amount as the ordinary income recognized by the optionee.
On a disposition of such shares by the optionee, any difference between the sale
price and the optionee's exercise price, to the extent not recognized as taxable
income as provided above, is treated as long-term or short-term capital gain or
loss, depending on the holding period.
STOCK RIGHTS. Restricted stock is generally acquired pursuant to Stock Rights.
At the time of acquisition, restricted stock is subject to a "substantial risk
of forfeiture" within the meaning of Section 83 of the Code. As a result, the
recipient will not generally recognize ordinary income at the time of
acquisition. Instead, the recipient will recognize ordinary income on the dates
when the stock ceases to be subject to a substantial risk of forfeiture. The
stock will generally cease to be subject to a substantial risk of forfeiture
when it is no longer subject to the Company's right to reacquire the stock on
the recipient's termination of employment with the Company. At such times, the
recipient will recognize ordinary income measured as the difference between the
purchase price (if any) and the fair market value of the stock on the date the
stock is no longer subject to a substantial risk of forfeiture. The purchaser
may accelerate to the date of acquisition his or her recognition of ordinary
income, if any, and the beginning of any capital gain holding period, by timely
filing an election pursuant to Section 83(b) of the Code. In such event, the
ordinary income recognized, if any, is measured as the difference between the
purchase price and the fair market value of the stock on the date of purchase
and the capital gain holding period commences on such date. The ordinary income
recognized by a purchaser who is an employee will be subject to tax withholding
by the Company. Different rules may apply if the purchaser is also an officer,
director, or 10% stockholder of the Company.
The foregoing is only a summary of the effect of federal income taxation on
optionees and the Company with respect to the grant and exercise of options, and
on recipients of Stock Rights, under the Plan. It does not purport to be
complete, and does not discuss the tax consequences of the employee's,
director's or consultant's death or the provisions of the income tax laws of any
municipality, state or foreign country in which the employee, director or
consultant may reside.
INDEPENDENT ACCOUNTANTS
-----------------------
The Company's current auditor is the Salt Lake City firm of Andersen Andersen &
Strong. During the past two years there have been no changes in, or
disagreements with, accountants on accounting and/or financial disclosure.
29
<PAGE>
WHERE YOU CAN FIND MORE INFORMATION
-----------------------------------
We file annual, quarterly and special reports, proxy statements and other
information with the SEC. You can read and copy any materials that we file with
the SEC at the SEC's Public Reference Room at 450 Fifth Street, N.W.,
Washington, D.C. 20549; the SEC's regional offices located at Seven World Trade
Center, New York, New York 10048, and at 500 West Madison Street, Chicago,
Illinois 60661. You can obtain information about the operation of the SEC's
Public Reference Room by calling the SEC at 1-800-SEC-0330. The SEC also
maintains a Web site that contains information we file electronically with the
SEC, which you can access over the Internet at http://www.sec.gov. Copies of
these materials may also be obtained by mail from the Public Reference Section
of the SEC, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates.
INCORPORATION OF DOCUMENTS BY REFERENCE
---------------------------------------
The SEC allows us to "incorporate by reference" the information we file with
them, which means that we can disclose important information to you without
re-printing the information in this Information Statement by referring you to
prior and future filings with the SEC. The information we incorporate by
reference is an important part of this Information Statement, and later
information that we file with the SEC will automatically update and supersede
this information.
We incorporate by reference the following documents filed by the Company
pursuant to the Securities Exchange Act of 1934: (i) the Company's Annual Report
on Form 10-K for the fiscal year ended December 31, 1999; and (ii) any future
filings we make with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Exchange Act. You may request a copy of these filings (other than an exhibit to
any of these filings unless we have specifically incorporated that exhibit by
reference into the filing), at no cost, by writing or telephoning us at the
following address:
Rich Earth, Inc.
c/o Venture Law Corporation
618 - 688 West Hastings Street
Vancouver, British Columbia V6B 1P1
Telephone No.: (604) 659-9188
You should rely only on the information we have provided or incorporated by
reference in this Information Statement or any supplement. We have not
authorized any person to provide information other than that provided here. We
have not authorized anyone to provide you with different information. You should
not assume that the information in this Information Statement or any supplement
is accurate as of any date other than the date on the front of the document.
30
EXHIBIT A
AMENDMENT TO ARTICLES OF INCORPORATION
RESOLVED, the Articles of Incorporation of Rich Earth, Inc. as follows:
1. The First Article be amended changing the name from Rich Earth, Inc. to
GlobalNet, Inc.;
2. The Fifth Article be amended allowing the Board of Directors to consist
of from one (1) to fifteen (15) directors, as may be determined from time
to time by the existing Board of Directors.
3. The Certificate of Articles of Amendment of the Articles of Incorporation
as attached to this resolution is hereby approved.
31
<PAGE>
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
RICH EARTH, INC.
----------------
Pursuant to the provisions of section 78.209, Nevada Revised Statutes, the
undersigned President and Secretary of Rich Earth, Inc. (the "Corporation"),
does hereby certify the Board of Directors of the Corporation adopted a
resolution to amend the original articles as follows:
ARTICLE FIRST WHICH PRESENTLY READS AS FOLLOWS:
ARTICLE FIRST
Corporate Name
The name of the Corporation shall be:
RICH EARTH, INC.
Is HEREBY AMENDED TO READ AS FOLLOWS:
ARTICLE FIRST
Corporate Name
The name of the Corporation is:
GLOBALNET, INC.
ARTICLE FIVE WHICH PRESENTLY READS AS FOLLOWS:
ARTICLE FIVE
DIRECTORS
---------
The Directors are hereby granted the authority to do any act on behalf of
the Corporation as may be allowed by law. Any action taken in good faith, shall
be deemed appropriate and in each instances where the Articles of Incorporation
so authorize, such action by the Directors, shall be deemed to exist in these
Articles and the authority granted by said Act shall be imputed hereto without
the same specifically having been enumerated herein.
The Board of Directors may consist of from one (1) to nine (9) directors,
as determined, from time to time, by the then existing Board of Directors.
32
<PAGE>
IS HEREBY AMENDED TO READ AS FOLLOWS:
ARTICLE FIVE
DIRECTORS
---------
The Directors are hereby granted the authority to do any act on behalf of
the Corporation as may be allowed by law. Any action taken in good faith, shall
be deemed appropriate and in each instances where the Articles of Incorporation
so authorize, such action by the Directors, shall be deemed to exist in these
Articles and the authority granted by said Act shall be imputed hereto without
the same specifically having been enumerated herein.
The Board of Directors may consist of from one (1) to fifteen (15)
directors, as determined, from time to time, by the then existing Board of
Directors.
The number of shares of the corporation outstanding and entitled to vote on
an amendment to the Articles of Incorporation is 9,960,000; that the said
changes and amendments have been consented to and approved by a majority vote of
the stockholders holding at least a majority of each class of stock outstanding
and entitled to vote thereon.
The effective date of this amendment is May __, 2000, at the Closing.
______________________________ ______________________________
Xenios Xenopoulos, Secretary Xenios Xenopoulos, President
On the _____ Day of May, 2000 Xenios Xenopoulos the sole director and officer of
the Company personally appeared before me, a Notary Public in and for the
Country of Cyprus, and acknowledged that he executed the above instrument.
______________________________
Notary Public in and for the
Country of Cyprus
33
<PAGE>
EXHIBIT B
AGREEMENT AND PLAN OF REORGANIZATION
AGREEMENT AND PLAN OF REORGANIZATION
BY AND AMONG
GLOBALNET INTERNATIONAL, INC.,
GN ACQUISITION CORP.
AND
RICH EARTH, INC.
DATED AS OF MARCH 22, 2000
34
<PAGE>
AGREEMENT AND PLAN OF REORGANIZATION
This AGREEMENT AND PLAN OF MERGER (the Agreement) is made and entered into
as of March 22, 2000 by and among Rich Earth, Inc., a Nevada corporation (Rich
Earth), GN Acquisition Corp., an Delaware corporation ("Merger Sub"), and
GlobalNet International, Inc., a Delaware corporation ("GLOBALNET").
The parties agree as follows:
1. THE MERGER.
1.1 The Merger. At the Effective Time (as defined in Section 1.2) and
-----------
subject to and upon the terms and conditions of this Agreement, GLOBALNET shall
be merged into Merger Sub (the Merger), the separate corporate existence of
Merger Sub shall cease and GLOBALNET shall continue as the surviving
corporation. The surviving corporation after the Merger is hereinafter
sometimes referred to as the "Surviving Corporation" which shall be a
wholly-owned subsidiary of Rich Earth.
1.2 Effective Time. Unless this Agreement is earlier terminated
---------------
pursuant to Section 8.1, the closing of the Merger (the "Closing") will take
place as promptly as practicable, but no later than two (2) business days
following satisfaction or waiver of the conditions set forth in Section 6, via
facsimile or at the offices of Venture Law Corporation, Suite 618, 688 West
Hastings Street, Vancouver, British Columbia, Canada, V6B 1P1, unless another
place or time is agreed to in writing by Rich Earth and GLOBALNET. The date
upon which the Closing actually occurs is herein referred to as the "Closing
Date." On the Closing Date, the parties hereto shall cause the Merger to be
consummated by filing Articles of Merger (or like instrument) in the form
attached hereto as Exhibit A with the Secretary of State of the State of
----------
Delaware (the "Merger Articles"), in accordance with the applicable provisions
of Delaware law (the later time of acceptance by the Secretary of State of the
State of Delaware of such filing being referred to herein as the "Effective
Time").
1.3 Effect of the Merger. At the Effective Time, the effect of the
-----------------------
Merger shall be as provided in the applicable provisions of Delaware law.
Without limiting the generality of the foregoing, and subject thereto, at the
Effective Time, all the property, rights, privileges, powers and franchises of
GLOBALNET and Merger Sub shall vest in the Surviving Corporation, and all debts,
liabilities and duties of GLOBALNET and Merger Sub shall become the debts,
liabilities and duties of the Surviving Corporation.
1.4 Articles of Incorporation, Bylaws. The Certificate of
------------------------------------
Incorporation and Bylaws of Surviving Corporation shall be the Certificate of
Incorporation and Bylaws of GLOBALNET.
1.5 Directors and Officers. Directors of Rich Earth and the Surviving
-----------------------
Corporation immediately after the Effective Time shall consist of eleven
members. Nine nominee directors selected by Robert Donahue and two nominees
selected by Myron Gushlak, each director to hold the office in accordance with
the provisions of applicable laws and the Bylaws of Rich Earth and the Surviving
Corporation, as applicable, until their successors are duly qualified and
elected. The directors and officers of Rich Earth immediately after the
Effective Time shall be the same as the Surviving Corporation except as changed
by Robert Donahue, President and C.E.O., each to hold office in accordance with
the provisions of the Bylaws of Rich Earth and the Surviving Corporation, as
applicable, on conversion as provided for in the succeeding paragraph.
1.6 Conversion of GLOBALNET and Merger Sub Common Stock.
----------------------------------------------------------
(a) At the Effective Time, each share of GLOBALNET Common Stock,
par value $ 0.001 per share ("GLOBALNET Common Stock"), upon the terms and
subject to the conditions set forth below shall be converted automatically into
10,000 shares (the "Exchange Ratio") of Rich Earth Common Stock par value $0.001
per share ("Rich Earth Common Stock") for an aggregate amount of 20,000,000
shares of Rich Earth Common Stock. Accordingly, at the Effective Time, the
Shareholders of GLOBALNET will hold approximately 67% of the issued shares of
the Rich Earth Common Stock in the Rich Earth without taking into account the
issuance of 600,000 shares of Rich Earth Common Stock in accordance with Section
5.1 below. At the Effective Time, each share of the common stock of Merger Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and exchanged for one validly issued, fully paid and
non-assessable share of common stock of the Surviving Corporation.
(b) The Exchange Ratio shall be adjusted to reflect fully the
effect of any stock split, reverse split, stock dividend (including any dividend
or distribution of securities convertible into GLOBALNET Common Stock or Rich
Earth Common Stock), reorganization, recapitalization or other like charge with
respect to GLOBALNET Common Stock or Rich Earth Common Stock occurring after the
date hereof.
35
<PAGE>
(c) No fractional share of GLOBALNET Common Stock shall be issued
in the Merger. In lieu thereof, any fractional share shall be rounded up to the
nearest whole share of GLOBALNET Common Stock.
1.7 Surrender of Certificates.
---------------------------
(a) Exchange Agent. The Venture Law Corporation of Vancouver,
---------------
British Columbia, Canada shall serve as exchange agent (the "Exchange Agent") in
the Merger.
(b) GLOBALNET to Provide Common Stock. Promptly after the
-------------------------------------
Effective Time, GLOBALNET shall make available to the Exchange Agent for
exchange in accordance with this Section, the shares of GLOBALNET Common Stock
convertible pursuant to Section 1.6(a) in exchange for shares of Rich Earth
Common Stock.
(c) Exchange Procedures. On or after the Closing Date, the
--------------------
holders of GLOBALNET Common Stock will surrender the certificates representing
their GLOBALNET Common Stock (the "GLOBALNET Stock Certificate") to the Exchange
Agent for cancellation together with a letter of transmittal in such form and
having such provisions that the Exchange Agent reasonably requests. Promptly
following the Effective Time, Exchange Agent will cause to be issued
stockholders certificates for the number of shares of Rich Earth Common Stock to
which such stockholders are entitled pursuant to Section 1.6.
(d) Transfers of Ownership. If any certificate for shares of Rich
----------------------
Earth Common Stock is to be issued in a name other than that in which the
certificate surrendered in exchange therefor is registered or if any cash is to
be delivered to a person other than the person whose name is on the certificate
surrendered, it will be a condition to the issuance and/or delivery thereof that
the certificate so surrendered will be properly endorsed and otherwise in proper
form for transfer and that the person requesting such exchange will have paid to
GLOBALNET or any agent designated by it any transfer or other taxes required by
reason or the issuance of a certificate for shares of Rich Earth Common Stock or
the delivery of any cash in any name other than that of the registered holder of
the certificate surrendered, or established to the satisfaction of the Exchange
Agent or any agent designated by it that such tax has been paid or is not
payable. Rich Earth and the Transfer Agent acknowledge and agree that Robert
Donahue shall designate prior to the Effective Time such persons and respective
amounts of Rich Earth Common Stock set forth in Section 5.16 hereof.
(e) No Liability. Notwithstanding anything to the contrary in
-------------
this Section 1.7, none of the Exchange Agent, the Surviving Corporation or any
party hereto shall be liable to a holder of shares of Rich Earth Common Stock or
GLOBALNET Common Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
1.8 No Further Ownership Rights in GLOBALNET Common Stock. All shares
------------------------------------------------------
of Rich Earth Common Stock issued upon the surrender for exchange of shares of
GLOBALNET Common Stock in accordance with the terms hereof, and any cash paid in
respect thereof, shall be deemed to be full satisfaction of all rights
pertaining to such shares of GLOBALNET Common Stock, and there shall be no
further registration of transfers on the records of Rich Earth of shares of
GLOBALNET Common Stock which were outstanding immediately prior to the Effective
Time. If, after the Effective Time, GLOBALNET Stock Certificates are presented
to Rich Earth for any reason, they shall be canceled and exchanged as provided
in this Section 1.
