OLD NIGHT, INC.
INFORMATION STATEMENT
SHAREHOLDER MAJORITY ACTION AS OF JULY 5, 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 STOCKHOLDERS THAT A MAJORITY ACTION OF
STOCKHOLDERS (THE "ACTION") OF OLD NIGHT, INC. (THE "COMPANY") WAS TAKEN ON JUNE
30, 2000 BY THE MAJORITY STOCKHOLDERS 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 change the
name of the Company from "Old Night, Inc." to "NxGen Networks, Inc."
2. To adopt a stock option plan;
3. To approve the Share Exchange Agreement between the Company, International
Long Distance Corporation, and certain stockholders of International Long
Distance Corporation; and
4. To elect three persons to the Company's Board of Directors to serve until
the next annual general meeting of stockholders and until their respective
successors are elected and qualify.
STOCKHOLDERS OF RECORD AT THE CLOSE OF BUSINESS ON JUNE 30, 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: July 5, 2000
<PAGE>
OLD NIGHT, INC.
Aluminum Tower 5th Floor
2 Limassol Avenue, 2003 Nicosia, Cyprus
INFORMATION STATEMENT FOR STOCKHOLDERS
The Board of Directors of Old Night, Inc., a Nevada corporation (the "Company")
is furnishing this INFORMATION STATEMENT to stockholders in connection with a
majority action of stockholders (the "Action") of Old Night, Inc. (the
"Company") taken on June 30, 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:
o certain amendments to the Articles of Incorporation of the Company,
o a stock option plan,
o a share exchange agreement dated as of June 30, 2000 among the Company,
International Long Distance Corporation ("ILDC") and the ILDC Stockholders
(as defined in the attached share exchange agreement) which provides for,
among other things, the issuance by the Company of 4,529,054 shares of its
Common Stock in exchange for 4,529,054 or 82.35% of the issued and
outstanding shares of common stock of ILDC, and
o electing three persons to serve on 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 July 5, 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 July 5, 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
<S> <C>
QUESTIONS AND ANSWERS.............................................................................................1
GENERAL INFORMATION...............................................................................................3
Outstanding Shares and Voting Rights.....................................................................3
Approval of the Name Change..............................................................................3
Election of New Directors................................................................................3
Record Date..............................................................................................3
Expenses of Information Statement........................................................................3
Interest of Certain Persons in Matters to Be Acted on....................................................4
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS...................................................................4
AMENDMENT TO ARTICLES OF INCORPORATION............................................................................4
Name Change..............................................................................................4
SUMMARY OF TRANSACTIONS CONTEMPLATED BY THE SHARE EXCHANGE AGREEMENT..............................................5
Background of the Share Exchange.........................................................................5
Reasons for Approval by the Majority Stockholders and Board of Directors.................................5
Accounting Treatment of the Share Exchange...............................................................5
Summary of the Share Exchange Agreement..................................................................6
Material Terms of the Common Stock of Old Night..........................................................7
Voting Trust Agreement...................................................................................7
Summary of Private Placements............................................................................8
Registration Rights......................................................................................9
Summary of Pro Forma Financial Statements................................................................9
Risks Related to the Share Exchange.....................................................................10
Certain Federal Income Tax Consequences.................................................................11
INFORMATION CONCERNING ILDC......................................................................................12
History of ILDC.........................................................................................12
General Description of Business of ILDC.................................................................12
Industry Overview.......................................................................................12
Business Strategy.......................................................................................13
Description of Services - ILDC VoIP System..............................................................13
Sales and Marketing and Distribution....................................................................14
Target Markets..........................................................................................14
ILDC's Network..........................................................................................14
Customer Relationship Management........................................................................14
Competition.............................................................................................14
Proprietary Rights......................................................................................16
Board of Directors of ILDC..............................................................................16
Employees...............................................................................................16
Facilities..............................................................................................17
Legal Proceedings.......................................................................................17
Selected Financial Data.................................................................................17
Management Discussion and Analysis of Financial Condition and Results of Operations.....................18
Risks Related to ILDC...................................................................................19
Material Terms of the Common Stock of ILDC..............................................................22
Forward-looking Statements..............................................................................22
ELECTION OF DIRECTORS............................................................................................22
Information Concerning Nominees.........................................................................22
Executive Compensation..................................................................................23
Board of Directors Report on Executive Compensation.....................................................24
Stock Options...........................................................................................24
Familial Relationships..................................................................................24
Indemnification.........................................................................................24
2000 STOCK OPTION PLAN...........................................................................................25
General.................................................................................................25
Administration..........................................................................................25
Eligibility; Limitations of Options.....................................................................25
Terms and Conditions of Options.........................................................................26
Adjustments of Options on Changes in Capitalization.....................................................27
Amendment and Termination of the Plan...................................................................27
Federal Income Tax Consequences of Options..............................................................27
INDEPENDENT ACCOUNTANTS..........................................................................................28
WHERE YOU CAN FIND MORE INFORMATION..............................................................................28
INCORPORATION OF DOCUMENTS BY REFERENCE..........................................................................28
EXHIBIT A - AMENDMENT TO ARTICLES OF INCORPORATION...............................................................29
CERTIFICATE OF AMENDMENT TO ARTICLES OF INCORPORATION OF OLD NIGHT, INC.................................30
EXHIBIT B - SHARE EXCHANGE AGREEMENT.............................................................................31
EXHIBIT C - PRO FORMA - OLD NIGHT, INC. CONSOLIDATED BALANCE SHEETS.............................................102
EXHIBIT D - AUDITED FINANCIAL STATEMENTS OF
INTERNATIONAL LONG DISTANCE CORPORATION................................................................106
EXHIBIT E - NXGEN NETWORKS, INC. 2000 STOCK PLAN................................................................121
</TABLE>
<PAGE>
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 stockholders
holding a majority of the outstanding voting common stock of the
Company (the "Majority Stockholders") have already agreed to approve:
o a change in the name of the Company to "NxGen Networks, Inc.";
o a share exchange agreement dated as of June 30, 2000 between the
Company, International Long Distance Corporation ("ILDC") and certain
stockholders of ILDC who are signatories to the share exchange
agreement ("ILDC Stockholders"), which provides for, among other
things, the issuance by the Company of 4,529,054 shares of its
Common Stock in exchange for 4,529,054 or 82.35% of the issued and
outstanding shares of common stock of ILDC (the "Share Exchange");
o a stock option plan; and
o the election of three persons to the Board of Directors of the Company.
Q: Why have the Board of Directors and the Majority Stockholders agreed to
approve these actions?
A: All of these actions are necessary to accomplish the terms of the share
exchange agreement between the Company, ILDC and the ILDC Stockholders
dated as of June 30, 2000 (the "Share Exchange Agreement") in which we
have agreed to offer to exchange one share of Common Stock of the
Company for each share of ILDC exchanged.
Following the completion of the Share Exchange Agreement, we will use
our reasonable best efforts, subject to applicable law, to acquire all
remaining shares of ILDC held by ILDC's minority stockholders that are
not parties to the Share Exchange Agreement by issuing one share of the
Company's common stock for each outstanding share of ILDC common stock
held by such minority stockholders. How we will conduct this buyout of
minority stockholders (which we refer to as the "Minority Buy-Out")
will be at our discretion and may include redemption, merger or other
corporate actions, as permitted under Nevada and North Carolina or
other applicable law. We cannot assure you that there will be a
Minority Buy-Out of any remaining shares after the completion of the
Share Exchange Agreement or that it will be successful.
The purpose of the Share Exchange Agreement is to acquire approximately
82.35% of the issued and outstanding shares of capital stock of ILDC or
approximately 80.161% of ILDC shares on a fully diluted basis.The Share
Exchange Agreement will permit us to acquire control of, and will
facilitate our intended acquisition of the entire equity interest in,
ILDC. If we successfully acquire all of the outstanding ILDC shares in
the Share Exchange Agreement and any subsequent Minority Buy-Out, ILDC
would become a wholly-owned subsidiary of Old Night.
Q: When Will the Minority Buy-Out Occur?
A: We will attempt to acquire the remaining ILDC shares that are not part
of the Share Exchange Agreement within six months after closing the
Share Exchange Agreement. We will use our reasonable best efforts,
subject to applicable law, to acquire any remaining shares of ILDC held
by minority stockholders. The timing of a Minority Buy-Out will depend
in part on the form of buy-out we select, such as a redemption, merger
or other corporate action.
Q: What Percentage of the Equity Interest in Old Night Will ILDC
Stockholders Own after the Share Exchange Agreement is Closed and the
Minority Buy-Out?
A: If we were to acquire all of the outstanding ILDC shares through the
Share Exchange Agreement and the Minority Buy-Out, the former
stockholders of ILDC would own approximately 45.34% of the total equity
interest in Old Night, based upon the exchange ratio of one for one and
the number of shares of Common Stock of Old Night and the number of
ILDC shares outstanding on June 30, 2000. This percentage does not take
into consideration the shares of the Company's common stock to be
issued under certain private placements by the Company which are
further discussed in this Information Statement.
1
<PAGE>
Q: Will I recognize gain or loss for U.S. federal income tax purposes in
connection with the transaction with ILDC?
A: No. We expect the transaction to qualify as tax-free transaction 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: How Will I Be Affected by the Share Exchange Agreement?
A: You will continue to own the same number of shares of the Company's
common stock that you owned immediately prior to the share issuances to
ILDC Stockholders. Each share of the Company's common stock you own
will, however, represent a smaller ownership percentage of a
significantly larger company after the consummation of the Share
Exchange.
Q: Are there any conditions to the transaction with ILDC?
A: Yes. There are several conditions, including the following:
o the representations and warranties of the Company, ILDC and the ILDC
Stockholders set forth in the Share Exchange Agreement are true at the
time of Closing;
o no law, regulation, judgement, injunction, order or decree prohibits
the transaction from Closing;
o no event has occurred that has resulted or could reasonably be
expected to result in a material adverse change in the anticipated
benefits of the transaction to the parties;
o the Company must not have less than $1,500,000 in cash on hand, reduced
by advances made to ILDC, at the time of Closing; and
o resignation of the existing Board of Directors of the Company and the
appointment of three nominee directors of ILDC.
Q: What business is conducted by ILDC?
A: Established in 1998, ILDC is a development stage company which provides
Internet Protocol telephony network and application services. The
executive offices of ILDC are in Hertford, North Carolina. (See
"INFORMATION CONCERNING ILDC")
Q: Are there risks involved in the transaction with ILDC?
A: Yes. After the transaction is completed, the Company's success will be
totally dependent on the success of the business conducted by ILDC.
ILDC is a development stage company and has not been profitable since
its inception in 1998. There are no assurances that ILDC's business
operations will be profitable after the closing of the transaction.
(See "SUMMARY OF TRANSACTIONS CONTEMPLATED BY THE SHARE EXCHANGE
AGREEMENT - Risks Related to the Share Exchange," and "INFORMATION
CONCERNING ILDC. - Risks Related to the Business of ILDC")
Q: When do you expect to complete the transaction with ILDC?
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.
2
<PAGE>
GENERAL INFORMATION
-------------------
Outstanding Shares and Voting Rights
At June 30, 2000 (the "Record Date"), the Company had 5,460,400 shares of common
stock, par value $0.001 outstanding ("Common Stock"). 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 any matter submitted to
stockholders at a meeting of stockholders, were held by approximately thirty-two
(32) stockholders of record. In connection with the Share Exchange, the Company
and the Majority Stockholders have agreed to amend the Articles of Incorporation
of the Company to change the name of the Company to NxGen Networks, Inc. The
Majority Stockholders have agreed by written consent in lieu of a stockholders
meeting to the Share Exchange Agreement, the amendment to the Company's Articles
of Incorporation, 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 "NxGen Networks, Inc." is intended
to convey more clearly a sense of the Company's business after the acquisition
of ILDC. 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 Stockholders holding a total of 2,934,800 shares of Common Stock
(53.74%), have already agreed to this action.
Election of New Directors
The election of new directors is proposed because the former ILDC Stockholders
will hold approximately 45.49% of the outstanding common stock of the Company
following the closing of the Share Exchange (excluding the shares to be issued
under the private placements being conducted by the Company and discussed later
in this Information Statement). The Share Exchange Agreement with ILDC requires
that new directors, approved by the former ILDC Stockholders, 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 from
one to nine members, 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 three. 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
Stockholders holding a total of 2,934,800 shares of Common Stock or 53.75% of
the outstanding shares of Common Stock have voted to elect the following
persons: Anthony Overman, Mark Sampson, and Don Spears. These three persons will
be the only directors of the Company following the closing of the Share
Exchange.
Record Date
The close of business on June 30, 2000, has been fixed as the record date for
the determination of stockholders entitled to receive this Stockholders'
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.
3
<PAGE>
Interest of Certain Persons in Matters to Be Acted on
The Company in total has loaned ILDC $2,149,000 in exchange for ILDC delivering
promissory notes evidencing each of the eight bridge loans (May 2, 3, 5, 9, 10,
15, and June 19 and 27) made by the Company to ILDC. The principal amount of
each note is due August 15, 2000 and will accrue interest at the rate of 8% per
annum. The Company obtained these funds from subscribers to the Private
Placements being conducted by the Company. Each subscriber approved and
acknowledged in writing that the funds advanced would be used by the Company to
provide a bridge loan to ILDC, the terms of this loan, and the risks involved.
ILDC intends to use the funds advanced for equipment acquisition and working
capital purposes.
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 ILDC transaction, with
respect to stockholders who were known to the Company to be beneficial owners of
more than 5% of the Common Stock as of June 30, 2000, and officers and directors
of the Company 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 Owner Before Share After Share Before Share After Share
Exchange Exchange Exchange Exchange
----------------------------------------- ------------------ ----------------- ------------------ ------------------
<S> <C> <C> <C> <C>
Xenios Xenopoulous(2) 99,000 99,000 1.8% 0.99%
Aluminum Tower 5th Floor
2 Limassol Avenue, 2003 Nicosia, Cyprus
----------------------------------------- ------------------ ----------------- ------------------ ------------------
Anthony Overman(3)(4)(5) 0 3,128,513 0% 31.32%
----------------------------------------- ------------------ ----------------- ------------------ ------------------
Don Spears(3)(4)(6) 0 605,000 0% 6.046%
----------------------------------------- ------------------ ----------------- ------------------ ------------------
Mark Sampson(3)(4) 0 0 0% 0%
----------------------------------------- ------------------ ----------------- ------------------ ------------------
Directors and Officers as a Group 99,000 3,832,513 .02% 38.37%
----------------------------------------- ------------------ ----------------- ------------------ ------------------
<FN>
1. The above table does not include any shares of Common Stock which are or become issuable on the close of
the Company's proposed private placements or exercise of stock options which may be issued.
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 Share Exchange
4. The address for this party is: P.O. Box 218 Hertford, North Carolina, 27944.
5. Following the Share Exchange, Mr. Overman will be the beneficial owner of 1,516,083 shares of the Company to be
held in the Anthony C. Overman Revocable Trust. Mr. Overman will also maintain voting control over an additional
1,612,430 shares of the Company pursuant to a voting trust agreement dated January 15, 2000 between himself and
certain stockholders of ILDC. Under the terms of this agreement, the terms of the voting trust continue to apply
for a period of 10 years.
6. Mr. Spears will beneficially own 250,000 shares of the Company following the Share Exchange. An additional
200,000 shares of the Company will be owned by Mr. Spears wife, Gerry N. Spears. Mr. Spears will also maintain
voting control over an additional 100,000 shares of the Company to be held by the Molly Spears Irrevocable Trust
and 55,000 shares to be held by Lantag Communications.
</FN>
</TABLE>
AMENDMENT TO ARTICLES OF INCORPORATION
--------------------------------------
Name Change.
The proposed amendment to the Company's Articles of Incorporation would change
4
<PAGE>
the name of the Company to "NxGen Networks, Inc." On filing of the Amendment to
the Articles 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 stockholders to represent the same number of shares of
Common Stock after the name change. Majority Stockholders holding a total of
2,934,800 shares of Common Stock (53.74%), have already agreed to this action.
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 SHARE EXCHANGE AGREEMENT
The Board of Directors of the Company has unanimously approved the Share
Exchange Agreement ("Share Exchange Agreement") dated as of June 30, 2000, among
the Company, International Long Distance Corporation (ILDC"), and certain
stockholders of ILDC which provides for or requires completion of the following
series of transactions as conditions to consummation of the Share Exchange:
o the Company change its name to NxGen Networks, Inc.;
o the issuance of 4,529,054 shares of Common Stock of the Company to the
stockholders of ILDC who have signed the Share Exchange Agreement;
o the resignation of the current directors and officers of the Company;
and
o the appointment of three new directors of the Company.
A majority of the Company's stockholders have agreed by way of a majority action
of stockholders to approve the above transactions as well as to adopt a stock
option plan.
Background of the Share Exchange
The Company was formed originally on November 26, 1980, 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. During 1999 and 2000, management of the Company reviewed various
business plans and chose to pursue the acquisition of ILDC due to its growth
opportunity.
In the spring of 2000, management of ILDC was seeking additional equity funding
in order to fully implement its business and marketing plan for the expansion of
its business. On May 18, 2000, the Company, and ILDC signed an agreement and
plan of merger and reorganization ("Reorganization Agreement"). The parties
subsequently terminated the Reorganization Agreement and decided to conduct a
two step transaction instead for timing purposes. The first step of the proposed
two step transaction consists of the acquisition of over 80% of the issued and
outstanding shares of capital stock of ILDC through the Share Exchange
Agreement. The second step consists of acquiring the remaining outstanding
shares of ILDC through a merger, redemption or other transaction. The definitive
Share Exchange Agreement was entered into by the parties as of June 30, 2000 and
is attached as Exhibit "B".
Reasons for Approval by the Majority Stockholders and Board of Directors
The Board of Directors has given careful consideration to the Share Exchange,
the existing business operations of ILDC, the future business potential and
plans of ILDC, the current book value of the Company, the interest of
stockholders of the Company, and the risks of the Share Exchange to the existing
stockholders. Based on the foregoing considerations, the Board of Directors
together with the Majority Stockholders believe that the transactions
contemplated by the Share Exchange Agreement, including the name change, and the
adoption of a stock option plan, are fair and in the best interests of the
Company.
The Majority Stockholders believe that the Company will benefit from the Share
Exchange, with an immediate impact being the significant new operations and
revenues, assets, and stockholders' equity, as well as giving the Company the
ability to expand the operations of ILDC based on funding through the Company's
private placements.
Accounting Treatment of the Share Exchange
The Company will account for the acquisition of the shares of ILDC under the
purchase method of accounting for purposes of United States generally accepted
accounting principles.
5
<PAGE>
Summary of the Share Exchange Agreement
The following contains, among other things, a summary of the material features
of the Share Exchange 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 Share Exchange Agreement, a copy of which
is attached hereto as Exhibit B.
General Terms. The Company, ILDC and the ILDC Stockholders have entered into a
Share Exchange Agreement which provides that subject to the meeting of certain
conditions, the Company will issue one share of its common stock for each share
of ILDC common stock held by the ILDC Stockholders that are parties to the Share
Exchange Agreement. In the Share Exchange, the Company will issue 4,529,054
shares of Common Stock in exchange for 4,529,054 or 82.35%, of the outstanding
capital stock of ILDC.
Before or after the closing of the Share Exchange Agreement, the Company intends
to complete two private placement transactions (the "Private Placements"). Up to
1,600,000 shares of common stock of the Company will be issued if these
offerings are fully sold (not including the issuance of any warrants in the
Private Placements).
On completion of the Share Exchange and the Private Placements, the ownership of
the Common Stock by (i) the ILDC Stockholders, as a group, (ii) the current Old
Night stockholders, as a group, and (iii) the investors in the Private
Placements as a group, is estimated to be as follows:
<TABLE>
<CAPTION>
---------------------------------------------- ----------------------------- -----------------
Groups of Stockholders Common Stock % Owned
---------------------------------------------- ----------------------------- -----------------
<S> <C> <C>
ILDC Stockholders 4,529,054 39%
---------------------------------------------- ----------------------------- -----------------
Old Night Stockholders 5,460,400 47%
---------------------------------------------- ----------------------------- -----------------
Private Placement Stockholders 1,600,000 14%
---------------------------------------------- ----------------------------- -----------------
TOTAL OF ALL Stockholders 11,589,454 100%
---------------------------------------------- ----------------------------- -----------------
<FN>
o Assuming placement of all 1,200,000 Units and 400,000 shares of Common Stock of the Company.
o The above table does not include any shares of Common Stock which are or become issuable
on the exercise of stock options or warrants. Currently there are no stock options issued
and outstanding.
</FN>
</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
stockholders under this Information Statement as prescribed by Section 14C of
the Securities Exchange Act of 1934 ("Closing").
Conditions for Closing. The respective obligations of the Company, ILDC and the
ILDC Stockholders to consummate the Closing are subject to the satisfaction or
waiver at or prior to the Closing Date of the following conditions: (i) no
provision of any applicable law or regulation and no judgment, injunction, order
or decree shall prohibit the consummation of the transactions contemplated by
the Share Exchange Agreement; (ii) no event shall have occurred that has
resulted or could reasonably be expected to result in a material adverse change
to the anticipated benefits of the transactions contemplated by the Share
Exchange Agreement to the Company, ILDC or the ILDC Stockholders; and (iii) ILDC
Stockholders owning not less than 80% of the issued and outstanding share
capital of ILDC will have executed the Share Exchange Agreement.
In addition, the obligation of ILDC and the ILDC Stockholders to consummate the
Closing is subject to the satisfaction or waiver at or prior to the Closing Date
of the following conditions: (i) the Company shall have performed in all
material respects all of its obligations under the Share Exchange Agreement
required to be performed by it on or prior to the Closing Date; (ii) the
representations and warranties of the Company contained in the Share Exchange
Agreement shall be true and correct in all material respects at and as of the
Closing Date as if made at and as of such date and ILDC shall have received a
certificate signed by the President of the Company to the foregoing effect;
(iii) ILDC shall have received a legal opinion as to certain matters including
the tax consequences of the Share Exchange; and (iv) ILDC shall have received
all documents it may reasonably request relating to the existence of the Company
and the authority of the Company to enter into the Share Exchange Agreement, all
in form and substance reasonably satisfactory to ILDC.
6
<PAGE>
In addition, the obligation of the Company to consummate the transactions
contemplated by the Share Exchange Agreement is subject to the satisfaction or
waiver at or prior to the Closing Date of the following conditions: (i) ILDC and
the ILDC Stockholders shall have performed in all material respects all of their
obligations under the Share Exchange Agreement required to be performed by them
on or prior to the Closing Date, the representations and warranties of ILDC and
the ILDC Stockholders contained therein shall be true and correct at and as of
the Closing Date, as if made at and as of such date, except for such breaches as
would not have a Material Adverse Effect (as defined in the Share Exchange
Agreement) and the Company shall have received a certificate signed by the
President of ILDC and a representative of each ILDC Stockholder to the foregoing
effect; (ii) unless the ILDC Stockholders shall have waived the condition set
forth in clause (i) of the previous paragraph, the Share Exchange Agreement and
Name Change shall have been approved by the shareholders of the Company, and the
Company shall have filed the Articles of Amendment in Nevada; (iii) the Company
shall have received a legal opinion as to certain matters; (iv) each ILDC
Stockholder shall have completed a securities law representation letter; (v) the
Company shall have received all documents it may reasonably request relating to
the existence of ILDC and each of its subsidiaries, and the authority of ILDC
and each ILDC Stockholder to enter into the Share Exchange Agreement, all in
form and substance reasonably satisfactory to the Company; and (vi) all
licenses, permits, consents, approvals and authorizations of third parties and
governmental bodies and agencies shall have been obtained that are necessary to
complete the Share Exchange Agreement and the transactions contemplated
thereunder.
Termination; Waivers. The Share Exchange may be terminated at any time prior to
the Closing by:
o mutual consent of the parties, or
o by ILDC or the Company if the other party is in material breach of any
representation, warranty, covenant or agreement contained in the Share
Exchange Agreement, or
o by either party if the conditions to the obligations of such party to
consummate the Share Exchange have not been satisfied, or waived by
August 31, 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 Share
Exchange.
Regulatory Approvals. No approvals by any governmental authority are required
in order to complete the Share Exchange.
Material Terms of the Common Stock of Old Night
The authorized common stock of the Company consists of 100,000,000 shares of
$0.001 par value stock. As of June 30, 2000, there were 5,460,400 shares issued
and outstanding. At the closing of the Share Exchange, 4,529,054 shares will be
issued in exchange for the 4,529,054 shares of ILDC held by the ILDC
Stockholders who signed the Share Exchange Agreement. On completion of the Share
Exchange and the Private Placements (assuming 1,200,000 shares and 400,000
shares of Common Stock of the Company are sold in the Private Placements
respectively), 11,589,454 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 stockholders. 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 stockholders.
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.
Voting Trust Agreement
1,630,000 of the shares of ILDC common stock are deposited in a voting trust, a
legal device that transfers the voting power of the shares to a trustee or group
of trustees. The "Trustee" of the ILDC voting trust is Anthony Overman. As
Trustee, Antony Overman, has the exclusive ability to vote shares of ILDC common
stock subject to the voting trust. The voting trust is for a ten year period and
will last until January 2011, unless the Trustee decides to terminate it
earlier. The Trustee cannot be removed by the stockholders subject to the voting
trust. If Anthony Overman ceases to be a trustee for any reason, then the
stockholders subject to the voting trust may select his replacement.
7
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If a stockholder subject to the voting trust acquires additional shares in ILDC,
those shares automatically become subject to the voting trust. Any shares of
another corporation issued to ILDC stockholders subject to the voting trust,
whether in connection with a merger, consolidation, sale of substantially all of
ILDC's assets or otherwise, automatically are subject to the voting trust
including the shares of the Company issued in connection with the Share Exchange
Agreement. Only transfers with the written consent of the Trustee may be
released from the voting trust. A copy of the voting trust agreement is attached
as Schedule 4.2 to the Share Exchange Agreement which is Exhibit "B" to this
Information Statement.
Summary of Private Placements
Terms of Private Placements. The Company is conducting two private placements
(the "Private Placements") which it believes will close on or shortly after the
closing of the Share Exchange Agreement. The first Private Placement is a unit
offering of 1,200,000 units at a purchase price of $5.00 per unit. Each unit
consists of one share and one share purchase warrant ("Warrant"). Each whole
Warrant is exerciseable for one additional share of Common Stock of the Company
for $5.00 per share for three years from the date of purchase. If all 1,200,000
Units are sold, there will be aggregate proceeds of $6,000,000, and maximum net
proceeds to the Company of $5,495,000 after payment of expenses and commissions.
There is no minimum sale requirement under this offering.
The second private placement consists of 400,000 shares at a purchase price of
$5.00 per share. If 400,000 are sold, there will be aggregate proceeds of
$2,000,000, and maximum net proceeds to the Company of $1,835,000 after payment
of expenses and commissions. Again, there is no minimum sale requirement under
this offering.
In connection with each Private Placement the Company has agreed to provide a
commission of 8% to selling broker/dealers. Each broker/dealer may elect to
receive up to 50% of its sales commission in the form of shares of the Company
priced at $5.00 per share.
The Private Placements will be made only to Accredited Investors as defined in
Regulation D of the Securities Act of 1933, as amended (the "Securities Act").
The Company has a number of subscription agreements and $2,515,000 in funds in
connection with the Private Placements. No assurances can be given that the
Company will be successful in completing the Private Placements or, if
completed, it will be completed on the terms described above.
Use of Proceeds. There is no minimum of Units or shares which must be sold. The
Share Exchange is not contingent on closing either of the Private Placements.
The net proceeds available to the Company from the first private placement,
assuming expenses of $ 25,000 and minus commission fees of $ 480,000 will be $
5,495,000 if all 1,200,000 Units are sold. The estimated use of these proceeds
will be as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
------------------------------------------------ ------------------------------ ---------------------------
<S> <C> <C>
Switches & Equipment Capital Expenditures by 1,195,000 21.75%
ILDC
------------------------------------------------ ------------------------------ ---------------------------
Working Capital of the Company and ILDC 2,200,000 40.04%
------------------------------------------------ ------------------------------ ---------------------------
Repayment of Existing Debt of ILDC 2,100,000 38.22%
------------------------------------------------ ------------------------------ ---------------------------
TOTAL: $ 5,495,000 100.00%
------------------------------------------------ ------------------------------ ---------------------------
</TABLE>
If the first and second Private Placements are completed, the net proceeds
available to the Company, minus expenses of $ 30,000 and minus commission fees
of $ 640,000, will be $ 7,330,000. The estimated use of these proceeds will be
as follows:
<TABLE>
<CAPTION>
AMOUNT PERCENTAGE
------------------------------------------------ ------------------------------ ---------------------------
<S> <C> <C>
Switches & Equipment Capital Expenditures by 1,195,000 16.30%
ILDC
------------------------------------------------ ------------------------------ ---------------------------
Working Capital of the Company and ILDC 2,170,000 29.60%
------------------------------------------------ ------------------------------ ---------------------------
Repayment of Existing Debt of ILDC 3,965,000 54.10%
------------------------------------------------ ------------------------------ ---------------------------
TOTAL: $ 7,330,000 100.00%
------------------------------------------------ ------------------------------ ---------------------------
</TABLE>
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:
8
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o key-man life insurance,
o obtaining officer and director liability insurance,
o employment contracts with executive officers,
o indemnification contracts, and
o 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 the Private Placements 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 verbally agreed to register for resale with the Securities and
Exchange Commission the following shares of Common Stock issued in connection
with the Share Exchange and the Private Placements, but no definitive agreements
have been entered into in this regard.:
o shares to be issued in connection with the two Private Placements;
o shares issuable on exercise of certain warrants of the Company to be
granted to investors in connection with the two Private Placements; and
o shares issued to the stockholders of ILDC in connection with the Closing of
the Share Exchange.
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 ILDC (which are attached to this Information Statement as Exhibit D) and has
been prepared on a pro forma basis to give effect to the Share Exchange under
the purchase method of accounting, as if the transaction had occurred at
December 31, 1999, 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 Share
Exchange 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 ILDC 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 Share Exchange had
occurred 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 ILDC.
The pro forma consolidated statements of operations data presented assumes the
Share Exchange occurred at the beginning of the periods presented. It should not
be assumed that the Company and ILDC would have achieved the unaudited pro forma
consolidated results if they had actually been combined during the periods
shown.
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 ILDC, including
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" for each of the Company and ILDC. Pro forma financial information is
set forth in greater detail in the Pro Forma Financial Statements beginning on
Exhibit C of this Information Statement.
For the Period Ended
PRO FORMA INCOME STATEMENT: December 31, 1999
-----------------
Revenues $ 173,464
Cost of Revenues $ 2,978,403
Gross Profit (Operating Loss) ($ 2,803,909)
Other Income and Expenses ($ 4,922,790)
Net Income (Loss) ($ 7,726,699)
Net Income (Loss) Per Share ($ 0.70)
As of
PRO FORMA BALANCE SHEET: December 31, 1999
-----------------
Total Assets $ 3,331,243
Total Current Liabilities $ 4,737,968
Deficit Accumulated During Dev. Stage $ 7,726,699
Stockholders' Equity (Deficit) ($ 1,662,215)
9
<PAGE>
Risks Related to the Share Exchange
You Will Suffer Immediate and Substantial Dilution of Your Percentage Equity and
Voting Interest. We will issue 4,529,054 shares of common stock to the
stockholders of ILDC in the Share Exchange. The 4,529,054 shares represent
approximately 45.34% of the number of shares of common stock outstanding as of
June 30, 2000 (excluding the securities to be issued under the private
placements being conducted by the Company). Accordingly, the Share Exchange will
have the effect of substantially reducing the percentage equity and voting
interest held by each of our stockholders.