1.9 Lost, Stolen or Destroyed Certificates. In the event any
------------------------------------------
certificates evidencing shares of GLOBALNET Common Stock shall have been lost,
stolen or destroyed, the Exchange Agent shall issue in exchange for such lost,
stolen or destroyed certificates, upon the making of an affidavit of that fact
by the holder thereof, such amount, if any, as may be required pursuant to
Section 1.6; provided, however, that the Exchange Agent may, in its discretion
-------- -------
and as a condition precedent to the issuance thereof, require the owner of such
lost, stolen or destroyed certificates to deliver an indemnity in such sum as it
may reasonably direct against any claim that may be made against Rich Earth or
the Exchange Agent with respect to the certificates alleged to have been lost,
stolen or destroyed.
1.10 Tax Consequences. It is intended by the parties hereto that the
-----------------
Merger will constitute a reorganization within the meaning of Section 368 of the
Internal Revenue Code of 1986, as amended. Each party has consulted with its
own tax advisors with respect to the tax consequences of the Merger.
1.11 Taking of Necessary Action; Further Action. If, at any time after
------------------------------------------
the Effective Time, any such further action is necessary or desirable to carry
out the purposes of this Agreement and to vest the Surviving Corporation with
full right, title and possession to all assets, property, rights, privileges,
powers and franchises of GLOBALNET, the officers and directors of GLOBALNET,
Merger Sub and Rich Earth are fully authorized in the name of their respective
corporations or otherwise to take, and will take, all such lawful and necessary
action.
36
<PAGE>
2.0 REPRESENTATIONS AND WARRANTIES OF RICH EARTH AND MERGER SUB
-----------------------------------------------
Rich Earth and Merger Sub represent and warrant to GLOBALNET, subject to such
exceptions as are specifically disclosed in the Rich Earth Disclosure Schedule
(referencing the appropriate Section and paragraph numbers) supplied by Rich
Earth to GLOBALNET (the "Rich Earth Disclosure Schedule") and dated as of the
date hereof, as follows:
2.1 Organization of Rich Earth and Merger Sub. Rich Earth is a
-----------------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Nevada. Merger Sub is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware. Rich
Earth and Merger Sub each has the corporate power to own its properties and to
carry on its business. Rich Earth and Merger Sub has each delivered a true and
correct copy of its Articles of Incorporation and Bylaws and the Certificate of
Incorporation and Bylaws, each as amended to date, to GLOBALNET. Xenios
Xenopoulous is the sole director and officer of Rich Earth. Rich Earth has never
conducted any operations.
2.2 Authority. Rich Earth and Merger Sub each has all requisite
---------
corporate power and authority to enter into this Agreement and the Related
Agreements (as defined below) and to consummate the transactions contemplated
hereby and thereby. The execution and delivery of this Agreement and the
Related Agreements and the consummation of the transactions contemplated hereby
and thereby have been duly authorized by all necessary corporate action on the
part of Rich Earth and Merger Sub except that the Merger must be approved by the
stockholders of Rich Earth. This Agreement has been duly executed and delivered
by Rich Earth and Merger Sub and constitutes, and the Related Agreements, when
duly executed and delivered by Rich Earth and Merger Sub, will constitute the
valid and binding obligations of each party, enforceable in accordance with
their terms, except as such enforceability may be limited by principles of
public policy and subject to the laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies. The
"Related Agreements" shall mean all such ancillary agreements required in this
Agreement to be executed and delivered in connection with the transactions
contemplated hereby.
2.3 Capital Structure of Rich Earth.
-----------------------------------
(a) The authorized capital stock of Rich Earth consists of
100,000,000 shares of authorized Common Stock, par value $0.001 per share, of
which 9,960,000 shares are issued and outstanding and an additional 20,000,000
shares will be issued and outstanding at the Closing which shall exclude the
600,000 shares to be issued under Section 2.3(b) below. The authorized capital
stock of Merger Sub consists of 1,000 shares of authorized Common Stock, no par
value, of which 100 shares are issued and outstanding in favor of Rich Earth.
All outstanding shares of Rich Earth Common Stock are duly authorized, validly
issued, fully paid and non-assessable and not subject to preemptive rights
created by statute, the Articles of Incorporation or Bylaws of Rich Earth or any
agreement to which Rich Earth is a party or by which it is bound and have been
issued in compliance with federal and state securities laws. Rich Earth has no
other capital stock authorized, issued or outstanding.
(b) Rich Earth has arranged a private placement of 600,000 units
at a price of $10.00 per unit for an aggregate amount of US$ 6,000,000 with two
purchasers. The $6,000,000 shall be raised prior to the Closing and be
available as cash to Rich Earth prior to Closing. Each "Unit" consists of one
share in the common stock of the Company and one share purchase warrant
("Warrant") with each Warrant entitling the holder to purchase one common share
in the Company for US$ 15.00 per share at any time on or before six months from
the date of the acquisition of the Units by the Purchasers. No Units have yet
been sold. Rich Earth may conduct another private placement of Units with the
consent of GLOBALNET prior to the Closing of this Merger in accordance with
Section 4.2. Except for the Rich Earth Warrants, there are no options,
warrants, calls, rights, commitments or agreements of any character, written or
oral, to which Rich Earth or any of its shareholders is a party or by which Rich
Earth or any of its shareholders is bound obligating Rich Earth or any of its
shareholders to issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares of the capital
stock of Rich Earth or obligating Rich Earth to grant, extend, accelerate the
vesting of, change the price of, otherwise amend or enter into any such option
warrant, call, right, commitment or agreement. There are no outstanding or
authorized stock appreciation, phantom stock, profit participation, or other
similar rights with respect to Rich Earth. There are no voting trusts, proxies,
or other agreements or understandings with respect to the voting stock of Rich
Earth.
(c) The Rich Earth Common Stock has been duly approved for
quotation on the NASD OTC Bulletin Board. Rich Earth has filed all forms,
reports, exhibits and other documents required to be filed with the Securities
and Exchange Commission under the Securities Act of 1933, the Securities
Exchange Act of 1934 and the rules and regulations promulgated thereunder. Rich
Earth shall have filed its annual report on Form 10-KSB for the year ended
December 31, 1999 with the Securities and Exchange Commission no later than the
earlier of such date as required under the regulations promulgated under the
Securities Exchange Act of 1934, as amended, or within ten days of the Effective
Date.
37
<PAGE>
2.4 Subsidiaries. Except for Merger Sub, Rich Earth does not have, and
------------
has never had, any subsidiaries or affiliated companies and does not otherwise
own, and has not otherwise owned, any shares in the capital of or any interest
in, or control, directly or indirectly, any other corporation, partnership,
association, joint venture or other business entity. Rich Earth owns all of the
issued and outstanding capital stock of Merger Sub.
2.5 Conflict. The execution and delivery of this Agreement and any
--------
Related Agreements to which it is a party by Rich Earth and Merger Sub do not,
and, the consummation of the transactions contemplated hereby and thereby will
not, conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation, modification or acceleration of any obligation or
loss of any benefit under (any such event, a "Conflict") (i) any provision of
the Articles of Incorporation and Bylaws of Rich Earth or Merger Sub, (ii) any
mortgage, indenture, lease, contract or other agreement or instrument, permit,
concession, franchise or license to which Rich Earth, Merger Sub or any of their
properties or assets are subject, or (iii) any judgment, order, decree, statute,
law, ordinance, rule or regulation applicable to Rich Earth, Merger Sub or their
respective properties or assets.
2.6 Consents. No consent, waiver, approval, order or authorization of,
--------
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party, including a party to any agreement with Rich Earth or Merger Sub
(so as not to trigger any Conflict), is required by or with respect to Rich
Earth or Merger Sub in connection with the execution and delivery of this
Agreement and any Related Agreements to which Rich Earth or Merger Sub is a
party or the consummation of the transactions contemplated hereby and thereby,
except for (i) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under applicable
securities laws thereby, and (ii) the filing of the Merger Articles with the
Secretary of State of the Delaware.
2.7 Rich Earth Financial Statements. Rich Earth has provided GLOBALNET
--------------------------------
with a copy of its audited balance sheets as of June 30, 1999, December 31, 1998
and December 31, 1997 and the related audited statements of operations,
stockholders' equity and cash flow for the periods then ended (the "Audited
Financials"). The Audited Financials are correct in all material respects and
have been prepared in accordance with GAAP applied on a basis consistent
throughout the periods indicated and consistent with each other. The Audited
Financials present fairly the financial condition, operating results and cash
flows of Rich Earth as of the dates and during the periods indicated therein.
The audited financial statements for the period ended December 31, 1999 will be
substantially the same in all respects as the audited financial statements for
the period ended June 30, 1999 except for any changes as a result of entering
into this Agreement, the transactions contemplated hereby and the transactions
referenced in Section 5.0 hereof
2.8 No Undisclosed Liabilities. Rich Earth and Merger Sub do not have
---------------------------
any liability, indebtedness, obligation, expense, claim, deficiency, guaranty or
endorsement of any type, whether accrued, absolute, contingent, matured,
unmatured or other (whether or not required to be reflected in financial
statements in accordance with GAAP).
2.9 No Changes. Since inception of Rich Earth and Merger Sub, there
-----------
has not been, occurred or arisen any:
(a) transaction, commitment or obligation by Rich Earth or Merger
Sub of any kind other than the stock and warrant issuances described in
paragraph (b) hereof;
(b) issuance or sale, or contract to issue or sell, by Rich Earth
of any shares of Rich Earth Common Stock, by Merger Sub of any of its capital
stock or securities exchangeable, convertible or exercisable therefor, or any
securities, warrants, options or rights to purchase any of the foregoing, except
for the issuance of Units and underlying shares of Rich Earth Common Stock and
the issuance of the Rich Earth Warrants previously disclosed in paragraph
2.3(b);
(c) negotiation or agreement by Rich Earth or Merger Sub or any
officer or employees thereof to do any of the things described in the preceding
clauses (a) or (b) (other than negotiations with GLOBALNET and its
representatives regarding the transactions contemplated by this Agreement and
the disclosed private placement offering).
2.10 Restrictions on Business Activities. There is no agreement
--------------------------------------
38
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(noncompete or otherwise), commitment, judgment, injunction, order or decree to
which Rich Earth or Merger Sub is a party or otherwise binding upon Rich Earth
which has or may have the effect of prohibiting or impairing any business
practice of Rich Earth, Merger Sub or the Surviving Corporation, any acquisition
of property (tangible or intangible) by Rich Earth, Merger Sub or the Surviving
Corporation or the conduct of business by Rich Earth, Merger Sub or the
Surviving Corporation.
2.11 Agreements, Contracts and Commitments. Rich Earth and Merger Sub
--------------------------------------
are not a party to nor are they bound by any contracts, obligations or
agreements of any kind except for this Agreement. (collectively a "Contract").
2.12 Litigation. There is no action, suit or proceeding of any nature
----------
pending, or, to Rich Earth's knowledge, threatened, against Rich Earth or Merger
Sub, their properties or any of its officers or directors, nor, to the knowledge
of Rich Earth, is there any reasonable basis therefor. There is no
investigation pending or, to Rich Earth's knowledge threatened, against Rich
Earth or Merger Sub, their properties or any of its officers or directors (nor,
to the best knowledge of Rich Earth, is there any reasonable basis therefor) by
or before any Governmental Entity. No Governmental Entity has at any time
challenged or questioned the legal right of Rich Earth or Merger Sub to conduct
its operations as presently or previously conducted.
2.13 Minute Books. The minutes of Rich Earth delivered to counsel for
-------------
GLOBALNET are the only minutes of Rich Earth and contain a reasonably accurate
summary of all meetings of the Board of Directors (or committees thereof) of
Rich Earth and its shareholders or actions by written consent since the time of
incorporation of Rich Earth.
2.14 Broker's and Finder's Fees: Third Party Expenses. Rich Earth and
--------------------------------------------------
Merger Sub have not incurred, nor will they incur, directly or indirectly, any
liability for brokerage or finders' fees or agents' commissions or any similar
charges in connection with the Agreement or any transaction contemplated hereby.
2.15 Compliance with Laws. Rich Earth and Merger Sub have complied
----------------------
with, are not in violation of, and have not received any notices of violation
with respect to, any foreign, federal, state or local statute, law or
regulation.
2.16 Complete Copies of Materials. Rich Earth has delivered or made
-------------------------------
available true and complete copies of each document (or summaries of same) that
has been requested by GLOBALNET or its counsel.
2.17 Representations Complete. None of the representations or
-------------------------
warranties made by Rich Earth or Merger Sub (as modified by the Rich Earth
Disclosure Schedule), nor any statement made in any Schedule or certificate
furnished by Rich Earth pursuant to this Agreement or finished in or in
connection with documents mailed or delivered to the shareholders of Rich Earth
for use in soliciting their consent to this Agreement and the Merger contains or
will contain at the Effective Time, any untrue statement of a material fact, or
omits or will omit at the Effective Time to state any material fact necessary in
order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
3.0 REPRESENTATIONS AND WARRANTIES OF GLOBALNET.
GLOBALNET and its subsidiaries represents and warrants to Rich Earth, subject to
such exceptions as are specifically disclosed in the GLOBALNET Disclosure
Schedule (referencing the appropriate Section and paragraph numbers) supplied by
GLOBALNET to Rich Earth (the "GLOBALNET Disclosure Schedule") and dated as of
the date hereof, as follows (for purposes of this Section 3.0 references to
GLOBALNET shall include its subsidiaries when appropriate under the
circumstances):
3.1 Organization of GLOBALNET. GLOBALNET is a corporation duly
---------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware. GlobalNet's subsidiaries are limited liability companies organized,
validly existing and in good standing under the laws of the State of Illinois.
GLOBALNET has the corporate power to own its properties and to carry on its
business as now being conducted and is duly qualified to do business and is in
good standing in each jurisdiction in which the failure to be so qualified would
have a material adverse effect on the ability of GLOBALNET to consummate the
transactions contemplated hereby. GLOBALNET has delivered a true and correct
copy of its Articles of Incorporation and Bylaws and the Certificate of
Incorporation and Bylaws, each as amended to date, to Rich Earth.
3.2 Authority. GLOBALNET has all requisite corporate power and
---------
39
<PAGE>
authority to enter into this Agreement and the Related Agreements and to
consummate the transactions contemplated hereby and thereby. The execution and
delivery of this Agreement and the Related Agreements and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of GLOBALNET except that the Merger
must be approved by the stockholders of GLOBALNET. This Agreement has been duly
executed and delivered by GLOBALNET and constitutes, and the Related Agreements,
when duly executed and delivered by GLOBALNET, will constitute the valid and
binding obligations of GLOBALNET, enforceable in accordance with their terms,
except as such enforceability may be limited by principles of public policy and
subject to the laws of general application relating to bankruptcy, insolvency
and the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies.
3.3 Capital Structure of GLOBALNET.
---------------------------------
(a) The authorized stock of GLOBALNET consists of 2,000 shares of
Common Stock, $ 0.001 par value, of which 2,000 shares are issued and
outstanding. All outstanding shares of GLOBALNET Common Stock are duly
authorized, validly issued, fully paid and non-assessable and not subject to
preemptive rights created by statute, the Articles of Incorporation or Bylaws of
GLOBALNET or any agreement to which GLOBALNET is a party or by which it is bound
and have been issued in compliance with federal and state securities laws.
GLOBALNET has no other capital stock authorized, issued or outstanding.
(b) There are no options, warrants, calls, rights, commitments or
agreements of any character, written or oral, to which GLOBALNET or any of its
stockholders is a party or by which GLOBALNET or any of its stockholders is
bound obligating GLOBALNET or any of its stockholders to issue, deliver, sell,
repurchase or redeem, or cause to be issued, delivered, sold, repurchased or
redeemed, any shares of the capital stock of GLOBALNET. There are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or other similar rights with respect to GLOBALNET. There are no
voting trusts, proxies, or other agreements or understandings with respect to
the voting stock of GLOBALNET.
3.4 Subsidiaries. Except for its wholly owned subsidiary DTA
------------
Communications Network, LLC, an Illinois limited liability company, which, at
closing, is expected to own all of the membership interests of GlobalNet, LLC,
an Illinois limited liability company, GLOBALNET does not have, and has never
had, any subsidiaries or affiliated companies and does not otherwise own, and
has not otherwise owned, any shares in the capital of or any interest in, or
control, directly or indirectly, any other corporation, partnership,
association, joint venture or other business entity.
3.5 Conflict. The execution and delivery of this Agreement and any
--------
Related Agreements to which it is a party by GLOBALNET do not, and, the
consummation of the transactions contemplated hereby and thereby will not,
conflict with, or result in any violation of, or default under (with or without
notice or lapse of time, or both), or give rise to a right of termination,
cancellation, modification or acceleration of any obligation or loss of any
benefit under (any such event, a "Conflict") (i) any provision of the Articles
of Incorporation and Bylaws of GLOBALNET, (ii) any mortgage, indenture, lease,
contract or other agreement or instrument, permit, concession, franchise or
license to which GLOBALNET or any of its properties or assets are subject, or
(iii) any judgment, order, decree, statute, law, ordinance, rule or regulation
applicable to GLOBALNET or its properties or assets.
3.6 Consents. No consent, waiver, approval, order or authorization of,
--------
or registration, declaration or filing with, any court, administrative agency or
commission or other federal, state, county, local or other foreign governmental
authority, instrumentality, agency or commission ("Governmental Entity") or any
third party, including a party to any agreement with GLOBALNET (so as not to
trigger any Conflict), is required by or with respect to GLOBALNET in connection
with the execution and delivery of this Agreement and any Related Agreements to
which GLOBALNET is a party or the consummation of the transactions contemplated
hereby and thereby, except for (i) such consents, waivers, approvals, orders,
authorizations, registrations, declarations and filings as may be required under
applicable securities laws thereby, and (ii) the filing of the Merger Articles
with the Secretary of State of the Delaware.
3.7 GLOBALNET Financial Statements. GLOBALNET has furnished Rich Earth
------------------------------
with a true and complete copy of its unaudited December 31, 1999 financials
statements (the "GLOBALNET Financials"). The GLOBALNET Financials present
fairly the financial condition of GLOBALNET as of the date indicated therein,
subject, to year-end adjustments.
3.8 No Undisclosed Liabilities. Except as disclosed in the GLOBALNET
----------------------------
40
<PAGE>
Financials, GLOBALNET does not have any liability, indebtedness, obligation,
expense, claim, deficiency, guaranty or endorsement of any type, whether
accrued, absolute, contingent, matured, un-matured or other (whether or not
required to be reflected in financial statements in accordance with GAAP).
3.9 Restrictions on Business Activities. Other than license and other
------------------------------------
restrictions included in agreements entered into in the ordinary course of
business, there is no agreement (non-compete or otherwise), commitment,
judgment, injunction, order or decree to which GLOBALNET is a party or otherwise
binding upon GLOBALNET which has or may have the effect of prohibiting or
impairing any business practice of GLOBALNET or the Surviving Corporation, any
acquisition of property (tangible or intangible) by GLOBALNET or the Surviving
Corporation or the conduct of business by GLOBALNET or the Surviving
Corporation.
3.10 Agreements, Contracts and Commitments. GLOBALNET is in compliance
-------------------------------------
with and has not breached, violated or defaulted under, or received notice that
it has breached, violated or defaulted under, any of the terms or conditions of
any agreement, contract, covenant, instrument, lease, license or commitment to
which GLOBALNET is a party or by which it is bound (collectively a "Contract"),
nor is GLOBALNET aware of any event that would constitute such a breach,
violation or default with the lapse of time, giving of notice or both. GLOBALNET
has obtained, or will obtain prior to the Closing Date, all necessary consents,
waivers and approvals as are required in connection with the Merger.
3.11 Litigation. There is no action, suit or proceeding of any nature
----------
pending, or, to GLOBALNET's knowledge, threatened, against GLOBALNET, its
properties or any of its officers or directors, nor, to the knowledge of
GLOBALNET, is there any reasonable basis therefor. There is no investigation
pending or, to GLOBALNET's knowledge threatened, against GLOBALNET, its
properties or any of its officers or directors (nor, to the best knowledge of
GLOBALNET, is there any reasonable basis therefor) by or before any Governmental
Entity. No Governmental Entity has at any time challenged or questioned the
legal right of GLOBALNET to conduct its operations as presently or previously
conducted.
3.12 Minute Books. The minutes of GLOBALNET made available to counsel
-------------
for Rich Earth are the only minutes of GLOBALNET and contain a reasonably
accurate summary of all meetings of the Board of Directors (or committees
thereof) of GLOBALNET and its shareholders or actions by written consent since
the time of incorporation of GLOBALNET.
3.13 Broker's and Finder's Fees: Third Party Expenses. Except for an
---------------------------------------------------
agreement dated October 6, 1999 between GLOBALNET and Patrick Kealy, GLOBALNET
has not incurred, nor will it incur, directly or indirectly, any liability for
brokerage or finder's fees or agents' commissions or any similar charges in
connection with the Agreement or any transaction contemplated hereby.
3.14 Compliance with Laws. GLOBALNET has complied with in all material
--------------------
respects, is not in violation of, and has not received any notices of violation
with respect to, any foreign, federal, state or local statute, law or
regulation.
3.15 Complete Copies of Materials. GLOBALNET has delivered or made
-------------------------------
available true and complete copies of each document (or summaries of same) that
has been requested by Rich Earth or its counsel.
3.16 Representations Complete. None of the representations or
-------------------------
warranties made by GLOBALNET (as modified by the GLOBALNET Disclosure Schedule),
nor any statement made in any Schedule or certificate furnished by GLOBALNET
pursuant to this Agreement or finished in or in connection with documents mailed
or delivered to the shareholders of GLOBALNET for use in soliciting their
consent to this Agreement and the Merger contains or will contain at the
Effective Time, any untrue statement of a material fact, or omits or will omit
at the Effective Time to state any material fact necessary in order to make the
statements contained herein or therein, in the light of the circumstances under
which made, not misleading.
4.0 CONDUCT PRIOR TO THE EFFECTIVE TIME.
4.1 Conduct of Business of GLOBALNET. During the period from the date
---------------------------------
of this Agreement and continuing until the earlier of the termination of this
Agreement or the Effective Time, GLOBALNET agrees that it shall not:
(a) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock or securities convertible into, or
subscriptions, rights, warrants or options to acquire, or other agreements or
commitments of any character obligating it to issue any such shares or other
convertible securities except if in connection therewith, it negotiates a
proportionate adjustment in the Exchange Ratio.
41
<PAGE>
(b) cause or permit any amendments to its Articles of
Incorporation or Bylaws; or
(c) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1 above, or any other action that would prevent
GLOBALNET from performing or cause GLOBALNET not to perform its covenants
hereunder.
4.2 Conduct of Business of Rich Earth and Merger Sub. During the
------------------------------------------------------
period from the date of this Agreement and continuing until the earlier of the
termination of this Agreement or the Effective Time, Rich Earth and Merger Sub
each agrees that it shall not:
(a) issue, grant, deliver or sell or authorize or propose the
issuance, grant, delivery or sale of, or purchase or propose the purchase of,
any shares of its capital stock (other than shares issued upon exercise of the
Rich Earth Warrants) or securities convertible into, or subscriptions, rights,
warrants or options to acquire, or other agreements or commitments of any
character obligating it to issue any such shares or other convertible securities
except if in connection therewith, it negotiates a proportionate adjustment in
the Exchange Ratio;
(b) enter into any contract, arrangement or obligation of any kind;
(c) cause or permit any amendments to their Articles of
Incorporation or Bylaws; or
(d) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.2 above, or any other action that would prevent
Rich Earth or Merger Sub from performing or cause Rich Earth or Merger Sub not
to perform its covenants hereunder.
5.0 ADDITIONAL AGREEMENTS.
5.1 Sale of Shares. The parties hereto acknowledge and agree that the
---------------
shares of Rich Earth Common Stock issuable to the stockholders of GLOBALNET
pursuant to Section 1.6 (the "Merger Shares") shall constitute "restricted
securities" within the meaning of the Securities Act. The certificates for the
Merger Shares shall bear appropriate legends to identify such privately placed
shares as being restricted under the Securities Act, to comply with applicable
state securities laws and, if applicable, to notice the restrictions on transfer
of such shares. It is understood and agreed by the parties that after the
Effective Time, Rich Earth intends to file a registration statement on Form S-1
with the Securities and Exchange Commission for registration of all or a portion
of the Merger Shares.
5.2 Stockholder Approval. GLOBALNET and Rich Earth shall promptly
---------------------
submit this Agreement and the transactions contemplated hereby to their
stockholders for approval and adoption as required by law. Rich Earth shall
include in its proxy materials submitted to its shareholders a proposal (i) to
amend its charter to change its name from Rich Earth, Inc. to "GlobalNet
International, Inc."; and (ii) to approve an omnibus stock incentive plan for up
to 3,000,000 shares of Rich Earth Common Stock for issuance under such plan to
officers, directors, employees and consultants of Rich Earth and its
subsidiaries and affiliates.
5.3 Access to Information. Each party shall afford the other and its
-----------------------
accountants, counsel and other representatives, reasonable access during normal
business hours during the period prior to the Effective Time to
(a) all of such party's properties, books, contracts, commitments and records
and (b) all other information concerning the business, properties and personnel
(subject to restrictions imposed by applicable law) of such party as the other
may reasonably request. No information or knowledge obtained in any
investigation pursuant to this Section shall affect or be deemed to modify any
representation or warranty contained herein or the conditions to the obligations
of the parties to consummate the Merger.
5.4 Confidentiality. Each party acknowledges that in the course of the
---------------
performance of this Agreement, it may obtain the Confidential Information of the
other party. The Receiving Party shall, at all times, both during the term of
this Agreement and thereafter, keep in confidence and trust all of the
Disclosing Party's Confidential Information received by it. The Receiving Party
shall not use the Confidential Information of the Disclosing Party other than as
expressly permitted under the terms of this Agreement or by a separate written
agreement. The Receiving Party shall take all reasonable steps to prevent
unauthorized disclosure or use of the Disclosing Party's Confidential
Information and to prevent it from falling into the public domain or into the
possession of unauthorized persons. The Receiving Party shall not disclose
Confidential Information of the Disclosing Party to any person or entity other
than its officers or employees (or outside legal, financial or accounting
advisors) who need GLOBALNET to such Confidential Information in order to effect
the intent of this Agreement and who have entered into confidentiality
agreements with such person's employer or who are subject to ethical
restrictions on disclosure which protects the Confidential Information of the
Disclosing Party. The Receiving Party shall immediately give notice to the
Disclosing Party of any unauthorized use or disclosure of Disclosing Party's
42
<PAGE>
Confidential Information. The Receiving Party agrees to assist the Disclosing
Party to remedy such unauthorized use or disclosure of its Confidential
Information. These obligations shall not apply to the extent that Confidential
Information includes information which:
(a) is already known to the Receiving Party at the time of
disclosure, which knowledge the Receiving Party shall have the burden of
proving;
(b) is, or through no act or failure to act of the Receiving Party
becomes, publicly known;
(c) is received by the Receiving Party from a third party without
restriction on disclosure (although this exception shall not apply if such third
party is itself violating a confidentiality obligation by making such
disclosure);
(d) is independently developed by the Receiving Party without
reference to the Confidential Information of the Disclosing Party, which
independent development the Receiving Party will have the burden of proving;
(e) is approved for release by written authorization of the Disclosing
Party; or
(f) is required to be disclosed by a Government Body to further
the objectives of this Agreement or by a proper order of a court of competent
jurisdiction; provided, however that the Receiving Party will use its best
efforts to minimize such disclosure and will consult with and assist the
Disclosing Party in obtaining a protective order prior to such disclosure.
5.5 Expenses. Whether or not the Merger is consummated, all fees and
--------
expenses incurred in connection with the Merger including, without limitation,
all legal, accounting, financial advisory, consulting and all other fees and
expenses of third parties ("Third Party Expenses") incurred by a party in
connection with the negotiation and effectuation of the terms and conditions of
this Agreement and the transactions contemplated hereby, shall be the obligation
of the respective party incurring such fees and expenses.
5.6 Public Disclosure. Unless otherwise required by law, prior to the
------------------
Effective Time, no disclosure (whether or not in response to an inquiry) of the
subject matter of this Agreement shall be made by any party hereto unless
approved by Rich Earth and GLOBALNET prior to release, provided that such
approval shall not be unreasonably withheld.
5.7 Consents. Each party shall use its best efforts to obtain the
--------
consents, waivers and approvals as may be required in connection with the Merger
so as to preserve all rights of, and benefits to, such party following the
Merger.
5.8 Reasonable Effort. Subject to the terms and conditions provided in
-----------------
this Agreement, each of the parties hereto shall use commercially reasonable
efforts to take promptly, or cause to be taken, all actions, and to do promptly,
or cause to be done, all things necessary, proper or advisable under applicable
laws and regulations to complete and make effective the transactions
contemplated hereby, to obtain all necessary waivers, consents and approvals and
to effect all necessary registrations and filings and to remove any injunctions
or other impediments or delays, legal or otherwise, in order to consummate and
make effective the transactions contemplated by this Agreement for the purpose
of securing to the parties hereto the benefits contemplated by this Agreement.