The ILDC Stockholders May Be Able to Significantly Influence Us Following the
Share Issuance. On Closing the Share Exchange the ILDC Stockholders will control
approximately 45.34% of the issued and outstanding shares of the capital stock
of the Company. Anthony Overman, either directly or as voting trustee, will
control approximately 31.32% of the Company's common stock following the closing
of the Share Exchange. (These percentages do not take into consideration the
securities to be issued under the private placements being conducted by the
Company as discussed in this Information Statement.) This concentration of
ownership of the Company's common stock and existence of a voting trust 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 ILDC Stockholders or Anthony Overman.
The Company and ILDC May Be Unable to Obtain Required Additional Capital. As
indicated in the risk factors relating to ILDC below, following the Share
Exchange, the Company will need to raise up to $8 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 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 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 ILDC into Our Operations. The
integration of ILDC into our operations involves a number of risks, including:
o difficulty integrating ILDC's operations and personnel;
o diversion of management attention;
o potential disruption of ongoing business;
o inability to retain key personnel; and
o impairment of relationships with employees, customers or vendors.
Failure to overcome these risks or any other problems encountered in connection
with the Share Exchange or other similar transactions could reduce the value of
the Share Exchange to us and could reduce the value of the Company's Common
Stock.
We May Lose Rights under Contracts with Customers and Other Third Parties as a
Result of the Share Exchange. ILDC has numerous contracts with suppliers,
customers, licensors, licensees and other business partners. The Share Exchange
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.
Uncertainty as to Proper Stock Issuances of ILDC. ILDC previously entered into
joint venture and profit sharing agreements with various investors. These
investors agreed to cancel their joint venture and profit sharing agreements in
exchange for common stock of ILDC. Each investor received one share of ILDC's
common stock for every $5.00 invested through joint venture or profit sharing
agreements. ILDC issued approximately 1,249,350 shares of stock on April 30,
2000 in connection with this conversion. Due to potential violations of federal
and state securities laws requiring registration of securities in certain
circumstances, as a result of these conversions ILDC may offer rescission rights
to all such investors and re-offer shares of ILDC under a separate offering to
these investors. To the extent any investors exercise their rescission rights
and elect not to continue their investment in ILDC, ILDC will be required to
return subscription funds to such investors with interest. $6,065,584 represents
the amounts invested in ILDC through the joint venture and profit sharing
agreements and therefore represents the potential rescission obligations of ILDC
to the joint venture investors (exclusive of interest). There can be no
assurances that the Company or ILDC will have sufficient capital to pay amounts
owed to joint venture investors who elect to exercise rescission rights. In
addition, any funds used by ILDC or the Company to satisfy rescission claims
would not be available to further the business plans of ILDC and the Company .
This discussion is not an assertion by the Company or an admission by ILDC that
ILDC did not comply with the registration or disclosure requirements of
applicable federal and state securities laws. See also "INFORMATION CONCERNING
ILDC - Risks Related to ILDC"
10
<PAGE>
Certain Federal Income Tax Consequences
The following discussion is limited to the material federal income tax
consequences of the proposed Share Exchange 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
For financial accounting purposes, this Transaction will be accounted for as a
purchase of ILDC by the Company. The Company intends the Share Exchange to be a
tax-free reorganization under Section 368(a)(1)(B) of the Internal Revenue Code
of 1986, as amended (the "Code") and ILDC Stockholders and ILDC Board of
Directors are receiving a legal opinion to that effect. However, an opinion of
counsel is not binding on the Internal Revenue Service or the courts. The
federal income tax law is uncertain as to many of the tax issues relevant to
"tax-free" transactions, and it is not possible to predict with certainty how
the law will develop or how the courts will decide various issues if they are
litigated. Accordingly, there can be no assurances that the Share Exchange will
be treated as a tax-free reorganization or that the Share Exchange will not be
challenged by the Internal Revenue Service and that such challenge will not be
sustained by the courts. The only parties to the Share Exchange, however, which
would suffer any adverse tax consequences would be ILDC Stockholders.
You Are Urged to Consult Your Own Tax Advisor as to Specific Tax Consequences to
You by the Share Exchange Including Tax Return Reporting Requirements and the
Applicability and Effect of Federal, State, Local, Foreign, and Other Applicable
Tax Laws.
11
<PAGE>
INFORMATION CONCERNING ILDC
---------------------------
History of ILDC
ILDC was incorporated in North Carolina in 1998 under the name International
Long Distance Corporation. The business focus of ILDC since its inception has
been Internet Protocol Telephony network and application services. ILDC is a
development stage company with offices in Hertford, North Carolina and Atlanta,
Georgia.
General Description of Business of ILDC
ILDC provides third generation telecommunications services using Internet
Protocol and a high speed data network that creates a suite of advanced
networking solutions, including Voice over Internet Protocols (VOIP) and Virtual
Private Networks (VPN). ILDC is rapidly deploying both network and corporate
infrastructure. 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 ILDC,
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.
ILDC currently holds an FCC License 214 issued by the Federal Communications
Commission , which effectively categorizes ILDC as an interexchange carrier for
telecommunication services (an ("IXC"). IXC's include the largest communications
companies, such as MCI WorldCom and Sprint. ILDC is licensed to carry both
domestic and international traffic on its network. ILDC believes that it is in
compliance with all regulatory and governmental authorities as they relate to
the operation of the network.
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 growth 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.
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.
ILDC anticipates 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. According to Frost & Sullivan, a consulting and
research firm, Voice over Internet Protocol (VoIP) technology or IP Telephony is
anticipated 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.
12
<PAGE>
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 network 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
ILDC's objective is to become a leader in the quickly evolving area of "Next
Generation of Networks". The Next Generation of Networks is defined loosely as a
group of enhanced services that are deliverable to users via an "access
network".
ILDC has developed a state of the art VoIP and an international data network
thought by ILDC and the Company to be unique in the industry. Through
integration of existing, leading edge technologies and ILDC's proprietary
application software, ILDC is able to offer advanced telecommunication services
(both voice and data) to potential carriers and service providers including;
CLEC's; ILEC's; ASP's; and ISP's. ILDC developed and tested its network platform
over the last two and one half years. With ILDC's network, end-users will be
connected via copper, coaxial, fiber and wireless platforms (unlike Net2Phone,
whose capabilities are mainly from PC's over the Internet). End-users will enjoy
carrier grade quality of service (QOS) and, effectively, not be aware that they
are communicating over Internet protocol rather than voice grade circuit
switching.
ILDC anticipates rapidly deploying its network and targeting providers and other
margin-sensitive concerns worldwide to attract traffic to its system.
Description of Services - ILDC VoIP System
ILDC has developed a system for bundling voice and data virtually eliminating
latency that bypasses traditional circuit switching.
The network architecture employed leverages the existing public network,
integrates new technologies and adds software control features that enables
services to be layered on public or private Internet Protocol (IP) networks.
ILDC's state of the art media gateways and software applications have reduced
the space necessary for such equipment to one seven foot tall rack which can be
easily co-located with other communications providers. This major gateway hub,
of which 12 will be deployed initially, has a capacity equal to existing switch
architecture requiring 2400-3600 square feet of space, allowing ILDC to
co-locate cost effectively with many partners. Once built, each ILDC gateway
will support up to 14,784 T-1 lines (each handling 354,816 lines),
simultaneously.
ILDC's IP based applications will run over an ATM backbone. The quality of
service (QOS) guarantees will be provided as part of each customer's service
level agreement (SLA).
The network will provide IP Centrex Services, enhanced data services (the
capability to provide dynamic bandwidth (capacity) on demand) for data, video
imaging and VPN's with encryption. ILDC will provide compressed voice transport
for long distance and wholesale transport for competitive local exchange
carriers and long distance carriers. This network architecture will offer client
concentration and switch bypass for Internet service providers, provide remote
access services and many other new capabilities, including the ability to
dynamically allocate bandwidth. The VPN's that ILDC will service has the ability
to offer secure, encrypted data transport from the point of creation, as opposed
to from a company's ISP. This represents a new service that will be extremely
desirable for large corporations.
ILDC's proprietary billing system will provide usage sensitive billing, as well
as bulk billing for any or all services offered. All of the billing will be
presented on a single bill.
This Third Generation network architecture, once the proprietary software and
applications are deployed, will represent a major breakthrough in the fledgling
VoIP industry.
13
<PAGE>
Sales and Marketing and Distribution
ILDC's initial marketing plan calls for entering the market for pre-paid
providers including ISP's, ASP's and CLEC's. ILDC anticipates these targets will
understand and embrace the system very quickly, providing an immense "virtual"
sales and distribution network. Most provider sectors are potential customers,
not competition. Targeting these providers for VoIP and VPN's, ILDC anticipates
being in a position to place a tremendous amount of traffic on the network
immediately. Additionally, partnering with these margin-sensitive entities,
should allow ILDC to take advantage of their marketing and distribution efforts
and utilize their infrastructure. Marketing/Sales personnel are currently being
added and will be stationed in strategic areas based upon the network deployment
plan.
ILDC anticipates that, initially, the bulk of traffic will be voice. However, as
the capabilities of the system and the many layered services become known, ILDC
anticipates that there will be a major conversion to data.
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, ILDC has identified the
following primary markets for its products: Europe; India; Pakistan;
Philippines; Japan; the Middle East; Mexico; and China. Negotiations are in the
final stages to draw traffic from the foregoing list of markets.
ILDC's Network
ILDC has deployed three of the first twelve gateways. The plan is to deploy the
gateways in stages so that any stage once complete and operational can begin to
run traffic (and produce revenue) immediately while the expansion stages are
undertaken. The first stage of deployment included switches strategically
located in New York, Miami and Los Angeles. This stage had been completed ahead
of schedule. Final configuration and testing is underway and the first stage is
anticipated to be operational by the end of the third week in August.
Before stage one is operational, stage two will begin, with switches being
deployed in London, Frankfurt and Amsterdam, to provide service to Europe. This
stage will also include Dubai, UAE. ILDC is currently negotiating the first free
VOIP license in the United Arab Emirate and is working with the Royal Family to
provide service for an "Internet City" there.
Stage three currently calls for switches in Dallas, Toronto and Denver, as well
as Singapore and Hong Kong. This final deployment will represent the major
portion of the network backbone and will allow the back hauling of traffic from,
substantially, anywhere in the world.
The system is expected to be fully in place and operational during the third
quarter of 2000. The anticipated system deployment cost is approximately $9.3
million dollars which will be financed using proceeds from the Private
Placements, operational revenues and vendor and other third party financing.
Customer Relationship Management
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 ILDC, 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 ILDC 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.
14
<PAGE>
Software/Hardware Providers. ILDC 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.
Many of ILDC'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 ILDC
has. As a result, certain of these competitors may be able to adopt more
aggressive pricing policies which could hinder ILDC's ability to market ILDC's
Internet-based voice services. ILDC believes that ILDC's key competitive
advantages are ILDC's ability to deliver reliable, high quality voice service
over the Internet in a cost-effective manner and the size and rapid growth of
ILDC's network. ILDC cannot provide assurances, however, that this advantage
will enable us or ILDC to succeed against comparable service offerings from
ILDC's competitors.
Government Regulation
Regulation of IP Telephony - General. ILDC is a multinational telecommunications
company subject to applicable laws and regulations in each of the jurisdictions
in which it provides services. ILDC may also be affected indirectly by the laws
of other jurisdictions that affect foreign carriers with which ILDC does
business. Telephone service provided through the use of the Internet and private
IP networks is a recent market development which ILDC believes 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. ILDC believes that the IP
communications services that ILDC provides 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 ILDC's business, financial
condition, operating results and future prospects. ILDC cannot guarantee that
ILDC'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 ILDC's business,
financial condition, results of operations and future prospects.
Portions of ILDC's 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.
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ILDC may be subject to regulations in some foreign jurisdictions, or ILDC may be
prohibited from providing its services or conducting its business in these
foreign jurisdictions. ILDC's failure to qualify as a foreign corporation in a
jurisdiction in which ILDC is required to do so or to comply with foreign laws
and regulations could materially adversely affect ILDC's business, financial
condition, operating results and future prospects, including the possibility of
subjecting ILDC to taxes and penalties and/or by precluding ILDC from, or
limiting ILDC in enforcing contracts in such jurisdictions. This holds true of
ILDC's partners as well. ILDC cannot be certain that ILDC's 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 ILDC's partners to comply with such requirements
could materially adversely affect ILDC's business, financial condition,
operating results and future prospects.
Recently, IP Telephony service of one of ILDC's 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 ILDC has not received any similar
notices from these regulators and ILDC does 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
ILDC's service or send ILDC similar cease and desist orders in the future.
Proprietary Rights
The Company and ILDC regard their intellectual property rights, such as
copyrights, trademarks, trade secrets, practices and tools, as important to the
success of the 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 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 Company intends to
offer its services. The steps taken by the Company or ILDC to protect their
intellectual property rights may not be adequate, third parties may infringe or
misappropriate intellectual property rights or the 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 Company or
ILDC. 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 Company's ability to use processes
covered by such patents or expose the Company to claims of patent infringement
or otherwise require the 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 Company's
business.
The Company believes that ILDC's products, trademark, and other proprietary
rights do not infringe on the proprietary rights of third parties.
Board of Directors of ILDC
ILDC is currently governed by its Board of Directors, which presently consists
of the four (4) directors named below. The directors are elected annually by the
stockholders and serve until their successors are duly elected. The following
table sets forth as of December 31, 1999, the name, age, and position of each
director of ILDC:
Name Age Position Director since:
Anthony Overman 41 Director March 20, 1998
Leonard Overman, Sr. 70 Director March 20, 1998
Leonard Overman, Jr. 46 Director March 20, 1998
Viola Overman 69 Director March 20, 1998
Employees
As of July 5, 2000, ILDC had 33 employees from offices in Atlanta, Georgia and
Hertford, North Carolina. Additional sales and technical personnel are being
added to meet the anticipated demand for ILDC's networking services. None of
ILDC's current employees are covered by any collective bargaining agreement and
ILDC has never experienced a work stoppage. ILDC 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.
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Facilities
ILDC's corporate headquarters are located in a 10,000 square foot ("sf")
facility in Hertford, North Carolina. This facility's lease expires on October
1, 2001 with a base monthly rent of $ 5,000 per month. ILDC also rents a 2009 sf
office space Atlanta, Georgia at $2,796 per month and rents an apartment on a
month to month basis in Atlanta, Georgia at $ 1,330 per month. The lease in
Hertford, North Carolina is leased by ACO Enterprises, Inc. an entity controlled
by Anthony Overman.
The Company plans to open offices in Vancouver, British Columbia and in Denver,
Colorado in the near future.
In January of 1999, ILDC purchased two vacant lots in Hertford, North Carolina
to build an office building. ILDC continues to own the property but does not
intend to develop the lots at this time.
Legal Proceedings
StarTouch International Ltd. has instituted an action against ILDC seeking
repayment of a $2,067,407 promissory note ILDC issued to StarTouch International
Ltd. in February 5, 2000 which was due on June 5, 2000 and remains unpaid,
together with accrued interest of $67,959.57 (plus per diem interest from June
5, 2000), costs and post judgment interest. ILDC was served on July 6, 2000 and
has not filed an answer to the complaint. An answer is due within 30 days from
the date of service. To date ILDC has not raised, and may not have, any defenses
to this lawsuit. ILDC is a party to another lawsuit alleging breach of contract
and seeking damages in the principal amount of $679,071.39, together with
accrued interest of $141,321.26 (with interest accruing at 1 1/2% per month from
the date of filing (12/8/99)), costs and post judgment interest. ILDC has filed
an Answer to the complaint denying any liability or obligation. ILDC has notice
of one other potential claim which concerns a party who refused to convert its
joint venture with ILDC into equity. Liability associated with this potential
claim is not determinable at this time.
Selected Financial Data
The following selected financial data is obtained from the audited financial
statements of ILDC, as of December 31, 1999, 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.
In addition, the audited financials of ILDC as of and for the year ended
December 31, 1999 ("Audited Financials") were issued when ILDC and the Company
still contemplated a one step merger pursuant to the Reorganization Agreement.
As discussed elsewhere in this Information Statement, the parties have
terminated the Reorganization Agreement and re-structured the transaction as a
two step transaction, the first step of which is the Share Exchange. To the
extent the notes in the Audited Financials discuss the Reorganization Agreement
or are otherwise inconsistent with the discussion of the Share Exchange in this
Information Statement, readers should rely on disclosure in the Information
Statement. In addition, Note 11 of the Audited Financials discusses an agreement
between ILDC and BDR Consulting, Inc. ("BDR"). Since the date the Audited
Financials were issued, the terms of the agreement between ILDC and BDR have
changed significantly and Note 11 to the Audited Financials is no longer
accurate. For a discussion of the current agreement between ILDC and BDR,
readers should review Schedule 3.7 to the Share Exchange Agreement, which is
included in this Information Statement as part of Exhibit B.
ILDC for Year Ended
12/31/99
-------------------------
Revenue $ 174,494
Operating Expenses $ 2,978,403
Gross Profit (Loss) ($ 2,803,909)
Other Expenses $ 4,922,790
Net Income (Loss) ($ 7,726,699)
Total Assets $ 3,331,243
Total Current Liabilities $ 4,736,368
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Management Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations. Planned principal operations of ILDC commenced in March
1998, however, to this date ILDC 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, ILDC and its activities from its
inception through December 31, 1999 fall within the referenced guidelines.
Accordingly, the Company has reported ILDC's activities in accordance with the
aforesaid Statement of Financial Accounting Standards No. 7.
From its inception in March 1998 through December 31, 1999, ILDC sustained a net
loss of approximately $7,685,699. These losses are expected to continue for a
presently undetermined time. The Company's losses in 1999, independent of ILDC,
were minimal due to lack of business operations.
Sales and Revenues. ILDC has derived (or intends to derive) revenues generally
from sale of the products described above in this Information Statement. From
inception through December 31, 1999, the Company's total revenue was $174,494.
In order to increase revenue, ILDC has entered into distribution agreements with
telecommunications companies who have established distribution into target
markets. ILDC 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 ILDC will be
successful in these efforts. During the fiscal year ended December 31, 1999,
100% of the revenues of ILDC were generated through distribution arrangements
with Airtime Technologies and Rubicon Technologies. There is no certainty that
the distribution arrangements with these entities will continue.
Liquidity and Capital Resources. As of December 31, 1999, ILDC had net
stockholders' deficit of $ 1,619,615, and accumulated losses during the
development stage of $7,685,699. There can be no assurance that ILDC will be
able to continue as a going concern or achieve material revenues or profitable
operations. ILDC 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. ILDC 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
ILDC.
The maximum proceeds of the Private Placements are intended to be used to
provide ILDC with the necessary capital to maintain and expand its operations
for a period of 12 months when ILDC expects to achieve 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 ILDC has
not experienced any immediate adverse impact on ILDC's operations from the
transition to the Year 2000, ILDC cannot provide complete assurance that ILDC'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, ILDC will continue to monitor ILDC's Year 2000 compliance and the Year
2000 compliance of ILDC's agents. However, ILDC anticipates no Year 2000
problems that are reasonably likely to have a material adverse effect on ILDC's
operations.
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Risks Related to ILDC
The following is a summary of some of the risk factors which may have an impact
on ILDC's business efforts:
ILDC has a limited operating history in a new and rapidly changing industry.
ILDC commenced operations in March 1998. Accordingly, ILDC 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 ILDC's ability to:
o expand its subscriber base and increase subscriber revenues,
o compete favorably in a highly competitive market,
o access sufficient capital to support its growth,
o recruit, train and retain qualified employees,
o introduce new products and services, and
o upgrade network systems and infrastructure.
ILDC 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 ILDC's business in the future.
ILDC has significant liability associated with a lawsuit. As discussed in "Legal
Proceedings" elsewhere in this Information Statement, ILDC has been sued by
StarTouch International, Ltd. ("StarTouch") for over $2 million. If the court
determines that ILDC is liable to StarTouch as asserted in the lawsuit, ILDC
will have to use significant amounts of capital to pay its obligations to
StarTouch. ILDC may also incur significant legal fees and expenses in defending
the lawsuit, if legal defenses are available. It is possible that ILDC will
never have sufficient capital to pay amounts owed to StarTouch. It is also
possible, that after paying amounts owed to StarTouch, ILDC will not have
sufficient funds to pursue its business plan. Accordingly, the StarTouch
litigation may have a material adverse effect on ILDC's financial condition,
results of operations and prospects.
ILDC has not been profitable and expect future losses. ILDC has incurred net
losses of $ 7,685,699 from inception through December 31, 1999. ILDC 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, ILDC 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 ILDC does achieve profitability, it cannot be
certain that it can sustain or increase profitability on a quarterly or annual
basis in the future. ILDC expects that costs and expenses will continue to
increase in future periods, which could negatively affect future operating
results.
ILDC Could Be Required to Cut Back or Stop its Operations If it Is Unable to
Obtain Needed Funding. ILDC 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 ILDC 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 ILDC will raise additional capital or generate funds from operations
sufficient to meet its obligations and planned requirements.
Ability of ILDC to Implement its Business Strategy. Although ILDC intends to
pursue a strategy of aggressive marketing of its network, implementation of this
strategy will depend in large part on its ability to: (i) establish a
significant customer base and maintain favorable relationships with those
customers; (ii) effectively introduce acceptable products to its customers;
(iii) obtain adequate financing on favorable terms to fund its business
strategies; (iv) maintain appropriate procedures, policies, and systems; and (v)
continue to operate with increasing competition. The inability of ILDC to obtain
or maintain any or all of these factors could impair its ability to successfully
implement its business strategy, which could have a material adverse effect on
the results of operations and financial condition of ILDC.
Dependence on Key Personnel. The future success of ILDC will depend on the
service of key personnel and, additionally, its ability to identify, hire and
retain additional qualified personnel. There is intense competition for
qualified personnel in the areas of the activities of ILDC, and there can be no
assurance that ILDC will be able to attract and retain personnel necessary for
the development of the business of ILDC. Because of the intense competition,
there can be no assurance that ILDC will be successful in adding personnel if
needed to satisfy its staffing requirements. Failure to attract and retain key
personnel could have a material adverse effect on ILDC. ILDC is dependent on the
efforts and abilities of its management. The loss of various members from
management could have a material adverse effect on the business and prospects of
ILDC. There can be no assurance that upon the departure of key personnel from
the service of ILDC that suitable replacement personnel will be available.
A Market for ILDC's Services May Not Develop. There can be no assurance that the
VOIP or other high speed data transmission services developed by ILDC, or any
other product subsequently developed by ILDC, will achieve a significant degree
of market acceptance, and that acceptance, if achieved, will be sustained for
any significant period or that product life cycles will be sufficient (or
substitute products developed) to permit ILDC to recover start-up and other
associated costs. Failure of the VOIP protocol or other proprietary software
products developed by ILDC or any other products of ILDC to achieve or sustain
market acceptance could have a material adverse effect on the business,
financial condition, and results of operations of ILDC.
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If ILDC Fails to Create and Maintain Strategic Relationships with International
Carriers its Revenues Will Decline. ILDC'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 ILDC's revenue. ILDC 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 ILDC'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 its business with
ILDC. If ILDC 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 ILDC's 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 ILDC
operates, and ILDC anticipates that rates will continue to be reduced in all of
the markets in which ILDC 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 ILDC will be unable to use such pricing
differentials to attract new customers in the future. In addition, ILDC's
ability to market its carrier transmission services to telecommunications
carriers depends on the existence of spreads between the rates offered by ILDC
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
ILDC obtains wholesale service. Continued rate decreases will require ILDC to
lower its rates to remain competitive and will reduce or possibly eliminate
ILDC's gross profit from its carrier transmission services. If
telecommunications rates continue to decline, ILDC may lose users for its
enhanced IP communications services and carrier transmission services.
Rapid Technological Change in Telecommunications Industry Could Reduce the
Demand for ILDC'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 ILDC uses. ILDC expects that new services and
technologies will emerge in the market in which ILDC competes. These new
services and technologies may be superior to the services and technologies that
ILDC uses, or these new services may render ILDC's services and technologies
obsolete. To be successful, ILDC must adapt to a 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. ILDC's success
will depend, in part, on ILDC's ability to license leading technologies and
respond to technological advances and emerging industry standards on a
cost-effective and timely basis. ILDC will need to spend significant amounts of
capital to enhance and expand its services to keep pace with changing
technologies. ILDC cannot predict the likelihood of these changes and cannot
assure you that any technological changes will not materially and adversely
affect ILDC's business and operating results.
Licenses and Consents. Although management believes that ILDC has all rights
necessary to use its intellectual property, the utilization or other
exploitation of the products and services developed by ILDC might require ILDC
to obtain licenses or consents from the producers or other holders of copyrights
or other similar rights relating to the products and technologies of ILDC. In
the event ILDC is unable, if so required, to obtain any necessary license or
consent on terms which management of ILDC considers to be reasonable, ILDC may
be required to cease developing, utilizing, or exploiting products or
technologies affected by those copyrights or similar rights. In the event ILDC
is challenged by the holders of such copyrights or other similar rights, there
can be no assurance that ILDC will have the financial or other resources to
defend any resulting legal action, which could be significant.
Uncertainties Associated with Patents and Proprietary Rights. The success of
ILDC may depend in large part on its ability to obtain patents for its
technologies and products, if any, resulting from the application of such
technologies, to defend patents once obtained and to maintain trade secrets,
both in the United States and in foreign countries. The success of ILDC will
also depend upon avoiding the infringement of patents issued to competitors.
There can be no assurance that ILDC will be able to obtain patent protection for
products based upon the technology of ILDC. Moreover, there can be no assurance
that any patents issued to ILDC will not be challenged, invalidated or
circumvented or that the rights granted thereunder will provide competitive
advantages to ILDC. Litigation, which could result in substantial cost to ILDC,
may be necessary to enforce the patent and license rights of ILDC or to
determine the scope and validity of its and others' proprietary rights.
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Lack of Marketing Experience. ILDC has no significant experience in the sales or
marketing of the ILDC network. There can be no assurance that ILDC will be able
to establish sales, marketing and distribution capabilities or make arrangements
with collaborators, licensees or others to perform such activities or that such
efforts will be successful.
Marketing Efforts; Limited Sales Force. ILDC may sell the ILDC network
principally through salespersons and agents, and may use only a very limited
number of salespeople in certain of its markets. There can be no assurance that
ILDC would be able to successfully establish other methods of marketing and
sales of its products should it become necessary or desirable in the future.
ILDC may market its product through independent distributors over which ILDC has
no control, who may also represent products of other companies.
ILDC's Business Is Exposed to Regulatory, Political and Other Risks Associated
with International Business. ILDC 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 ILDC's results of operations and the value of ILDC'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 ILDC 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 ILDC's operations. Accordingly, ILDC's
results of operations may be materially affected by international events and
fluctuations in foreign currencies. ILDC does not employ foreign currency
controls or other financial hedging instruments.
ILDC may be subject to foreign regulatory authorities governing communications
and Internet services as it seeks to market the ILDC network outside the United
States. Whether or not the ILDC network is subject to FCC regulation or other
regulation in the United States, approval of the ILDC network by regulatory
authorities of foreign countries may need to be obtained prior to the
commencement of marketing ILDC's services in those countries. The approval
process varies from country to country and the time required may be significant.
There can be no assurance that any foreign regulatory agency will approve ILDC
or any product or services submitted for review by ILDC.
The Loss of Key Personnel Could Weaken ILDC's Technical and Operational
Expertise, Delay Entry into New Markets and Lower the Quality of its Service.
ILDC's success depends on the continued efforts of its senior management team
and its technical, marketing and sales personnel. ILDC 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. ILDC may
not be able to retain or successfully integrate existing personnel or identify
and hire additional qualified personnel. If ILDC loses the services of key
personnel or is unable to attract additional qualified personnel, its business
could be materially and adversely affected. ILDC does not have key-man life
insurance. ILDC initiates and maintains its relationships with foreign carriers
in its targeted markets through the combined efforts of its senior management
team. ILDC 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.
ILDC May Be Liable for Violations of Federal and State Securities Laws. ILDC
previously entered into joint venture and profit sharing agreements with various
investors. These investors agreed to cancel their joint venture and profit
sharing agreements in exchange for common stock of ILDC. Each investor received
one share of the common stock for every $5.00 invested through these joint
venture or profit sharing agreements. ILDC issued approximately 1,249,350 shares
of stock on April 30, 2000 in connection with this conversion. Due to potential
violations of federal and state securities laws requiring rescission of
securities in certain circumstances, as a result of these conversions ILDC may
offer rescission rights to all such investors and re-offer shares of ILDC under
a separate offering to these investors. To the extent any investors exercise
rescission rights and elect not to continue their investment in ILDC, ILDC will
be required to return subscription funds to such investors, with interest.
Investors of ILDC who did not accept the rescission offer, either because they
affirmatively reject it or because they fail to respond to it, may still attempt
to assert claims against ILDC relating to non-compliance with the securities
laws. ILDC cannot predict with certainty that those claims will be barred by any
rescission offer conducted by ILDC because the legal effect of the rescission
offer is uncertain. To the extent those claims are brought and result in
judgments for damages, ILDC's business, financial condition and results of
operation could all be adversely affected. Even if ILDC is successful in
defending those claims under applicable securities laws, their mere assertion
could result in costly litigation and significant diversions of effort by
management. At this point, ILDC cannot quantify the dollar amount of the ILDC
shares held by persons who will accept or reject any such rescission offer.
Therefore, ILDC cannot quantify the potential continuing liability until
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completion of any such rescission offer. $6,065,584 represents the amounts
invested in ILDC through the joint venture and profit sharing agreements. There
can be no assurance that the Company or ILDC will have sufficient capital to pay
any amounts owed to investors or otherwise expended in defending claims, in each
case related to the matters discussed above. This discussion is not an assertion
by the Company or an admission by ILDC that ILDC did not comply with the
registration or disclosure requirements of applicable federal and state
securities laws.
Because ILDC Does Not Have Sufficient Liquid Assets to Fund the Rescission Offer
If it Is Accepted by All Holders of ILDC Shares Who May Be Entitled to
Recission, ILDC May Be Required to Incur Additional Debt or Sell Assets to Fund
the Rescission Offer. If all or a material number of ILDC investors who may have
a right to rescission accept any subsequent rescission offer, ILDC will have to
borrow funds or liquidate assets to pay off those investors. ILDC has
approximately $200,000 in current assets that could be used to fund the
rescission offer without materially and adversely affecting ILDC' operations or
financial condition. This discussion is not an assertion by the Company or an
admission by ILDC that ILDC did not comply with the registration or disclosure
requirements of applicable federal and state securities laws.
Material Terms of the Common Stock of ILDC
The authorized capital stock of ILDC consists of 11,000,000 shares of Common
Stock with a par value of $1.00 per share. ILDC has no other authorized classes
of stock. On June 30, 2000, ILDC had 5,500,000 shares issued and outstanding
held by 389 stockholders of record. There is no trading market for the shares of
common stock of ILDC. All shares of the common stock of ILDC are equal to each
other with respect to voting, and dividend rights, and are equal to each other
with respect to liquidation rights.