5.9 Notification of Certain Matters. Each party shall give prompt
----------------------------------
notice to the other of (i) the occurrence or non-occurrence of any event, the
occurrence or non-occurrence of which is likely to cause any representation or
warranty of such party contained in this Agreement to be untrue or inaccurate at
or prior to the Effective Time and (ii) any failure of such party to comply with
or satisfy any covenant, condition or agreement to be complied with or satisfied
by it hereunder; provided, however, that the delivery of any notice pursuant to
this Section shall not limit or otherwise affect any remedies available to the
party receiving such notice.
5.10 Additional Documents and Further Assurances. Each party hereto,
---------------------------------------------
at the request of another party hereto, shall execute and deliver such other
instruments and do and perform such other acts and things as may be necessary or
desirable for effecting completely the consummation of this Agreement and the
transactions contemplated hereby.
5.11 Private Placement. Rich Earth will complete a private placement
------------------
raising a minimum of $6,000,000. The private placement will be a unit offering
conducted in connection with this Merger. Each "Unit" will consist of one
common share and one share purchase warrant. Each warrant will be exercisable
for a period of six months for one additional share in the capital of Rich Earth
for $15.00 per share from the date of acquisition by the purchaser of the Units.
Rich Earth may conduct an additional offering under the same terms prior to the
Closing Date with the consent of GLOBALNET prior to the Closing of this Merger
in accordance with Section 4.2. All such funds to be made available minus
expenses to Rich Earth.
43
<PAGE>
5.12 Bridge Loan. Rich Earth will arrange or directly provide DTA
------------
Communications Network, LLC with a bridge loan in the amount of $2,427,198 (the
"Loan"). The Loan is to be evidenced by a promissory note with a maturity date
of (1)May 31, 2000, or (2) September 21, 2000 in the event the Closing shall not
occur. The parties agree the loan may be repaid or assumed by Rich Earth on
closing the private placement contemplated in sub-section 5.11 above.
5.13 Stock Purchase Agreement. Imperium Capital (USA), Inc. will enter
------------------------
into a binding agreement with Robert Donahue to purchase Rich Earth Common Stock
for an aggregate amount of $1,500,000. Imperium Capital (USA), Inc. will be
obligated to acquire these shares from Robert Donahue within 30 days of the
Closing Date of the Effective Date.
5.14 Employment Agreements. Rich Earth shall enter into employment
----------------------
agreements with Robert Donahue and Colum Donahue (collectively, the "Donahues")
in form and substance acceptable to each of the Donahues.
5.15 Officers and Directors. Rich Earth shall cause each of their
------------------------
officers and directors to submit and such persons shall have submitted written
resignations effective as of the Closing and the nominees selected as per
Section 1.5 shall have been appointed officers and directors of Rich Earth and
the Surviving Corporation, as applicable, effective as of the Closing.
5.16 Donahue Designee's. Robert Donahue and the shareholders of
-------------------
GlobalNet, pro rata based upon their percentage ownership interest in GlobalNet,
shall designate Patrick Kealy and Carmine Adimando to each receive 300,000
shares of Rich Earth Common Stock and such other persons within Robert Donahue's
sole discretion to receive not more than 2,000,000 shares of Rich Earth Common
Stock in the aggregate.
6.0 CONDITIONS TO THE MERGER.
6.1 Conditions to Obligations of Each Party to Effect the Merger. The
-------------------------------------------------------------
respective obligations of each party to this Agreement to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of the
following conditions:
(a) No Injunctions or Restraints; Illegality. No temporary
--------------------------------------------
restraining order, preliminary or permanent injunction or other order issued by
any court of competent jurisdiction or other legal restraint or prohibition
preventing the consummation of the Merger shall be in effect, nor shall any
proceeding brought by an administrative agency or commission or other
governmental authority or instrumentality, domestic or foreign, seeking any of
the foregoing be pending; nor shall there be any action taken, or any statute,
rule, regulation or order enacted, entered, enforced or deemed applicable to the
Merger, which makes the consummation of the Merger illegal.
(b) Governmental Approval. Approvals from Governmental Entities
----------------------
(if any) deemed appropriate or necessary by any party to this Agreement shall
have been timely obtained.
(c) Litigation. There shall be no bona fide action, suit, claim
----------
or proceeding of any nature pending, or overtly threatened, against the Rich
Earth or GLOBALNET, their respective properties or any of their officers or
directors, arising out of, or in any way connected with, the Merger or the other
transactions contemplated by the terms of this Agreement.
(d) Minimum Asset Value. Effective as of the Closing and
---------------------
excluding expenses as permitted hereunder, Rich Earth shall have not less than
$3,572,802 of cash and shall have no commitments, obligations or liabilities,
whether fixed, accrued or contingent, other than legal fees and disbursements or
as otherwise disclosed or set forth in this Agreement or the Rich Earth
Disclosure Schedule. Rich Earth shall have loaned to DTA Communications
Network, LLC or to its subsidiaries $2,127,198 in cash for payment by DTA
Communications Network, LLC in accordance with the Transfer Agreement dated
March 6, 2000 between I:Comm Networks, LLC and DTA Communications Network, LLC
and an additional $300,000 to DTA Communications Network, LLC for working
capital purposes of DTA Communications Network, LLC and its affiliates.
6.2 Additional Conditions to Obligations of GLOBALNET. The obligations
-------------------------------------------------
of GLOBALNET to consummate and effect this Agreement and the transactions
contemplated hereby shall be subject to the satisfaction at or prior to the
Effective Time of each of the following conditions, any of which may be waived,
in writing, exclusively by GLOBALNET:
(a) Representations, Warranties and Covenants. The
--------------------------------------------
representations and warranties of Rich Earth in this Agreement shall be true and
correct in all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of such time and Rich Earth
shall have performed and complied in all material respects with all covenants
and obligations of this Agreement required to be performed and complied with by
it as of the Effective Time.
44
<PAGE>
(b) Claims. There shall not have occurred any claims (whether or
------
not asserted in litigation) which may materially and adversely affect the
consummation of the transactions contemplated hereby or may have a material
adverse effect on Rich Earth.
(c) Certificate of President. GLOBALNET shall have been provided
-------------------------
with a certificate executed on behalf of Rich Earth by its President to the
effect that, as of the Effective Time:
(i) all representations and warranties made by the Rich Earth
in this Agreement are true and correct in all material respects;
(ii) all covenants and obligations of this Agreement to be
performed by the Rich Earth on or before such date have been so performed in all
material respects.
(iii) the conditions set forth in Section 6.1 and 6.2 have
been satisfied.
6.3 Additional Conditions to the Obligations of Rich Earth. The
-------------------------------------------------------------
obligations of Rich Earth to consummate and effect this Agreement and the
transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Time of each of the following conditions, any of which
may be waived, in writing, exclusively by Rich Earth:
(a) Representations, Warranties and Covenants. The
--------------------------------------------
representations and warranties of GLOBALNET in this Agreement shall be true and
correct in all material respects on and as of the Effective Time as though such
representations and warranties were made on and as of the Effective Time and
GLOBALNET shall have performed and complied in all material respects with all
covenants and obligations of this Agreement required to be performed and
complied with by it as of the Effective Time.
(b) Claims. There shall not have occurred any claims (whether or
------
not asserted in litigation) which may materially and adversely affect the
consummation of the transactions contemplated hereby or may have a material
adverse effect on GLOBALNET.
(c) Third Party Consents. Any and all consents, waivers, and
----------------------
approvals required by GLOBALNET shall have been obtained.
(d) Certificate of GLOBALNET. Rich Earth shall have been provided
------------------------
with a certificate executed on behalf of GLOBALNET by its President to the
effect that, as of the Effective Time:
(i) all representations and warranties made by GLOBALNET in
this Agreement are true and correct in all material respects; and
(ii) all covenants and obligations of this Agreement to be
performed by GLOBALNET on or before such date have been so performed in all
material respects.
(iii) the provisions set forth in Section 6.3 have been
satisfied.
7.0 SURVIVAL OF REPRESENTATIONS AND WARRANTIES.
7.1 Survival of Representations and Warranties. All representations,
---------------------------------------------
warranties, agreements, covenants contained in this Agreement shall survive for
a period of three years from the anniversary date of the Effective Date; except
for the representations and warranties relating or pertaining to any tax or tax
returns by the parties which shall survive until the expiration of all
applicable statutes of limitations, or extensions thereof, governing each tax or
tax returns.
8.0 TERMINATION, AMENDMENT AND WAIVER.
8.1 Termination. Except as provided in Section 8.2, this Agreement may
-----------
be terminated and the Merger abandoned at any time prior to the Effective Time:
(a) by mutual consent of GLOBALNET and Rich Earth;
(b) by Rich Earth or GLOBALNET if (a) the Effective Time has not
occurred by July 1, 2000; (b) there shall be a final nonappealable order of a
federal or state court in effect preventing consummation of the Merger; or (c)
there shall be any statute, rule, regulation or order enacted, promulgated or
issued or deemed applicable to the Merger by any Governmental Entity that would
make consummation of the Merger illegal;
(c) by either party if there shall be any action taken, or any
statute, rule, regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which would prohibit
GLOBALNET's ownership or operation of any portion of the business of Rich Earth;
(d) by GLOBALNET if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of Rich Earth and such breach has not been cured within ten (10)
calendar days after written notice to Rich Earth; provided, however, that, no
-------- -------
cure period shall be required for a breach which by its nature cannot be cured;
45
<PAGE>
(e) by Rich Earth if it is not in material breach of its
obligations under this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this Agreement on
the part of GLOBALNET and such breach has not been cured within ten (10)
calendar days after written notice to GLOBALNET; provided, however, that no cure
-------- -------
period shall be required for a breach which by its nature cannot be cured.
Where action is taken to terminate this Agreement pursuant to this Section 8.1,
it shall be sufficient for such action to be authorized by the Board of
Directors (as applicable) of the party taking such action.
8.2 Effect of Termination. In the event of termination of this
-----------------------
Agreement as provided in Section 8.1, this Agreement shall forthwith become void
and there shall be no liability or obligation on the part of Rich Earth or
GLOBALNET, or their respective officers, directors or shareholders, provided
that each party shall remain liable for any breaches of this Agreement prior to
its termination; provided further that, the provisions of Sections 5.4, 5.5 and
5.6, Section 9 and this Section 8.2 shall remain in full force and effect and
survive any termination of this Agreement.
8.3 Amendment. This Agreement may be amended by the parties hereto at
---------
any time by execution of an instrument in writing signed on behalf of each of
the parties hereto.
8.4 Extension; Waiver. At any time prior to the Effective Time, Rich
------------------
Earth and GLOBALNET, may, to the extent legally allowed, (i) extend the time for
the performance of any of the obligations of the other party hereto, (ii) waive
any inaccuracies in the representations and warranties made to such party
contained herein or in any document delivered pursuant hereto, and (iii) waive
compliance with any of the agreements or conditions for the benefit of such
party contained herein. Any agreement on the part of a party hereto to any such
extension or waiver shall be valid only if set forth in an instrument in writing
signed on behalf of such party.
9.0 GENERAL PROVISIONS.
9.1 Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given if delivered personally or by commercial
messenger or courier service, or mailed by registered or certified mail (return
receipt requested) or sent via facsimile (with acknowledgment of complete
transmission) to the parties at the following addresses (or at such other
address for a party as shall be specified by like notice), provided, however,
--------
that notices sent by mail will not be deemed given until received:
(a) if to Rich Earth, to:
Venture Law Corporation
688 West Hastings Street, Suite 618
Vancouver, BC, V6B 1P1
Attention: Alixe B. Cormick
Telephone No.: (604) 659-9188
Facsimile No.: (604) 659-9178
(b) if to GLOBALNET, to:
GLOBALNET, Inc.
721 E. Madison
Villa Park, Illinois 60181
Attention: Robert Donahue, President
Telephone No.: (630) 279-1735
Facsimile No.: (630) 279-9720
and copies to:
Cummings & Lockwood
Four Stamford Plaza
P.O. Box 120
Stamford, Connecticut 06904-0120
Attn: David E. Fleming, Esq.
Telephone No.: (203) 327-1700
Facsimile No.: (203) 351-4535
46
<PAGE>
and to:
Greenhill Partners, P.C.
555 Fifth Avenue
18th Floor
New York, NY 10017
Attn: Jonathan S. Greenhill, Esq.
Telephone No.: (212) 661-5500
Facsimile No.: (212) 661-5509
9.2 Interpretation. The words include, includes and including when
--------------
used herein shall be deemed in each case to be followed by the words without
limitation. The headings contained in this Agreement are for reference purposes
only and shall not affect in any way the meaning or interpretation of this
Agreement.
9.3 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party, it being understood that all
parties need not sign the same counterpart.
9.4 Entire Agreement; Assignment. This Agreement, the Exhibits hereto
-----------------------------
and the documents and instruments and other agreements among the parties hereto
referenced herein: (a) constitute the entire agreement among the parties with
respect to the subject matter hereof and supersede all prior agreements and
understandings both written and oral among the parties with respect to the
subject matter hereof, (b) are not intended to confer upon any other person any
rights or remedies hereunder; and (c) shall not be assigned by operation of law
or otherwise.
9.5 Severability. In the event that any provision of this Agreement or
------------
the application thereof, becomes or is declared by a court of competent
jurisdiction to be illegal, void or unenforceable, the remainder of this
Agreement will continue in full force and effect and the application of such
provision to other persons or circumstances will be interpreted so as reasonably
to effect the intent of the parties hereto. The parties further agree to
replace such void or unenforceable provision of this Agreement with a valid and
enforceable provision that will achieve, to the extent possible, the economic,
business and other purposes of such void or unenforceable provision.
9.6 Other Remedies. Except as otherwise provided herein, any and all
---------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby, or by law or equity upon
such party, and the exercise by a party of any one remedy will not preclude the
exercise of any other remedy.
9.7 Governing Law. This Agreement shall be governed by and construed
--------------
in accordance with the laws of the State of Nevada, regardless of the laws that
might otherwise govern under applicable principles of conflicts of laws thereof.
Each of the parties hereto irrevocably consents to the exclusive jurisdiction
and venue of any court within Clark County, State of Nevada, in connection with
any matter based upon or arising out of this Agreement or the matters
contemplated herein, agrees that process may be served upon them in any manner
authorized by the laws of the State of Nevada for such persons and waives and
covenants not to assert or plead any objection which they might otherwise have
to such jurisdiction, venue and such process.
9.8 Rules of Construction. The parties hereto agree that they have
-----------------------
been represented by counsel during the negotiation and execution of this
Agreement and, therefor, waive the application of any law, regulation, holding
or rule of construction providing that ambiguities in an agreement or other
document will be construed against the party drafting such agreement or
document.
47
<PAGE>
IN WITNESS WHEREOF, the Parties have executed this Agreement as of March __,
2000.
GLOBALNET, INC. RICH EARTH, INC.
By:_____________________________ By:___________________________
Name: Robert Donahue Name: Xenios Xenopoulous
Title: Chief Executive Officer and Title: President
GN ACQUISITION CORP.
By:___________________________
Name:
Title:
Agreed and accepted to as to Sections 1.7 and
9 hereof:
VENTURE LAW CORPORATION
By:_____________________________
Name:
Title:
48
<PAGE>
EXHIBIT C
RICH EARTH, INC AND SUBSIDIARY
CONSOLIDATED BALANCE SHEETS
JANUARY 1, 2000
<TABLE>
<CAPTION>
<S> <C>
ASSETS
CURRENT ASSETS
Cash. . . . . . . . . . . . . . . . . . . . $ 717,854
Accounts receivable . . . . . . . . . . . . 806,489
Prepaid expenses. . . . . . . . . . . . . . 3,443
------------
Total Current Assets. . . . . . . . . . . 1,527,786
------------
EQUIPMENT - net of accumulated depreciation 4,888,689
------------
$ 6,416,475
------------
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Accounts payable. . . . . . . . . . . . . $ 2,689,444
------------
Total Current Liabilities. . . . . . . 2,689,444
------------
OTHER LIABILITIES . . . . . . . . . . . . . 5,505,158
------------
STOCKHOLDER'S DEFICIENCY. . . . . . . . . . (1,778,127)
------------
$ 6,416,475
------------
</TABLE>
See the Company's 10KSB for December 31, 2000
49
<PAGE>
RICH EARTH, INC AND SUBSIDIARY
CONSOLIDATED STATEMENTS OF OPERATIONS
FOR THE YEARS ENDED DECEMBER 31, 1999, AND 1998
(STATED IN THOUSANDS)
<TABLE>
<CAPTION>
Dec 31, Dec 31,
1999 1998
--------- -------
<S> <C> <C>
REVENUES . . . . . . . . . $ 27,474 $4,046
COST OF TELECOMMUNICATIONS 26,587 $3,370
--------- -------
GROSS PROFIT . . . . . . . 887 676
EXPENSES . . . . . . . . . 2,618 866
--------- -------
NET LOSS . . . . . . . . . $ (1,731) $ (190)
--------- -------
</TABLE>
See the Company's 10KSB for December 31, 2000.
50
<PAGE>
EXHIBIT D
GLOBALNET INTERNATIONAL, INC.
Unaudited Financial Statements
December 31, 1999 and 1998
NOTE: DTA Communications Network LLC is the predecessor to GlobalNet
International, Inc.
DTA COMMUNICATIONS NETWORK LLC
Consolidated Balance Sheets
December 31, 1999 and 1998
<TABLE>
<CAPTION>
ASSETS 1999 1998
<S> <C> <C>
Current Assets
Cash. . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 777,645 197,270
Accounts Receivable . . . . . . . . . . . . . . . . . . . . . 1,199,283 -
Due from related party. . . . . . . . . . . . . . . . . . . . 41,319 7,944
Prepaid Expenses . . . . . . . . . . . . . . . . . . . . . . 137,427 5,478
Total Current Assets . . . . . . . . . . . . . . . 2,155,674 210,692
Property and Equipment, Net . . . . . . . . . . . . . . . . . . . . 4,449,726 -
Total Assets . . . . . . . . . . . . . . . . . . . $ 6,605,400 210,692
LIABILITIES AND MEMBERS EQUITY (DEFICIT)
Current Liabilities
Accounts Payable. . . . . . . . . . . . . . . . . . . . . . . $ 2,925,798 447,475
Salaries, wages and commissions payable. . . . . . . . . . . 176,083 342,390
Deferred Revenues. . . . . . . . . . . . . . . . . . . . . . 891,350 71,249
Term Loan . . . . . . . . . . . . . . . . . . . . . . . . . 617,039 -
Current portion of capital lease obligation . . . . . . . . 1,114,677 -
Accrued Interest. . . . . . . . . . . . . . . . . . . . . . 94,694 -
Total Current Liabilities. . . . . . . . . . . . 5,819,641 761,114
Capital Lease Obligation, net of current position. . . . . . . . . . 3,773,443 -
Member's Equity (Deficit). . . . . . . . . . . . . . . . . . . . . . (2,987,684) (550,422)
Total Liabilities and Members' Equity (Deficit) $ 6,605,400 210,692
See accompany notes to consolidate financial statements
</TABLE>
51
<PAGE>
DTA COMMUNICATIONS NETWORK, L.L.C.
Consolidated Statements of Operations
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------ ---------- ---------
<S> <C> <C> <C>
EXPENSES . . . . . . . . . . . . . . . . . . . . $25,618,203 4,046,246 792,654
- ------------------------------------------------ ------------ ---------- ----------
Operating Expenses:
- ------------------------------------------------
Cost of Revenue . . . . . . . . . . . . . . . . 25,298,532 3,370,153 636,216
- ------------------------------------------------ ------------ ---------- ----------
Sales and Marketing. . . . . . . . 121,585 108,021 28,737
- ------------------------------------------------ ------------ ---------- ----------
Depreciation. . . . . . . . . . . 882,639 - -
- ------------------------------------------------ ------------ ---------- ----------
General and Administrative . . . . 1,159,776 679,562 383,783
- ------------------------------------------------ ------------ ---------- ----------
Total Operating Expenses 27,462,532 4,157,736 1,048,736
- ------------------------------------------------ ------------ ---------- ----------
Operating Loss . . . . . (1,844,329) (111,490) (256,082)
- ------------------------------------------------ ------------ ---------- ----------
Other Expense. . . . . . . . . . (40,865) (174,780) -
- ------------------------------------------------ ------------ ---------- ----------
Interest Expense . . . . . . . . (752,068) (8,070) -
- ------------------------------------------------ ------------ ---------- ----------
Minority Interest. . . . . . . . 730,874 - -
- ------------------------------------------------ ------------ ---------- ----------
Net Loss. . . . . . . . $(1,906,388) (294,340) (256,082)
- ------------------------------------------------ ------------ ---------- ----------
</TABLE>
See accompanying notes to consolidated financial statements
52
<PAGE>
DTA COMMUNICATIONS NETWORK, L.L.C.
Consolidated Statements of Members' Equity (Deficit)
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
Members'
Equity (Deficit)
-----------------
<S> <C>
Balance at December 31, 1996 . . . . . . . . . . . . . . $ 241,000
- ------------------------------------------------------------- -----------------
Net Loss . . . . . . . . . . . . . . . . . . . . . . (256,082)
- ------------------------------------------------------------- -----------------
Balance at December 31, 1997. . . . . . . . . . . . . . (15,082)
- ------------------------------------------------------------- -----------------
Distributions . . . . . . . . . . . . . . . . . . . (241,000)
- ------------------------------------------------------------- -----------------
Net Loss. . . . . . . . . . . . . . . . . . . . . . (294,340)
- ------------------------------------------------------------- -----------------
Balance at December 31, 1998 . . . . . . . . . . . . . (550,422)
- ------------------------------------------------------------- -----------------
Contributions . . . . . . . . . . . . . . . . . . . 150,000
- ------------------------------------------------------------- -----------------
Minority Interest Loss Charged to Majority Interest (680,874)
- ------------------------------------------------------------- -----------------
Net Loss. . . . . . . . . . . . . . . . . . . . . . (1,906,388)
- ------------------------------------------------------------- -----------------
Balance at December 31, 1999. . . . . . . . . . . . . $ (2,987,684)
- ------------------------------------------------------------- -----------------
</TABLE>
See accompanying notes to consolidated financial statements
53
<PAGE>
DTA COMMUNICATIONS NETWORK, L.L.C.
Consolidated Statements of Cash Flows
Years ended December 31, 1999, 1998 and 1997
<TABLE>
<CAPTION>
1999 1998 1997
------------- --------- ---------
<S> <C> <C> <C>
Cash Flows From Operating Activities:
- -------------------------------------------------------
Net loss. . . . . . . . . . . . . . . . . . . . . . ($1,906,388) (294,340) (256,082)
- ------------------------------------------------------- ------------- --------- ---------
Adjustments to reconcile net loss to net
cash provided by operating activities:
- -------------------------------------------------------
Depreciation . . . . . . . . . . . . . . . . . 882,639 - -
- ------------------------------------------------------- ------------- --------- ---------
Minority Interest . . . . . . . . . . . . . . . (50,000) - -
- ------------------------------------------------------- ------------- --------- ---------
Changes in Assets and Liabilities:
- -------------------------------------------------------
Accounts Receivable . . . . . . . . . . . . . . (1,199,283) 141,735 (141,735)
- ------------------------------------------------------- ------------- --------- ---------
Due from Related Party. . . . . . . . . . . . . (33,375) 6,660 (14,604)
- ------------------------------------------------------- ------------- --------- ---------
Prepaid Expenses. . . . . . . . . . . . . . . . (131,949) 5,478 -
- ------------------------------------------------------- ------------- --------- ---------
Accounts Payable. . . . . . . . . . . . . . . . 2,478,323 329,190 118,285
- ------------------------------------------------------- ------------- --------- ---------
Salaries, Wages, and Commissions Payable. . . . (66,307) 57,721 184,669
- ------------------------------------------------------- ------------- --------- ---------
Deferred Revenue . . . . . . . . . . . . . . . . 820,101 96,751 168,000
- ------------------------------------------------------- ------------- --------- ---------
Accrued Interest . . . . . . . . . . . . . . . . 94,694 - -
- ------------------------------------------------------- ------------- --------- ---------
Net Cash Provided by Operating Activities. . . 888,455 138,737 58,533
- ------------------------------------------------------- ------------- --------- ---------
Cash Flows from Investing Activities -
Purchase of Furniture and Equipment . . . . . . . . (240,530) - -
- ------------------------------------------------------- ------------- --------- ---------
Cash Flows from Financing Activities:. . . . . . . . . - -
- ------------------------------------------------------- ------------- ---------
Proceeds from Term Loan . . . . . . . . . . . . . 754,517 - -
- ------------------------------------------------------- ------------- --------- ---------
Repayments of Principal on Term Loan. . . . . . . (117,478) - -
- ------------------------------------------------------- ------------- --------- ---------
Principal Payments on Capital Lease Obligation . (203,715) - -
- ------------------------------------------------------- ------------- --------- ---------
Capital Contributions from Member . . . . . . . . 200,000 - -
- ------------------------------------------------------- ------------- --------- ---------
Minority Interest Loss Charged to Majority Interest (680,874) - -
- ------------------------------------------------------- ------------- --------- ---------
Net Cash Used in Financing Activities . . . . (67,550) - -
- ------------------------------------------------------- ------------- --------- ---------
Net Increase in Cash. . . . . . . . . . . . . 580,375 138,737 58,533
- ------------------------------------------------------- ------------- --------- ---------
Cash at beginning of year . . . . . . . . . . . . 197,270 58,533 -
- ------------------------------------------------------- ------------- --------- ---------
Cash at end of year. . . . . . . . . . . . . . . . $ 777,645 197,270 58,533
- ------------------------------------------------------- ------------- --------- ---------
Supplemental disclosure of cash flow information-
Cash paid for Interest . . . . . . . . . . . . $ - - -
- ------------------------------------------------------- ------------- --------- ---------
Supplemental Disclosure of Non Cash Investing and
Financial Activities -
Equipment acquired through Capital Lease . . $ 5,091,835 - -
- ------------------------------------------------------- ------------- --------- ---------
</TABLE>
See accompanying notes to consolidated financial statements
54
<PAGE>
DTA COMMUNICATIONS NETWORK, L.L.C
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
4) NATURE OF ORGANIZATION AND BUSINESS
DTA Communications Network, L.L.C. (the Company) was organized in Illinois on
May 22, 1996 as a limited liability company. The Company was originally formed
to provide global telecommunications, including high quality voice, fax, and
other value-added applications over the Internet and other networks.
By the terms of the operating agreement, the Company will continue until April
19, 2026, unless terminated earlier by the written agreement of a majority of
the members. Members participate in income and losses proportionately on the
basis of the percentage of interest held and are subject to losses only to the
extent of their respective investments.
On April 20, 1999, the Company and a Texas limited liability company formed an
Illinois limited liability company, later named GlobalNet, L.L.C. The Company
provides wholesale carrier voice and fax, value-added applications, and third
generation application service provider (ASP) products via an international
Internet protocol based network.
The Company is subject to risks and uncertainties common to growing
telecommunications-based companies, including rapid technological changes, low
costs to customers of switching from carrier to carrier, failed alliances, and
pricing pressures in the international long distance market.
5) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The 1999 consolidation financial statements include the accounts of DTA
Communications Network, L.L.C. and its majority-owned subsidiary, GlobalNet,
L.L.C. The Company's interest in GlobalNet L.L.C. was 75% at December 31, 1999.
As a result of losses attributable to the minority interest balance has been
reduced to $-0 at December 31, 1999. The excess of the loss has been charged to
the majority interest and is reflected in member's equity (deficit).
Uses of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and the disclosure of
contingent assets and liabilities at the date of the financial statements, and
the reported amounts of revenue and expenses during the reporting period.
Subsequent actual results may differ from those estimates.
55
<PAGE>
Revenue Recognition
The majority of the Company's revenue consists principally on the sale of
wholesale carrier voice, fax, and value added applications via an international
Internet protocol network. Revenue is deferred by the Company upon repayment
made by its customers, and then the Company recognizes the revenue as services
are rendered. Not all customers prepay for their services. In those cases,
revenue is recognized after service has been rendered.
Some revenues from the Company's value-added applications come from supplying
underlying services to issuers of prepaid phone cards. Those issuers prepay some
or all of the services provided. Payments received in advance for such services
are recorded in the accompanying consolidated balance sheets as deferred
revenue. Consequently, revenue from such services has been contracted and
expires without being fully used (cards have effective lives up to three
56
<PAGE>
DTA COMMUNICATIONS NETWORK, L.L.C
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
months after the first use); then the unused value is referred to as breakage
and recorded as revenue at the date of expiration.
Concentration of Credit Risk and Geographical Information
The Company transacts a significant volume of business with only a few
customers. Three customers represent 91%, 96% and 98% of total revenue in 1999,
1998 and 1997, respectively. Accounts receivable from these customers were
approximately $ 66 and $ _______ at December 31, 1999 and 1998, respectively.
The Company requires certain customers to provide collateral in the form of a
cash deposit.
Minutes revenue for traffic sent to Mexico was 50%, 100% and 100% of total
revenue in 1999, 1998 and 1997, respectively.