Forward-looking Statements
Certain statements included in this Information Statement regarding the Company
and ILDC 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 ILDC after
the Share Exchange. 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 ILDC's sales strategies, market acceptance of
ILDC's products and services, ILDC'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 ILDC's competitors. Accordingly, actual results may differ
materially from those expressed in the forward-looking statements.
ELECTION OF DIRECTORS
---------------------
The current director and officer of the Company will resign his positions with
the Company at the closing of the Share Exchange and three 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 ILDC who will become directors and officers of
the Company on the closing of the Share Exchange. Information regarding the
current officer and director of the Company is set forth in the Form 8-K dated
May 18, 2000 on file with the Securities and Exchange Commission on Edgar.
Information Concerning Nominees
The following nominees of ILDC are expected to become executive officers and
directors of the Company at the closing of the Share Exchange.
---------------------------- -------- -----------------------------------------
Name Age Expected Position with Company
---------------------------- -------- -----------------------------------------
Mark Sampson 45 Chairman and Chief Executive Officer and
Director
---------------------------- -------- -----------------------------------------
Anthony Overman 41 President and Director
---------------------------- -------- -----------------------------------------
Don Spears 51 Director
---------------------------- -------- -----------------------------------------
The following describes the principal occupation of each officer and director of
the Company for the previous five years:
Mr. Mark Sampson - Chairman and Chief Executive Officer. Mr. Sampson brings
twelve years of executive experience in telecommunications and information
technology to ILDC. Prior to joining ILDC, he was Senior Vice President and
General Manager of Data Services for AT&T Canada (formerly MetroNet
Communications), where he was responsible for building its data and Internet
businesses from inception to $80 million in annual revenue. From 1994 to 1998,
Mr. Sampson served as Vice President and General Manager for Telus (formerly BC
22
<PAGE>
Tel Advanced Communications), where he developed the unregulated ATM based data
and Internet business from start-up to $75 million in annual revenue. From 1992
to 1994, he served as Chief Operating Officer of Cue Data West, providing
banking applications and high speed managed networks to the financial community.
Mr. Sampson is a director of the Colorado Internet and Telecom Alliance (CITA).
He studied business at Dalhousie University and is a graduate of the University
of British Columbia's sales and marketing executive program (SME)
Mr. Anthony Overman - President. Mr. Overman is the founder of ILDC. From March
1998 to the present, he has been responsible for the development of ILDC's
business from inception. Mr. Overman has been responsible for supervising the
VOIP network design and construction, negotiating business transactions,
building the executive management team and all other aspects of ILDC to date.
Prior to undertaking the development of ILDC, Mr. Overman was involved in
several entrepreneurial enterprises, including security systems, energy
management systems and smarthouse designs. Mr. Overman is active in World
Missions and charitable organizations. As President of ILDC, Mr. Overman will be
involved with overall management, oversight and business development activities.
Mr. Donald M. Spears - Director. Mr. Spears graduated from the University of
Arkansas School of Law in 1975 after obtaining his B.A from Ouachita Baptist
University. He specializes in Commercial Transactions, Banking and Business
Litigation as well as Real Estate Law. He served as a Director of the Arkansas
Development Finance Authority and as Juvenile Judge for Hot Springs County,
Arkansas. Mr. Spears has served on the board of several private entities,
including Chairman of PC Interface, Inc., a banking technology company,
President of Westridge Development Company and as Chairman of Worldlynx, Inc.,
an Internet Service Provider. He is a member of the Arkansas Bar Association,
the American Bar Association and the American Trial Lawyers Association.
Residing in Little Rock, Mr. Spears married in 1970, and has two children.
The term of office of each director is one year or until his successor is
elected at the annual meeting of the Company and qualified. The term of office
for each officer of the Company is at the pleasure of the Board of Directors.
The Board of Directors has no nominating, audit or compensation committee.
Except for the terms of the Share Exchange Agreement, there are no arrangements
or understandings between any of the officers or directors and any other persons
pursuant to which such officer or director was selected as an officer or
director.
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 executive
officer received cash compensation from the Company in excess of $50,000 in the
prior three years ended December 31, 1999. There are no bonus or deferred
compensation plans, pension, stock option or other compensatory plans currently
maintained by the Company. Additionally, the Company is not a party to any other
compensatory plans or arrangements, including payments to be received from the
Company, with respect to any person named above which would in any way result in
payments to any such person because of his or her resignation, retirement, or
other termination of such person's employment, or any change in control of the
Company, or a change in the person's responsibilities following a change in
control of the Company.
The Company's Board of Directors has complete discretion as to the
appropriateness of:
o key-man life insurance,
o obtaining officer and director liability insurance,
o employment contracts with and compensation of executive officers and
directors,
o indemnification contracts, and
o 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, through its subsidiary ILDC, which will be in effect as of the
Closing of the Share Exchange:
<TABLE>
<CAPTION>
Annual Salary
Name Office 2000 (projected)(1)
------------------------------ ------------------------------------------------------ ---------------------
<S> <C> <C>
Mark Sampson Chief Executive Officer $ 250,000
------------------------------ ------------------------------------------------------ ---------------------
Anthony Overman President $ 150,000
------------------------------ ------------------------------------------------------ ---------------------
Leonard Overman, Jr. Vice President $ 104,000
------------------------------ ------------------------------------------------------ ---------------------
Emerson Overman Chief of Operations $ 104,000
------------------------------ ------------------------------------------------------ ---------------------
Reginald Ibison Chief Technical Officer $ 140,000
------------------------------ ------------------------------------------------------ ---------------------
William R. Neale Vice President Marketing $ 144,000
------------------------------ ------------------------------------------------------ ---------------------
Ralph Proceviat Chief Financial Officer $ 144,000
------------------------------ ------------------------------------------------------ ---------------------
Darren Dumba Vice President Sales and Operations $ 144,000
------------------------------ ------------------------------------------------------ ---------------------
(1) The definitive compensation of the Company's officers will be determined by the Board of Directors of the Company.
</TABLE>
23
<PAGE>
The Company, through ILDC intends, to enter into employment agreements with the
individuals set out in the above table. It is anticipated that each will also be
entitled to the following: major medical health benefits; indemnification from
any claim or law suit which may be asserted against him when acting in his
official capacity for ILDC or the Company 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 shares of the Common
Stock of the Company pursuant to the stock option plan described below.
Board of Directors Report on Executive Compensation
The Company's Board of Directors will appoint an executive compensation
committee which will be responsible for reviewing and determining the annual
salary and other compensation of the executive officers and key employees of the
Company and ILDC following the closing of the Share Exchange. 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 intends to provide base salaries to its executive officers and key
employees sufficient to provide motivation to achieve certain operating goals.
In the future, executive compensation may include without limitation cash
bonuses, stock option grants pursuant to the stock option plan described below
and stock award grants. In addition, the Company may set up a pension plan or
similar retirement plans.
Stock Options
There are currently no stock options outstanding. However, the Board of
Directors and Majority Stockholders 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 the shares available for
issuance under the stock option plan will be registered on Form S-8 with the
Securities and Exchange Commission following the closing of the Share Exchange.
(See "2000 STOCK OPTION PLAN" below for further details.)
Familial Relationships
Anthony Overman, Emerson Overman and Leonard Overman, Jr., are sons of Leonard
Overman, Sr. and Viola Overman. Leonard Overman, Sr. and Viola Overman are
husband and wife.
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 matters referred to in or
covered by such section. The indemnification provided for is not exclusive of
any other rights to which the persons so indemnified may be entitled under any
By-Law, agreement, vote of stockholders or disinterested directors or otherwise,
both as to action in his official capacity and as to action in another capacity
by holding such office. Indemnification available to the Company's directors and
officers under the Certificate of Incorporation continues as to a person who has
ceased to be a director of officer and inures 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.
24
<PAGE>
2000 STOCK OPTION PLAN
----------------------
General.
The Board of Directors and Majority Stockholders have adopted and approved a
stock option plan (the "Plan"). The purpose of the Plan is to enable the Company
to offer its officers, directors, employees, 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:
o select the persons to whom options and Stock Rights are to be granted;
o determine the number of shares of Common Stock to be covered by each option
and Stock Right granted;
o approve forms of option agreements for use under the Plan;
o determine the terms and conditions of any option or Stock Right;
o 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;
o institute an option exchange program;
o interpret the Plan and awards granted under the Plan;
o 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;
o modify or amend each option or Stock Right issued;
o 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;
o 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
o 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.
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.
25
<PAGE>
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:
o 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.
o Exercise of Option. The Administrator determines when options become
exercisable, and may in its discretion, accelerate the vesting of any
outstanding option.
o 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.
o 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.
o 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.
o 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.
o 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.
o 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.
o 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 will be 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.
26
<PAGE>
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 affected 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 Share Exchange 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.
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:
o the fair market value of the shares at the date of the option exercise; or
o 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.
27
<PAGE>
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.
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-KSB for the fiscal year ended December 31, 1999; (ii) the Company's
Quarterly Report on Form 10-QSB for the quarter ended March 31, 2000; and (iii)
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:
Old Night, 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.
28
<PAGE>
EXHIBIT A
AMENDMENT TO ARTICLES OF INCORPORATION
RESOLVED, the Articles of Incorporation of Old Night, Inc. as follows:
1. The First Article be amended changing the name from Old Night, Inc. to
NxGen Networks, Inc.
2. The Certificate of Articles of Amendment of the Articles of Incorporation
as attached to this resolution is hereby approved.
<PAGE>
CERTIFICATE OF AMENDMENT
TO
ARTICLES OF INCORPORATION
OF
OLD NIGHT, INC.
Pursuant to the provisions of section 78.209, Nevada Revised Statutes,
the undersigned President and Secretary of Old Night, 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:
OLD NIGHT, INC.
Is hereby amended to read as follows:
ARTICLE FIRST
Corporate Name
The name of the Corporation is:
NXGEN NETWORKS, INC.
----------------------
The number of shares of the corporation outstanding and entitled to
vote on an amendment to the Articles of Incorporation is 5,460,400; 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 July __, 2000, at the Closing.
------------------------------ ------------------------------
Xenios Xenopoulos, Secretary Xenios Xenopoulos, President
On the _____ Day of July, 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
<PAGE>
EXHIBIT B
SHARE EXCHANGE AGREEMENT
SHARE EXCHANGE AGREEMENT
DATED AS OF
JUNE 30, 2000
AMONG
OLD NIGHT, INC.
INTERNATIONAL LONG DISTANCE CORPORATION
AND
THE STOCKHOLDERS OF
INTERNATIONAL LONG DISTANCE CORPORATION LISTED ON
THE SIGNATURE PAGES OF THIS AGREEMENT
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
<S> <C>
ARTICLE I - DEFINITIONS
Section 1.1 Definitions..................................................................................1
ARTICLE II - EXCHANGE OF SHARES
Section 2.1 Exchange of Shares...........................................................................2
Section 2.2 Closing......................................................................................2
Section 2.3 FIRPTA Withholding...........................................................................3
ARTICLE III - REPRESENTATIONS AND WARRANTIES OF ILDC
Section 3.1 Corporate Existence and Power................................................................3
Section 3.2 Corporate Authorization......................................................................3
Section 3.3 Governmental Authorization...................................................................3
Section 3.4 Non-Contravention............................................................................3
Section 3.5 Capitalization...............................................................................3
Section 3.6 Subsidiaries.................................................................................3
Section 3.7 Financial Statements.........................................................................4
Section 3.8 Absence of Certain Changes...................................................................4
Section 3.9 No Undisclosed or Contingent Liabilities.....................................................5
Section 3.10 Material Contracts..........................................................................5
Section 3.11 Litigation..................................................................................6
Section 3.12 Compliance with Laws and Court Orders.......................................................6
Section 3.13 Title to Properties: Encumbrances...........................................................6
Section 3.14 Equipment..................................................................................6
Section 3.15 Taxes.......................................................................................6
Section 3.16 Consents and Approvals......................................................................6
Section 3.17 Insurance...................................................................................6
Section 3.18 Customers and Suppliers.....................................................................7
Section 3.19 Accounts Receivable.........................................................................7
Section 3.20 Certain Interests...........................................................................7
Section 3.21 Intellectual Property......................................................................7
Section 3.22 Employee Benefit Plans......................................................................8
Section 3.23 Labor Matters...............................................................................8
Section 3.24 Licences and Permits........................................................................8
Section 3.25 Personnel..................................................................................8
Section 3.26 Bank Accounts...............................................................................8
Section 3.27 Environmental Matters.......................................................................8
Section 3.28 Disclosure..................................................................................9
ARTICLE IV - REPRESENTATIONS AND WARRANTIES OF THE STOCKHOLDERS AS TO THEMSELVES
Section 4.1 Capacity.....................................................................................9
Section 4.2 Title........................................................................................9
Section 4.3 Valid Agreement..............................................................................9
Section 4.4 Litigation...................................................................................9
Section 4.5 Trust Constitution and Power.................................................................9
Section 4.6 Governmental Authorization; Consents.........................................................9
Section 4.7 Non-Contravention...........................................................................10
Section 4.8 Acquisition for Investment; Informed Decision...............................................10
ARTICLE V - REPRESENTATIONS AND WARRANTIES OF OLD NIGHT
Section 5.1 Corporate Existence and Power...............................................................10
Section 5.2 Corporate Authorization.....................................................................10
Section 5.3 Governmental Authorization..................................................................10
Section 5.4 Non-Contravention...........................................................................10
Section 5.5 Capitalization..............................................................................11
Section 5.6 Reports and Financial Statements............................................................11
Section 5.7 Litigation..................................................................................12
<PAGE>
Section 5.8 Validity of Stock...........................................................................12
Section 5.9 No Undisclosed or Contingent Liabilities...................................................12
Section 5.10 Absence of Certain Changes...............................................................12
Section 5.11 Litigation. Orders.........................................................................12
Section 5.12 Title to Properties: Encumbrances..........................................................12
Section 5.13 Equipment..................................................................................12
Section 5.14 Compliance with Law.......................................................................12
Section 5.16 Consents and Approvals.....................................................................13
Section 5.17 Contracts, Commitments and Returns.........................................................13
Section 5.18 Insurance.................................................................................13
Section 5.19 Accounts Receivable........................................................................13
Section 5.20 Certain Interests..........................................................................13
Section 5.21 Employee Benefit Plans....................................................................13
Section 5.22 Labor Matters..............................................................................13
Section 5.23 Personnel..................................................................................13
Section 5.24 Environmental..............................................................................13
Section 5.25 Securities Laws............................................................................13
Section 5.26 Disclosure.................................................................................14
ARTICLE VI - COVENANTS OF ILDC AND THE STOCKHOLDERS
Section 6.1 Conduct of ILDC.............................................................................14
Section 6.2 ILDC Common Shares..........................................................................16
Section 6.3 Access to Information.......................................................................16
ARTICLE VII - ADDITIONAL COVENANTS OF THE PARTIES
Section 7.1 Best Efforts................................................................................16
Section 7.2 Old Night Annual Stockholder Meeting; Information Statement.................................16
Section 7.3 Certain Filings.............................................................................17
Section 7.4 Public Announcements........................................................................17
Section 7.5 Notices of Certain Events...................................................................17
ARTICLE VIII - CONDITIONS TO CLOSING
Section 8.1 Conditions to Obligations of Old Night and the Stockholders.................................17
Section 8.2 Conditions to Obligation of Old Night.......................................................18
Section 8.3 Conditions to Obligations of Stockholders...................................................18
ARTICLE IX - TERMINATION
Section 9.1 Grounds for Termination.....................................................................19
Section 9.2 Effect of Termination.......................................................................19
ARTICLE X - MISCELLANEOUS
Section 10.1 Survival...................................................................................20
Section 10.2 Notices....................................................................................20
Section 10.3 Amendments and Waivers.....................................................................21
Section 10.4 Expenses...................................................................................21
Section 10.5 Successors and Assigns.....................................................................21
Section 10.6 Governing Law..............................................................................21
Section 10.7 Jurisdiction...............................................................................21
Section 10.8 Counterparts; Third Party Beneficiaries....................................................21
Section 10.9 Entire Agreement...........................................................................22
</TABLE>
<PAGE>
SHARE EXCHANGE AGREEMENT
THIS AGREEMENT dated as of June 30, 2000 among Old Night,
Inc., a Nevada corporation ("Old Night"), International Long Distance
Corporation, a North Carolina corporation ("ILDC"), and the Stockholders of ILDC
listed on the signature pages of this Agreement (each a "Stockholder" and
collectively, the "Stockholders").
WHEREAS, each Stockholder is the owner of the number of shares
of common stock, par value $1.00 per share, of ILDC ("ILDC Common Shares") set
forth next to the name of such Stockholder on the signature pages of this
Agreement, such shares representing in the aggregate 80% of the issued and
outstanding ILDC Common Shares;
WHEREAS, the Stockholders and Old Night desire to effect an
exchange (the "Exchange") of ILDC Common Shares for shares of common stock, par
value $0.001 per share, of Old Night (the " Old Night Common Shares"), on the
terms and subject to the conditions set forth in this Agreement;
WHEREAS, for federal income tax purposes, it is intended that
the Exchange shall qualify as a reorganization under the provisions of Section
368(a) of the Internal Revenue Code of 1986, as amended (the "Code")
WHEREAS, the obligation of the Stockholders to consummate the
Exchange is subject to the approval by the stockholders of Old Night of the
appointment of Messrs. Anthony Overman, Don Spears and Mark Sampson to the Board
of Directors of Old Night and the amendment to the Old Night Charter to change
its name to NxGen Networks, Inc., such appointments and name change to take
effect only if the Exchange is consummated; and
WHEREAS, the Board of Directors of Old Night (the "Board of
Directors") has approved this Agreement, subject to the approval thereof by the
stockholders of Old Night in accordance with this Agreement, the requirements of
Nevada corporate law.
NOW, THEREFORE, the parties hereto agree as follows:
ARTICLE I
DEFINITIONS
Section 1.1 Definitions.
(a) The following terms, as used herein, have the following
meanings:
"Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or
under common control with such Person; PROVIDED that for
purposes of this Agreement, unless express provision is made
to the contrary, (i) neither ILDC nor any of its Subsidiaries
nor any Stockholder shall be considered an Affiliate of Old
Night and (ii) neither Old Night nor any of its Subsidiaries
shall be considered an Affiliate of ILDC.
"Balance Sheet" means the consolidated balance sheet of ILDC
and its Subsidiaries as of December 31, 1999.
"Balance Sheet Date" means December 31, 1999.
<PAGE>
"Benefit Arrangements" means all life and health insurance,
hospitalization, savings, bonus, deferred compensation,
incentive compensation, holiday, vacation, severance pay, sick
pay, sick leave, disability, retirement benefits, tuition
refund, service award, company car, scholarship, relocation,
fringe benefit, contracts, collective bargaining agreements,
workers' compensation, individual employment, consultancy or
severance contracts and other policies (whether written or
oral) or practices of providing employee or executive
compensation or benefits to employees which in any such case
is or was maintained, administered or contributed to by ILDC
or its Subsidiaries or in which ILDC or its Subsidiaries
participates or participated and which provides benefits to
current or former employees of ILDC or its Subsidiaries, other
than Employee Benefit Plans.
"Closing Date" means the date of the Closing.
"Material Adverse Effect" means an effect that would (i)
result in ILDC and its Subsidiaries having, as of or after the
Closing, any liabilities that would result or could reasonably
be expected to result in any liability that is material to
ILDC and its Subsidiaries, taken as a whole, other than
liabilities as to which ILDC has disclosed to Old Night, or
(ii) adversely affect or delay in any material respect the
consummation of the transactions contemplated by this
Agreement.
"1934 Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
"Person" means an individual, corporation, partnership,
association, trust or other entity or organization, including
a government or political subdivision or an agency or
instrumentality thereof.
"Pro Rata Share" means with respect to any Stockholder, the
ratio determined by dividing the number of ILDC Common Shares
owned by such Stockholder as of the Closing by the number of
ILDC Common Shares owned by all Stockholders as of the
Closing.
"Subsidiary" means, with respect to any Person, any entity of
which securities or other ownership interests having ordinary
voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time
directly or indirectly owned by such Person.
ARTICLE II
EXCHANGE OF SHARES
Section 2.1 Exchange of Shares. On the terms and subject to the conditions of
this Agreement, each Stockholder agrees to exchange ILDC Common Shares owned by
it for the number of Old Night Common Shares set forth opposite such
Stockholder's name on the signature page of this Agreement.
Section 2.2 Closing. The closing (the "Closing") of the Exchange shall take
place at the offices of ILDC, Global Tech Center, Hertford, North Carolina, as
soon as possible, but in no event sooner than five business days nor later than
10 business days, after satisfaction of the conditions set forth in Article IX,
or at such other time or place as Old Night and the Stockholders may agree. At
the Closing:
(a) Each Stockholder shall deliver to Old Night certificates for ILDC
Common Shares being exchanged by such Stockholder duly endorsed or
accompanied by stock powers duly endorsed in blank, with any required
transfer stamps affixed thereto.
(b) ILDC shall deliver to Old Night:
(i) a certificate, dated as of the Closing Date and executed by an
authorized officer of ILDC certifying the fulfillment of the
conditions specified in Article VIII, and
(ii) a certificate, dated as of the Closing Date and executed by the
Secretary of ILDC certifying ILDC's articles of incorporation and
all amendments, bylaws and resolutions of ILDC's board of
directors attached to the certificate.
(c) Old Night shall deliver to ILDC:
(i) a certificate, dated as of the Closing Date and executed by an
authorized officer of Old Night certifying the fulfillment of the
conditions specified in Article VIII, and
(ii) a certificate, dated as of the Closing Date and executed by the
Secretary of Old Night certifying Old Night's articles of
incorporation and all amendments, bylaws and resolutions of Old
Night's board of directors attached to the certificate.
<PAGE>
Old Night shall deliver to each Stockholder appropriately legended certificates
for the number of Old Night Common Shares contemplated by Section 2.1 no later
than five days from Closing.
Section 2.3 FIRPTA Withholding. Unless Old Night shall have received from each
of the Stockholders certification signed by such Stockholder to the effect that
such Stockholder is not a "foreign person" as defined in Section 1445 of the
Code, Old Night shall withhold and remit to the Internal Revenue Service the
amount required by Section 1445 of the Code to be withheld with respect to such
Stockholder.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF ILDC
ILDC represents and warrants to Old Night that:
Section 3.1 Corporate Existence and Power. ILDC is a corporation duly
incorporated, validly existing and in good standing under the laws of North
Carolina and has all corporate powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted. ILDC has heretofore delivered to Old Night true and
complete copies of its certificate of incorporation and bylaws as currently in
effect. Except as set forth on Schedule 3.1, ILDC does not do business as a
foreign corporation in any jurisdiction where the failure to be qualified as a
foreign corporation would have a material adverse effect on the operations,
condition (financial or other), assets, liabilities, earnings or prospects of
ILDC.
Section 3.2 Corporate Authorization. The execution, delivery and performance by
ILDC of this Agreement are within ILDC's corporate powers and have been duly
authorized by all necessary corporate action on the part of ILDC. This Agreement
constitutes a valid and binding agreement of ILDC.
Section 3.3 Governmental Authorization. The execution, delivery and performance
by ILDC of this Agreement require no action by or in respect of, or filing with,
any governmental body, agency or official or any other applicable requirements.
Section 3.4 Non-Contravention. The execution, delivery and performance by ILDC
of this Agreement do not and will not:
(a) violate the certificate of incorporation or bylaws of each of
ILDC and its Subsidiaries,
(b) assuming compliance with the matters referred to in Section 3.3
and 4.6, violate in any material respect any applicable law,
rule, regulation, judgment, injunction, order or decree, or
(c) require any consent or other action by any Person under, other
than set out in Schedules 3.4, 3.10 and 3.13, or constitute a
default under, or give rise to any right of termination,
cancellation or acceleration of any right or obligation of ILDC
or any of its Subsidiaries or to a loss of any benefit to which
ILDC or any of its Subsidiaries is entitled under, any material
agreement or other instrument binding on ILDC or any of its
Subsidiaries or any material license, franchise, permit or other
similar authorization held by ILDC or any of its Subsidiaries.
Section 3.5 Capitalization. The authorized capital stock of ILDC consists of
11,000,000 shares of Common Stock with a par value of $1.00 per share of which
5,500,000 shares are outstanding as of the date of this Agreement. All
outstanding shares of capital stock of ILDC have been duly authorized and
validly issued and are fully paid and non-assessable. None of the outstanding
shares of capital stock of ILDC has been issued in violation of, or is subject
to, any preemptive or subscription rights. Except as set forth in Schedule 3.7
(with respect to the options which may be granted to BDR, Inc.), there are no
outstanding subscriptions, stock options, stock warrants, options or other
rights to acquire from ILDC, or other obligation of ILDC to issue, any capital
stock, voting securities or securities convertible into or exchangeable for
capital stock or voting securities of ILDC. A complete list of the stockholders
of ILDC and the number and class of shares held is shown on Schedule 3.5.
There are no outstanding obligations of ILDC to repurchase, redeem or otherwise
acquire any ILDC Shares.
Section 3.6 Subsidiaries. ILDC has no subsidiaries. ILDC has, or has had, equity
investments in the entities referenced in Schedule 3.6.
<PAGE>
Section 3.7 Financial Statements. ILDC has delivered to Old Night copies of the
regularly-prepared consolidated balance sheet of ILDC and its Subsidiaries as of
December 31, 1999 and the related regularly-prepared consolidated statements of
income and changes in retained earnings for each of the years ended December 31,
1998 and 1997. Such financial statements present fairly the financial position
of ILDC and its Subsidiaries as of the dates thereof and their results of
operations and changes in retained earnings for the periods then ended, in each
case prepared on a tax basis, except as set forth on Schedule 3.7.
Section 3.8 Absence of Certain Changes. Except as set forth on Schedule 3.8,
since the date of the ILDC Balance Sheet, ILDC has conducted its business only
in the ordinary course and consistent with part practice, and has not:
(a) Suffered any material adverse change in its operations, condition
(financial or otherwise), assets, liabilities, earnings, working
capital or prospects;
(b) Incurred any liabilities or obligations (absolute, accrued, contingent
or otherwise) except immaterial items incurred in the ordinary course
of business and consistent with past practice (including obligations
or liabilities arising from one transaction or a series of related or
similar transactions, and all periodic installments or payments under
any lease of other agreement providing for periodic installments or
payments, as a single obligation or liability), or increased, or
experienced any change in any assumptions underlying or methods of
calculating, any bad debt, contingency or other reserves;
(c) Paid, discharged or satisfied any claims, liabilities or obligations
(absolute, accrued, contingent or otherwise) other than the payment,
discharge or satisfaction in the ordinary course of business and
consistent with past practice of liabilities and obligations reflected
or reserved against in the ILDC Balance Sheet or incurred in the
ordinary course of business and consistent with past practice since
the date of the ILDC balance Sheet;
(d) Permitted or allowed any of its assets to be subjected to any
mortgage, pledge, lien, security interest encumbrance, restriction or
charge of any kind;
(e) Written down the value of any inventory or written off as
uncollectible any notes or accounts receivable;
(f) Canceled any debts or waived any claims or rights or substantial
value;
(g) Sold, transferred or otherwise disposed of any of its properties or
assets, except in the ordinary course of business and consistent with
past practice;
(h) Disposed of or permitted to lapse any rights to the use of any patent,
trademark, trade name, service mark or copyright, or disposed of or
disclosed to any person any trade secret, formula, process or know-how
not therefore a matter of public knowledge;
(i) Granted any general increase in the compensation of employees
(including any such increase pursuant to any bonus, pension, profit
sharing or other plan or commitment) or any increase in the
compensation payable or to become payable to any employee, and not such
increase is customary on a periodic basis or required by agreement or
understanding;
(j) Made any capital expenditure or commitment for additions to its
property, equipment or intangible capital assets in excess of
$100,000;
(k) Made any change in any method of accounting or accounting practice or
failed to maintain its books, accounts and records in the ordinary
course of business and consistent with past practice;
(l) Failed to maintain any properties or equipment in good operating
condition and repair;
(m) Failed to maintain in full force and affect all existing policies of
insurance at least at such levels as were in effect prior to such date
or canceled any such insurance or taken or failed to take any action
that would enable the insurers under such policies to avoid liability
for claims arising out of occurrences prior to the Closing;
<PAGE>
(n) Entered into any transaction or made or entered into any material
contract or commitment, or terminated or amended any material contract
or commitment, except in the ordinary course of business and
consistent with past practice, and not in excess of current
requirements;
(o) Taken any action that could have a material adverse effect on its
business organization or its current relationships with its employees,
suppliers, distributors, advertisers, subscribers or others having
business relationships with it;
(p) Declared, paid or set aside for payment and dividend or other
distribution in respect of its capital stock or redeemed, purchased or
otherwise acquired, directly or indirectly, any shares of its capital
stock or other securities; or
(q) Agreed in writing or otherwise to take any action with respect to any
of the matters described in this Section 3.8.
Section 3.9 No Undisclosed or Contingent Liabilities. Except as set forth on
Schedule 3.9, ILDC has no liabilities or obligations of any nature (whether
absolute, accrued, contingent or otherwise and whether due or to become due)
that are not fully reflected on the ILDC Balance Sheet, except for liabilities
and obligations incurred in the ordinary course of business since the date
thereof, and there is no basis for the assertion against ILDC of any liability
or obligation of any nature whatsoever not fully reflected on the ILDC Balance
Sheet.
Section 3.10 Material Contracts.
(a) Except as disclosed in Schedule 3.10, ILDC is not a party to or bound
by:
(i) any lease (whether of real or personal property), other than
leases which in the aggregate provide for annual payments of less
than $50,000;
(ii) any agreement for the purchase of materials, supplies, goods,
services, equipment or other assets that will continue in effect
after the Closing other than such agreements which in the
aggregate provide for payments of less than $50,000;
(iii)any sales, distribution or other similar agreements providing
for the sale by ILDC or any of its Subsidiaries of materials,
supplies, goods, services, equipment or other assets that will
continue in effect after the Closing involving payments in the
aggregate in excess of $25,000;
(iv) any partnership, joint venture or other similar agreement or
arrangement;
(v) any agreement relating to the acquisition or disposition of any
business (whether by merger, sale of stock, sale of assets or
otherwise);
(vi) any agreement relating to indebtedness for borrowed money or the
deferred purchase price of property (in either case, whether
incurred, assumed, guaranteed or secured by any asset);
(vii)any license, franchise or similar agreement other than licenses,
franchises or agreements which in the aggregate provide for
payments of less than $50,000;
(viii) any agency, dealer, sales representative, marketing or other
similar agreements that will continue in effect after the Closing
involving payments in excess of $25,000;
(ix) any agreement that limits the freedom of ILDC or any of its
Subsidiaries to compete in any line of business or with any
Person or in any area or which would so limit the freedom of ILDC
or any of its Subsidiaries after the Closing Date;
(x) any material agreement with: (A) any Stockholder or any of its
Affiliates, (B) any Person 5% or more of whose outstanding voting
securities are directly or indirectly owned, controlled or held
with power to vote by ILDC, or (C) any director or officer of
ILDC or any of its Affiliates or any "associates" or members of
the "immediate family" (as such terms are respectively defined in
Rule 12b-2 and Rule 16a-1 of the 1934 Act) of any such director
or officer; or
(xi) any other material agreement, commitment, arrangement or plan
involving ILDC or any of its Subsidiaries that will continue
after the Closing.