Income Taxes
On May 22, 1996, the Company was formed as a limited liability company in the
State of Illinois. As such, the net losses for the Company for the Three-years
ended December 31, 1999 were reported in the members' tax returns. Accordingly,
these consolidated financial statements contain no provision or benefit and no
assets or liabilities for Federal or State income taxes for any of the periods
presented.
Impairment of Long-Lived Assets
In accordance with SFAS No. 121, Accounting for the Impairment of Long-Lived
Assets and for Long-Lived Assets to be disclosed of, the Company records
impairment of losses on long-lived assets used in operations when indicators of
impairment are present and the undiscounted cash flows estimated to be generated
by those assets are less than the assets' carrying amount.
(3) Property and Equipment
57
<PAGE>
Property and equipment consists of the following:
<TABLE>
<CAPTION>
December 31,
-------------------------
1999 1998
-------- --------
<S> <C> <C>
Network equipment under capital lease $5,267,565 -
Furniture and equipment . . . . . . . 64,800 -
---------- -
5,332,365 -
Less accumulated depreciation . . . . 882,639 -
---------- -
Property and equipment, net . $4,449,726 -
---------- ---------
</TABLE>
Property and equipment are stated at cost. Equipment net under capital lease is
stated at the lower of fair value of the asset or the net present value of the
minimum lease payments at the inception of the lease. Depreciation expense is
generally calculated being the straight-line method over the estimated useful
lives of the assets which range from three to five years. Depreciation expense
totaled $882,639, $-0 and $-0 in
58
<PAGE>
DTA COMMUNICATIONS NETWORK, L.L.C
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
1999, 1998 and 1997, respectively. Accumulated depreciation of assets recorded
under capital lease amount to $877,925, $-0 at December 31, 1999 and 1998,
respectively.
(4) OPERATING AND CAPITAL LEASES
The Company leases its headquarters in Villa Park, Illinois on a month-to-month
basis. Annual rent expense under this arrangement was approximately $27,950,
$9,574 and $3,840 for the years ended December 31, 1999, 1998 and 1997,
respectively.
The Company leases its network equipment under a capital lease. This lease has
a 42-month term, with annual interest at a rate of 22%. The lease equipment
secures all leases.
The following is a schedule of future minimum rental payments requrired under
the capital lease:
Years ended Capital
December 31, Lease
- ------------- --------
2000 $ 2,082,088
2001 2,082,088
2002 2,082,088
2003 694,029
2004 and thereafter -
---------------
Total future minimum lease payments 6,940,293
Less amount representing interest 2,090,926
-----------
Net present value of minimum lease
payments 4,849,367
Less current portion 1,454,810
--------------
$ 3,394,557
-------------
(5) RELATED PARTIES
During the years ended December 31, 1999 and 1998, an officer and primary member
borrowed funds from the Company totaling $39,606 and $16,629, respectively. The
primary member repaid $6,231 and $19,933 in 1999 and 1998, respectively.
In 1999, the Company paid $126,223 to a minority owner for the reimbursement of
costs of maintenance on equipment. The Company paid $45,865 and $119,533 of
obligations of an affiliated entity in 1999 and 1998, respectively, and wrote
off $55,247 of amounts due from the affiliate in 1998.
(6) AGREEMENT WITH OPERADORA PROTEL, S.A. DE C.V.
On August 1, 1999, GlobalNet L.L.C. entered into a five-year agreement with
Operadora Protel, S.A. DE C.V., a Mexico corporation (Protel), whereby Protel
provides the platform for prepaid debit card calls and the use of its network
for traffic originating and terminating between Mexico and the United States.
The agreement also provides that Protel and GlobalNet, L.L.C agree to equally
share in the gross profits generated from services provided under the
agreement.
59
<PAGE>
DTA COMMUNICATIONS NETWORK, L.L.C
Notes to Consolidated Financial Statements
December 31, 1999 and 1998
(7) DEBT
On October 1, 1999, GlobalNet L.L.C. entered into a term loan for $734,517 at an
annual interest rate of 19.75%. The initial term of the loan included eight
payments maturing on May 15, 2000. During February 2000, the terms were
renegotiated, extending the maturity date to July 15, 2000. Additionally, the
creditor charges GlobalNet L.L.C. a collateral monitoring fee which is derived
by applying a set percentage to the Company's gross margin as defined by their
Financing and Security agreement dated November 9, 1999. Expense related to the
collateral monitoring fee during 1999 was $42,577 and is recorded in interest
expense.
(8) SUBSEQUENT EVENTS
On March 22, 2000, the Company entered into a term note and security agreement
for $2,427,198 with Rich Earth, Inc. The loan bears interest at an annual rate
of 8% and is due on May 31, 2000.
On March 24, 2000, the Company used portion of the proceeds from the term note
to purchase the 25% minority interest and certain assets from the minority owner
of GlobalNet L.L.C for $2,000,000 and $127,198, respectively. The purchase of
the minority interest increased the Company's interest in GlobalNet L.L.C. to
100%.
On February 18, 2000, GlobalNet signed a letter of intent with Rich Earth, Inc
(Rich Earth), an NASD OTC Bulletin Board System trading Company, to merge
GlobalNet with and into Rich Earth whereby Rich Earth is to be the surviving
entity. The merger is conditioned upon Rich Earth having completed a private
60
60
<PAGE>
placement for $6,000,000. The letter of intent states that the merger must
occur no later than May 31, 2000. While the merger was not consummated as of
May 8, 2000, the Company expects the merger to be closed in the near future.
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EXHIBIT E
GLOBALNET, INC.
2000 STOCK PLAN
1. PURPOSES OF THE PLAN. The purposes of this Stock Plan are to attract and
retain the best available personnel for positions of substantial responsibility,
to provide additional incentive to Employees, Directors and Consultants and to
promote the success of the Company's business. Options granted under the Plan
may be Incentive Stock Options or Non-statutory Stock Options, as determined by
the Administrator at the time of grant. Stock Purchase Rights may also be
granted under the Plan.
2. DEFINITIONS. As used in this Stock Plan, the following definitions will
apply:
(a) "ADMINISTRATOR" means the Board or any of its Committees as will be
administering the Plan under Section 4 of the Plan.
(b) "APPLICABLE LAWS" means the requirements relating to the administration
of stock option plans under U.S. state corporate laws, U.S. federal and state
securities laws, the Code, any stock exchange or quotation system on which the
Common Stock is listed or quoted and the applicable laws of any other country or
jurisdiction where Options or Stock Purchase Rights are granted under the Plan.
(c) "BOARD" means the Board of Directors of the Company.
(d) "CODE" means the Internal Revenue Code of 1986, as amended.
(e) "COMMITTEE" means a committee of Directors appointed by the Board under
Section 4 of the Plan.
(f) "COMMON STOCK" means the Common Stock of the Company.
(g) "COMPANY" means GlobalNet, Inc., a Nevada corporation.
(h) "CONSULTANT" means any person who is engaged by the Company or any
Parent or Subsidiary to render consulting or advisory services to such
entity.
(i) "DIRECTOR" means a member of the Board of Directors of the Company.
(j) "Disability" means total and permanent disability as defined in Section
22(e)(3) of the Code.
(k) "EMPLOYEE" means any person, including Officers and Directors, employed
by the Company or any Parent or Subsidiary of the Company. A Service Provider
will not cease to be an Employee in the case of (i) any leave of absence
approved by the Company or (ii) transfers between locations of the Company or
between the Company, its Parent, any Subsidiary, or any successor. For purposes
of Incentive Stock Options, no such leave may exceed ninety days, unless
re-employment on expiration of such leave is guaranteed by statute or contract.
If re-employment on expiration of a leave of absence approved by the Company is
not so guaranteed, on the 181st day of such leave any Incentive Stock Option
held by the Optionee will cease to be treated as an Incentive Stock Option and
will be treated for tax purposes as a Non-statutory Stock Option. Neither
service as a Director nor payment of a director's fee by the Company will be
sufficient to constitute "employment" by the Company.
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(l) "EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended.
(m) "FAIR MARKET VALUE" means, as of any date, the value of Common Stock
determined as follows:
(i) If the Common Stock is listed on any established stock exchange or a
national market system, including without limitation the Nasdaq
National Market or The Nasdaq SmallCap Market of The Nasdaq Stock
Market, its Fair Market Value will be the closing sales price for
the stock (or the closing bid, if no sales were reported) as quoted
on the exchange or system for the last market trading day prior to
the time of determination, as reported in The Wall Street Journal or
any other source as the Administrator considers reliable;
(ii) If the Common Stock is regularly quoted by a recognized securities
dealer but selling prices are not reported, its Fair Market Value
will be the mean between the high bid and low asked prices for the
Common Stock on the last market trading day prior to the day of
determination; or
(iii) In the absence of an established market for the Common Stock, the
Fair Market Value will be determined in good faith by the
Administrator.
(n) "INCENTIVE STOCK OPTION" means an Option intended to qualify as an
incentive stock option within the meaning of Section 422 of the Code.
(o) "NON-STATUTORY STOCK OPTION" means an Option not intended to qualify as
an Incentive Stock Option.
(p) "OFFICER" means a person who is an officer of the Company within the
meaning of Section 16 of the Exchange Act and the rules and regulations
promulgated thereunder.
(q) "OPTION" means a stock option granted pursuant to the Plan.
(r) "OPTION AGREEMENT" means a written or electronic agreement between the
Company and an Optionee evidencing the terms and conditions of an individual
Option grant. The Option Agreement is subject to the terms and conditions of the
Plan.
(s) "OPTION EXCHANGE PROGRAM" means a program whereby outstanding Options
are exchanged for Options with a lower exercise price.
(t) "OPTIONED STOCK" means the Common Stock subject to an Option or a Stock
Purchase Right.
(u) "OPTIONEE" means the holder of an outstanding Option or Stock Purchase
Right granted under the Plan.
(v) "PARENT" means a "parent corporation," whether now or hereafter
existing, as defined in Section 424(e) of the Code.
(w) "PLAN" means this 2000 Stock Plan.
(x) "RESTRICTED STOCK" means shares of Common Stock acquired pursuant to a
grant of a Stock Purchase Right under Section 11 below.
(y) "RULE 16B-3" means Rule 16b-3 of the Exchange Act or any successor to
Rule 16b-3, as in effect when discretion is being exercised with
respect to the Plan.
(z) "SECTION 16(B)" means Section 16(b) of the Exchange Act.
(aa) "SERVICE PROVIDER" means an Employee, Director or Consultant.
(bb) "SHARE" means a share of the Common Stock, as adjusted under Section 12
below.
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(cc) "STOCK PURCHASE RIGHT" means a right to purchase Common Stock pursuant
to Section 11 below.
(dd) "SUBSIDIARY" means a "subsidiary corporation," whether now or hereafter
existing, as defined in Section 424(f) of the Code.
3. STOCK SUBJECT TO THE PLAN. Subject to the provisions of Section 12 of the
Plan, the maximum aggregate number of Shares that may be subject to option and
sold under the Plan is 3,000,000 Shares. The Shares may be authorized but
unissued, or reacquired Common Stock.
If an Option or Stock Purchase Right expires or becomes unexercisable without
having been exercised in full, or is surrendered pursuant to an Option Exchange
Program, the unpurchased underlying Shares will become available for future
grant or sale under the Plan (unless the Plan has terminated). However, Shares
that have actually been issued under the Plan, on exercise of either an Option
or Stock Purchase Right, will not be returned to the Plan and will not become
available for future distribution under the Plan, except that if Shares of
Restricted Stock are repurchased by the Company at their original purchase
price, the Shares will become available for future grant under the Plan.
4. ADMINISTRATION OF THE PLAN.
(a) PROCEDURE.
(i) MULTIPLE ADMINISTRATIVE BODIES. The Plan may be administered by
different Committees with respect to different groups of Service
Providers.
(ii) SECTION 162(M). To the extent that the Administrator determines it
to be desirable to qualify Options granted hereunder as
"performance-based compensation," within the meaning of Section
162(m) of the Code, the Plan will be administered by a Committee
of two or more "outside directors," within the meaning of Section
162(m) of the Code.
(iii) RULE 16B-3. To the extent desirable to qualify transactions
hereunder as exempt under Rule 16b-3, the transactions contemplated
hereunder will be structured to satisfy the requirements for
exemption under Rule 16b-3.
(iv) OTHER ADMINISTRATION. Other than as provided above, the Plan will
be administered by (A) the Board or (B) a Committee, which
committee will be constituted to satisfy Applicable Laws.
(b) POWERS OF THE ADMINISTRATOR. Subject to the provisions of the Plan and,
in the case of a Committee, the specific duties delegated by the Board to the
Committee, and subject to the approval of any relevant authorities, the
Administrator will have the authority in its discretion:
(i) to determine the Fair Market Value;
(ii) to select the Service Providers to whom Options and Stock Purchase
Rights may from time to time be granted hereunder;
(iii) to determine the number of Shares to be covered by each award
granted under the Plan;
(iv) to approve forms of agreement for use under the Plan;
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(v) to determine the terms and conditions, of any Option or Stock
Purchase Right granted under the Plan. The terms and conditions
include, but are not limited to, the exercise price, the time or
times when Options or Stock Purchase Rights may be exercised
(which may be based on performance criteria), Any vesting
acceleration or waiver of forfeiture restrictions, and any
Restriction or limitation regarding any Option or Stock
Purchase Right or underlying Common Stock, based in each case on
the factors as the Administrator, in its sole discretion, will
determine;
(vi) to determine whether and under what circumstances an Option may
be settled in cash under subsection 9(e) instead of Common
Stock;
(vii) to reduce the exercise price of any Option to the then current
Fair Market Value if the Fair Market Value of the Common Stock
covered by the Option has declined since the date the Option
was granted;
(viii) to initiate an Option Exchange Program;
(ix) to prescribe, amend and rescind rules and regulations relating to
the Plan, including rules and regulations relating to sub-plans
established for the purpose of qualifying for preferred tax
treatment under foreign tax laws;
(x) to allow Optionees to satisfy withholding tax obligations by
electing to have the Company withhold from the Shares to be
issued on exercise of an Option or Stock Purchase Right that
number of Shares having a Fair Market Value equal to the amount
required to be withheld. The Fair Market Value of the Shares to be
withheld will be determined on the date that the amount of tax
to be withheld is to be determined. All elections by Optionees to
have Shares withheld for this purpose will be made in the
form and under the conditions as the Administrator may consider
necessary or advisable; and
(xi) to construe and interpret the terms of the Plan and awards granted
pursuant to the Plan.
(c) EFFECT OF ADMINISTRATOR'S DECISION. All decisions, determinations and
interpretations of the Administrator will be final and binding on all Optionees.
5. ELIGIBILITY.
(a) Non-statutory Stock Options and Stock Purchase Rights may be
granted to Service Providers. Incentive Stock Options may be granted only to
Employees.