<PAGE>
(b) Neither ILDC nor any of its Subsidiaries nor, to the knowledge of ILDC
or any Stockholder, any other party to any agreement, contract, plan,
lease, license, franchise, permit or other authorization, arrangement
or commitment disclosed in any Schedule to this Agreement or required
to be disclosed pursuant to this Section is in default or breach in any
material respect under the terms of any such agreement, contract, plan,
lease, license, franchise, permit or other authorization, arrangement
or commitment.
Section 3.11 Litigation. Except as disclosed on Schedule 3.11, there is no
action, suit, investigation or proceeding pending by or against or, to the
knowledge of ILDC, threatened against or affecting, ILDC or any of its
Subsidiaries or any of their respective properties (whether now or previously
owned) before any court or arbitrator or any governmental body, agency or
official, which could reasonably be expected to result in a material liability
to ILDC or any of its Subsidiaries or which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement.
Section 3.12 Compliance with Laws and Court Orders. To the best of its knowledge
ILDC is not in violation in any material respect of, and has not since inception
violated in any material respect, any applicable law, rule, regulation,
judgment, injunction, order or decree.
Section 3.13 Title to Properties: Encumbrances. Except as set forth on Schedule
3.13, ILDC does not own or lease any real property. ILDC has good, marketable
and defensible title to all of its properties and assets, including any
vehicles, free and clear of all liens, charges and encumbrances, except liens
for taxes not yet due and payable and such liens or other imperfections of
title, if any, that do not materially detract from the value of or interfere
with the present use of the property affected thereby or that would not and are
not reasonably likely to have a Material Adverse Effect, and all leases pursuant
to which ILDC leases other real or personal property, including any vehicles,
are in good standing, valid and effective in accordance with their respective
terms, and there is not under any such lease any existing default or event of
default (or to ILDC's knowledge any event which with notice or lapse of time, or
both, would constitute a default).
Section 3.14 Equipment. The equipment of ILDC has no known material defects and
is in good operating condition and repair (ordinary wear and tear excepted) and
is adequate for its current uses. None of such equipment is in need of known
maintenance or repairs except for ordinary routine maintenance and repairs that
are not material in nature or cost.
Section 3.15 Taxes.
(a) ILDC has timely filed (including any applicable extension periods) all
tax reports, returns and forms required to be filed by applicable
federal, state, local or foreign tax laws, and all such reports,
returns and forms are correct and complete; copies of all tax returns
for ILDC in respect of all years not barred by the statute of
limitations have been delivered by ILDC to Old Night. None of ILDC's
tax returns have been examined or audited by the Internal Revenue
Service or any other state or local taxing authority.
(b) Except as set forth in Schedule 3.15, ILDC has timely paid all federal,
state, local and foreign income payroll, withholding, excise, sales,
use, real and personal property, use and occupancy, business and
occupancy, business and occupation, mercantile, real estate, capital
stock and franchise or other tax due or claimed to be due from ILDC by
the Internal Revenue Service or any Authority. No tax liens have been
filed on any property or assets of ILDC and no claims are being
asserted with respect to any taxes.
(c) ILDC has complied with all applicable laws, rules and regulations
relating to the payment and withholding of taxes and has withheld all
amounts required by law to be withheld from the wages or salaries of
its employees, and is not liable for any taxes or other charges for
failure to comply with such laws, rules and regulations.
Section 3.16 Consents and Approvals. Except as set forth on Schedule 3.16, ILDC
is not required to obtain, transfer or cause to be transferred any consent,
approval, license, permit or authorization of, or make any declaration, filing
or registration with, any third party or any governmental or regulatory
authority in connection with (a) the execution and delivery of this Agreement,
(b) the execution and delivery of any agreement contemplated hereby, (c) the
consummation of the transactions contemplated hereby or thereby or (d) the
ownership and operation by Old Night of ILDC.
<PAGE>
Section 3.17 Insurance. All policies of fire, medical, life, liability, product
liability, workmen's compensation, health and other forms of insurance currently
in effect with respect to ILDC's business are in full force and effect, all
premiums with respect thereto covering all periods up to and including the
Closing Date have been paid, and no notice of cancellation, termination or
non-renewal has been received with respect to any such policy. Such policies are
sufficient for compliance with all requirements of law and of all agreements to
which ILDC is a party, are valid, outstanding and enforceable policies; provide
adequate insurance coverage for ILDC's business; and the coverage provided
thereby, with respect to any act or event occurring on or prior to the Closing
Date, will not in any way be affected by or terminate or lapse by reason of the
transactions contemplated by this Agreement. No risks with respect to the ILDC's
business are or have been designated by ILDC as being self-insured.
Section 3.18 Customers and Suppliers. No material adverse change has occurred in
the business relationship of ILDC with any of its significant customers or
suppliers and, to ILDC's knowledge, no facts exist and no events have occurred
that could reasonably be expected to result in a material adverse change to any
such relationship.
Section 3.19 Accounts Receivable. All accounts receivable of ILDC, whether
reflected on the ILDC Balance Sheet or subsequently created through the Closing
Date, represent sales actually made or services actually performed in the
ordinary course of business and are current and either have been collected in
full or to ILDC's knowledge will be collectable in full, without any setoff of
counterclaim.
Section 3.20 Certain Interests. Except as set forth on Schedule 3.20, neither
ILDC nor any officer, director or shareholder thereof, nor any of their
respective affiliates, has:
(a) any direct or indirect interest (other than the ownership of less than
one percent of the outstanding securities of a publicly held company)
in any corporation or business that competes with ILDC, or
(b) any direct or indirect interest in any property or assets used by, or
relating to ILDC or its business, except through the ownership of
ILDC's capital stock.
Section 3.21 Intellectual Property.
(a) ILDC owns, free and clear of all liens, mortgages, security interests,
charges and encumbrances and has good and marketable title to, or holds
adequate licenses or otherwise possess all rights necessary to use, all
patents, trademarks, service marks, trade names, copyrights (including
any applications for any of the foregoing), inventions, discoveries,
processes, know-how, trade secrets, scientific, technical, engineering
and marketing data, object and source codes, and techniques used or
proposed to be used in, or necessary for, the conduct of ILDC's
business as now conducted or proposed to be conducted (collectively,
the "Intellectual Property"). The attached Schedule 3.21 contains a
correct and complete list of all such Intellectual Property and any
applications pending or that have been denied.
(b) All applications for the registration of patents, trademarks and
copyrights constituting a part of the Intellectual Property are valid
and subsisting, and are duly recorded and being prosecuted in the name
of ILDC.
(c) ILDC to its knowledge has the sole and exclusive right to use all of
the Intellectual Property in all jurisdictions in which ILDC conducts
or proposes to be conducting its business, and the consummation of the
transactions contemplated hereby will not alter or impair any such
rights.
(d) No claims have been asserted by any person challenging or questioning
the ownership, validity, enforceability or use by ILDC of any of the
Intellectual Property and, to the knowledge of ILDC, there is not valid
basis for such claim, and to the knowledge of ILDC, the use or other
exploitation of the Intellectual Property by ILDC does not infringe on
or dilute the rights of any person; and to the knowledge of ILDC, no
other person is infringing on the rights of ILDC with respect to any of
the Intellectual Property.
(e) ILDC has taken reasonable security measures to protect the secrecy,
confidentiality and value of its trade secrets and other confidential
information.
<PAGE>
(f) ILDC has delivered to Old Night all documents with respect to any
invention, process, design, computer program or other know-how or trade
secret included in the Intellectual Property, which documents are
accurate in all material respects and reasonably sufficient in detail
and content to identify and explain such invention, process, design,
computer program or other know-how or trade secret and to facilitate
its full and proper use without reliance on the special knowledge or
memory of any person.
Section 3.22 Employee Benefit Plans. Schedule 3.22 sets forth a list of all
Employee Benefit Plans, Benefit Arrangements and Options. Except as set forth on
Schedule 3.22, no employee of ILDC or any of its Subsidiaries will be entitled
to any retirement, severance or similar benefit from ILDC or any of its
Subsidiaries after the Closing or will become entitled to any such benefit from
ILDC or any of its Subsidiaries after the Closing as a result of the
transactions contemplated by this Agreement. No Employee Benefit Plan is subject
to Title IV of ERISA and neither ILDC nor any of its Subsidiaries has incurred
any liability under Title IV of ERISA (whether direct, indirect, actual or
contingent).
Section 3.23 Labor Matters.
(a) ILDC has and is currently complying in al material respects with all
applicable laws relating to employment and employment practices, terms
and conditions of employment, and wages and hours, and is not engaged
in any unfair labor practice or unlawful employment practice;
(b) There is no unfair labor practice charge or complaint against ILDC
pending or threatened before the National Labor Relations Board nor, to
the knowledge of ILDC, is there any basis for any such charge or
complaint;
(c) There is no labor strike, slowdown or work stoppage pending or
threatened against ILDC;
(d) ILDC has not experienced any significant work stoppages or been a party
to any proceedings before the National Labor Relations Board involving
any significant issues or been a party to any arbitration proceedings
arising out of or under collective bargaining agreements; and
(e) There is no charge or complaint pending or threatened against ILDC
before the Equal Employment Opportunity Commission or the Department of
Labor or any state or local agency of similar jurisdiction. No
employees of ILDC are represented by any labor union and there is no
collective bargaining agreement in effect with respect to such
employees. To the knowledge of ILDC, no labor union has engaged in any
organizing activities with respect to ILDC's employees.
Section 3.24 Licences and Permits. ILDC has obtained, and is in compliance in
all material respects with, all necessary and material Governmental
Authorizations required by all federal, state, local and other governmental or
regulatory authorities and all courts and other tribunals for the conduct of the
business and operations of ILDC as now conducted (collectively, the "Permits").
To ILDC's knowledge: (i) there are no proceedings currently pending or
threatened which will validly result in the revocation, cancellation or
suspension, or any adverse modification, of any such Permits such that it will
materially and adversely affect ILDC and its business and/or assets, (ii) there
are no disciplinary actions under any such Permits against ILDC, pending or
threatened and there are no prior proceedings or disciplinary actions which have
resulted in materially adverse action against ILDC and (iii) no governmental or
regulatory authority has refused to grant or denied any license or permit
application filed by ILDC and such refusal or denial has become final and
nonappealable. The attached Schedule 3.24 contains a correct and complete list
of all such Permits and any Permit applications pending or that have been
denied.
Section 3.25 Personnel. Schedule 3.25 contains an accurate and complete list of
(a) the names, titles and current salaries of all officers of ILDC and (b) the
wage rates of non-salaried and non-executive salaried employees of ILDC by
classification. ILDC is not in default with respect to any obligation to any of
its employees.
Section 3.26 Bank Accounts. Schedule 3.26 sets forth the names and locations of
all banks, trust companies, savings and loan associations and other financial
institutions at which ILDC has accounts or safe deposit boxes and the names of
all persons authorized to draw thereon or to have access thereto.
<PAGE>
Section 3.27 Environmental Matters.
(a) ILDC, to the knowledge of ILDC, is not required to obtain any permits,
licenses or other authorizations under federal, state of local laws,
rules and regulations relating to pollution or protection of the
environment (collectively, the "Environmental Laws").
(b) ILDC has not received any notice alleging non-compliance with any
Environmental Laws. There is no civil, criminal or administrative
action, suit, demand, claim, investigation, proceeding, notice or
demand letter pending or threatened against ILDC relating in any way to
any Environmental Laws.
(c) There are no past or present events or conditions relating to ILDC and
caused by ILDC that may interfere with or prevent compliance with any
Environmental Laws or that may give rise to any common law or other
legal liability thereunder.
Section 3.28 Disclosure. No representation or warranty by ILDC contained in this
Agreement, and no statement contained in any document, list, certificate or
other writing furnished or to be furnished by or on behalf of ILDC to Old Night
or any of its representatives in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading. For purposes of this Agreement,
disclosure on one or more schedules will be deemed disclosure on any other
schedule which may require said disclosure.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES
OF THE STOCKHOLDERS AS TO THEMSELVES
Each Stockholder hereby represents and warrants to Old Night, as to such
Stockholder and no other Stockholder, that:
Section 4.1 Capacity. Such Stockholder is either an individual, corporation or
a trust.
Section 4.2 Title. Such Stockholder is the record and beneficial owner of, and
has full right, title and interest in and to, ILDC Common Shares listed on the
signature pages hereof adjacent to such Stockholder's name, free and clear of
any Lien. Except for the voting trust agreement attached in Schedule 4.2, the
ILDC Common Shares are not subject to any other contract, agreement,
arrangement, commitment or understanding restricting or otherwise relating to
the voting, dividend rights or disposition of such ILDC Common Shares. At the
Closing, such Stockholder will transfer and deliver to Old Night valid title to,
and all of such Stockholder's right, title and interest in and to, such ILDC
Common Shares free and clear of any Lien or any claim in respect of such shares,
including under any applicable community property law.
Section 4.3 Valid Agreement. This Agreement has been duly authorized, executed
and delivered by such Stockholder and constitutes a valid and binding agreement
of such Stockholder.
Section 4.4 Litigation. There is no action, suit or proceeding pending or, to
the knowledge of such Stockholder, threatened against or affecting such
Stockholder or such Stockholder's properties before any court, arbitrator or
governmental body, agency or official which in any manner challenges or seeks to
prevent, enjoin, alter or materially delay the transactions contemplated by this
Agreement.
Section 4.5 Trust Constitution and Power. If such Stockholder is a trust:
(a) such Stockholder will prior to Closing, deliver to Old Night a true
and complete copy of such Stockholder's trust agreement or other
constitution document as currently in effect, and
(b) the execution, delivery and performance by such Stockholder of this
Agreement, and the consummation by such Stockholder of the transaction
contemplated hereby are within such Stockholder's powers and have been
duly authorized by all necessary action of such Stockholder's trustees
or other relevant parties.
<PAGE>
Section 4.6 Governmental Authorization; Consents.
(a) The execution, delivery and performance by such Stockholder of this
Agreement require no action by or in respect of, or filing with, any
governmental body, agency, official or authority.
(b) No consent, approval, waiver or other action by any Person (other than
any governmental body, agency, official or authority referred to in
Section 4.6(a) above) under any contract, agreement, indenture, lease,
instrument or other document to which such Stockholder is a party or
by which such Stockholder is bound is required for the execution,
delivery and performance of this Agreement by such Stockholder or the
consummation by the Stockholder of the transactions contemplated
hereby.
Section 4.7 Non-Contravention. The execution, delivery and performance by such
Stockholder of this Agreement do not and will not:
(a) if such Stockholder is a trust, contravene or conflict with the trust
agreement or other constitution document, as applicable, of such
Stockholder,
(b) assuming compliance with the matters referred to in Section 4.6(a),
contravene or conflict with or constitute a violation of any provision
of any law, regulation, judgment, injunction, order or decree binding
on or applicable to such Stockholder,
(c) constitute a default under or give rise to any right of termination,
cancellation or acceleration of any right or obligation of such
Stockholder under any material agreement, contract or other instrument
binding on such Stockholder or under any material license, franchise,
permit or other similar authorization held by such Stockholder, or
(d) result in the creation or imposition of any Lien on ILDC Common Shares
held by such Stockholder.
Section 4.8 Acquisition for Investment; Informed Decision. Such Stockholder is
acquiring the Old Night Common Shares for its own account and not with a view
to, or for sale in connection with, any distribution thereof. Such Stockholder
has sufficient knowledge and experience in financial and business matters as to
be capable of evaluating the merits and risks of its acquisition of the Old
Night Common Shares in accordance with this Agreement, and of its decision to
enter into and perform this Agreement. Such Stockholder has been given an
opportunity to ask questions and receive answers from ILDC and Old Night
concerning the business and financial condition of ILDC and Old Night,
concerning the terms and conditions of this Agreement, and concerning such other
matters that such Stockholder deemed relevant in connection with its decision to
enter into this Agreement. In particular, such Stockholder acknowledges that
such Stockholder's rights under this Agreement may not be assigned without Old
Night's written consent.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF OLD NIGHT
Old Night represents and warrants to each Stockholder that:
Section 5.1 Corporate Existence and Power. Old Night is a corporation duly
incorporated, validly existing and in good standing under the laws of the State
of Nevada and has all corporate powers and all material governmental licenses,
authorizations, permits, consents and approvals required to carry on its
business as now conducted. A copy of the Articles of Incorporation of Old Night
has been delivered to ILDC and such copy is complete and correct in full force
and effect on the date of this Agreement.
Section 5.2 Corporate Authorization. Except for the approval by the shareholders
of Old Night of this Agreement and the Amendment, the execution, delivery and
performance by Old Night of this Agreement are within the corporate powers of
Old Night and have been duly authorized by the disinterested directors of the
Board of Directors and by all other necessary corporate action on the part of
Old Night. This Agreement constitutes a valid and binding agreement of Old
Night.
<PAGE>
Section 5.3 Governmental Authorization. The execution, delivery and performance
by Old Night of this Agreement require no action by or in respect of, or filing
with, any governmental body, agency or official other than the filing of the
Information Statement being delivered to the stockholders of Old Night.
Section 5.4 Non-Contravention. The execution, delivery and performance by Old
Night of this Agreement do not and will not:
(a) violate the charter or bylaws of Old Night, or
(b) assuming compliance with the matters referred to in Section 5.3,
violate any applicable law, rule, regulation, judgment, injunction,
order or decree which, singly or in the aggregate:
(i) is reasonably likely to have a material adverse effect on the
condition, financial or otherwise, or the earnings or business
affairs of Old Night and its Subsidiaries, considered as one
enterprise, or
(ii) would adversely affect in any material respect the
consummation of the transactions contemplated by this
Agreement.
(c) violate, conflict with, or constitute a default (or an event or
condition that, with notice or lapse of time or both, would constitute
a default) under, or result in the termination of, or accelerate the
performance required by, or cause the acceleration of the maturity of
any liability or obligation pursuant to, or result in the creation or
imposition of any security interest, lien, charge or other encumbrance
upon any of the property or assets of Old Night under any note, bond,
mortgage, indenture, deed of trust, license, lease, contract,
commitment, understanding, arrangement, agreement or restriction of any
kind or character to which Old Night is a party or by which Old Night
may be bound or affected or to which any of the property or assets of
Old Night may be subject.
Section 5.5 Capitalization. The authorized capital stock of Old Night consists
of 50,000,000 Old Night Common Shares (of which as of June 26, 2000, 5,460,400
shares were outstanding). Old Night has no other class of shares. The Old Night
Common Shares to be issued pursuant to this Agreement are duly authorized and,
when delivered by Old Night pursuant to this Agreement, will be validly issued
and fully paid and non-assessable. The issuance of the Old Night Common Shares
is not subject to preemptive or other similar rights. Old Night has no other
capital stock authorized, issued or outstanding. Old Night has arranged two
private placements. The first private placement consists of 1,200,000 units at a
price of $5.00 per unit for an aggregate amount of US$ 6,000,000. The $6,000,000
shall be raised prior to the Closing and be available as cash to Old Night prior
to Closing. Each "Unit" consists of one share in the common stock of Old Night
and one share purchase warrant ("Warrant") with each Warrant entitling the
holder to purchase one common share in Old Night for US$ 5.00 per share at any
time on or before three years from the date of the acquisition of the Units by
the purchasers. In the second private placement 400,000 shares will be sold at a
purchase price of $5.00 per share. Except for the Old Night shares and warrants
to be issued pursuant to the foregoing private placements, there are no
outstanding subscriptions, stock options, warrants or other agreements or
commitments obliging Old Night to issue additional shares of its capital stock
or options, warrants or other securities convertible into or exchangeable for
shares of its capital stock. A complete list of the stockholders of Old Night
and the number of shares held is shown on Schedule 5.5.
Section 5.6 Reports and Financial Statements. Old Night has previously furnished
to ILDC true and complete copies of:
(a) Old Night's Annual Report on Form 10-KSB filed with the Securities and
Exchange Commission (the "SEC") for the year ended December 31, 1999;
(b) Old Night's Quarterly Report on Form 10-QSB filed with the SEC for the
year ended March 31, 2000 and
(b) the Form 10SB filed originally filed by Old Night with the SEC.
As of their respective dates, such reports and information statements
(collectively, the " Old Night Sec Reports")
(i) complied as to form in all material respects with the applicable
requirements of the 1934 Act, and the rules and regulations
thereunder and
<PAGE>
(ii) did not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or
necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading.
The audited consolidated financial statements included in the Old Night SEC
Reports (including any related notes and schedules) fairly present the financial
position of Old Night and its consolidated Subsidiaries as of the dates thereof
and the consolidated results of operations and cash flows for the periods or as
of the dates then ended (subject, where appropriate, to normal year-end accrual
adjustments), in each case in accordance with past practice and generally
accepted accounting principles consistently applied during the periods involved
(except as otherwise disclosed in the notes thereto).
Section 5.7 Litigation. There is no action, suit, investigation or proceeding
pending against, or to the knowledge of Old Night, threatened against or
affecting, Old Night before any court or arbitrator or any governmental body,
agency or official which in any manner challenges or seeks to prevent, enjoin,
alter or materially delay the transactions contemplated by this Agreement.
Section 5.8 Validity of Stock. The shares of Old Night Common Stock to be issued
in the share exchange pursuant to this Agreement will be duly authorized and,
when issued and delivered in accordance with this Agreement, will be validly
issued, fully paid and non-assessable with no personal liability attaching to
the ownership of these shares, and will not be subject to preemptive rights.
Section 5.9 No Undisclosed or Contingent Liabilities. Old Night has no
liabilities or obligations of any nature (whether absolute, accrued, contingent
or otherwise and whether due or to become due) that are not fully reflected on
the Old Night Balance Sheet, except for liabilities and obligations incurred in
the ordinary course of business since the date thereof, and there is no basis
for the assertion against Old Night of any liability or obligation of any nature
whatsoever not fully reflected on the Old Night Balance Sheet.
Section 5.10 Absence of Certain Changes. Since the date of the Old Night Balance
Sheet, Old Night has conducted its business only in the ordinary course and
consistent with past practice.
Section 5.11 Litigation. Orders. There are no claims, actions, suits,
proceedings, investigations or inquiries pending before any court, arbitrator or
governmental or regulatory official or office, or threatened against or
affecting Old Night or questioning the validity of this Agreement, the
transactions contemplated hereby or any action taken or to be taken by Old Night
pursuant to this Agreement or pursuant to any other agreement contemplated
hereby, at law or in equity, before or by any federal, state, local or foreign
governmental authority; nor is there any valid basis for any such claim, action,
suit, proceeding, inquiry or investigation. Old Night is not subject to any
judgement, order or decree entered in any lawsuit or proceeding that has had or
may have a material adverse effect on Old Nights's ability to acquire any
property for the use or benefit of Old Night or to conduct its business in any
area.
Section 5.12 Title to Properties: Encumbrances. Old Night does not own or lease
any real property.
Section 5.13 Equipment. Old Night has no equipment.
Section 5.14 Compliance with Law. Old Night is currently in compliance in all
material respects with all applicable laws (whether statutory or otherwise),
rules, regulations, orders, ordinances, judgments, decrees, writs and
injunctions of all federal, state, local or foreign governmental authorities
(collectively, "Laws"), including all Laws relating to the safe conduct of Old
Night's business, environmental protection and conservation, antitrust, taxes,
consumer protection, currency exchange, equal opportunity, health, sanitation,
fire zoning building, occupational safety, pension, securities and trademark and
copyright; and Old Night has not received notification in the last three years
of any asserted present or past failure to so comply. Old Night is not required
to obtain any permits, licenses or other authorizations under the Laws for Old
Night to conduct its business.
Section 5.15 Taxes.
<PAGE>
(a) Old Night has or will have filed by closing (including any applicable
extension periods) all tax reports, returns and forms required to be
filed by applicable federal, state, local or foreign tax laws, and all
such reports, returns and forms are correct and complete; copies of all
tax returns for Old Night in respect of all years not barred by the
statute of limitations have been delivered by Old Night to ILDC. None
of Old Night's tax returns have been examined or audited by the
Internal Revenue Service or any other state or local taxing authority.
(b) Old Night has timely paid all federal, state, local and foreign income
payroll, withholding, excise, sales, use, real and personal property,
use and occupancy, business and occupancy, business and occupation,
mercantile, real estate, capital stock and franchise or other tax due
or claimed to be due from Old Night by the Internal Revenue Service or
any authority. No tax liens have been filed on any property or assets
of Old Night and no claims are being asserted with respect to any
taxes.
(c) Old Night has complied with all applicable laws, rules and regulations
relating to the payment and withholding of taxes and has withheld all
amounts required by law to be withheld from the wages or salaries of
its employees, and is not liable for any taxes or other charges for
failure to comply with such laws, rules and regulations.
Section 5.16 Consents and Approvals. 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 Old Night, is required by or with respect to Old Night in connection with
the execution and delivery of this Agreement and any related agreements to which
Old Night is a party or the consummation of the transactions contemplated hereby
and thereby, except for
(a) such consents, waivers, approvals, orders, authorizations,
registrations, declarations and filings as may be required under
applicable securities laws, and which are disclosed in Schedule 5.16;
and
(b) the filing of the Articles of Amendment with the Secretary of State of
the Nevada.
Section 5.17 Contracts, Commitments and Returns. Old Night is not a party to,
nor is Old Night bound by any contracts, obligations or agreements of any kind
except for this Agreement.
Section 5.18 Insurance. Old Night has no insurance policies of any kind.
Section 5.19 Accounts Receivable. Old Night has no accounts receivable.
Section 5.20 Certain Interests. Neither Old Night nor any officer, director or
shareholder thereof, nor any of their respective affiliates, has:
(a) any direct or indirect interest (other than the ownership of less than
one percent of the outstanding securities of a publicly held company)
in any corporation or business that is involved in or competes with
Old Night, or
(b) any direct or indirect interest in any property or assets used by, or
relating to Old Night or its business, except through the ownership of
Old Night's capital stock.
Section 5.21 Employee Benefit Plans. Old Night has no employees or employee
benefit plans of any sort whatsoever.
Section 5.22 Labor Matters. Old Night has not had any employees for over 10
years or more and has no charges or complaint pending or threatened against Old
Night concerning labor matters.
Section 5.23 Personnel. Xenios Xenopoulos is the sole director and officer of
Old Night. Old Night has no employees or other personnel. Mr. Xenopoulos does
not receive any form of remuneration in connection with his services to Old
Night.
Section 5.24 Environmental.
(a) Old Night is not required to obtain any permits, licenses or other
authorizations under federal, state and local laws, rules and
regulations relating to pollution or protection of the environment
(collectively, the "Environmental Laws").
<PAGE>
(b) There is no past or present events or conditions relating to Old Night
that may interfere with or prevent compliance with any Environmental
Laws or that might give rise to any common law or other legal liability
thereunder.
Section 5.25 Securities Laws.
(a) Old Night has previously issued securities pursuant to available
exemptions under the Securities Act of 1933 (the "Securities Act"), and
is a reporting company under the Securities Exchange Act of 1934 (the
"Exchange Act"). Shares of Old Night's common stock are currently
traded on the Pink Sheets of the National Association of Securities
Dealers ("Pink Sheets") pursuant to Rule 15c2-11 under the Exchange
Act.
(b) Old Night is a corporation subject to the reporting requirements of the
Exchange Act. Old Night has filed all required reports, schedules,
forms, statements, and other documents with the SEC (the "SEC
Documents"), As of their respective dates, the SEC Documents complied
with all material respects with the requirements of the Securities Act
or the Exchange Act, as the case may be, and the rules and regulations
of the SEC promulgated thereunder applicable to such SEC Documents, and
none of the SEC Documents contained any untrue statement of a material
fact or omitted to state a material fact required to be stated therein
or necessary in order to make the statements therein, in light of the
circumstances under which they are made, not misleading. The financial
statements included or incorporated by reference by the SEC Documents
comply as to form in all material respects with applicable accounting
requirements and published rules and regulations of the SEC with
respect thereto, have been prepared in accordance with GAAP (except in
the case of unaudited financial statements permitted by SEC Form 10QSB)
applied on a consistent basis during the period involved (except as may
be indicated in the notes thereto) and fairly present the financial
position of Old Night and its subsidiaries as of the date thereof and
their statements of operations, changes in shareholders' equity and
cash flows for the periods then ended (subject, in the case of
unaudited statements, to normal year-end audit adjustments).
(c) There is no known fact or circumstance that materially and adversely
has affected or is affecting or, in the reasonable opinion of Old
Night's executive officers, may reasonably be expected in the future to
materially or adversely affect, Old Night's financial condition or
results of operations.
Section 5.26 Disclosure. No representation or warranty by Old Night contained in
this Agreement, and no statement contained in any document, list, certificate or
other writing furnished or to be furnished by or on behalf of Old Night to ILDC
or any of its representatives in connection with the transactions contemplated
hereby, contains or will contain any untrue statement of a material fact, or
omits or will omit to state a material fact necessary, in light of the
circumstances under which it was or will be made, in order to make the
statements herein or therein not misleading.
ARTICLE VI
COVENANTS OF ILDC AND THE STOCKHOLDERS
Each of ILDC and each Stockholder agrees that:
Section 6.1 Conduct of ILDC. On or prior to the Closing, ILDC will:
(a) During the period from the date of this Agreement to the Closing Date,
except as expressly contemplated or permitted by this Agreement
(including the Schedules), ILDC shall:
(i) conduct its business in the ordinary course,
(ii) use its best efforts to maintain and preserve intact its business
organization, employees and advantageous business relationships
and retain the services of its key officers and key employees and
(iii)to take no action which would adversely affect or delay the
ability of either ILDC or Old Night to obtain the necessary
approvals of any third party required for the transactions
contemplated hereby or to perform its covenants and agreements
under this Agreement or to consummate the transactions
contemplated hereby and thereby.