(b) Each Option will be designated in the Option Agreement as either an
Incentive Stock Option or a Non-statutory Stock Option. However, notwithstanding
the designation, to the extent that the aggregate Fair Market Value of the
Shares with respect to which Incentive Stock Options are exercisable for the
first time by the Optionee during any calendar year (under all plans of the
Company and any Parent or Subsidiary) exceeds $100,000, the Options will be
treated as Non-statutory Stock Options. For purposes of this Section 5(b),
Incentive Stock Options will be taken into account in the order in which they
were granted. The Fair Market Value of the Shares will be determined as of the
time the Option with respect to the Shares is granted.
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(c) Neither the Plan nor any Option or Stock Purchase Right will confer on
any Optionee any right with respect to continuing the Optionee's relationship as
a Service Provider with the Company, nor will it interfere in any way with his
or her right or the Company's right to terminate the relationship at any time,
with or without cause.
(d) The following limitations will apply to grants of Options:
(i) No Service Provider will be granted, in any fiscal year of the
Company, Options to purchase more than ___________ Shares.
(ii) In connection with his or her initial service, a Service Provider
may be granted Options to purchase up to an additional _________
Shares which will not count against the limit set forth in
subsection (i) above.
(iii) The foregoing limitations will be adjusted proportionately in
connection with any change in the Company's capitalization
as described in Section 12.
(iv) If an Option is cancelled in the same fiscal year of the Company
in which it was granted (other than in connection with a
transaction described in Section 12), the cancelled Option will
be counted against the limits set forth in subsections (i) and (ii)
above. For this purpose, if the exercise price of an Option is
reduced, the transaction will be treated as a cancellation of the
Option and the grant of a new Option.
6. TERM OF PLAN. The Plan will become effective on its adoption by the Board.
It will continue in effect for a term of ten (10) years unless terminated at an
earlier date under Section 14 of the Plan.
7. TERM OF OPTION. The term of each Option will be stated in the Option
Agreement; provided, however, that the term will be no more than ten (10) years
from the date of grant. In the case of an Incentive Stock Option granted to an
Optionee who, at the time the Option is granted, owns stock representing more
than ten percent (10%) of the voting power of all classes of stock of the
Company or any Parent or Subsidiary, the term of the Option will be five (5)
years from the date of grant or a shorter term as may be provided in the Option
Agreement.
8. OPTION EXERCISE PRICE AND CONSIDERATION.
(a) OPTION EXERCISE PRICE. The per share exercise price for the Shares
to be issued on exercise of an Option will be the price as is determined by the
Administrator, but will be subject to the following:
(i) In the case of an Incentive Stock Option
(A) granted to an Employee who, at the time of grant of the Option,
owns stock representing more than ten percent (10%) of the
voting power of all classes of stock of the Company or any
Parent or Subsidiary, the exercise price will be no less
than 110% of the Fair Market Value per Share on the date of
grant.
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(B) granted to any other Employee, the per Share exercise price
will be no less than 100% of the Fair Market Value
per Share on the date of grant.
(ii) In the case of a Non-statutory Stock Option, the per Share exercise
price will be determined by the Administrator. In the case of a
Non-statutory Stock Option intended to qualify as "performance-
based compensation" within the meaning of Section 162(m) of the
Code, the per Share exercise price will be no less than 100% of
the Fair Market Value per Share on the date of grant.
(iii) Notwithstanding the foregoing, Options may be granted with a per
Share exercise price other than as required above pursuant to a
merger or other corporate transaction.
(b) CONSIDERATION. The consideration to be paid for the Shares to be issued
on exercise of an Option, including the method of payment, will be determined by
the Administrator (and, in the case of an Incentive Stock Option, will be
determined at the time of grant). The consideration may consist of:
(i) cash,
(ii) check,
(iii) promissory note,
(iv) other Shares which:
(A) in the case of Shares acquired on exercise of an Option, have
been owned by the Optionee for more than six months on the
date of surrender, and
(B) have a Fair Market Value on the date of surrender equal to the
aggregate exercise price of the Shares as to which the
Option will be exercised,
(v) consideration received by the Company under a cashless exercise
program implemented by the Company in connection with the Plan,
or
(vi) any combination of the foregoing methods of payment. In making
its determination as to the type of consideration to accept, the
Administrator will consider if acceptance of the consideration may
be Reasonably expected to benefit the Company.
9. EXERCISE OF OPTION.
(a) PROCEDURE FOR EXERCISE; RIGHTS AS A SHAREHOLDER. Any Option
granted under the Plan will be exercisable according to the terms of the Plan at
the times, and under any other conditions as determined by the Administrator and
set forth in the Option Agreement. Unless the Administrator provides otherwise,
vesting of Options granted to Officers and Directors will be tolled during any
unpaid leave of absence. An Option may not be exercised for a fraction of a
Share.
An Option will be considered exercised when the Company receives:
(i) written or electronic notice of exercise (under the Option
Agreement) from the person entitled to exercise the Option,
And
(ii) full payment for the Shares with respect to which the Option is
exercised.
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Full payment may consist of any consideration and method of payment authorized
by the Administrator and permitted by the Option Agreement and the Plan. Shares
issued on exercise of an Option will be issued in the name of the Optionee or,
if requested by the Optionee, in the name of the Optionee and his or her spouse.
Until the Shares are issued (as evidenced by the appropriate entry on the books
of the Company or of a duly authorized transfer agent of the Company), no right
to vote or receive dividends or any other rights as a shareholder will exist
with respect to the Shares, notwithstanding the exercise of the Option. The
Company will issue (or cause to be issued) the Shares promptly after the Option
is exercised. No adjustment will be made for a dividend or other right for which
the record date is prior to the date the Shares are issued, except as provided
in Section 12 of the Plan.
Exercise of an Option in any manner will result in a decrease in the number of
Shares thereafter available, both for purposes of the Plan and for sale under
the Option, by the number of Shares as to which the Option is exercised.
(b) TERMINATION OF RELATIONSHIP AS A SERVICE PROVIDER. If an Optionee
ceases to be a Service Provider, the Optionee may exercise his or her Option
within the period of time as is specified in the Option Agreement to the extent
that the Option is vested on the date of termination (but in no event later than
the expiration of the term of the Option as set forth in the Option Agreement).
In the absence of a specified time in the Option Agreement, the Option will
remain exercisable for three (3) months following the Optionee's termination.
If, on the date of termination, the Optionee is not vested as to his or her
entire Option, the Shares covered by the unvested portion of the Option will
revert to the Plan. If, after termination, the Optionee does not exercise his or
her Option within the time specified by the Administrator, the Option will
terminate, and the Shares covered by the Option will revert to the Plan.
(c) DISABILITY OF OPTIONEE. If an Optionee ceases to be a Service Provider
as a result of the Optionee's Disability, the Optionee may exercise his or her
Option within the period of time as is specified in the Option Agreement to the
extent the Option is vested on the date of termination (but in no event later
than the expiration of the term of the Option as set forth in the Option
Agreement). In the absence of a specified time in the Option Agreement, the
Option will remain exercisable for twelve (12) months following the Optionee's
termination. If, on the date of termination, the Optionee is not vested as to
his or her entire Option, the Shares covered by the unvested portion of the
Option will revert to the Plan. If, after termination, the Optionee does not
exercise his or her Option within the time specified, the Option will terminate,
and the Shares covered by the Option will revert to the Plan.
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(d) DEATH OF OPTIONEE. If an Optionee dies while a Service Provider,
the Option may be exercised within the period of time as is specified in the
Option Agreement to the extent that the Option is vested on the date of death
(but in no event later than the expiration of the term of the Option as set
forth in the Option Agreement) by the Optionee's estate or by a person who
acquires the right to exercise the Option by bequest or inheritance. In the
absence of a specified time in the Option Agreement, the Option will remain
exercisable for twelve (12) months following the Optionee's termination. If, at
the time of death, the Optionee is not vested as to the entire Option, the
Shares covered by the unvested portion of the Option will immediately revert to
the Plan. If the Option is not so exercised within the time specified, the
Option will terminate, and the Shares covered by the Option will revert to the
Plan.
(e) BUYOUT PROVISIONS. The Administrator may at any time offer to buy out
for a payment in cash or Shares, an Option previously granted, based on the
terms and conditions as the Administrator will establish and communicate to the
Optionee at the time that the offer is made.
10. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. The Options and
Stock Purchase Rights may not be sold, pledged, assigned, hypothecated,
transferred, or disposed of in any manner other than by will or by the laws of
descent or distribution and may be exercised, during the lifetime of the
Optionee, only by the Optionee.
11. STOCK PURCHASE RIGHTS.
(a) RIGHTS TO PURCHASE. Stock Purchase Rights may be issued either
alone, in addition to, or in tandem with other awards granted under the Plan
and/or cash awards made outside of the Plan. After the Administrator determines
that it will offer Stock Purchase Rights under the Plan, it will advise the
offeree in writing or electronically of the terms, conditions and restrictions
related to the offer, including the number of Shares that the person will be
entitled to purchase, the price to be paid, and the time within which the person
must accept the offer. The offer will be accepted by execution of a Restricted
Stock purchase agreement in the form determined by the Administrator.
(b) REPURCHASE OPTION. Unless the Administrator determines otherwise,
the Restricted Stock purchase agreement will grant the Company a repurchase
option exercisable on the voluntary or involuntary termination of the
purchaser's service with the Company for any reason (including death or
disability). The purchase price for Shares repurchased pursuant to the
Restricted Stock purchase agreement will be the original price paid by the
purchaser and may be paid by cancellation of any indebtedness of the purchaser
to the Company. The repurchase option will lapse at the rate as the
Administrator may determine.
(c) OTHER PROVISIONS. The Restricted Stock purchase agreement will
contain any other terms, provisions and conditions not inconsistent with the
Plan as may be determined by the Administrator in its sole discretion.
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(d) RIGHTS AS A SHAREHOLDER. Once the Stock Purchase Right is
exercised, the purchaser will have rights equivalent to those of a shareholder
and will be a shareholder when his or her purchase is entered on the records of
the duly authorized transfer agent of the Company. No adjustment will be made
for a dividend or other right for which the record date is prior to the date the
Stock Purchase Right is exercised, except as provided in Section 12 of the Plan.
12. ADJUSTMENTS ON CHANGES IN CAPITALIZATION, MERGER OR ASSET SALE.
(a) CHANGES IN CAPITALIZATION. Subject to any required action by the
stockholders of the Company, the number of shares of Common Stock covered by
each outstanding Option or Stock Purchase Right, and the number of shares of
Common Stock which have been authorized for issuance under the Plan but as to
which no Options or Stock Purchase Rights have yet been granted or which have
been returned to the Plan on cancellation or expiration of an Option or Stock
Purchase Right, as well as the price per share of Common Stock covered by each
outstanding Option or Stock Purchase Right, will be proportionately adjusted for
any increase or decrease in the number of issued shares of Common Stock
resulting from a stock split, reverse stock split, stock dividend, combination
or reclassification of the Common Stock, or any other increase or decrease in
the number of issued shares of Common Stock effected without receipt of
consideration by the Company. The conversion of any convertible securities of
the Company will not be considered to have been "effected without receipt of
consideration." The adjustment will be made by the Board, whose determination in
that respect will be final, binding and conclusive. Except as expressly provided
in this Plan, no issuance by the Company of shares of stock of any class, or
securities convertible into shares of stock of any class, will affect, and no
adjustment will be made to, the number or price of shares of Common Stock
subject to an Option or Stock Purchase Right.
(b) DISSOLUTION OR LIQUIDATION. In the event of the proposed dissolution or
liquidation of the Company, the Administrator will notify the Optionee not less
than fifteen (15) days prior to the proposed action. To the extent it has not
been previously exercised, the Option or Stock Purchase Right will terminate
immediately prior to the consummation of the proposed action.
(c) MERGER. In the event of a merger, sale or reorganization of the Company
with or into any other corporation or corporations or a sale of all or
substantially all of the assets or outstanding stock of the Company, in which
transaction the Company's stockholders immediately prior to the transaction own
immediately after the transaction less than 50% of the equity securities of the
surviving corporation or its parent, all Options that have not been terminated
under the Stock Option Agreement that will become vested within 18 months of the
closing date of the merger, sale or reorganization will be accelerated. In the
event of a merger of the Company with or into another corporation, each
outstanding Option or Stock Purchase Right may be assumed or an equivalent
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option or right may be substituted by the successor corporation or a parent or
subsidiary of the successor corporation. If, in the event, an Option or Stock
Purchase Right is not assumed or substituted, the Option or Stock Purchase Right
will terminate as of the date of the closing of the merger. For the purposes of
this paragraph, the Option or Stock Purchase Right will be considered assumed
if, following the merger, the Option or Stock Purchase Right confers the right
to purchase or receive, for each Share of Optioned Stock subject to the Option
or Stock Purchase Right immediately prior to the merger, the consideration
(whether stock, cash, or other securities or property) received in the merger by
holders of Common Stock for each Share held on the effective date of the
transaction (and if the holders are offered a choice of consideration, the type
of consideration chosen by the holders of a majority of the outstanding Shares).
If the consideration received in the merger is not solely common stock of the
successor corporation or its Parent, the Administrator may, with the consent of
the successor corporation, provide for the consideration to be received on the
exercise of the Option or Stock Purchase Right, for each Share of Optioned Stock
subject to the Option or Stock Purchase Right, to be solely common stock of the
successor corporation or its Parent equal in fair market value to the per share
consideration received by holders of Common Stock in the merger.
13. NON-TRANSFERABILITY OF OPTIONS AND STOCK PURCHASE RIGHTS. Unless
determined otherwise by the Administrator, an Option or Stock Purchase Right may
not be sold, pledged, assigned, hypothecated, transferred, or disposed of in any
manner other than by will or by the laws of descent or distribution and may be
exercised, during the lifetime of the Optionee, only by the Optionee. If the
Administrator makes an Option or Stock Purchase Right transferable, the Option
or Stock Purchase Right will contain all additional terms and conditions as the
Administrator considers appropriate.
14. TIME OF GRANTING OPTIONS AND STOCK PURCHASE RIGHTS. The date of grant of an
Option or Stock Purchase Right will, for all purposes, be the date on which the
Administrator makes the determination granting the Option or Stock Purchase
Right, or any other date as is determined by the Administrator. Notice of the
determination will be given to each Service Provider to whom an Option or Stock
Purchase Right is so granted within a reasonable time after the date of the
grant.
15. AMENDMENT AND TERMINATION OF THE PLAN.
(a) AMENDMENT AND TERMINATION. The Board may at any time amend, alter,
suspend or terminate the Plan.
(b) SHAREHOLDER APPROVAL. The Board will obtain shareholder approval
of any Plan amendment to the extent necessary and desirable to comply with
Applicable Laws.