<PAGE>
(b) During the period from the date of this Agreement to the Closing Date,
except as expressly contemplated or permitted by this Agreement, ILDC
shall not, without the prior written approval of Old Night:
(i) other than in the ordinary course of business, incur any
indebtedness for borrowed money or any indebtedness that
constitutes the deferred purchase price of any property or
assets, assume, guarantee, endorse or otherwise as an
accommodation become responsible for the obligations of any other
individual, corporation or other entity, or make any loan or
advance;
(ii) adjust, split, combine or reclassify any capital stock;
(iii)make, declare or pay any dividend (whether in cash or property),
or make any other distribution on, or directly or indirectly
redeem, purchase or otherwise acquire, any shares of its capital
stock or any securities or obligations convertible (whether
currently convertible or convertible only after the passage of
time or the occurrence of certain events) into or exchangeable
for any shares of its capital stock;
(iv) sell, transfer, mortgage, encumber or otherwise dispose of any of
its material properties or assets (including without limitation,
cash) to any individual, corporation or other entity, or cancel,
release or assign any indebtedness to any such person or any
claim held by any such person, except in the ordinary course of
business pursuant to contracts or agreements in force at the date
of this Agreement;
(v) except pursuant to contracts or agreements in force at the date
of or permitted by this Agreement, make any investment in, either
by purchase of stock or securities, contributions to capital,
property transfers, or purchase of any property or assets, any
other individual, corporation or other entity;
(vi) except for any transactions in the ordinary course of business,
terminate or waive any material provisions of, any contract, or
make any change in any instrument or agreement governing the
terms of any of its securities, or material lease or contract,
other than normal renewals of contracts and leases without
material adverse changes of terms;
(vii)increase in any manner the compensation or fringe benefits of
any of its employees or pay any pension or retirement allowance
not required by any existing plan or agreement to any such
employees or become party to, amend or commit itself to any
pension, retirement, profit-sharing or welfare benefit plan or
agreement or employment agreement with or for the benefit of any
employee other than in the ordinary course of business, or
accelerate the vesting of, or the lapsing of restrictions with
respect to, any stock options or other stock-based compensation;
(viii) solicit or encourage from any third party or enter into any
negotiations, discussions or agreement in respect of, or
authorize any individual, corporation or other entity to solicit
or encourage from any third party or enter into any negotiations,
discussions or agreement in respect of, or provide or cause to be
provided any confidential information in connection with, any
inquires or proposals relating to the conveyance, sale, lease,
transfer or other disposition of all or a substantial portion of
its business, property or assets, or the acquisition of its
capital stock or securities convertible into capital stock, or
the merger or consolidation, whether in one transaction or a
series of transactions, of it with any corporation or other
entity, other than as provided by this Agreement (and each party
shall promptly notify the other of all the relevant details
relating to all inquiries and proposals which it may receive
relating to these matters);
(ix) settle any material claim, action or proceeding involving money
damages, except in the ordinary course of business;
(x) make any material capital expenditures, make any material changes
in its current method of conducting business, or liquidate,
dissolve or suffer any liquidation or dissolution;
<PAGE>
(xi) make any material payment of principal of any debt, with a
maturity of more than one year, for borrowed money or for the
deferred purchase price of property or services except as at the
stated maturity of the debt or as required by mandatory
prepayment provisions relating thereto (subject to any
subordination provisions applicable thereto);
(xii)enter into any material agreements or become liable under any
material agreement for the lease, hire or use of any real or
personal property, or enter into any material sale/lease back
arrangement with respect to any real or personal property which
is now owned or hereafter acquired;
(xiii) incur or make optional prepayment of, or purchase, redeem or
otherwise acquire, or amend any provision pertaining to the
subordination, or the terms of payment of, any subordinated debt;
(xiv)create, incur, assume or suffer to exist any lien or encumbrance
or any kind on any of its properties, assets, income or profits,
whether borrowed or hereafter acquired;
(xv) amend its articles of incorporation of its by-laws;
(xvi)take any action that is intended or expected to result in any of
its representations and warranties set forth in this Agreement
being or becoming untrue in any material respect at any time
prior to the Closing Date, or in any of the conditions to the
Transaction not being satisfied or in violation of any provision
of this Agreement, except, in every case, as may be required by
applicable law;
(xvii) implement or adopt any change in its accounting principles,
practices or methods, other than as may be required by general
accepted accounting principles or regulatory guidelines; or
(xviii) agree to take, make any commitment to take, or adopt any
resolutions of its board of directors in support of, any of the
actions prohibited by this Section 6.1.
Section 6.2 ILDC Common Shares. The Stockholders will not sell, transfer or
permit any Lien to exist with respect to their ILDC Common Shares.
Section 6.3 Access to Information. From the date hereof until the Closing, ILDC
will give, and will cause its Subsidiaries to give, Old Night, the Board of
Directors, its counsel, financial advisors, auditors and other authorized
representatives full access to the offices, properties, books and records of
ILDC and its Subsidiaries, will furnish to Old Night, the Board of Directors,
its counsel, financial advisors, auditors and other authorized representatives
such financial and operating data and other information as such Persons may
reasonably request and will instruct ILDC's and its Subsidiaries' employees,
counsel and financial advisors to cooperate with such Persons in their
investigation of the business of ILDC and its Subsidiaries; PROVIDED that no
investigation pursuant to this Section shall affect any representation or
warranty given by ILDC or any Stockholder to Old Night hereunder.
ARTICLE VII
ADDITIONAL COVENANTS OF THE PARTIES
The parties hereto agree that:
Section 7.1 Best Efforts. Subject to the terms and conditions of this Agreement,
each party will use its best efforts to take, or cause to be taken, all actions
and to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate the transactions contemplated by
this Agreement.
Section 7.2 Old Night Annual Stockholder Meeting; Information Statement. Old
Night will include in the information statement for its 2000 Annual Meeting of
Stockholders (the "Old Night Information Statement") four proposals:
(a) To approve the amendment of the Articles of Incorporation to change
the name of the Old Night from "Old Night, Inc." to "NxGen Networks,
Inc.;"
(b) To adopt a stock option plan;
(c) To approve this share exchange agreement between Old Night, ILDC, and
certain stockholders of ILDC; and
<PAGE>
(d) To elect Messrs. Anthony Overman, Don Spears and Mark Sampson to the
Old Night's Board of Directors to serve until the next annual general
meeting of shareholders and until their respective successors are
elected and qualified.
In addition, each proposal will require the approval by the affirmative vote of
a majority of the votes cast by the holders of Old Night Common Shares . In
connection with such meeting, Old Night will promptly prepare and file with the
SEC, will use its commercially reasonable best efforts to have cleared by the
SEC and will thereafter mail to its stockholders as promptly as practicable the
Old Night Information Statement and all other proxy materials for such meeting,
will use its commercially reasonable best efforts to obtain the necessary
approvals by its stockholders of the Amendment and this Agreement and will
otherwise comply with all legal requirements applicable to such meeting.
Section 7.3 Certain Filings. Each party shall cooperate with one another:
(a) in connection with the preparation of the Old Night Information
Statement,
(b) in determining whether any action by or in respect of, or filing with,
any governmental body, agency or official, or authority is required,
or any actions, consents, approvals or waivers are required to be
obtained from parties to any material contracts, in connection with
the consummation of the transactions contemplated by this Agreement,
and
(c) in seeking any such actions, consents, approvals or waivers or making
any such filings, furnishing information required in connection
therewith or with the Old Night Information Statement and seeking
timely to obtain any such actions, consents, approvals or waivers.
Section 7.4 Public Announcements. The parties will consult with each other
before issuing any press release or making any public statement with respect to
this Agreement and the transactions contemplated hereby and, except as may be
required by applicable law or any listing agreement with any national securities
exchange, will not issue any such press release or make any such public
statement prior to such consultation.
Section 7.5 Notices of Certain Events. Each party shall promptly notify each
other party of:
(a) any notice or other communication from any Person alleging that the
consent of such Person is or may be required in connection with the
transactions contemplated by this Agreement;
(b) any notice or other communication from any governmental or regulatory
agency or authority in connection with the transactions contemplated
by this Agreement; and
(c) any actions, suits, claims, investigations or proceedings commenced
or, to the best of its knowledge threatened against, relating to or
involving or otherwise affecting ILDC or any of its Subsidiaries or
which relate to the consummation of the transactions contemplated by
this Agreement.
ARTICLE VIII
CONDITIONS TO CLOSING
Section 8.1 Conditions to Obligations of Old Night and the Stockholders. The
obligations of Old Night and the Stockholders to consummate the Closing are
subject to the satisfaction or waiver of the conditions that:
(a) No provision of any applicable law or regulation and no judgment,
injunction, order or decree shall prohibit the consummation of the
Closing.
(b) The stockholders of Old Night shall have approved this Agreement in
accordance with the requirements of Chapter 78 of the Nevada Revised
Statutes and by the affirmative vote of a majority of the votes cast
by the Old Night Common Shares.
(c) No event shall have occurred that has resulted or could reasonably be
expected to result in a material adverse change to the anticipated
benefits of the transactions contemplated hereby to Old Night, ILDC or
the Stockholders.
<PAGE>
(d) Stockholders owning not less than eighty percent (80%) of the issued
and outstanding common stock of ILDC have executed this Agreement and
all other documents required to be delivered by such Stockholders in
connection with the exchange of the ILDC shares contemplated under
this Agreement.
Section 8.2 Conditions to Obligation of Old Night. The obligation of Old Night
to consummate the Closing is subject to the satisfaction or waiver of the
following further conditions:
(a) General:
(i) ILDC and the Stockholders shall have performed in all material
respects all of their obligations hereunder required to be
performed by them on or prior to the Closing Date,
(ii) the representations and warranties of ILDC and the Stockholders
contained herein shall be true and correct at and as of the
Closing Date, as if made at and as of such date, except for such
breaches as would not have a Material Adverse Effect, and
(iii)Old Night shall have received a certificate signed by the
President of ILDC and a representative of each Stockholder to the
foregoing effect.
(b) Unless the Stockholders have waived the condition set forth in Section
8.3(a), the Amendment shall have been approved in accordance with the
requirements of Nevada law, the Old Night Charter and the affirmative
vote of a majority of the votes cast by the holders of Old Night
Common Shares, other than such Old Night Common Shares beneficially
owned by the Stockholders and their respective Affiliates, and Old
Night shall have filed Articles of Amendment with respect to the
Amendment with the Secretary of State of the State of Nevada.
(c) Old Night shall have received a legal opinion from legal counsel to
ILDC, in the form and substance reasonably satisfactory to Old Night.
(d) Each of the ILDC shareholders shall have executed a securities law
representation letter in the form acceptable to Old Night.
(e) Old Night shall have received all documents it may reasonably request
relating to the existence of ILDC and each of its Subsidiaries, and
the authority of ILDC and each Stockholder to enter into this
Agreement, all in form and substance reasonably satisfactory to Old
Night.
(f) There shall not be threatened, instituted or pending any suit, action,
investigation, inquiry or other proceeding by or before any court or
governmental or other regulatory or administrative agency or
commission requesting or looking toward an order, judgement, decree or
injunction that restrains or prohibits consummation of any of the
transactions contemplated under this Agreement or could have a
Material Adverse Effect.
(g) All licenses, permits, consents, approvals and authorizations of all
third parties and governmental bodies and agencies shall have been
obtained that are necessary, in connection with:
(i) the execution and delivery of ILDC of this Agreement,
(ii) the consummation by ILDC of the transactions contemplated hereby,
or
(iii)the control and operation by Old Night of ILDC, and copies of
all such licenses, permits, consents, approvals and
authorizations shall have been delivered to Old Night.
Section 8.3 Conditions to Obligations of Stockholders. The obligation of the
Stockholders to consummate the Closing is subject to the satisfaction or waiver
of the following further conditions:
(a) General:
(i) Old Night shall have performed in all material respects all of
its obligations hereunder required to be performed by it at or
prior to the Closing Date,
(ii) the representations and warranties of Old Night shall be true and
correct in all material respects at and as of the Closing Date as
if made at and as of such date and
<PAGE>
(iii)ILDC shall have received a certificate signed by any Vice
Chairman, Executive Vice President or Senior Vice President of
Old Night to the foregoing effect.
(b) The appointment of Messrs. Anthony Overman, Don Spears and Mark
Sampson as directors of Old Night and the change of Old Night's name
to NxGen Networks, Inc. shall have been approved in accordance with
the requirements of Nevada law, the Old Night Charter and by the
affirmative vote of a majority of the votes cast by the holders of Old
Night Common Shares, and Old Night shall have filed Articles of
Amendment with respect to the name change with the Secretary of State
of the State of Nevada.
(c) On the Closing Date, there shall be no effective injunction, writ,
preliminary restraining order or other order issued by a court of
competent jurisdiction restraining or prohibiting the consummation of
the transactions contemplated under this Agreement.
(d) ILDC shall have received such opinions of counsel to Old Night, in the
form and substance reasonably satisfactory to ILDC.
(e) ILDC and the ILDC Stockholders shall have received such tax opinions
from independent counsel hired by Old Night, in the form and substance
reasonably satisfactory to ILDC.
(f) ILDC shall have received all documents it may reasonably request
relating to the existence of Old Night and the authority of Old Night
to enter into this Agreement, all in form and substance reasonably
satisfactory to ILDC.
(g) Old Night shall have cash and cash equivalents of not less than $1.5
million (net of previous contributions to ILDC), in excess of
outstanding liabilities or obligations as of the Closing Date.
ARTICLE IX
TERMINATION
Section 9.1 Grounds for Termination. This Agreement may be terminated at any
time prior to the Closing:
(a) by mutual written agreement of the Stockholders and Old Night;
(b) by either the Stockholders or Old Night if the Closing shall not have
been consummated on or before August 31, 2000;
(c) by either the Stockholders or Old Night if there shall be any law or
regulation that makes consummation of the transactions contemplated
hereby illegal or otherwise prohibited or if consummation of the
transactions contemplated hereby would violate any nonappealable final
order, decree or judgment of any court or governmental body having
competent jurisdiction;
(d) by either the Stockholders or Old Night if an event shall have occurred
that has resulted or could reasonably be expected to result in a
material adverse change to the anticipated benefits of the transactions
contemplated hereby to Old Night, ILDC or the Stockholders;
(e) by either the Stockholders or Old Night if there has been a material
misrepresentation or breach of warranty on the part of Old Night (in
the case of termination by the Stockholders) or a misrepresentation or
breach of warranty by ILDC or the Stockholders which would have a
Material Adverse Effect (in the case of termination by Old Night) in
each case in the representations and warranties contained herein and
such misrepresentation or breach is not capable of being cured through
commercially reasonable best efforts prior to August 31, 2000, or any
condition to such party's obligations hereunder becomes incapable of
fulfillment through no fault of such party and is not waived by the
other party;
The party desiring to terminate this Agreement shall give notice of such
termination to the other parties.
<PAGE>
Section 9.2 Effect of Termination. If this Agreement is terminated as permitted
by Section 9.1, such termination shall be without liability of any party (or any
stockholder, director, officer, employee, agent, consultant or representative of
such party) to the other parties to this Agreement; PROVIDED that if such
termination shall result from the willful failure of any party to fulfill a
condition to the performance of the obligations of the other parties, willful
failure to perform a covenant of this Agreement or willful breach by any party
hereto of any representation or warranty or agreement contained herein, such
party shall be fully liable for any and all damages incurred or suffered by the
other party as a result of such failure or breach.
ARTICLE X
MISCELLANEOUS
Section 10.1 Survival. All statements contained in any certificate or other
instrument delivered by or on behalf of ILDC or Old Night pursuant to this
Agreement or in connection with the transactions contemplated by this Agreement
will be considered representations and warranties by ILDC and Old Night, as the
case may be, with the same force and effect as if contained in this Agreement.
All representations, warranties, covenants and agreements by ILDC or Old Night
will survive the Closing Date for a period of one (1) year after the Closing
Date notwithstanding any investigation at any time by or on behalf of any party
to which such representation or warranty was given, and will not be considered
waived by the consummation of the share exchange contemplated by this Agreement
with knowledge of any breach of misrepresentation of the parties.
Section 10.2 Notices. All notices, requests and other communications to any
party hereunder shall be in writing (including facsimile transmission) and shall
be given,
If to Old Night, to:
Old Night, Inc.
c/o Aluminum Tower 5th Floor
2 Limassol Avenue
2003 Nicosia, Cyprus
Facsimile No.: 357-233-6382
Attention: Xenios Xenopoulos, President
With a copy to:
Venture Law Corporation
688 West Hastings Street, Suite 618
Vancouver, British Columbia V6B 1P1
Facsimile No.: 604-659-9178
Attention: Alixe B. Cormick
If to ILDC:
International Long Distance Corporation
Global Tech Center
Don Juan Road
P.O. Box 218
Hertford, North Carolina 27944
Facsimile No.: 252-426-3205
Attention: Anthony Overman, Chief Executive Officer
With a copy to:
Friday, Eldredge & Clark
400 West Capital Avenue, Suite 2000
Little Rock, Arkansas 72201
Facsimile No.: 501-244-5302
Attention: Price C. Gardner, Esq.
And:
<PAGE>
Kaufman & Canoles, P.C.
One Commercial Place
Norfolk, VA 23510
P.O. Box 3037
Norfolk, VA 23514
Facsimile No.: 757-624-3169
Attention: David M. Delpierre, Esq
if to the Stockholders, to their respective addresses set forth on the signature
pages of this Agreement.
All such notices, requests and other communications shall be deemed received on
the date of receipt by the recipient thereof if received prior to 5 p.m. in the
place of receipt and such day is a business day in the place of receipt.
Otherwise, any such notice, request or communication shall be deemed not to have
been received until the next succeeding business day in the place of receipt.
Section 10.3 Amendments and Waivers.
(a) Any provision of this Agreement may be amended or waived prior to the
Closing Date if, but only if, such amendment or waiver is in writing
and is signed, in the case of an amendment, by each party to this
Agreement, or in the case of a waiver, by the party against whom the
waiver is to be effective.
(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any
single or partial exercise thereof preclude any other or further
exercise thereof or the exercise of any other right, power or
privilege. The rights and remedies herein provided shall be cumulative
and not exclusive of any rights or remedies provided by law.
Section 10.4 Expenses. Each party to this Agreement shall bear its own costs and
expenses in connection with the transactions contemplated by this Agreement,
including without limitation, attorney fees, accounting fees and fees of any
investment bankers or other financial advisors.
Section 10.5 Successors and Assigns. The provisions of this Agreement shall be
binding on and inure to the benefit of the parties hereto and their respective
successors and assigns; PROVIDED that no party may assign, delegate or otherwise
transfer any of its rights or obligations under this Agreement without the
consent of each other party hereto.
Section 10.6 Governing Law. This Agreement shall be governed by and construed in
accordance with the law of the State of Nevada, without regard to the conflicts
of law rules of such state.
Section 10.7 Jurisdiction. The parties hereto irrevocably consent to the
jurisdiction of the United States federal courts and the state courts located in
the State of Nevada in any suit or proceeding based on or arising under this
Agreement and irrevocably agree that any and all claims arising out of this
Agreement or related to the transactions contemplated by this Agreement shall be
determined exclusively in such courts. The parties hereto irrevocably waive the
defense of an inconvenient forum to the maintenance of such suit or proceeding.
Section 10.8 Counterparts; Third Party Beneficiaries. This Agreement may be
signed in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were on the same
instrument. No provision of this Agreement is intended to confer on any Person
other than the parties hereto any rights or remedies hereunder.
[CONTINUED ON NEXT PAGE]
<PAGE>
Section 10.9 Entire Agreement. This Agreement constitutes the entire agreement
among the parties with respect to the subject matter of this Agreement and
supersedes all prior agreements and understandings, both oral and written, among
the parties with respect to the subject matter of this Agreement. No
representation, inducement, promise, understanding, condition or warranty not
set forth herein has been made or relied on by party hereto.
IN WITNESS WHEREOF, each party hereto has caused this Agreement to be duly
executed by its respective authorized officers or representatives as of the day
and year first above written.
OLD NIGHT, INC.
By:
-------------------------------------------------
Xenios Xenopoulos
President and Secretary
INTERNATIONAL LONG DISTANCE CORPORATION
By:
-----------------------------------------------
Anthony Overman
President and CEO
<TABLE>
<CAPTION>
STOCKHOLDERS:
--------------------- ------------------- --------------------------------------------------------------------------
Old Night Shares
ILDC Shares to be to be
Delivered Received Name and Address
--------------------- ------------------- --------------------------------------------------------------------------
<S> <C> <C>
26,693 26,693 Name: William Askew, Sr.
Address: P.O. Box 244, Elizabeth City, NC 27909
--------------------- ------------------- --------------------------------------------------------------------------
10,000 10,000 Name: Curtis D. Bunch, III
Address: 3095 Sentinel Parkway, Lawrenceville, GA 30043
--------------------- ------------------- --------------------------------------------------------------------------
25,000 25,000 Name: LaRonda Carr
Address: 403 Forestside Circle, Amercus, GA 31709
--------------------- ------------------- --------------------------------------------------------------------------
25,000 25,000 Name: Kevin Cordell
Address: 408 Bonn Court, Westminister NC 34457
--------------------- ------------------- --------------------------------------------------------------------------
92,800 92,800 Name: Billy Joe Dickens
Address: 1851 W. Ehringhause St., #353, Elizabeth City, NC 27909
--------------------- ------------------- --------------------------------------------------------------------------
24,000 24,000 Name: John Gimenez
Address: c/o Rock Church, 640 Kempsville Rd., Chesapeake, VA 23464
--------------------- ------------------- --------------------------------------------------------------------------
11,000 11,000 Name: Douglas A. Hamilton
Address: 215 Stockbridge Drive. Selma, NC 27576
--------------------- ------------------- --------------------------------------------------------------------------
15,940 15,940 Name: George Harrell
Address: 752 Mount Herman Church Rd., Elizabeth City, NC 27909
--------------------- ------------------- --------------------------------------------------------------------------
50,000 50,000 Name: Syed Asghar Hasan
Address: 3100 River Exchange Dr., Apt. 616, Norcross, GA 30092
--------------------- ------------------- --------------------------------------------------------------------------
50,000 50,000 Name: Syed Ashraf Hasnain
Address: 4144 Gunnin Road, Norcross, GA 30092
--------------------- ------------------- --------------------------------------------------------------------------
50,000 50,000 Name: Lennie Hughes, 1514 Cresent Dr., Eilzabeth City, NC 27909
--------------------- ------------------- --------------------------------------------------------------------------
225,000 225,000 Name: Reginald & Sharon Ibison
1212 Saddleridge Court, Kennesaw, GA 30144
--------------------- ------------------- --------------------------------------------------------------------------
60,501 60,501 Name: Carl Lewis, Jr.
Address: Rt. 5 Box 122, Hertford, NC 27944
--------------------- ------------------- --------------------------------------------------------------------------
25,000 25,000 Name: Gabriel & Ana Londono
Address: 192 Rainbow Lane, Hiram, GA 30141
--------------------- ------------------- --------------------------------------------------------------------------
15,000 15,000 Name: Vincent Losiciale
Address: 2536 Elson Green Avenue, Virginia Beach, VA 23454-6303
--------------------- ------------------- --------------------------------------------------------------------------
25,000 25,000 Name: Wyant McAvoy
Address: 570 North Temperance, Clovis, CA
--------------------- ------------------- --------------------------------------------------------------------------
11,000 11,000 Name: Harold & Pamela McLeod
Address: 9070 McNeil Road, Semmes, AL 36575
--------------------- ------------------- --------------------------------------------------------------------------
75,000 75,000 Name: Lino Morris
Address: 445 Poinciana Island, Miami Beach, FL 33160
--------------------- ------------------- --------------------------------------------------------------------------
50,000 50,000 Name: Jack Nelson
Address: 1563 Portland Avenue, St Paul MN 55104
--------------------- ------------------- --------------------------------------------------------------------------
95,000 95,000 Name: Deborah Overman
Address: 1 B Ainsley Road, Hertford, NC 27944
--------------------- ------------------- --------------------------------------------------------------------------
241,215 241,215 Name: Emerson Overman
Address: 997 John White Road, Elizabeth City, NC 27909
--------------------- ------------------- --------------------------------------------------------------------------
60,000 60,000 Name: Viola Overman
Address: 6A Ainsley Road, Hertford, NC 27944
--------------------- ------------------- --------------------------------------------------------------------------
241,215 241,215 Name: Leonard Overman, Jr.
Address: 330 Ryland Road, Tyner NC 27980
--------------------- ------------------- --------------------------------------------------------------------------
60,000 60,000 Name: Leonard Overman, Sr.
Address: 6A Ainsley Road, Hertford, NC 27944
--------------------- ------------------- --------------------------------------------------------------------------
25,000 25,000 Name: Bruce Read
Address: 1900 Bloor Street E., Suite 504, Mississauga, ON L4X 2S1
--------------------- ------------------- --------------------------------------------------------------------------
10,000 10,000 Name: Diane Rudy
Address: 98 Yellowfield Boulevard, Elkton, MD 21921
--------------------- ------------------- --------------------------------------------------------------------------
33,500 33,500 Name: Lawrence Sawyer, Sr.
Address: Rt. 2Box 67AA, Hertford, NC 27944
--------------------- ------------------- --------------------------------------------------------------------------
200,000 200,000 Name: Kulwani Shahi
Address: 1 Arborwood Court, East Winsor, NJ 8520
--------------------- ------------------- --------------------------------------------------------------------------
250,000 250,000 Name: Donald Spears
Address: P.O. Box 622, Malvern, AR 72104
--------------------- ------------------- --------------------------------------------------------------------------
200,000 200,000 Name: Gerry Spears
Address: P.O. Box 622, Malvern, AR 72104
--------------------- ------------------- --------------------------------------------------------------------------
15,667 15,667 Name: Charles Stallings
Address: 1233 Four Folks Road, Elizabeth City, NC 27909
--------------------- ------------------- --------------------------------------------------------------------------
34,000 34,000 Name: Larry & June Stallings
Address: 1018 Ryland Road, Tyner, NC 27980
--------------------- ------------------- --------------------------------------------------------------------------
17,140 17,140 Name: Don Steely
Address: 11 Sandstone Court, Little Rock, AR 72227
--------------------- ------------------- --------------------------------------------------------------------------
25,000 25,000 Name: Hugo Vilegas
Address: 192 Rainbow Lane, Hiram, GA 30141
--------------------- ------------------- --------------------------------------------------------------------------
50,000 50,000 Name: Kevin Wachter
Address: 475 Buckhead Avenue, Duluth, GA 30097
--------------------- ------------------- --------------------------------------------------------------------------
26,200 26,200 Name: Derek & Melissa Witcher
Address: 106 Jason Drive, Elizabeth City, NC 27909
--------------------- ------------------- --------------------------------------------------------------------------
1,516,083 1,516,083 Anthony C. Overman Revocable Trust
Name: ______________________________
Address: 1B Ainsley Road, Hertford, NC 27944
--------------------- ------------------- --------------------------------------------------------------------------
72,100 72,100 Atlanta Communications Investors
Name: ______________________________
Address: 1 Buckhead Plaza, Suite 1585 306, Atlanta, GA 30305
--------------------- ------------------- --------------------------------------------------------------------------
180,000 180,000 Coastal Warehouse, LLC
Name: ______________________________
Address: 23301 US Hwy 64 West, Crestwell, NC 27978
--------------------- ------------------- --------------------------------------------------------------------------
80,000 80,000 Name: William Edmundson
Address: 214 Mulberry Hill Lane, Edenton, NC 27932
--------------------- ------------------- --------------------------------------------------------------------------
55,000 55,000 Lantag Communications or its Nominees
Name: ______________________________
Address: P.O. Box 622, Malvern, AK 72104
--------------------- ------------------- --------------------------------------------------------------------------
100,000 100,000 Molly Bear Spears (Irrevocable Trust)
Name: ______________________________
Address: P.O. Box 622, Malvern, AR 72104
--------------------- ------------------- --------------------------------------------------------------------------
75,000 75,000 Name: Dean Keil
Address: 5019 80th Terrace South, Lake Worth, FL 33467
</TABLE>
<PAGE>
SCHEDULE 3.1
ILDC FOREIGN QUALIFICATIONS
ILDC is registered as a foreign corporation in the state of Georgia.
<PAGE>
SCHEDULE 3.5
ILDC STOCKHOLDERS LIST
----------------------------------------------------- -------------
Name Shares
----------------------------------------------------- -------------
123 Trust Limited 75,000
----------------------------------------------------- -------------
Abbitt, Robert B. 2,000
----------------------------------------------------- -------------
Adams, Kimberley J. 200
----------------------------------------------------- -------------
Adams Sr. Mr. & Mrs. Randolph 2,000
----------------------------------------------------- -------------
Albrecht, Craig T. 2,597
----------------------------------------------------- -------------
Albrecht, Phyllis 6,597
----------------------------------------------------- -------------
Albrecht, Jeanetta L. 4,000
----------------------------------------------------- -------------
Amato, Louis J. 2,000
----------------------------------------------------- -------------
Ambrose, Mitchell 1,000
----------------------------------------------------- -------------
Anderson, Lisa R. 200
----------------------------------------------------- -------------
Anthony C. Overman Revocable Trust 1,516,083
----------------------------------------------------- -------------
Askew Jr., William 467
----------------------------------------------------- -------------
Askew, Joseph & Judy 2,000
----------------------------------------------------- -------------
Askew, Mary 198
----------------------------------------------------- -------------
Askew, Kevin & Dawn 200
----------------------------------------------------- -------------
Askew Sr., William 26,693
----------------------------------------------------- -------------
Atkins, Bobby & Lawana 1,000
----------------------------------------------------- -------------
Atlanta Communications Investors 72,100
----------------------------------------------------- -------------
Baccus Jr., Gilbert 1,400
----------------------------------------------------- -------------
Bailey, James & Marsha 1,000
----------------------------------------------------- -------------
Bandy, Jack 1,362
---------------------------------------------------- -------------
Bass, Sandra 1,000
----------------------------------------------------- -------------
Bateman, William B. 500
----------------------------------------------------- -------------
Berry, Samuel T. & Peggy F. 1,000
----------------------------------------------------- -------------
Billy Joe's Contracting Service 8,000
----------------------------------------------------- -------------
Blanchard, Rube F. 6,000
----------------------------------------------------- -------------
Blood of Jesus Ministries 1,000
----------------------------------------------------- -------------
Boone, Willie 1,000
----------------------------------------------------- -------------
Bowman, Tommy & Sharon 2,500
----------------------------------------------------- -------------
Boyce, Robert A. & Paula S. 1,000
----------------------------------------------------- -------------
Braddy, Ricky D. 500
----------------------------------------------------- -------------
Bradham, Julian Terrell 2,300
----------------------------------------------------- -------------
Bright, C.F & Carolyn O. 1,000
----------------------------------------------------- -------------
Bright, Mark 2,000
----------------------------------------------------- -------------
Brinkley, Mr. & Mrs. John 1,000
----------------------------------------------------- -------------
Brinson, Gregory 4,000
----------------------------------------------------- -------------
Brown, Shirley 70
----------------------------------------------------- -------------
Bryant, Garry E. 1,400
----------------------------------------------------- -------------
Buchanan, Timothy L. 2,260
----------------------------------------------------- -------------
Buchanan, Cecil 3,140
----------------------------------------------------- -------------
Bunch, III, Curtis D. 10,000
----------------------------------------------------- -------------
Buzzell Family Ltd. Partnership 25,000
----------------------------------------------------- -------------
Byrd, Sharon 600
----------------------------------------------------- -------------
Byrum, Walter & Robin 1,500
----------------------------------------------------- -------------
Byrum, Leamon V. 500
----------------------------------------------------- -------------
Byrum, Harold & Betty 4,000
----------------------------------------------------- -------------
Byrum, Bobby L. & Jerry 500
----------------------------------------------------- -------------
Byrum Jr., John B. & Deborah 1,000
----------------------------------------------------- -------------
Byrum, John B. & Nina 1,300
----------------------------------------------------- -------------
Byrum, Jerry & Joyce 200
----------------------------------------------------- -------------
Carawan, Lila L. 600
----------------------------------------------------- -------------
Carr, LaRonda O. 25,000
----------------------------------------------------- -------------
Cason, William H. & Nancy S. 1,000
----------------------------------------------------- -------------
Casper Investment 1,000
----------------------------------------------------- -------------
Cerebral Trading 10,000
----------------------------------------------------- -------------
Chappell, Earl & Terry 200
----------------------------------------------------- -------------
Chappell, William & Sharon 2,000
----------------------------------------------------- -------------
Chappell Jr., John William 2,000
----------------------------------------------------- -------------
Chappell , Roger B. 200
----------------------------------------------------- -------------
Chappell, William B. 1,000
----------------------------------------------------- -------------
Clark II, Glen Mason 1,000
----------------------------------------------------- -------------
Coastal Warehouse, LLC 190,000
----------------------------------------------------- -------------
Cobb II, Larry Thomas 300
----------------------------------------------------- -------------
Coggin, Brad A. 200
----------------------------------------------------- -------------
Cole, Ralph 1,000
----------------------------------------------------- -------------
Colonna, Preston & Jacquelina 100
----------------------------------------------------- -------------
Copeland, Devolure 99
----------------------------------------------------- -------------
Copeland, Wallace 70
----------------------------------------------------- -------------
Copeland, Paul Durwood & Rhonda 200
----------------------------------------------------- -------------
Copeland, Salinas 498
----------------------------------------------------- -------------
Cordell, Kevin R. 25,000
----------------------------------------------------- -------------
Corprew, Mr. & Mrs. Anthony Wayne 1,000
----------------------------------------------------- -------------
Cowan, Michael 200
----------------------------------------------------- -------------
Crone, Robert & Gail 23,392
----------------------------------------------------- -------------
Crouse, Jon S. 7,500
----------------------------------------------------- -------------
Crouse Jr., David 1,000
----------------------------------------------------- -------------
Culbertson, Dr. Wayne E. 3,000
----------------------------------------------------- -------------
Curtice, Margene 10,000
----------------------------------------------------- -------------
Dagenhart, Robert L. 2,000
----------------------------------------------------- -------------
Daniels, Billie & Lana 1,000
----------------------------------------------------- -------------
Davis Jr., Dr. Alden 2,000
----------------------------------------------------- -------------
Davis, Gerald Wayne 2,000
----------------------------------------------------- -------------
Desert Sands Limited 10,000
----------------------------------------------------- -------------
Dickens, Billy Joe 92,800
----------------------------------------------------- -------------
Difebo, Philip 1,000
----------------------------------------------------- -------------
Drake, Amy 297
----------------------------------------------------- -------------
Drake, Jeremy 915
----------------------------------------------------- -------------
Dukes, Jerry & Sallie 500
----------------------------------------------------- -------------
Duncan Jr., James E. 1,000
----------------------------------------------------- -------------
Dunlow, Joseph N. & Amber P. 2,400
----------------------------------------------------- -------------
Dunlow, Robert M. & Julie M. 900
----------------------------------------------------- -------------
Dunlow, Bettie 1,000
----------------------------------------------------- -------------
Dunlow, Milton B. & Susan J. 1,000
----------------------------------------------------- -------------
E & S Holdings 37,898
----------------------------------------------------- -------------
Eagle, Steven 263
----------------------------------------------------- -------------
Eastern VA Conference of the IPHC 15,000
----------------------------------------------------- -------------
Edmundson, William F. 80,000
----------------------------------------------------- -------------
Eley, J. Sindey & Candice 2,000
----------------------------------------------------- -------------
Elizabeth City IPHC 1,000
----------------------------------------------------- -------------
Ellis, James 10,000
----------------------------------------------------- -------------
Evans, John T. 2,000
----------------------------------------------------- -------------
Faith Outreach 1,000
----------------------------------------------------- -------------
Farless, Lonnie Wood & Pattie 5,000
----------------------------------------------------- -------------
Feiger, Robert E. 1,788
----------------------------------------------------- -------------
Ferebee, Brad 200
----------------------------------------------------- -------------
Ferebee, Audrey 800
----------------------------------------------------- -------------
Ferebee, Maggelene 70
----------------------------------------------------- -------------
Flanagan, Franklin 2,000
----------------------------------------------------- -------------
Forehand, Carroll J. 6,000
----------------------------------------------------- -------------
Fowler, Raymond 140
----------------------------------------------------- -------------
Fox, Ron 6,000
----------------------------------------------------- -------------
Freeman, Paula S. 200
----------------------------------------------------- -------------
Garrett, Timothy James & Anita R. 200
----------------------------------------------------- -------------
Gathings Jr. Allen Wayne 2,000
----------------------------------------------------- -------------
Gerber, Bob & Charlotte 7,551
----------------------------------------------------- -------------
Gibbs, Milford 200
----------------------------------------------------- -------------
Gimenez, Anna 1,000
----------------------------------------------------- -------------
Gimenez, Anne 5,000
----------------------------------------------------- -------------
Gimenez, Anne 15,000
----------------------------------------------------- -------------
Gimenez, John 24,000
----------------------------------------------------- -------------
Godfrey, Richard T. & Elizabeth Ann 600
----------------------------------------------------- -------------
Godwin, Katrina 198
----------------------------------------------------- -------------
Graves, Paul 1,000
----------------------------------------------------- -------------
Grieco, Andre & Paula 132
----------------------------------------------------- -------------
Grieco, Darro 11,182
----------------------------------------------------- -------------
Hall, David W. 2,498
----------------------------------------------------- -------------
Halley, Joann C. 500
----------------------------------------------------- -------------
Hamilton, Mike & Lynette 400
----------------------------------------------------- -------------
Hamilton, A. Douglas 11,000
----------------------------------------------------- -------------
Hare, Jerry B. & Rhonda B. 5,000
----------------------------------------------------- -------------
Hare, Dawn 600
----------------------------------------------------- -------------
Hare, Chrystal 200
----------------------------------------------------- -------------
Hare, Carolyn 200
----------------------------------------------------- -------------
Hare, Michael R. & Mary B. 1,000
----------------------------------------------------- -------------
Hare, Andy 4,800
----------------------------------------------------- -------------
Harrell, George A. 15,940
----------------------------------------------------- -------------
Harrell, David B. & Karen P. 1,000
----------------------------------------------------- -------------
Harrell, George Kevin 1,000
----------------------------------------------------- -------------
Harris, Ryan 400
----------------------------------------------------- -------------
Harrison, Regina F. 200
----------------------------------------------------- -------------
Hasan, Syed Asghar 50,000
----------------------------------------------------- -------------
Hasnain, Syed Ashraf 50,000
----------------------------------------------------- -------------
Hayes, David E. 1,000
----------------------------------------------------- -------------
Henshaw, Stacy A. 200
----------------------------------------------------- -------------
Herriott, Jane 1,001
----------------------------------------------------- -------------
Herriott, Dan 1,376
----------------------------------------------------- -------------
Hodges, Howard & Linda 1,000
----------------------------------------------------- -------------
Hoggard, Curtis R. & Renee A. 1,000
----------------------------------------------------- -------------
Hoggard Jr., Joseph R. 2,000
----------------------------------------------------- -------------
Hoggard, Charney & Mary 300
----------------------------------------------------- -------------
Hoggard, Mark Daniel 2,000
----------------------------------------------------- -------------
Hoggard, Patrick K. 400
----------------------------------------------------- -------------
Holland, Troy W. 400
----------------------------------------------------- -------------
Holland, Anthony E. & Tamara D. 1,000
----------------------------------------------------- -------------
Holland, Ronnie W. 1,000
----------------------------------------------------- -------------
Holland, Tony W. 800
----------------------------------------------------- -------------
Holland, Robert C. & Delsie H. 1,000
----------------------------------------------------- -------------
Holloman, Vincent M. 1,000
----------------------------------------------------- -------------
Hooper Jr., Cleveland F. & Annette E. 1,400
----------------------------------------------------- -------------
Hopkins, Thomas H. 3,000
----------------------------------------------------- -------------
Hughes Jr. Percy G. & Mary F. 1,000
----------------------------------------------------- -------------
Hughes, Lennie L. 50,000
----------------------------------------------------- -------------
Hughes, Gary G. & Pamela B. 2,000
----------------------------------------------------- -------------
Ibison Reginald & Sharon 225,000
----------------------------------------------------- -------------
Integrated Global Resources 2,000
----------------------------------------------------- -------------
J.W. Harrell Construction Company 5,000
----------------------------------------------------- -------------
Jarvis, Wilma W. 1,000
----------------------------------------------------- -------------
Jemmott Jr., David 200
----------------------------------------------------- -------------
Jennings, Joseph D. 500
----------------------------------------------------- -------------
Jennings, Lucy 1,000
----------------------------------------------------- -------------
Jenson, Rod 1,001
----------------------------------------------------- -------------
Jernigan, Oressa 140
----------------------------------------------------- -------------
Johnson, Carroll & Ruthann 200
----------------------------------------------------- -------------
Johnson, John F. 1,000
----------------------------------------------------- -------------
Jolly Green Giant Trust 7,916
----------------------------------------------------- -------------
Jones, Lonnie W. & Karen D. 1,000
----------------------------------------------------- -------------
Josue Sr., Alfredo & Joan F. 1,000
----------------------------------------------------- -------------
Kearns, Thomas E. 200
----------------------------------------------------- -------------
Keil, Dean 75,000
----------------------------------------------------- -------------
Kendall, David B. 2,000
----------------------------------------------------- -------------
Killgore, Gary T. & Brenda D. 2,500
----------------------------------------------------- -------------
Klender, James 5,000
----------------------------------------------------- -------------
Klender, Crystal O. 5,000
----------------------------------------------------- -------------
Knox, Jeff L. 300
----------------------------------------------------- -------------
Lacasse, David & Melanie 1,200
----------------------------------------------------- -------------
Lachapelle III, Robert & Karen 600
----------------------------------------------------- -------------
Lamb, Dorothy 597
----------------------------------------------------- -------------
Lane, Duwood P. 1,000
----------------------------------------------------- -------------
Langley, Tony A. & Glenn C. 4,000
----------------------------------------------------- -------------
Langley, Bernice J., Tony A., & Glenn C. 200
----------------------------------------------------- -------------
Lanich, LeAnne M. 200
----------------------------------------------------- -------------
Lantag Communications or its Nominees 55,000
----------------------------------------------------- ------------
Lee, Hai Soon 2,002
----------------------------------------------------- -------------
Leggett Sr. William 200
----------------------------------------------------- -------------
Leggett Jr. William & Lonnie R. Shearin 200
----------------------------------------------------- -------------
Lewis, Jim & Wendy 200
----------------------------------------------------- -------------
Lewis, Tony 99
----------------------------------------------------- -------------
Lewis Jr., Carl W. 60,501
----------------------------------------------------- -------------
Light, Rick & Georianna 1,001
----------------------------------------------------- -------------
Lilly, Brian K. & Donna B. 1,000
----------------------------------------------------- -------------
Lilly, William Douglas 1,000
----------------------------------------------------- -------------
Lister Sr., Isaac L. 1,000
----------------------------------------------------- -------------
Londono, Gabriel J. & Ana L. 25,000
----------------------------------------------------- -------------
Losiciale, Vincent 15,000
----------------------------------------------------- -------------
Louie, Don 189
----------------------------------------------------- -------------
Marcuccio, Catherine 2,000
----------------------------------------------------- -------------
Mariano, Tanya C. 500
----------------------------------------------------- -------------
Martin, Alfred G. & Valerie A. 1,000
----------------------------------------------------- -------------
Mayo, William A. & Sylvia J. 1,000
----------------------------------------------------- -------------
McAvoy, Wyant 25,000
----------------------------------------------------- -------------
McCoy, Elnora 140
----------------------------------------------------- -------------
McLean, Ronald L. 1,000
----------------------------------------------------- -------------
McLean, Roger A. 1,000
----------------------------------------------------- -------------
McLean, Dexter 1,000
----------------------------------------------------- -------------
McLeod, Harold & Pamela 11,000
----------------------------------------------------- -------------
McPherson, Deborah & Valerie 199
----------------------------------------------------- -------------
McPherson, Valerie 99
----------------------------------------------------- -------------
McPherson, Cornell 99
----------------------------------------------------- -------------
Medway, Georgia Z. 1,000
----------------------------------------------------- -------------
Miller, Matthew 2,000
----------------------------------------------------- -------------
Miller, Ruth W. 8,686
----------------------------------------------------- -------------
Mills, Lisa T. 200
----------------------------------------------------- -------------
Mizelle, Jim L. & Peggy D. 400
----------------------------------------------------- -------------
Mizelle, Jimmy Dean 500
----------------------------------------------------- -------------
Mizelle, Dean 500
----------------------------------------------------- -------------
Molly Bea Spears (Irrevoable Trust) 100,000
----------------------------------------------------- -------------
Monsees, Charles L. 1,000
----------------------------------------------------- -------------
Monsen, Caroline 800
----------------------------------------------------- -------------
Moore, Gary C. 5,000
----------------------------------------------------- -------------
Moore, Michael S. & Sherri M. 500
----------------------------------------------------- -------------
Morris, Lino G. 75,000
----------------------------------------------------- -------------
Morris, Mary 99
----------------------------------------------------- -------------
Mulder, Marlin 5,000
----------------------------------------------------- -------------
Mulder, Mildred A. 1,600
----------------------------------------------------- -------------
N-9 of Rawlins 1,001
----------------------------------------------------- -------------
Nelson, Jack 50,000
----------------------------------------------------- -------------
Newsome, Mattie 99
----------------------------------------------------- -------------
Nichols, Johnny & Pamela 200
----------------------------------------------------- -------------
Nichols, William C. 200
----------------------------------------------------- -------------
Nicholson, R.P. 1,000
----------------------------------------------------- -------------
Nolz, Paul B. 200
----------------------------------------------------- -------------
O'Dea, Charles L. 1,000
----------------------------------------------------- -------------
O'Kelly, Christine 1,001
----------------------------------------------------- -------------
O'Neil, William E. 1,000
----------------------------------------------------- -------------
Oliver, Myrtle & Orressa Jernigan 100
----------------------------------------------------- -------------
Oliver, Faye 198
----------------------------------------------------- -------------
Olmstead, Iris Hare 1,000
----------------------------------------------------- -------------
Overman, David 5,000
----------------------------------------------------- -------------
Overman, Emerson L. 241,215
----------------------------------------------------- -------------
Overman Sr. W. Leonard 60,000
----------------------------------------------------- -------------
Overman Jr., C. Anthony 5,000
----------------------------------------------------- -------------
Overman, Brenda R. 5,000
----------------------------------------------------- -------------
Overman Jr., W. Leonard 241,215
----------------------------------------------------- -------------
Overman, Viola P. 60,000
----------------------------------------------------- -------------
Overman, Deborah L. 95,000
----------------------------------------------------- -------------
Overman, Leon B. 4,000
----------------------------------------------------- -------------
Overton Jr., Robert W. & Sue G. 11,064
----------------------------------------------------- -------------
Ozanne, Jeff J. & Darla J. 1,000
----------------------------------------------------- -------------
Ozanne, Maurice W. 1,000
----------------------------------------------------- -------------
Padgett, Dennis 6,000
----------------------------------------------------- -------------
Panorama Financial 11,522
----------------------------------------------------- -------------
Perry, Curtis R. & Joyce L. 300
----------------------------------------------------- -------------
Perry , Logan R. 200
----------------------------------------------------- -------------
Perry, Daryl L. 600
----------------------------------------------------- -------------
Perry, Luther 120
----------------------------------------------------- -------------
Perry, Robley 6,000
----------------------------------------------------- -------------
Perry, Donna J. 200
----------------------------------------------------- -------------
Perry, Joe W. 500
----------------------------------------------------- -------------
Perry, William Bryant 2,000
----------------------------------------------------- -------------
Phelps, Steven Craig 1,200
----------------------------------------------------- -------------
Phelps Jr., William T. & Patricia W. 5,000
----------------------------------------------------- -------------
Phillips Sr., Randy L. 200
----------------------------------------------------- -------------
Pierce, Carol 500
----------------------------------------------------- -------------
Pillow, Henry D. & Sarah L. 1,000
----------------------------------------------------- -------------
Pitcher, John 1,001
----------------------------------------------------- -------------
Porter, Bonnie 99
----------------------------------------------------- -------------
Poyner, Michael L. 100
----------------------------------------------------- -------------
Pranger, William E. & Joanna 500
----------------------------------------------------- -------------
Pritchard Sr., William P. 200
----------------------------------------------------- -------------
R & R Enterprises Properties, LLC 5,000
----------------------------------------------------- -------------
Ransim, Henry 5,000
----------------------------------------------------- -------------
Rawls Jr., Linwood L. 500
----------------------------------------------------- -------------
Rawls, Linwood L. & Louise W. 1,000
----------------------------------------------------- -------------
Read, Bruce 25,000
----------------------------------------------------- -------------
Redmond, Errick 1,000
----------------------------------------------------- -------------
Reuben, Dr. Allen 6,000
----------------------------------------------------- -------------
Revis, Tim W. 10,000
----------------------------------------------------- -------------
Rex Nichols Family Partnership, Ltd. 50,000
----------------------------------------------------- -------------
Riddick, James R. 8,000
----------------------------------------------------- -------------
Riggs, James S. & Beth H. 2,000
----------------------------------------------------- -------------
Rittenhouse, Rodney W. & Dianne M. 1,000
----------------------------------------------------- -------------
Roberson, Al 5,000
----------------------------------------------------- -------------
Roffo, Diane 1,000
----------------------------------------------------- -------------
Ross, Scott R. & Deborah 500
----------------------------------------------------- -------------
Rudy, Diane 10,000
----------------------------------------------------- -------------
Samame, Julio 10,000
----------------------------------------------------- -------------
Sawyer, Mark 398
----------------------------------------------------- -------------
Sawyer, Sr. Lawrence W. 33,500
----------------------------------------------------- -------------
Seawall, David 1,001
----------------------------------------------------- -------------
Self III, Mr. & Mrs. IR 400
----------------------------------------------------- -------------
Shahi, Kulwant 200,000
----------------------------------------------------- -------------
Shamis, Carolyn 4,000
----------------------------------------------------- -------------
Shaw, William H. & Reta L. 1,000
----------------------------------------------------- -------------
Shouse, Cherry 2,000
----------------------------------------------------- -------------
SHR Trust Limited 50,000
----------------------------------------------------- -------------
Simpson, Charles W. & Olga 1,000
----------------------------------------------------- -------------
Singh, Gail 4,000
----------------------------------------------------- -------------
Singh, Sarah 800
----------------------------------------------------- -------------
Smith , Patience D. 400
----------------------------------------------------- -------------
Smith, Angie K. 400
----------------------------------------------------- -------------
Smith, Rodney B. 1,000
----------------------------------------------------- -------------
Smith, Douglas B. & Aleta M. 1,000
----------------------------------------------------- -------------
Smith, Frank M. & Angie K. 3,000
----------------------------------------------------- -------------
Smith, Barbara C. 1,000
----------------------------------------------------- -------------
Smith, Kermit & Eva 1,000
----------------------------------------------------- -------------
Spear, Deborah K. 6,000
----------------------------------------------------- -------------
Spears, Gerry N. 200,000
----------------------------------------------------- -------------
Spears, Donald M. 250,000
----------------------------------------------------- -------------
Spence, Sharon 198
----------------------------------------------------- -------------
Spence, Mrs. Shelton 100
----------------------------------------------------- -------------
Stallings, Kuwarn 70
----------------------------------------------------- -------------
Stallings, Jimmy E. 2,000
----------------------------------------------------- -------------
Stallings, Edna P. & Jimmy E. 400
----------------------------------------------------- -------------
Stallings, Darryl E. Wanda C. 4,800
----------------------------------------------------- -------------
Stallings, Larry & June 34,000
----------------------------------------------------- -------------
Stallings, Alton Ray & Anna R. 200
----------------------------------------------------- -------------
Stallings, Charles 15,667
----------------------------------------------------- -------------
Starks, Grady & Judith 2,000
----------------------------------------------------- -------------
Steely, Don 17,140
----------------------------------------------------- -------------
Stepney, Mary 70
----------------------------------------------------- -------------
Stevens, Barbara S. 10,000
----------------------------------------------------- -------------
Summerford, Allen P. 31,250
----------------------------------------------------- -------------
Suter, Terry D. 300
----------------------------------------------------- -------------
Swain, Hal & Janet 400
----------------------------------------------------- -------------
Swain, Susan M. 2,000
----------------------------------------------------- -------------
Swanson, Martin 1,000
----------------------------------------------------- -------------
Taylor, George & Annie 2,430
----------------------------------------------------- -------------
Taylor, Joel V. 2,000
----------------------------------------------------- -------------
Terry, Ken & Rhonda 2,000
----------------------------------------------------- -------------
Terry, Kelvin 600
----------------------------------------------------- -------------
Terry, Keith A. & Cynthia B. 200
----------------------------------------------------- -------------
Totty, Gregory L. & Janet L. 540
----------------------------------------------------- -------------
Tribus, Paul A. 1,000
----------------------------------------------------- -------------
Trotman, Walter L. 697
----------------------------------------------------- -------------
Trotman, Diane 398
----------------------------------------------------- -------------
Trueblood, Ricky W. & Reggie W. 1,000
----------------------------------------------------- -------------
Trueblood, Carolyn D. 1,000
----------------------------------------------------- -------------
Tynch, Ricky V. 1,000
----------------------------------------------------- -------------
Tynch, Aubrey D. 2,000
----------------------------------------------------- -------------
Vaughan, Willie & Annie 2,500
----------------------------------------------------- -------------
Vaughan, Linda J. 3,500
----------------------------------------------------- -------------
Villegas, Hugo 25,000
----------------------------------------------------- -------------
Wachter, Kevin 50,000
----------------------------------------------------- -------------
Walls, Michael 1,000
----------------------------------------------------- -------------
Walls, Larry E. 1,000
----------------------------------------------------- -------------
Walls, Gregory S. 1,000
----------------------------------------------------- -------------
Ward, Harry R. & Teresa B. 600
----------------------------------------------------- -------------
Ward, H. Ivey & Jackie 200
----------------------------------------------------- -------------
Ward, Randolph & Yvonne 400
----------------------------------------------------- -------------
Ward, Dennis M. 400
----------------------------------------------------- -------------
Ware, Carlton N. & Crystal S. 2,000
----------------------------------------------------- -------------
Warren, Edward C. 1,000
----------------------------------------------------- -------------
Watson, Linda 1,000
----------------------------------------------------- -------------
WBC Family Estate Trust 5,001
----------------------------------------------------- -------------
Whidbee, Andre 764
----------------------------------------------------- -------------
White Jr., Oscar 1,000
----------------------------------------------------- -------------
White, William & Melody 1,060
----------------------------------------------------- -------------
White, Henry F. 1,500
----------------------------------------------------- -------------
White, Wallace 20,000
----------------------------------------------------- -------------
White, Namanuel 140
----------------------------------------------------- -------------
White, Oscar E. 2,000
----------------------------------------------------- -------------
Whitehurst, Beth 10,000
----------------------------------------------------- -------------
Wiggins, Gerald G. 1,000
----------------------------------------------------- -------------
Wiggins, Patricia P. 1,000
----------------------------------------------------- -------------
Williams Trust, Wendal 17,200
----------------------------------------------------- -------------
Williams, Derrick 198
----------------------------------------------------- -------------
Williams, Brenda Diane 2,000
----------------------------------------------------- -------------
Winslow, Alden & Elaine 4,000
----------------------------------------------------- -------------
Winslow, Willis B. & Evelyn L. 500
----------------------------------------------------- -------------
Winslow, Harry & Brenda W. 2,000
----------------------------------------------------- -------------
Winslow, James H. 1,000
----------------------------------------------------- -------------
Witcher, Derek D. & Melissa S. 26,200
----------------------------------------------------- -------------
Woods, Gary G. 250
----------------------------------------------------- -------------
Woods, Ronald R. & Betty E. 250
----------------------------------------------------- -------------
Worrie, Norma 1,000
----------------------------------------------------- -------------
Yoder, Alva & Susan 3,400
----------------------------------------------------- -------------
Young, Greg R. 2,000
----------------------------------------------------- -------------
Zimmerman, Judith D. 2,600
----------------------------------------------------- -------------
Zimmerman Sr., Peter R. 2,000
----------------------------------------------------- -------------
Total Investment 5,500,000
----------------------------------------------------- -------------
<PAGE>
SCHEDULE 3.6
ILDC SUBSIDIARIES
1. By Memorandum of Understanding dated November 30, 1999, StarTouch
International, Ltd. ("StarTouch") and ILDC contemplated the formation
of a joint venture corporation to be known as Custom Telecom Solutions,
Ltd. ("CTS"). ILDC has issued a Note in the amount of $2,067,407.87 to
StarTouch International, Ltd. in consideration of a like amount of
funds having been advanced to ILDC. The incorporation and
organizational documents of CTS, if prepared, were prepared by
Startouch and its counsel and ILDC has neither seen nor has in its
possession, any of such documents. Correspondence between StarTouch and
ILDC, including a letter dated March 2, 2000 from Ara F. Kalpak of
StarTouch to Anthony Overman, suggest that CTS was to be dissolved on
execution of the Promissory Note.
2. ILDC owns 150,000 shares of common stock of Airtime Technologies, Inc.,
one hundred twenty thousand (120,000) of which shares were issued on
April 3, 2000 and thirty thousand (30,000) of which were issued on
April 10, 2000.
<PAGE>
SCHEDULE 3.7
ILDC FINANCIAL STATEMENTS
ILDC has delivered December 31, 1999 unaudited financial statements to Old
Night. ILDC has not delivered January 31, 2000 audited or unaudited financial
statements. The financial statements delivered by ILDC are subject to change.
Old Night has advanced in total $2,149,000 to ILDC by way of seven separate loan
transactions on May 2, 3, 9 and 10, 2000 and June 15, 19 and 27, 2000. These
funds are evidenced by promissory notes secured by the assets of ILDC.
In February, 2000, BDR, Inc. loaned ILDC $1,500,000. This loan is evidenced by a
promissory note. The promissory note is due September 30, 2000 and is
non-interest bearing. On closing the share exchange, the amount due under the
note will be converted into a capital contribution to ILDC (the "Conversion")
and the note will be extinguished and be of no further force or effect. On the
Conversion, BDR, Inc. will be granted an option to purchase 150,000 shares of
common stock of ILDC at an exercise price of $5.00 per share. The option will be
exerciseable immediately following the Conversion but must be exercised within
five (5) years of the date of Conversion.
See discussion on Schedule 3.6 regarding Star Touch International, Ltd.
<PAGE>
SCHEDULE 3.8
DISCLOSURE OF TRANSACTIONS
NOT IN THE ORDINARY COURSE OF BUSINESS
--------------------------------------
1. ILDC currently has purchase commitments for purchases of switching
equipment as follows:
a. Purchase order dated March 6 issued to Nuera Communications, Inc. for
switching equipment with a purchase price of $555,975.
b. Purchase order dated December 3, 1999 issued to Salix Technologies,
Inc. for switching equipment with an aggregate purchase price of
$5,514,684.
c. Purchase order dated February 22, 2000 issued to Salix Technologies,
Inc. for switching equipment with an aggregate purchase price of
$4,220,580.
d. Purchase order dated February 22, issued to Salix Technologies, Inc.
for switching equipment with an aggregate purchase price of
$2,757,342.
e. Purchase order issued to Spring Tide Networks dated May 25, 2000 for
switching equipment with an aggregate purchase price of $245,700.
f. Purchase Order issued to Lucent Technologies for two switches with an
aggregate purchase price of $860,182.20. This purchase order was
amended as a result of an upgrade in the ordered equipment; the
purchase price has been increased to $921,036.96.
2. See Agreements referenced on Schedules 3.13 Title to Properties and 3.10
Contractual Commitments.
3. ILDC does not currently have any material written contracts with customers.
However, ILDC is in active discussions with four customers with whom ILDC
anticipates executing contracts within the next several weeks. Those
contracts are anticipated to involve call volume of approximately
60,000,000 minutes a month.
<PAGE>
SCHEDULE 3.9
UNDISCLOSED OR CONTINGENT LIABILITIES
See Schedule 3.11 regarding litigation.
See Agreements referenced on Schedules 3.13 Title to Property and 3.10
Contractual Commitments to the extent entered into after the date of the ILDC
Balance Sheet.
ILDC has received correspondence dated May 16, 2000 from the law firm of Brown,
Flebotte, Wilson & Horn, P.L.L.C. ("Brown") of Durham, North Carolina who
represent Charles and Olga Simpson (the "Simpsons") who previously entered into
a Joint Venture Agreement with ILDC dated November 8, 1998 (the "JV Agreement").
The Simpsons have declined ILDC's request to convert their rights and benefits
under the JV Agreement into Shares of common stock of ILDC and they have
retained Brown to protect their rights and to "take further legal action if
necessary."
See Schedules 3.6 Subsidiaries and 3.11 Litigation (with reference to StarTouch
International, Ltd.).
<PAGE>
SCHEDULE 3.10
CONTRACTUAL COMMITMENTS
1. See the Atlanta Lease, the Hertford Lease and the Atlanta Apartment Lease
referenced on Schedule 3.13 Title to Properties.
2. Various third parties have entered into equipment lease arrangements as
lessees for the benefit of ILDC. Pursuant to subscription agreements dated
April 18, 2000, such parties have received shares of common stock in ILDC
in consideration for entering into such leasing arrangements. ILDC has, and
Old Night will (as the surviving corporation after the Transaction), make
all payments under such leasing arrangements to the third party lessors.
Those leasing arrangements are as follows:
a. Carl W. Lewis, doing business as Central Insurance Agency, entered
into an Equipment Lease dated July 17, 1998 for the benefit of ILDC
with American Business Credit, as Lessor, requiring monthly lease
payments of $1,792.74, plus applicable tax. The lease has a term of 60
months. Section 24 of the lease states that the Lessee cannot assign
the lease or "permit any item of equipment . . . to be used by anyone
other than Lessee or Lessee's employees." The lease does not
specifically address share exchange transactions. This equipment lease
has been assigned to and assumed by ILDC.
b. Carl W. Lewis, doing business as Central Insurance Agency, entered
into an Equipment Lease dated July 13, 1998 for the benefit of ILDC
with Leasco, requiring monthly lease payments of $1,783.60. The lease
has a term of 60 months. Assignability of the lease cannot be
determined. This Equipment Lease has been assigned to and assumed by
ILDC.
c. Carl W. Lewis, doing business as Central Insurance Agency, entered
into an Equipment Lease dated June 4, 1998 for the benefit of ILDC
with Prepaid Cellular Services, as Lessor, requiring monthly lease
payments of $1,929.43 (including taxes). The lease has a term of 60
months. Assignability of the lease cannot be determined. This
Equipment Lease has been assigned to and assumed by ILDC.
d. Carpet and Appliance Plaza, Inc., as Lessee, entered into a Master
Equipment Lease Agreement dated October 27, 1998 for the benefit of
ILDC with Leasco, as Lessor. Such lease was also guaranteed by William
F. Edmunson on October 27, 1998. Pages 2 and 3 of the Master Equipment
Lease Agreement are not among ILDC's records. Assignability of the
lease cannot be determined. The monthly lease rate is $1,857.12. The
lease term is 60 months. This equipment lease has been assigned to and
assumed by ILDC.
e. Coastal Warehouse, LLC, as Lessee, entered into an Equipment Lease
Agreement dated March 4, 1999 for the benefit of ILDC with Leasing
Unlimited Portfolio, Inc., as Lessor. The lease was also personally
guaranteed by Fred D. Suter and Carolyn Suter. Section 17 of the lease
states "you agree you may not assign (transfer) any of your interests
under the lease to any other person or sublease any of the equipment."
The lease does not specifically address share exchange transactions.
The lease requires monthly payments of $2,300.00 over a 36 month term.
This equipment lease has been assigned to and assumed by ILDC.
f. Coastal Warehouse, LLC, as Lessee, entered into an Equipment Lease
Agreement dated March 4, 1999 for the benefit of ILDC with Leasing
Unlimited Portfolio, Inc., as Lessor. The lease was also personally
guaranteed by Fred D. Suter and Caroline Suter. Section 17 of the
lease states "you agree you may not assign (transfer) any of your
interests under the lease to any other person or sublease any of the
equipment. The lease does not specifically address share exchange
transactions. The lease requires monthly payments of $2,300.00 over a
36 month term. This equipment lease has been assigned to and assumed
by ILDC.