(c) EFFECT OF AMENDMENT OR TERMINATION. No amendment, alteration,
suspension or termination of the Plan will impair the rights of any Optionee,
unless mutually agreed otherwise between the Optionee and the Administrator,
which agreement must be in writing and signed by the Optionee and the Company.
Termination of the Plan will not affect the Administrator's ability to exercise
the powers granted to it with respect to Options granted under the Plan prior to
the date of termination.
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16. CONDITIONS ON ISSUANCE OF SHARES.
(a) LEGAL COMPLIANCE. Shares will not be issued pursuant to the exercise of
an Option unless the exercise of the Option and the issuance and delivery of the
Shares will comply with Applicable Laws and will be further subject to the
approval of counsel for the Company with respect to such compliance.
(b) INVESTMENT REPRESENTATIONS. As a condition to the exercise of an
Option, the Administrator may require the person exercising the Option to
represent and warrant at the time of exercise that the Shares are being
purchased only for investment and without any present intention to sell or
distribute the Shares if, in the opinion of counsel for the Company, such a
representation is required.
17. INABILITY TO OBTAIN AUTHORITY. The inability of the Company to obtain
authority from any regulatory body having jurisdiction, which authority is
considered by the Company's counsel to be necessary to the lawful issuance and
sale of any Shares the Plan, will relieve the Company of any liability in
respect of the failure to issue or sell the Shares as to which the requisite
authority may not have been obtained.
18. RESERVATION OF SHARES. The Company, during the term of this Plan, will at
all times reserve and keep available a sufficient number of Shares to satisfy
the requirements of the Plan.
19. SHAREHOLDER APPROVAL. The Plan will be subject to approval by the
shareholders of the Company within twelve (12) months after the date the Plan is
adopted. Shareholder approval must be obtained in the degree and manner required
under Applicable Laws.
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GLOBALNET, INC.
2000 STOCK PLAN
STOCK OPTION AGREEMENT
Unless otherwise defined in this Stock Option Agreement, the terms defined in
the 2000 Stock Plan will have the same defined meanings in this Stock Option
Agreement.
1. NOTICE OF STOCK OPTION GRANT.
NAME: ______________________________ "Optionee"
The Optionee has been granted an Option to purchase Common Stock of the Company,
subject to the terms and conditions of the Plan and this Option Agreement, as
follows:
DATE OF GRANT: __________________________
VESTING COMMENCEMENT DATE: _____________ "VCD"
EXERCISE PRICE PER SHARE: _________________
TOTAL NUMBER OF SHARES GRANTED: __________ Number of shares
TOTAL EXERCISE PRICE: _____________________ Total Price
TYPE OF OPTION: _________________________ Incentive Stock Option
_________________________ Non-statutory Stock Option
TERM/EXPIRATION DATE: ___________________
VESTING SCHEDULE:
The vesting schedule shall be determined by the Administrator in its sole
discretion.
TERMINATION PERIOD:
This Option will be exercisable for one month after Optionee ceases to be a
Service Provider. On Optionee's death or Disability, this Option may be
exercised for one year after Optionee ceases to be a Service Provider. In no
event may Optionee exercise this Option after the Term/Expiration Date as
provided above.
2. AGREEMENT.
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2. GRANT OF OPTION. The Plan Administrator of the Company grants to the
Optionee named in the Notice of Grant (the "Optionee"), an option (the "Option")
to purchase the number of Shares set forth in the Notice of Grant, at the
exercise price per Share set forth in the Notice of Grant (the "Exercise
Price"), and subject to the terms and conditions of the Plan, which is
incorporated by reference. Subject to Section 14(c) of the Plan, in the event of
a conflict between the terms and conditions of the Plan and this Option
Agreement, the terms and conditions of the Plan will prevail.
If designated in the Notice of Grant as an Incentive Stock Option ("ISO"), this
Option is intended to qualify as an Incentive Stock Option as defined in Section
422 of the Code. Nevertheless, to the extent that it exceeds the $100,000 rule
of Code Section 422(d), this Option will be treated as a Non-statutory Stock
Option ("NSO").
3. EXERCISE OF OPTION.
(i) RIGHT TO EXERCISE. This Option will be exercisable during its term
under the Vesting Schedule set out in the Notice of Grant and with the
applicable provisions of the Plan and this Option Agreement.
(ii) METHOD OF EXERCISE. This Option will be exercisable by delivery of an
exercise notice in the form attached as Exhibit A (the "Exercise Notice") which
will state the election to exercise the Option, the number of Shares with
respect to which the Option is being exercised, and any other representations
and agreements as may be required by the Company. The Exercise Notice will be
accompanied by payment of the aggregate Exercise Price as to all Exercised
Shares. This Option will be considered to be exercised on receipt by the Company
of a fully executed Exercise Notice accompanied by the aggregate Exercise Price.
No Shares will be issued pursuant to the exercise of an Option unless
the issuance and exercise complies with Applicable Laws. Assuming compliance,
for income tax purposes the Shares will be considered transferred to the
Optionee on the date on which the Option is exercised with respect to the
Shares.
3. METHOD OF PAYMENT. Payment of the aggregate Exercise Price will be by any
of the following, or a combination of the following, at the election of the
Optionee:
(a) cash or check;
(b) consideration received by the Company under a formal cashless exercise
program adopted by the Company in connection with the Plan; or
(c) surrender of other Shares which:
(i) in the case of Shares acquired on exercise of an option, have been
owned by the Optionee for more than six (6) months on the date
of surrender, and
(ii) have a Fair Market Value on the date of surrender equal to the
aggregate Exercise Price of the Exercised Shares.
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4. RESTRICTIONS ON EXERCISE. This Option may not be exercised until such time
as the Plan has been approved by the shareholders of the Company, or if the
issuance of the Shares on the exercise or the method of payment of consideration
for the shares would constitute a violation of any Applicable Law.
5. NON-TRANSFERABILITY OF OPTION. This Option may not be transferred in any
manner otherwise than by will or by the laws of descent or distribution and may
be exercised during the lifetime of Optionee only by Optionee. The terms of the
Plan and this Option Agreement will be binding on the executors, administrators,
heirs, successors and assigns of the Optionee.
6. TERM OF OPTION. This Option may be exercised only within the term set out
in the Notice of Grant, and may be exercised during the term only under the Plan
and the terms of this Option.
7. TAX CONSEQUENCES. Set forth below is a brief summary as of the date of this
Option of some of the federal tax consequences of exercise of this Option and
disposition of the Shares. THIS SUMMARY IS NECESSARILY INCOMPLETE, AND THE TAX
LAWS AND REGULATIONS ARE SUBJECT TO CHANGE. THE OPTIONEE SHOULD CONSULT A TAX
ADVISER BEFORE EXERCISING THIS OPTION OR DISPOSING OF THE SHARES.
(a) EXERCISE OF NSO. There may be a regular federal income tax liability on
the exercise of an NSO. The Optionee will be treated as having received
compensation income (taxable at ordinary income tax rates) equal to the excess,
if any, of the Fair Market Value of the Shares on the date of exercise over the
Exercise Price. If Optionee is an Employee or a former Employee, the Company
will be required to withhold from Optionee's compensation or collect from
Optionee and pay to the applicable taxing authorities an amount in cash equal to
a percentage of this compensation income at the time of exercise, and may refuse
to honor the exercise and refuse to deliver Shares if the withholding amounts
are not delivered at the time of exercise.
(b) EXERCISE OF ISO. If this Option qualifies as an ISO, there will be no
regular federal income tax liability on the exercise of the Option, although the
excess, if any, of the Fair Market Value of the Shares on the date of exercise
over the Exercise Price will be treated as an adjustment to the alternative
minimum tax for federal tax purposes and may subject the Optionee to the
alternative minimum tax in the year of exercise.
(c) DISPOSITION OF SHARES. In the case of an NSO, if Shares are held for
not less than one year, any gain realized on disposition of the Shares will be
treated as long-term capital gain for federal income tax purposes. In the case
of an ISO, if Shares transferred pursuant to the Option are held for not less
than one year after exercise and of not less than two years after the Date of
Grant, any gain realized on disposition of the Shares will also be treated as
long-term capital gain for federal income tax purposes. If Shares purchased
under an ISO are disposed of within one year after exercise or two years after
the Date of Grant, any gain realized on such disposition will be treated as
compensation income (taxable at ordinary income rates) to the extent of the
difference between the Exercise Price and the lesser of:
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(i) the Fair Market Value of the Shares on the date of exercise, or
(ii) the sale price of the Shares. Any additional gain will be taxed as
capital gain, short-term or long-term depending on the period
that the ISO Shares were held.
(d) NOTICE OF DISQUALIFYING DISPOSITION OF ISO SHARES. If the Option
granted to Optionee is an ISO, and if Optionee sells or otherwise disposes of
any of the Shares acquired pursuant to the ISO on or before the later of:
(i) the date two years after the Date of Grant, or
(ii) the date one year after the date of exercise, the Optionee will
immediately notify the Company in writing of such disposition.
Optionee agrees that Optionee may be subject to income tax
withholding by the Company on the compensation income recognized
by the Optionee.
8. ENTIRE AGREEMENT; GOVERNING LAW. The Plan is incorporated by reference. The
Plan and this Option Agreement constitute the entire agreement of the parties
and supersede in their entirety all prior undertakings and agreements of the
Company and Optionee with respect to Options and Stock Purchase Rights, and may
not be modified adversely to the Optionee's interest except by means of a
writing signed by the Company and Optionee. This agreement is governed by the
internal substantive laws but not the choice of law rules of Nevada.
9. NO GUARANTEE OF CONTINUED SERVICE. OPTIONEE ACKNOWLEDGES AND AGREES THAT
THE VESTING OF SHARES PURSUANT TO THE APPLICABLE VESTING SCHEDULE IS EARNED ONLY
BY CONTINUING AS A SERVICE PROVIDER AT THE WILL OF THE COMPANY (NOT THROUGH THE
ACT OF BEING HIRED, BEING GRANTED THIS OPTION OR ACQUIRING SHARES HEREUNDER).
OPTIONEE FURTHER ACKNOWLEDGES AND AGREES THAT THIS AGREEMENT, THE TRANSACTIONS
CONTEMPLATED HEREUNDER AND THE ATTACHED VESTING SCHEDULE DO NOT CONSTITUTE AN
EXPRESS OR IMPLIED PROMISE OF CONTINUED ENGAGEMENT AS A SERVICE PROVIDER FOR THE
VESTING PERIOD, FOR ANY PERIOD, OR AT ALL, AND WILL NOT INTERFERE IN ANY WAY
WITH OPTIONEE'S RIGHT OR THE COMPANY'S RIGHT TO TERMINATE OPTIONEE'S
RELATIONSHIP AS A SERVICE PROVIDER AT ANY TIME, WITH OR WITHOUT CAUSE.
Optionee acknowledges receipt of a copy of the Plan and represents that he or
she is familiar with the terms and provisions of the Plan, and accepts this
Option subject to all of the terms and provisions of the Plan. Optionee has
reviewed the Plan and this Option in their entirety, has had an opportunity to
obtain the advice of counsel prior to executing this Option and fully
understands all provisions of the Option. Optionee agrees to accept as binding,
conclusive and final all decisions or interpretations of the Administrator on
any questions arising under the Plan or this Option. Optionee further agrees to
notify the Company on any change in the residence address indicated below.
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OPTIONEE: GLOBALNET, INC.
_________________________________ _________________________________
Signature By:_______________________
_________________________________ _________________________________
Print Name Title
_________________________________
Social Security Number
Residential Address:
_________________________________
_________________________________
CONSENT OF SPOUSE
The undersigned spouse of Optionee has read and approves the terms and
conditions of the Plan and this Option Agreement. In consideration of the
Company's granting his or her spouse the right to purchase Shares as set forth
in the Plan and this Option Agreement, the undersigned agrees to be irrevocably
bound by the terms and conditions of the Plan and this Option Agreement and
further agrees that any community property interest shall be similarly bound.
The undersigned appoints the undersigned's spouse as attorney-in-fact for the
undersigned with respect to any amendment or exercise of rights under the Plan
or this Option Agreement.
_________________________________
Spouse of Optionee
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EXHIBIT A
2000 STOCK PLAN
EXERCISE NOTICE
GlobalNet, Inc.
721 E. Madison
Villa Park, Illinois 60181
1. EXERCISE OF OPTION. Effective as of today, ___________, 20__, the
undersigned ("Optionee") elects to exercise Optionee's option to purchase
_________ shares of the Common Stock (the "Shares") of GlobalNet, Inc. (the
"Company") under and pursuant to the 2000 stock plan (the "Plan") and the stock
option agreement dated ________, 20__ (the "Option Agreement"). The purchase
price for the Shares shall be $________, as required by the Option Agreement.
2. DELIVERY OF PAYMENT. Purchaser has delivered to the Company the full
purchase price of the Shares.
3. REPRESENTATIONS OF OPTIONEE. Optionee acknowledges that Optionee has
received, read and understood the Plan and the Option Agreement and agrees to
abide by and be bound by their terms and conditions.
4. RIGHTS AS SHAREHOLDER. Until the issuance of the Shares (as evidenced
by the appropriate entry on the books of the Company or of a duly authorized
transfer agent of the Company), no right to vote or receive dividends or any
other rights as a shareholder will exist with respect to the Optioned Stock,
notwithstanding the exercise of the Option. The Shares will be issued to the
Optionee as soon as practicable after the Option is exercised. No adjustment
will be made for a dividend or other right for which the record date is prior to
the date of issuance except as provided in Section 12 of the Plan.
5. TAX CONSULTATION. Optionee understands that Optionee may suffer
adverse tax consequences as a result of Optionee's purchase or disposition of
the Shares. Optionee represents that Optionee has consulted with any tax
consultants Optionee considers advisable in connection with the purchase or
disposition of the Shares and that Optionee is not relying on the Company for
any tax advice.
6. INTERPRETATION. Any dispute regarding the interpretation of this
Exercise Notice will be submitted by Optionee or by the Company immediately to
the Administrator which will review the dispute at its next regular meeting. The
resolution of a dispute by the Administrator will be final and binding on all
parties.
7. ENTIRE AGREEMENT/GOVERNING LAW. The Plan and Option Agreement are
incorporated by reference. This Exercise Notice, the Plan, the Option Agreement
and the Investment Representation Statement constitute the entire agreement of
the parties concerning Options and Stock Purchase Rights and supersede in their
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entirety all prior undertakings and agreements of the Company and Optionee
concerning Options and Stock Purchase Rights, and may not be modified adversely
to the Optionee's interest except by means of a writing signed by the Company
and Optionee. This Exercise Notice is governed by the internal substantive laws
but not the choice of law rules, of Nevada.
SUBMITTED BY: ACCEPTED BY:
OPTIONEE: GLOBALNET, INC.
_________________________________ _________________________________
Signature By:_______________________
_________________________________ _________________________________
Print Name Title
_________________________________
Social Security Number
Date Received: _____________________