3. ILDC entered into a "Basic Intranet Services Agreement, Terms and
Conditions" dated April 19, 2000 with Savvis Communications Corporation,
pursuant to which Savvis provides Permanent Virtual Circuits (PVCs) to ILDC
for London, Frankfurt, Miami, Los Angeles, New York and Atlanta. Section 14
of the Agreement states
<PAGE>
SCHEDULE 3.10
CONTRACTUAL COMMITMENTS
(Continued)
that "this Agreement shall not be assignable by you except with the written
consent of Savvis, which consent shall not be unreasonably withheld.
Subject to the foregoing, this Agreement shall be binding on and inure to
the benefit of the parties hereto and their respective successors and
assigns." The Agreement does not specifically address share exchange
transactions.
4. ILDC entered into a Telco Facilities License Agreement on May 14, 1999 with
Telx Communications Corporation providing ILDC with a license to install
certain electronic equipment to receive and deliver telephone and/or data
communications traffic in Telx Communications Corporation's facilities
located at 60 Hudson Street, Suite 2300, New York, New York. The license
was granted for a term of one year. Section 10 of the license agreement
states that "Licensee shall not enter into any sublicense agreement with
respect to the license without prior written consent from Licensor which
may or may not be granted in Licensor's sole discretion." The license
agreement does not address a change of control or share exchange
transactions.
5. ILDC currently operates through a letter agreement originally entered into
between Prepaid Cellular Services, Inc. and Equant Network Services, Inc.
which provides ILDC access to equipment which is collocated in facilities
of Equant and its affiliates located in Atlanta, Georgia, Alexandria,
Virginia, Schiller, Illinois, Miami, Florida, Bellrose, New York, El
Segundo, California, Seattle, Washington and South San Francisco,
California.
6. ILDC issued an offer of employment on April 1, 2000 to Mark Sampson
pursuant to which Sampson would serve as the Chief Executive Officer of
ILDC effective April 1, 2000. The offer of employment has not been accepted
in writing by Mark Sampson; however, Sampson has communicated to ILDC that
the terms of the offer are acceptable. A formal employment agreement is to
be prepared.
7. ILDC entered into a Sprint Enhanced Frame Relay Sales Agreement on May 9,
2000 with Carolina Telephone and Telegraph Company, dba Sprint, for frame
relays to be installed in Atlanta and Denver. The term of the contract is
for one year. Assignability of the Agreement cannot be determined. The
monthly cost of each relay is $1,324.40.
8. ILDC entered into a Contract Service Agreement for Fiber Sonet Ring
Services dated May 8, 2000 with Carolina Telephone and Telegraph Company,
dba Sprint. The Agreement requires monthly payments of $6,869.23 a month
over a 60 month term. Section 8 of the Agreement prohibits the assignment
of the Service Agreement" except on written consent of Company, which
consent shall not be unreasonably withheld." The Agreement does not address
a change of control or share exchange transactions.
9. ILDC entered into an Arrangement for Integrated Services Digital Network
dated April 14, 2000 with Carolina Telephone and Telegraph Company, dba
Sprint, pursuant to which ILDC leases ISDN-PRI services with monthly
charges of $678.00 payable over a 48 month term. Section 8 of the Agreement
prohibits the assignment of the Agreement by ILDC "except on written
consent of Company." The Agreement does not address a change of control or
share exchange transactions.
10. ILDC entered into a Sales Agreement with Carolina Telephone and Telegraph
Company, dba Sprint, pursuant to which ILDC purchased certain telephone
equipment for an aggregate purchase price of $99,522.81. ILDC made a down
payment of $25,000. The balance of the purchase price ($74,522.81) is being
financed over a 48 month period. Section 8 of Attachment B of the Sales
Agreement provides that either party may assign its rights and obligations
to any successor in interest, "provided it gives the other party advanced
written notice thereof and the assignee agrees in writing to be bound by
and assume all obligations and liability under the terms of the Agreement."
Sprint appears to have secured payment of the amount outstanding through
the filing of a UCC financing statement in North Carolina.
<PAGE>
SCHEDULE 3.10
CONTRACTUAL COMMITMENTS
(Continued)
11. ILDC entered into a Commercial Service Order Agreement dated April 14, 2000
with Media One. The Agreement, which has a month to month term, has monthly
recurring charges of $1,107.40. The Agreement states that either party may
assign the Agreement to a successor without the prior written consent of
the other party, provided that the Assignment does not increase the
obligations of the other party. The Agreement does not address a change of
control or share exchange transactions.
12. ILDC entered into a Consulting Agreement dated March 14, 2000 with BDR,
Inc. This Agreement is for a term of thirty-six months and has monthly
charge of $7,000 per month. The Agreement does not address a change of
control or share exchange transactions.
o ILDC entered into a Consulting Agreement on or about July 1, 1999 with
Venture TeleCom. The Agreement is for a term of thirty-six months and has
monthly charge of $10,000. o
<PAGE>
SCHEDULE 3.11
ILDC LITIGATION
1. Compaq Computer Corp. v. International Long Distance Corp. State Court
----------------------------------------------------------
of Dekalb County, Georgia, Civil Action No. 99-A-62685-5.
Compaq Computer Corp. has instituted an action against ILDC alleging breach
of contract and seeking damages in the principal amount of $679,071.39,
together with accrued interest of $141,321.26 (with interest accruing at 1
1/2% per month from the date of filing (12/8/99)), costs and post judgment
interest. ILDC has filed an Answer to Compaq's complaint denying any
liability or obligation to Compaq.
2. Also, See Section 3.9 regarding potential claim by Charles and Olga
Simpson.
3. StarTouch International, Ltd. V. International Long Distance Corporation
and Anthony Overman. Superior Court of Fulton County, Georgia, Civil Action
No. 2000CU24652.
ILDC's $2,067,407.87 Promissory Note issued to StarTouch International,
Ltd. ("StarTouch") on February 5, 2000 was due on June 5, 2000. Payment
has not been made. On May 26, 2000, StarTouch forwarded a letter to
ILDC confirming the June 5th payment date and the total amount
outstanding of $2,136,321.47 (including interest of $68,913.60).
StarTouch filed a Verified Complaint on Promissory Note in the Superior
Court of Fulton County, State of Georgia on June 21, 2000. Process was
served on Anthony C. Overman on July 6, 2000. StarTouch's complaint
requests the following relief:
a. judgement be entered in favor of StarTouch in the principal amount of
$2,067,407.87;
b. judgement be entered in the amount of $67,969.57 for interest through
the June 5, 2000 due date of the Note;
c. judgement be entered in a per diem amount after June 5, 2000 of
$1,989.9981 through June 30 and then each month thereafter, $566.4131
per diem plus two (2) percent of the unpaid balance; and
d. judgement be entered for reasonable attorney fees.
ILDC has not filed an answer to the complaint. An answer is due within
30 days after the date of service.
<PAGE>
SCHEDULE 3.12
COMPLIANCE WITH LAWS
ILDC is not aware of any material noncompliance with Laws.
<PAGE>
SCHEDULE 3.13
TITLE TO PROPERTIES
Hertford Lease
--------------
ILDC currently occupies approximately 10,000 sq. ft. of office space in the Don
Juan Building in Hertford, North Carolina. The property is leased by ACO
Enterprises, Inc. (an entity controlled by Anthony Overman) from Apricot, Inc.
under a 24 month lease commencing October 1, 1999. ILDC currently occupies space
pursuant to an unwritten sublease arrangement. It is anticipated that a formal
written sublease will be prepared and executed prior to the Closing Date.
Atlanta Lease
-------------
ILDC currently leases office space pursuant to a Lease Agreement between Bank
Building Limited Partnership ("Landlord") dated on or about June 9, 2000, for
leased premises (the "Atlanta Premises") located at 55 Marietta Street, Atlanta
Georgia (Suite 1740) (the "Atlanta Lease")
Pursuant to ss. 4 of Addendum III of the Atlanta Lease, Tenant may assign the
lease to "any entity which succeeds to all or substantially all of its assets
whether by merger, sale or otherwise.
Atlanta Apartment Lease
-----------------------
Leonard Overman, Jr. entered into an apartment rental agreement ("Atlanta
Apartment Lease") dated November 13, 1998 with Julian Lecraw and Co., Inc. for
Apartment 2006 located at 1280 W. Peachtree Street, Atlanta, GA. ILDC pays the
monthly rental of $1,330.00. The apartment is used by various ILDC employees
while conducting business in Atlanta. The lease's initial 12 month term
beginning November 13, 1998 ended on November 12, 1999. Pursuant to Section 6 of
the lease, the lease is currently renewed on a month to month basis.
Denver, Colorado
----------------
ILDC has entered into three Lease Agreements with Globe Business Resources, Inc.
dated May 12, 2000 for corporate apartments located in Denver, Colorado. The
term of each Lease is ninety (90) days commencing on May 15, 2000 and ending on
August 12, 2000. The total rents payable over the ninety (90) day period for
each of the three corporate apartments is $4,410, $4,410, and $5,490,
respectively. The Lease Agreements do not address a change of control or share
exchange transactions.
Vancouver Lease
---------------
[Disclosure on Vancouver lease to come]
Other
-----
On October 1, 1999, ILDC purchased equipment from Comdial for $305,509.80 which
was financed by Comdial through a Note Agreement bearing interest at 10.75%. The
current remaining balance of $127,295.75 (as of May 25, 2000) is secured by the
Comdial equipment.
See Equipment Leases referenced on Section 3.10
In January of 1999, ILDC purchased two vacant lots in Hertford, North Carolina
with the intention of building an office building. ILDC continues to own the
lots; however, there are no immediate plans to either dispose of or develop the
lots. The seller of the lot maintains a deed of trust on the property to secure
a promissory note dated January 15, 1999 in the original principal amount of
$29,000.
See lien in favor of Sprint referenced in paragraph 10 of Schedule 3.10.
<PAGE>
SCHEDULE 3.15
ILDC TAXES
----------
ILDC currently owes payroll taxes and withholdings from employees wages to the
Internal Revenue Service, State of North Carolina and ________, in the aggregate
amount of $ _______________.
<PAGE>
SCHEDULE 3.16
CONSENTS AND APPROVALS
The following third party consents and approvals may be necessary in order to
consummate the share exchange:
Consent of each of the third parties referenced in Schedules 3.13 Title
to Properties and 3.10 Contractual Commitments.
<PAGE>
SCHEDULE 3.20
INTEREST CONFLICTS TO ILDC BY DIRECTORS, OFFICERS & SHAREHOLDERS
----------------------------------------------------------------
See disclosure regarding Hertford Lease set forth in Schedule 3.13.
ILDC was affiliated with National Marketing Corporation (NMC), a marketing
organization, which is owned by the president of ILDC. ILDC advanced $1,085,448
to National Marketing Corporation during the calendar years 1998 and 1999, which
will not be repaid since operations of NMC have been discontinued. A substantial
portion of the funds advanced to NMC were forwarded to Prepaid Cellular
Services, LLC in the form of loans, advances, and direct payment of Prepaid
Cellular's liabilities. Prepaid Cellular ceased operations during 1999. As a
result, these advances to National Marketing Corporation have been reflected as
uncollectible advances to affiliate in ILDC's consolidated December 31, 1999
audited financial statements.
ILDC has advanced the president $84,060 as of December 31, 1999. No interest is
charged on the advance.
ILDC received advances from a relative of the president totaling $41,985. This
amount is included in accounts payable at December 31, 1999.
ILDC entered into various transactions with Prepaid Cellular Services, LLC (PCS)
regarding the use of the ILDC telephone switching and network services. As the
relationship with PCS progressed, the Company also made cash advances to PCS,
purchased equipment for PCS and paid operating expenses of PCS. In addition,
Anthony Overman, the president of ILDC, served for a brief period as CEO of PCS.
ILDC also attempted to acquire the stock of PCS and merge PCS into ILDC. The
acquisition of the stock was rejected and irreconcilable differences between the
companies arose. Due to the significant amount invested into PCS, ILDC continued
to fund the operations of PCS in an attempt to reach a point where revenue could
be generated or some of the investment recovered. PCS ultimately failed.
Numerous claims were made against PCS by various creditors and third parties.
Due to the close relationship of ILDC with PCS and the fact that the ILDC
president served as CEO of PCS, claims have been made against ILDC for some of
the PCS debts and obligations.
ILDC funded PCS amounts totaling $2,518,149. These amounts include advances by
ILDC to PCS, payment of PCS expenses and obligations, and a settlement of
approximately $468,000 to Garwell Limited Partnership for advances to PCS. The
Garwell claim was settled by issuance of ILDC common stock. Subsequent to
December 31, 1999, ILDC agreed to issue 200,000 shares of common stock to
Garwell or its affiliates in exchange for canceling the $468,000 claim and in
exchange for $350,000 which had previously been invested in ILDC. When PCS
ceased operations, ILDC took possession of equipment totaling $506,753. Those
stock issuances have been completed and are reflected in the ILDC shareholder
list attached as Schedule 3.1. The remaining costs related to PCS, totaling
$2,011,396, have been charged to expense as loss on failed venture.
ILDC has assumed responsibility for the portion of the debts incurred by PCS in
cases where management has determined that ILDC has financially benefited or is
ultimately liable for payment. These liabilities have been recorded in ILDC's
consolidated audited December 31, 1999 audited financial statements.
<PAGE>
SCHEDULE 3.21
INTELLECTUAL PROPERTY
ILDC is in the process of preparing a patent application to be filed in the U.S.
Patent and Trademark office to protect certain proprietary processes
<PAGE>
SCHEDULE 3.22
EMPLOYEE BENEFIT PLANS
ILDC offers basic healthcare coverage to its employees under its healthcare plan
with Blue Cross Blue Shield of Georgia, an independent licensee of the Blue
Cross and Blue Shield Association.
There are no claims by former or present employees of ILDC.
ILDC has neither adopted a stock option plan nor has issued any currently
outstanding options to purchase shares of capital stock of ILDC.
<PAGE>
SCHEDULE 3.24
LICENSES AND PERMITS
ILDC maintains a 214 License with the Federal Communications Commission.
ILDC is registered as a foreign corporation in the State of Georgia.
ILDC has been informed by the local authorities in North Carolina that no
business license is required to conduct business in Hertford, North Carolina.
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE 3.23
LIST OF EMPLOYEES AND SALARIES
First Name MI Last Name Title Salary Date Hired
<S> <C> <C> <C> <C> <C>
Viola P. Overman Executive Secretary $45,000.00 8/ 1/97
Kana P. Overman Customer Service Manager $35,000.00 8/ 1/99
Rube F Blanchard CPA $40,000.00 4/27/00
William R. Neale Vice President Marketing $144,000.00 5/ 1/00
Mark Sampson CEO $250,000.00 2/ 1/00
Derek D Witcher Office Manager $45,000.00 12/ 4/99
Anthony Overman President $150,000.00
Emerson L Overman Chief of Operations $104,000.00 8/ 1/99
Brenda R Overman Secretary $20,800.00 1/20/00
Cheryl F Green Supervisor $20,800.00 2/14/00
Clifton D Jarvis Jr. Customer Service $16,120.00 2/27/00
Curtis D Bunch Technician $80,000.00 3/ 6/00
Douglas A Hamilton Network Manager $80,000.00 3/27/00
Gabriel Londono Technician $40,000.00 3/ 1/98
Syed A Hasan International Marketing $120,000.00 4/10/00
Harold L McLeod Project Manager $80,000.00 3/28/00
Hugo Villegas Technician $45,000.00 6/30/97
James M Klender Technician $28,600.00 10/ 1/99
Kevin T Wacher Techician $65,000.00 2/ 9/97
Leah M Hurley Customer Service $15,600.00 2/25/00
Leonard Overman Jr. Vice President $104,000.00 2/ 1/98
Leonard Overman Sr. Chief Advisor $52,000.00 8/ 1/97
Norva G Wills Customer Service $15,600.00 2/14/00
Mary A. Paulino Customer Service $15,900.00 2/29/00
Rebekah J Hurley Customer Service $15,600.00 2/25/00
Reginald Ibison CTO $140,000.00 11/ 1/97
Sarah K Hurley Customer Service $15,600.00 2/25/00
Stephen M Parsons Customer Service $15,900.00 2/27/00
Vincent J Losciale Supervisor $58,500.00 11/ 1/99
Lawrence W Sawyer Supervisor $52,000.00 2/ 1/98
Lawrence Sawyer, Jr. Technician $20,800.00 6/1/00
Patrick J Klender Customer Service $16,120.00 12/10/99
Lino G Morris Marketing Director $120,000.00 4/10/00
</TABLE>
<PAGE>
SCHEDULE 3.26
BANK ACCOUNTS
ILDC maintains a business checking account with First Union National Bank as
well as a business checking account with Centura Bank.
<PAGE>
SCHEDULE 4.2
ILDC VOTING TRUST AGREEMENT
VOTING TRUST AGREEMENT
THIS VOTING TRUST AGREEMENT is effective the 15th day of
January, 2000, by and between (the "Shareholder") and Anthony C. Overman as
trustee (the "Trustee").
RECITALS
A. The Shareholder is the owner of ______shares (the "Stock") of the
outstanding common stock of International Long Distance Corporation, a
North Carolina corporation (the "Corporation");
B. The Shareholder deems it advisable and in the best interests of the
Shareholder and the Corporation to ensure continuity and stability of
management of the Corporation and to protect the Shareholder's interest in
the Corporation;
C. The Shareholder has selected the Trustee as the Shareholder's choice for
the individual best able to effectuate the purposes of this Agreement, and
the Trustee has consented to act under this Agreement for the purposes
herein provided.
AGREEMENT
In consideration of the mutual agreements of the parties and other good and
valuable consideration, the receipt and adequacy of which are hereby
acknowledged, the parties have agreed as follows:
ARTICLE 1.
DEPOSIT OF STOCK AND ISSUANCE
OF VOTING TRUST CERTIFICATES
1.1. Deposit of Stock. The Shareholder shall deposit with the Trustee or cause
the Corporation to issue in the name of the Trustee simultaneously with the
execution of this Agreement certificates representing the Stock. The Trustee
agrees to receive and hold the Stock and all additional stock of the Corporation
as may be transferred to it pursuant to this Agreement in trust, to be held,
used, transferred, and disposed of for the uses and purposes and upon the terms
and conditions set forth in this Agreement. The term "Stock," as used in this
Agreement, shall mean all stock now owned or hereafter acquired by any means or
at any time during the term or any renewal of this Agreement by the Shareholder
or any of the Shareholder's heirs, personal representatives, successors, or
assigns, all of which Stock hereafter acquired, the Shareholder shall, promptly
upon receipt thereof, deliver to the Trustee, as provided by this Agreement.
1.2. Trust Certificates. At the time of deposit of (or issuance to) the stock
certificates with the Trustee, the Shareholder shall transfer to the Trustees by
proper endorsement his full legal title to all Stock owned by him, and the
Trustee shall be vested with all of the rights and powers of the owner of the
Stock, with the full rights and powers of the owner, of whatever nature
necessary to enable the Trustee to exercise the powers granted to the Trustee
under this Agreement. The Trustee shall issue to the Shareholder Voting Trust
Certificates ("Trust Certificates"), in substantially the form attached to this
Agreement as Exhibit A, for all Stock transferred to the Trustee.
1.3. Issuance of New Stock Certificates. All stock certificates transferred and
delivered to the Trustee pursuant to this Agreement shall be surrendered by the
Trustee to the Corporation and the Corporation shall issue new certificates
therefor in the name of the Trustee. Each certificate issued to the Trustee
shall state that it is issued pursuant to this Voting Trust Agreement, a copy of
which shall be on file both at the Corporation's principal office and with the
Trustee.
<PAGE>
SCHEDULE 4.2
ILDC VOTING TRUST AGREEMENT
(Continued)
1.4. Mutilated, Destroyed, Etc. Trust Certificates. In case any Trust
Certificate becomes mutilated, destroyed, stolen, or lost, the Trustee, upon the
written request of the owner of the Trust Certificate, shall issue a duplicate
Trust Certificate, which shall be so marked, and the Trustee may, as a condition
precedent to issuing the duplicate Trust Certificate, require the requesting
Shareholder to furnish satisfactory evidence of such mutilation, destruction,
theft, or loss, together with reasonable indemnity satisfactory to the Trustee.
1.5. Effect of this Agreement on Option Rights. Neither this Agreement nor the
transfer of the Stock to the Trustee shall terminate the right of any
Shareholder to acquire additional shares of the stock of the Corporation
pursuant to any subscription agreement, option agreement, employment agreement,
or otherwise. For all such purposes, a Shareholder shall be deemed to hold the
number of shares of the stock of the Corporation as are represented by his Trust
Certificate.
1.6. Additional Stock. If the Shareholder receives additional shares of stock
of the Corporation during the term of this Agreement or any renewal term, such
stock shall be transferred to the Trustee pursuant to this Article and shall be
subject to the terms and conditions of this Agreement. Any reference to Stock in
this Agreement shall include any shares of the stock of the Corporation which
become subject to this Agreement.
ARTICLE 2.
DISTRIBUTIONS, LIQUIDATION AND REORGANIZATION
2.1. Distributions Paid to Trustee. Prior to the termination of this
Agreement, the Shareholder shall be entitled to receive payments equal to the
cash dividends, if any, and property other than cash, if any, received by the
Trustee with respect to the Stock. If any dividend in respect of the Stock is
paid, in whole or in part, in stock of the Corporation, the Trustee, shall
likewise hold, subject to the terms of this Agreement, the certificates for such
stock received on account of such dividend, and the Shareholder shall be
entitled to receive Trust Certificates for the number of shares and class of
stock received as such dividend.
2.2. Distributions Paid to Shareholder. In lieu of receiving cash and property
dividends on the Stock and paying such distributions to the Shareholder, the
Trustees may, at their option, instruct the Corporation in writing to pay such
dividends to the Shareholder. Upon receiving such instructions, the Corporation
shall pay such dividends directly to the Shareholder in such amounts as they
would have received in the absence of this Agreement, based upon the interest of
the Shareholder, as it appears in the records of the Trustee. Upon the Trustee
giving such instructions to the Corporation, and until such instructions are
revoked, all liabilities of the Trustee with respect to such dividends shall
cease. The Trustee may at any time revoke such instructions and by written
notice to the Corporation direct it to make all future dividend payments to the
Trustee. Such instructions shall be effective only with respect to cash
distributions and distributions of property, but not with respect to stock
distributions. Any stock distributions shall be made to the Trustee, regardless
of any instructions delivered pursuant to this Section.
2.3. Redemption. If any shares represented by a Trust Certificate are redeemed
by the Corporation, the proceeds from the redemption shall be distributed to the
Shareholder in whose name the Trust Certificate stands upon surrender of the
Trust Certificate duly endorsed to the Trustee.
2.4. Dissolution. In the event of the dissolution or total or partial
liquidation of the Corporation, whether voluntary or involuntary, the Trustee
shall receive the moneys, securities, rights, or property to which the
Shareholder is entitled and shall distribute the same to the Shareholder in such
amounts as the Shareholder would have received in the absence of this Agreement.
2.5. Merger. In case the Corporation is merged into or consolidated with another
corporation, or all or substantially all of the assets of the Corporation are
transferred to another corporation and shares of such other
<PAGE>
SCHEDULE 4.2
ILDC VOTING TRUST AGREEMENT
(Continued)
corporation are issued to the Trustee, then in connection with such transfer the
term "Corporation" for all purposes of this Agreement shall be taken to include
such successor corporation, and the Trustee shall receive and hold under this
Agreement any stock of the successor corporation delivered or distributed to the
Shareholder under this Agreement as a result of such merger, consolidation, or
transfer. Trust Certificates issued and outstanding under this Agreement at the
time of the merger, consolidation, or transfer may remain outstanding, or the
Trustee may substitute for the outstanding Trust Certificates new Trust
Certificates in appropriate form. The term "Stock," as used in this Agreement,
shall include any stock which may be received by the Trustee in lieu of all or
any part of the Stock of the Corporation. Any property other than stock received
by the Trustee as part of the transaction will be distributed to the Shareholder
in such amounts as they would have received in the absence of this Agreement.
ARTICLE 3.
POWERS AND OBLIGATIONS OF THE TRUSTEES
3.1. Powers of Trustee. Except as otherwise provided in this Agreement, the
Trustee in respect to the Stock shall be vested with all of the rights, powers,
and privileges of every kind and character of an owner thereof, including,
without limitation the rights to vote the Stock, either in person or by proxy,
for every purpose.
3.2. Rights of Trustee. The Trustee, individually or otherwise, may hold stock
of the Corporation and, individually or as a trustee, may vote for himself as a
director and/or officer of the Corporation and, subject to any limitations
imposed by any agreement by which the Corporation or the Shareholder is bound,
participate in fixing the amount of compensation therefor or as an employee of
the Corporation, and any Trustee, or any firm of which he is an employee, owner,
director, or agent may contract with the Corporation or the Trustee or be or
become pecuniarily interested in any matter or transaction to which the
Corporation or the Trustee may be a party, as fully as though such person were
not a Trustee hereunder.
3.3. Compensation and Reimbursement. The Trustee shall serve without
compensation. The Trustee shall have the right to incur and pay such reasonable
expenses and charges, and to employ and pay such agents, attorneys, and counsel
as the Trustee may deem necessary and proper for carrying this Agreement into
effect. Any such expenses or charges incurred by and due to the Trustee may be
deducted from the dividends or other moneys or property received by the Trustee
on the Stock.
3.4. Liability. The Trustee shall not be personally liable for any act committed
or omitted to be done under this Agreement, provided such commission or omission
does not amount to either gross negligence or willful misconduct, and provided
also that the Trustee at all times exercises good faith in all matters relating
to this Agreement. The Trustee shall not at any time be required to give or file
any bond in order to qualify or continue as Trustee hereunder.
ARTICLE 4.
VOTING
4.1. Voting By Trustees. At all meetings of the shareholders of the Corporation,
the Trustee shall vote the Stock on all issues considered in its absolute
discretion. The voting rights and powers extended to the Trustee pursuant to
this Agreement shall extend to all matters upon which the Shareholder would
otherwise be entitled to vote, including, but not limited to, the dissolution,
consolidation, or merger of the Corporation, the sale, lease, encumbrance, or
other disposition of all or substantially all of the assets of the Corporation,
either in or not in the ordinary course of its business, the authorization of
additional stock of the Corporation, the creation of new classes of stock or
reclassification of any existing class of stock, and amendment of the Articles
of Incorporation of the Corporation, regardless of whether any of such matters
may substantially and/or adversely affect the Shareholder.
<PAGE>
SCHEDULE 4.2
ILDC VOTING TRUST AGREEMENT
(Continued)
4.2 Proxies. The Trustee shall be authorized to cast its votes at any meeting of
the shareholders of the Corporation by proxy. Any proxy given by the Trustee may
give the holder thereof discretion to vote the Stock to the same extent the
Trustee would have had discretion to vote the Stock. The Trustee shall not be
liable to the Shareholder for any action taken by the holder of any such proxy,
provided that the Trustee is not guilty of gross negligence or willful
wrongdoing in connection with appointing such holder of the proxy.
4.3 Action Without Meeting. In the event the Trustee is asked or desires to
consent to any action of the shareholders of the Corporation without a meeting,
it shall be authorized to act, consent or refuse to consent to such action, or
consent to any alternative action, in its absolute discretion.
ARTICLE 5.
RESIGNATION AND REPLACEMENT OF THE TRUSTEE
5.1. Resignation. The Trustee (and any successor Trustee) may at any time resign
by mailing to the shareholder a written resignation, to take effect ten (10)
days thereafter or upon the prior acceptance thereof.
5.2. Appointment of Successor Trustee. In the event the Trustee resigns or for
any other reason is unable to continue to perform the duties required by this
Agreement, one or more replacement Trustee shall be selected by the Shareholder.
5.3. Rights of Successor Trustees. The rights, powers, and privileges of the
Trustee named hereunder shall be possessed by all successor Trustees, with the
same effect as though such successors had originally been parties to this
Agreement. The word Trustees, as used in this Agreement, means the Trustee or
any successor Trustees acting hereunder.
ARTICLE 6.
TRANSFER OF TRUST CERTIFICATES
6.1. Addendum to Subscription Agreement. The Stock shall remain subject to the
Addendum to Subscription Agreement and Investment Intent Letter for Common Stock
of International Long Distance Corporation, effective as of January 15, 2000, by
and between the Corporation and the Shareholder ("Addendum to Subscription
Agreement") and the restrictions and obligations applicable to the Stock under
the Addendum to Subscription Agreement shall be fully applicable to the Trust
Certificates. For this purpose, the Shareholder shall be considered to be a
shareholder holding shares of the Stock equal to the number of shares
transferred to the Trustees, as shown on the Trust Certificate issued to the
Shareholder.
6.2. Procedure for Transfer. Subject to the provisions of Section 6.1 above and
the Addendum to Subscription Agreement, the Trust Certificates or portions
thereof shall be transferable at the principal office of the Corporation (or
such other place as designated by the Trustee by notice to the Shareholder) on
the books of the Trustee, by the registered owner thereof, either in person or
by duly authorized attorney, upon the surrender thereof, according to the rules
established by the Trustee from time to time. The Trustee shall not be required
to recognize any transfer of a Trust Certificate not made in accordance with the
provisions of this Article; provided that the Trustee shall be authorized, but
not required, to recognize any transfer in which the person claiming ownership
of a Trust Certificate has produced indicia of ownership satisfactory to the
Trustee and has deposited with the Trustee indemnity satisfactory to the
Trustee. Upon the transferor Shareholder complying with the requirements of this
Agreement and any other applicable agreement, the Trustee shall issue to the
transferee(s) one or more Trust Certificates, and the shares of the Stock
represented thereby shall continue to be subject to this Agreement. Provided, at
any time the Shareholder may with the prior written consent of the Trustee,
which consent shall not be unreasonably withheld, transfer all or any part of
the Trust Certificates to a third party which is not a family member or
Affiliate of the Shareholder in a bona fide arms-length sale for fair value (a
"Bona Fide Purchaser"). Upon the
<PAGE>
SCHEDULE 4.2
ILDC VOTING TRUST AGREEMENT
(Continued)
transfer of the Stock to a Bona Fide Purchaser as provided herein, this
Agreement shall terminate with regard to the Stock transferred to the Bona Fide
Purchaser. For the purposes of this Agreement "Affiliate" shall have the meaning
ascribed to it in Rule 12b-2 of the regulations promulgated under the Securities
Exchange Act of 1934, as amended.
6.3. Voting Rights After Transfer. Any transfer of Trust Certificates not in
accordance with the terms and conditions of this Agreement shall be null and
void and of no effect. The Trustee shall continue to vote the shares of the
Stock represented by such Trust Certificate.
Upon complying with the requirements for transfer of a Trust Certificate, a
Transferee shall be entitled to:
(a) receive a new Trust Certificate;
(b) receive any distributions or dividends of the Corporation with
respect to the shares represented by his Trust Certificate;
(c) receive the shares of Stock represented by his Trust Certificate
upon the termination of this Agreement.
ARTICLE 7.
TERM OF THE TRUST; RIGHTS ON TERMINATION
7.1. Term. Except to the extent otherwise provided in Section 7.2, the term of
this Agreement shall commence on January 15, 2000 (the effective date), and
shall continue in effect for ten (10) years thereafter. At any time within one
(1) year prior to the scheduled termination date, or at any time within one year
prior to the expiration of any extension of this Agreement, the Shareholders (or
any of them) may, by agreement in writing, extend the duration of this Agreement
(with respect to the extending Shareholders) for an additional period of time
not to exceed ten years from the date the first Shareholder signs the extension
agreement.
7.2. Early Termination. This Agreement and any extension thereof, shall be
terminated at any time upon the mutual written consent of the Shareholder and
the Trustee or in accordance with the provisions of Section 6.2 above.
7.3. Delivery of Stock Certificates. Following termination of this Agreement or
any extension thereof, upon surrender of the Trust Certificates, duly endorsed
in blank by the Shareholder or the Bona Fide Purchaser in the case of a
termination under Section 6.1, and payment to the Trustee of the costs,
expenses, and disbursements incurred by the Trustee in administration of this
Agreement, the Trustee shall, within eighty (80) days after receipt of such
Trust Certificates, deliver, or cause to be delivered to the Shareholder or Bona
Fide Purchaser, as applicable certificates for shares of the Stock equal to the
number of shares represented by the surrendered Trust Certificates together with
all dividends or other distributions applicable to those shares held by the
Trustee.
ARTICLE 8.
MISCELLANEOUS
8.1. Shareholder Have Shareholder Inspection Rights in the Corporation. During
the term of this Agreement and any extension thereof, the Shareholder shall
retain all shareholder inspection and copying rights authorized by the law of
the State of North Carolina, or in the case of a merger or business combination
by the Corporation with or into another corporation which is the survivor of
such merger or business combination, the laws of the state of incorporation of
such surviving corporation.
<PAGE>
SCHEDULE 4.2
ILDC VOTING TRUST AGREEMENT
(Continued)
8.2. Shareholder Inspection Rights of Trustees' Books. During the term of this
Agreement and any extension thereof, the Shareholder shall have the right at any
time during normal business hours to inspect and copy the records of the Trustee
with respect to this Agreement upon giving two business days advance written
notice of the request to the Trustee.
8.3. Severability. If any provision of this Agreement shall be held
unenforceable, the rest and remainder of this Agreement shall continue in effect
and be construed and enforced as if such unenforceable provision had not been
contained herein. Each provision of this Agreement shall be valid and
enforceable to the fullest extent permitted by law.
8.4. Entire Agreement. This Agreement and to the extent referenced herein, the
Addendum to Subscription Agreement constitutes the entire agreement between the
parties with respect to the voting rights of the Shareholder and supersedes,
merges, and replaces all prior negotiations, offers, representations,
warranties, and agreements with respect to the subject matter hereof.
8.5. Modification, Waiver. This Agreement may be modified only by a writing
signed by all parties. No waiver of any of the provisions of this Agreement,
including the provisions of this paragraph, shall be binding upon the waiving
party unless set forth in a writing signed by the waiving party.
8.6. Governing Law. This Agreement, and the performance hereunder, shall be
interpreted and enforced in accordance with the laws of the State of North
Carolina, excluding its laws relating to choice of law.
8.7. Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of, the Shareholder and the Shareholder's respective heirs, personal
representatives, successors and permitted assigns, provided however, that
nothing in this paragraph shall be construed to permit the assignment of the
Stock other than in accordance with the terms of this Agreement and the Addendum
to Subscription Agreement. Unless expressly provided for herein, this Agreement
and the rights, obligations and duties of the parties hereto shall not be
assignable or transferable without the express written consent of all the
parties.
8.8. Notices. Any notice or other communication required or permitted by this
Agreement shall be in writing and shall be given by hand delivery, via
facsimile, or sent by the United States Mail by certified mail, return receipt
requested, postage prepaid, and addressed to the Shareholder as his addresses
may appear in the records of the Trustee, and to the Trustee at 1B Ainsley Road,
Hertford, NC 27944, (or such other address as the parties may, by notice,
specify), and shall be deemed given when hand delivered, when transmission is
complete for a facsimile provided confirmation of receipt is retained (unless
the sender receives oral or written notice within one business day of the time
of the completion of transmission that the transmission was incomplete or
illegible), or two days after deposit with the United States Postal Service.
8.9. Headings. The headings contained in this Agreement are for the convenience
of the parties only, and shall not be deemed to be a part of the substantive
agreement of the parties or to effect the meaning or interpretation of any
provision of this Agreement in any way.
8.10. Number and Gender. When used herein, the singular shall include the
plural, the plural shall include the singular, and the use of any gender shall
include any other gender, as circumstances may require. The term person shall
include both natural persons and entities.
8.11. Third Party Beneficiaries. The provisions of this Agreement are intended
to benefit only the parties hereto. No person not a party to this Agreement
shall be deemed to be a third party beneficiary of this Agreement, nor shall any
such person be authorized or empowered to enforce the provisions hereof, except
to the extent such a person becomes a permitted assignee of one of the parties
hereto.
<PAGE>
SCHEDULE 4.2
ILDC VOTING TRUST AGREEMENT
(Continued)
8.12. Counterparts. This Agreement may be executed in multiple counterparts.
When at least one copy of this Agreement has been executed by each party to this
Agreement, this Agreement shall be in full force and effect, and all of such
counterparts shall be read together as a single agreement.
WITNESS the following signatures and seals as of the date indicated above.
SHAREHOLDER:
---------------------------------
TRUSTEE:
---------------------------------
Andrew C. Overman
<PAGE>
SCHEDULE 4.2
ILDC VOTING TRUST AGREEMENT
(Continued)
VOTING TRUST CERTIFICATE
INTERNATIONAL LONG DISTANCE CORPORATION
No.
Shares
THIS IS TO CERTIFY THAT is entitled to receive and enjoy all
the dividends, rights and benefits prescribed in the Voting Trust Agreement,
hereinafter referred to, with respect to shares of the common capital stock of
INTERNATIONAL LONG DISTANCE CORPORATION (the "Corporation"), a corporation duly
organized and existing under the laws of the State of North Carolina. This
Voting Trust Certificate represents the shares which have been issued,
transferred to and deposited with the undersigned Voting Trustee by on January
15, 2000.
Until the termination of the voting trust, the Voting Trustee
shall possess and be entitled to exercise all rights of every kind and
description, including the right to vote, in respect of any and all such stock,
it being expressly stipulated that no voting right on any such stock passes to
the holder hereof by or under this certificate or by or under any agreement,
expressed or implied.
This certificate is transferable only on the books which shall
be kept for that purpose by said Voting Trustee, (as defined herein) either in
person or by attorney, upon surrender hereof, properly endorsed, and upon the
payment of any transfer costs and taxes, and until so transferred said Voting
Trustee may treat the registered holder as owner hereof for all purposes
whatsoever.
This certificate is issued and held pursuant and subject to
the terms of a Voting Trust Agreement, effective January 15, 2000, made and
entered into between Anthony C. Overman, as trustee (the "Voting Trustee") and ,
the holder of shares of the common capital stock of the Corporation, imposing
certain restrictions and obligations on the sale or other disposition of the
capital stock of the corporation, providing, among other things, that any
transfer of shares in the Corporation, shall be governed by the provisions of an
Addendum to Subscription Agreement and Investment Intent Letter for the Common
Stock of the Corporation (the "Addendum to Subscription Agreement"). The Voting
Trust Agreement and the Addendum to Subscription Agreement are on file with the
Voting Trustee at the
<PAGE>
SCHEDULE 4.2
ILDC VOTING TRUST AGREEMENT
(Continued)
principal office of the corporation, and every holder and transferee hereof
assents to all of the terms of this certificate and of said agreements.
This certificate shall be surrendered to the Trustees by the
holder hereof, at the termination of the Voting Trust Agreement, upon the
delivery to such holder of the securities represented thereby.
THIS TRUST CERTIFICATE HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED, OR THE SECURITIES LAWS OF
ANY STATE. THIS TRUST CERTIFICATE MAY NOT BE OFFERED, SOLD,
TRANSFERRED, PLEDGE OR HYPOCATED IN THE ABSENCE OF
REGISTRATION OR THE AVAILABILITY OF AN EXEMPTION FROM
REGISTRATION UNDER THE SECURITIES ACT OF 1933 AND ANY
APPLICABLE STATE SECURITIES LAWS. ANY TRANSFER CONTRARY TO THE
ABOVE INSTRUCTIONS IS VOID.
IN WITNESS WHEREOF, said Voting Trustee has signed this certificate this 15th
day of January, 2000.
----------------------------------------
Voting Trustee, Anthony C. Overman
<PAGE>
SCHEDULE 5.5
OLD NIGHT LIST OF STOCKHOLDERS
-------------------------------- -----------------------------
Name Number of Shares
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Arnold, F. Scott 220,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Arnold, Greg 110,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Arnold, Charlice 220,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Arnold, Doug 110,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Blakely, Christine 50,160
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Butler, Arnold Norma 367,400
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Butler, Paul 367,400
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Davis, M. Christine 220,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Fiducia, Julie 220,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Geo Services, Inc. 51,040
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Gordon, Dawn 220,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Heidelberger, Jon 55,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Heidelberger, Loretta 44,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Johnson, Jaime 110,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Johnson, Susan 110,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Kendrick, Christy 220,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Lee, David 220,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Long, Darwin 74,800
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Long, Jackie 74,800
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Marin, N. James 440,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Moore, Marguerite 220,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Moore, Allen 220,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Neal, Tim 440,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Noerring, Lynn 3,960
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Roberts, Paul 147,400
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Sanchez, Holly 110,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Sharpe, Jared 147,400
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Tongish, Dawn 147,400
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Tongish, Dee 147,400
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Twelves, Julie 147,400
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Van Pletzen, Lynn 4,840
-------------------------------- -----------------------------
-------------------------------- -----------------------------
Williams, Anita 220,000
-------------------------------- -----------------------------
-------------------------------- -----------------------------
TOTAL: 5,460,000
-------------------------------- -----------------------------
<PAGE>
SCHEDULE 5.16
OLD NIGHT CONSENTS AND APPROVALS REQUIRED
Old Night does not require any regulatory consents or approvals in connection
with the proposed transactions under this Share Exchange Agreement.
Old Night must obtain stockholder approval for the share exchange and to change
the name of Old Night.
Old Night must file Articles of Amendment with the Secretary of State of Nevada
in order to complete the Name Change. In connection with the name change Old
Night must request a new CUSIP number from Standard and Poor's and a new stock
trading symbol from the National Association of Securities Dealers.
<TABLE>
<CAPTION>
EXHIBIT C
PRO FORMA - OLD NIGHT, INC.
CONSOLIDATED BALANCE SHEETS
DECEMBER 31, 1999
(UNAUDITED)
Old
Night, Inc ILDC
-------------- --------------
Proforma Proforma
Actual Actual Adjustments Balance
--------------- ---------------- --------------- ----------------
<S> <C> <C> <C> <C>
Assets
Current assets
Accounts receivable - trade $ - $ 101,181 $ 101,181
--------------- ---------------- --------------- ----------------
Accounts receivable - officer - 84,060 84,060
--------------- ---------------- --------------- ----------------
Total current assets - 185,241 185,241
--------------- ---------------- --------------- ----------------
Property and equipment
Land - 39,374 39,374
Leasehold improvements - 105,132 105,132
Computers and software - 248,652 248,652
Furniture and fixtures - 4,660 4,660
Telephone switching equipment - 3,100,135 3,100,135
--------------- ---------------- --------------- ----------------
Total property and equipment - 3,497,953 3,497,953
Less: accumulated depreciation - 718,697 718,967
--------------- ---------------- --------------- ----------------
Property and equipment - net - 2,779,256 2,779,256
--------------- ---------------- --------------- ----------------
Other assets
Deposits - 44,559 44,559
Deferred finance charges, net of
amortization of $121,018 - 322,187 322,187
--------------- ---------------- --------------- ----------------
Total other assets - 366,746 366,746
--------------- ---------------- --------------- ----------------
Total assets $ - $ 3,331,243 $3,331,243
=============== ================ --------------- ================
</TABLE>
<PAGE>
OLD NIGHT, INC
BALANCE SHEETS (CONTINUED)
DECEMBER 31, 1999
(UNAUDITED)
<TABLE>
<CAPTION>
Old
Night, Inc ILDC Proforma Proforma
Actual Actual Adjustments Balance
--------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Liabilities and Stockholders'
Equity (Deficit)
Current liabilities
Cash overdraft $ - $ 3,118 $ 3,118
Accounts payable 1,600 2,450,224 2,451,824
Accrued expenses - 116,073 116,073
Accrued interest - 70,000 70,000
Current portion of capital
lease obligations - 123,715 123,715
Short-term notes payable - 1,918,238 1,918,238
Unearned revenue - 55,000 55,000
--------------- ---------------- ----------------- ---------------
Total current liabilities 1,600 4,736,368 4,737,968
--------------- ---------------- ----------------- ---------------
Capital lease obligations - 255,490 255,490
--------------- ---------------- ----------------- ---------------
Stockholders' equity (deficit)
Common stock, $.001 par value, (d) 40
100,000 shares authorized; (c) 5,500
496,400 shares issued and outstanding 496 (b) (4,964) 11,000
Capital in excess of par value 37,504 (b) (4,964) 60,534,884
(c) 6,060,584
Common stock, $.001 par value; (c) (39,600)
100,000 shares authorized; (d) (40) -
500 shares issued and outstanding 500 (c) (500)
Subscription agreements 6,065,584 (c) (6,065,584) -
Deficit accumulated during the
development stage (39,600) (7,726,699) (c) 39,600 (7,726,699)
Total stockholders' equity 1,600 (1,660,615) - (1,662,215)
(deficit)
Total liabilities and
stockholders' $ - $3,331,243 $ - $3,331,243
equity (deficit)
-------------------------------------------------- =============== ================ ================= ===============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
OLD NIGHT, INC.
STATEMENT OF OPERATIONS
FOR THE PERIOD MARCH 20, 1998 (INCEPTION) TO
YEAR ENDED DECEMBER 31, 1999
(UNAUDITED)
Old
Night, Inc IILDC
---------------------------------------------------- ------------- ---------------- ----------------- ---------------
Proforma Proforma
STATEMENT OF OPERATIONS Actual Actual Adjustments Balance
---------------------------------------------------- ------------- ---------------- ----------------- ---------------
<S> <C> <C> <C> <C>
Revenue
Service revenue $ - $ 173,464 $ 173,464
Other income - 1,030 1,030
------------- ---------------- ----------------- ---------------
- 174,494 174,494
Costs and expenses
Costs of telephone services - 961,674 961,674
Research and development - 140,911 140,911
General and administrative 1,600 972,323 (1,600) 972,323
Other operating expenses - 656,305 656,305
Maintenance and utilities - 103,727 103,727
Travel, meals and entertainment - 143,463 143,463
------------- ---------------- ----------------- ---------------
1,600 2,978,403 1,600 2,978,403
------------- ---------------- ----------------- ---------------
Operating loss 1,600 2,803,909 1,600 (2,803,909)
------------- ---------------- ----------------- ---------------
Other expenses
Bad debt - 1,300 1,300
Charitable contributions - 137,664 137,664
Depreciation and amortization - 839,715 839,715
Interest - 175,189 175,189
Loss on impairment of assets - 279,071 279,071
Loss on uncollectible advances
to affiliate - 1,085,448 1,085,448
Loss on failed venture - 2,314,603 2,314,603
Rents and leases - 89,800 89,800
------------- ---------------- ----------------- ---------------
Total other expenses - 4,922,790 4,922,790
------------- ---------------- ----------------- ---------------
Net loss $ (1,600) $ (7,726,699) (c) $ 1,600 $ (7,726,699)
------------- ---------------- ----------------- ---------------
Basic and diluted loss per common shares $ - - $ (0.70)
============= ================ ===============
Average outstanding shares 496,400 - 11,000,000
============= ================ ===============
</TABLE>
<PAGE>
PROFORMA ADJUSTMENTS
14) The proforma financial statements reflect the acquisition by Old
Night. ("Old Night"), a non-operating public company with
5,460,400 common shares outstanding (after an 11 for 1 stock
split) and no assets, of 100% of the outstanding common shares of
International Long Distance Corporation ("ILDC"). The acquisition
resulted in the owners and management of ILDC having effective
control of the combined entity.
Under generally accepted accounting principles, the acquisition will be
considered to be a capital transaction in substance, rather than a business
combination. That is, the acquisition is equivalent to the issuance of stock
by ILDC for the net monetary assets of Old Night, accompanied by a
recapitalization, and is accounted for as a change in capital structure.
Accordingly, the accounting for the acquisition is identical to that resulting
from a reverse acquisition, except that no goodwill is recorded. Under reverse
takeover accounting, the post reverse-acquisition, comparative historical
financial statements of the "legal acquirer" (Old Night) are those of the
"legal acquire" (ILDC) (i.e. the accounting acquirer).
15) To reflect an 11 for 1 stock split on Old Night common stock from
496,400 shares to 5,460,400 shares.
16) To reflect the issuance of 5,500,000 common shares of Old Night
stock for 100% of common shares outstanding and subscriptions of
ILDC and recapitalization.
17) To reflect the issuance of 39,600 common shares on Old Night in
lieu of an investment banking fee.
EXHIBIT D
INTERNATIONAL LONG DISTANCE CORPORATION
(A development stage company)
Consolidated Audited Financial Statements
December 31, 1999
International Long Distance Corporation
and Subsidiary
(A development stage company)
Consolidated Audited Financial Statements
December 31, 1999
<PAGE>
International Long Distance Corporation and Subsidiary
(a development stage company)
Contents
Page
Independent Auditor's Report 1
Consolidated Balance Sheet 2-3
Consolidated Statement of Operations 4
Consolidated Statement of Changes in Stockholder's Deficit 5
Consolidated Statement of Cash Flows 6-7
Notes to Consolidated Financial Statements 8-15
<PAGE>
LANEY
BOTELER &
KILLINGER
Certified Public Accountants
Independent Auditors' Report
Board of Directors
International Long Distance Corporation
Hertford, North Carolina
We have audited the accompanying consolidated balance sheet of International
Long Distance Corporation and Subsidiary (a development stage company), as of
December 31, 1999, and the related consolidated statements of operations,
changes in stockholder's deficit and cash flows for the period March 20, 1998
(date of inception) to December 31, 1999. These consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements based on our audit.
We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of International Long
Distance Corporation and Subsidiary, as of December 31, 1999, and the results of
its operations and its cash flows for the period March 20, 1998 (date of
inception) to December 31, 199, in conformity with generally accepted accounting
principles.
LANEY BOTELER & KILLINGER
Atlanta, Georgia
June 2, 2000
<PAGE>
International Long Distance Corporation and Subsidiary
(a development stage company)
Consolidated Audited Balance Sheet
December 31, 1999
ASSETS
------
CURRENT ASSETS:
---------------------------------------------------------------------------
Accounts receivable - trade $ 101,181
Accounts receivable - officer 84,060
------
TOTAL CURRENT ASSETS 185,241
-------
PROPERTY AND EQUIPMENT
Land 39,374
Leasehold improvements 105,132
Computers and software 248,652
Furniture and Fixtures 4,660
Telephone switching equipment 3,100,135
TOTAL PROPERTY AND EQUIPMENT 3,497,953
Less: accumulated depreciation 718,697
PROPERTY AND EQUIPMENT, NET 2,779,256
=========
OTHER ASSETS:
Deposits 44,559
Deferred finance charges, net of
amortization of $121,018 322,187
-------
TOTAL OTHER ASSETS 366,746
TOTAL ASSETS $3,331,243
=========
The accompanying notes are an integral part of these financials
<PAGE>
International Long Distance Corporation and Subsidiary
(a development stage company)
Consolidated Audited Balance Sheet
December 31, 1999
LIABILITIES AND STOCKHOLDERS' DEFICIT
--------------------------------------------------------------------------------
CURRENT LIABILITIES
Cash overdraft 3,118
Accounts payable 2,528,020
Accrued expenses 145,027
Accrued interest 3,300
Current portion of capital lease obligations 123,715
Short-term notes payable 1,837,188
Unearned revenue 55,000
TOTAL CURRENT LIABILITIES 4,695,368
Capital lease obligations 255,490
STOCKHOLDERS' DEFICIT
Common Stock, 1.00 par value;
100,000 shares authorized;
500 shares issued and outstanding 500
Subscription agreements 6,065,584
Deficit accumulated during
the development stage (7,685,699)
TOTAL STOCKHOLDERS' EQUITY (1,619,615)
TOTAL LIABILITIES AND STOCKHOLDER'S DEFICIT $ 3,331,243
The accompanying notes are an integral part of these financials
<PAGE>
International Long Distance Corporation and Subsidiary
(a development stage company)
Consolidated Audited Statement of Operations
For the Period March 20, 1998 (date of inception)
to December 31, 1999
--------------------------------------------------------------------------------
REVENUE
Service revenue $ 173,464
Other income 1,030
174,494
COSTS AND EXPENSES
Costs of telephone services 961,674
Research and development 140,911
General and administrative 368,103
Other operating expenses 511,684
Maintenance and utilities 47,720
Travel, meals and entertainment 142,793
2,172,885
OPERATING LOSS (1,998,391)
OTHER EXPENSES
Amortization and finance costs 1,114,122
Bad Debt 1,300
Charitable Contributions 137,664
Depreciation 718,697
Interest 249,810
Loss on impairment of asset 279,071
Loss on uncollectible advance to affiliate 1,085,448
Loss on failed venture 2,011,396
Rents and Leases 89,800
TOTAL OTHER EXPENSES 5,687,308
NET LOSS $(7,685,699)
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
International Long Distance Corporation and Subsidiary
(a development stage company)
Consolidated Audited Statement of Changes in Stock Holder's Deficit
For the Period March 20, 1998 (date of inception)
to December 31, 1999
Common Subscription Retained Total
Stock Agreements Earnings Stockholder's
--------- ---------- Deficit Deficit
--------------- -----------------
<S> <C> <C> <C> <C>
Balance beginning of period $ - $ - $ - $ 0
Issuance of 500 shares
of common stock 500 - 500
Funds/services received
for stock subscriptions - 6,065,584 - 6,065,584
Net loss
(7,685,699) (7,685,699)
Balance, December 31, 1999 $ 500 $ 6,065,584 $ (7,685,699) $ (1,619,615)
============ ================ =============== =================
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
International Long Distance Corporation and Subsidiary
(a development stage company)
Consolidated Audited Statement of Cash Flows
For the Period March 20, 1998 (date of inception)
to December 31, 1999
<TABLE>
<CAPTION>
----------------------------------------------------------------------------------------- -------------------
<S> <C>
Cash flows from operating activities:
Cash received from service revenue $ 128,313
Cash paid to suppliers , employees and affiliate (894,992)
Cash paid for interest (246,510)
Cash advanced to failed joint venture (1,829,396)
Net Cash used on operating activities (2,842,585)
Cash flows from investing activities:
Purchases of property and equipment (3,307,229)
Payment for deposits (44,559)
Net cash provided by financing activities (3,351,788)
Cash flows from financing activities:
Proceeds from issuance of notes payable 2,525,838
Proceeds from stock subscription agreements 4,447,275
Proceeds from issuance of common stock 500
Repayment of notes payable and capital leases (779,240)
Net cash provided by financing activities 6,194,373
Net increase in cash and cash equivalents -
Cash and cash equivalents, beginning of period -
Cash and cash equivalents, end of period $ -
----------------------------------------------------------------------------------------- ===================
</TABLE>
The accompanying notes are an integral part of these financial statements
<PAGE>
<TABLE>
<CAPTION>
International Long Distance Corporation and Subsidiary
(a development stage company)
Consolidated Audited Statement of Cash Flows
For the Period March 20, 1998 (date of inception)
to December 31, 1999
------------------------------------------------------------------------------------------------ -------------------
<S> <C>
Cash Flows From Operating Activities:
Net loss $ (7,685,699)
Adjustments to reconcile net loss to
net cash used in operating activities
Depreciation 718,697
Amortization 1,114,122
Loss on impairment of asset 279,071
Non-cash portion of loss on failed venture 182,000
Changes in assets and liabilities:
(Increase) in assets
Accounts receivable - trade (101,181)
Accounts receivable - officer (84,060)
Increase in liabilities
Cash overdraft 3,118
Accounts payable 2,528,020
Accrued expenses 145,027
Accrued interest 3,300
Unearned revenue 55,000
----------------
Net cash used in operating activities (2,842,585)
----------------
Schedule of non-cash operating, investing, and financial transactions:
Acquisition of certain property and equipment
Capital leases
Equipment acquired $ 469,795
Capital leases assumed (379,206)
----------------
Cash paid $ 90,589
----------------
Conversion of investor services to equity
Subscription agreements
Settlement of claims $ 182,000
Services received 993,104
Acquisition of equipment leases 443,205
Subscription agreements issued (1,618,309)
================
Cash Paid $ -
----------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
<PAGE>
International Long Distance Corporation and Subsidiary
(a development stage company)
Notes to Consolidated Audited Financial Statements
December 31, 1999
Note 1 - Summary of Significant accounting policies
Nature of business and basis of presentation
International Long Distance Corporation ("ILDC" or the "Company") was formed on
March 20, 1998, in the State of North Carolina as a long distance service
provider dedicated to utilizing state of the art technology to provide premier
service both domestically and internationally. The Company is headquartered in
Hertford, North Carolina and is currently in the process of raising capital to
expand it s operations.
Custom Telecom Solutions ("CTS") was formed as a joint venture corporation in
November 1999, by an agreement between the Company and StarTouch International.
The joint venture agreement was never executed. CTS remains a wholly-owned
subsidiary of the Company, but currently has no operations. All significant
intercompany transactions have been eliminated in consolidation.
Cash and cash equivalents
Cash and cash equivalents include all highly liquid investments with an original
maturity of three months or less.
Property, equipment and depreciation
Property and equipment are stated at cost. Maintenance and repairs are charged
to operations and major improvements are capitalized. Upon retirement, sale or
other disposition, the cost and accumulated depreciation are eliminated from the
accounts and any gain or loss is included in operations. Depreciation is
computed using the straight-line method for financial reporting purposes and
accelerated methods for income tax purposes. Estimated useful lives of the
assets range from three to fifteen years.
Property and equipment include assets acquired under capital leases of $469,795.
Capital leases are included as a component of telephone switching equipment.
Revenue recognition
Originally the Company provided services involving the sale of prepaid phone
cards. The corresponding revenue is included in the accompanying financial
statements. Proceeds from the sale of prepaid phone cards are originally
recorded on the balance sheet as unearned revenue. As the cards are used, the
income earned by ILDC is reported in the statement of operations as service
revenue. ILDC's primary source of revenue in the future is anticipated to be
generated through establishment of revenue producing long distance telephone
networks.
Income taxes
ILDC is subject to federal and state corporation income taxes on any net taxable
income. Deferred income tax assets and liabilities are computed annually for
differences between the financial statement and tax basis of assets and
liabilities that will result in taxable or deductible amounts in the future
based on enacted tax laws and rates applicable to the periods in which the
differences are expected to affect taxable income. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. Income tax expenses is the tax payable or refundable for the
period plus or minus the change during the period in deferred tax assets and
liabilities.
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 disclosure of
contingent assets and liabilities at the date of the financial statements and
revenues and expenses during the period reported. Actual results could differ
from those estimates.
<PAGE>
International Long Distance Corporation and Subsidiary
(a development stage company)
Notes to Consolidated Audited Financial Statements
December 31, 1999
Start-Up expenses
In accordance with Statement of Position 98-5, Reporting on the Costs of
Start-up Activities, the Company expensed all organization and start-up expenses
as incurred.
Allowance for doubtful accounts
Accounts receivable have been reviewed by management and no allowance for
doubtful accounts is considered necessary as of December 31, 1999.
Deferred financial charges
In the early stages of development, certain investors assisted the Company in
obtaining some of the telephone switching equipment necessary to further the
Company's operations. The investors leased the equipment and assigned the leases
to the Company. These equipment leases are recorded on the books as capital
leases (Note 8). The total cost of equipment leased by investors and assigned to
ILDC is $469,795. ILDC has either directly made all payments required under the
leases or given credit to the investors for any lease payments made by the
investors.
In consideration for the assistance provided by the investors in obtaining the
equipment leases, ILDC has credited these investors with joint venture or
profit-sharing agreements (Note 2) totaling $443,205. These costs have been
recorded as deferred finance charges and are being amortized over the term of
leases. Amortization of deferred finance charges for the period ended December
31, 1999 was $121,018.
Additionally, ILDC credited investors $993,104 for providing short-term loans
and lines of credit to ILDC or obtaining additional investors. This amount is
included as a component of amortization and finance costs in the consolidated
statement operations.
Common stock
At December 31, 1999, ILDC had 100,000 shares of $1.00 per value common stock
authorized with 500 shares issued and outstanding. All of the shares outstanding
at December 31, 1999, are owned by the Anthony C. Overman Revocable Trust. The
trustee is Anthony C. Overman, president of ILDC.
Subsequent to December 31, 1999, as a part of the merger and reorganization
(Note 3), the stock was split and the number of authorized shares was increased
to 11,000,000.
<PAGE>
International Long Distance Corporation and Subsidiary
(a development stage company)
Notes to Consolidated Audited Financial Statements
December 31, 1999
Note 2 - Stock subscription agreements
In order to obtain capital for the purposes of the construction, installation
and maintenance of a telephone switching and call router system and to fulfill
liabilities and obligations associated with start-up expenses, the Company
entered into joint venture and profit sharing agreements with various investors.
In addition, the Company credited certain investors with joint venture or
profit-sharing agreements in exchange for services provided to ILDC (Note 1) and
in settlement of claims againgst ILDC (Note 6) Through December 31, 1999, ILDC
issued joint venture and profit-sharing totaling $6,065,584 in exchange for the
following consideration:
Consideration Amount
------------- ------
Cash received $4,447,275
Acquisition of equipment leases 443,205
Providing short-term loans and
raising capital 993,104
Settlement of claims 182,000
------------
$6,065,584
------------
No payments were made under these agreements since ILDC had not reached
profitability.
Subsequent to December 31, 1999, the investors agreed to cancel their joint
venture and profit sharing agreements in exchange for common stock of ILDC. In
order to facilitate the exchange, the Company increased the number of authorized
shares from 100,000 to 11,000,000 (Note 1). Generally, each investor will
receive one share of common stock for every $5.00 invested through joint venture
or profit sharing agreements. The shares will be issued in conjunction with the
merger and reorganization (Note 3).
The amount reported in stockholder's deficit as subscription agreements of
$6,065,584 represents the amounts invested through joint venture and profit
sharing agreements. The Company expects to issue 1,249,350 shares of stock for
the subscription agreements. Subsequent to December 31, 1999, ILDC received
additional capital of approximately $800,000 through the issuance of joint
venture agreements. The additional joint venture agreements will also be
cancelled in exchange for common stock of ILDC at the merger.
Note 3 - Merger and reorganization
The Company as of May 18, 2000, has finalized plans for a merger and
reorganization with a publicly traded entity. Closing on the merger is
anticipated to be June 30, 2000. Upon completion of the merger, all of the ILDC
stock issued and outstanding at June 30, 2000, will be converted into the right
to receive newly issued shares of the publicly traded common stock, par value
$.001. The merger is expected to be a tax free reorganization within the meaning
of Section 368 of the Internal Revenue Code.
Note 4 - Income taxes
ILDC has a net operating loss of $7,685,699 as of December 31, 1999, which will
be carried forward to offset future taxable income. The tax benefit and deferred
tax asset totaling $2,984,000, generated by this net operating loss has been
offset by a valuation allowance due to the uncertainty of profitable operations.
<PAGE>
International Long Distance Corporation and Subsidiary
(a development stage company)
Notes to Consolidated Audited Financial Statements
December 31, 1999
Note 5 - Related party transactions
ILDC was affiliated with National Marketing Corporation (NMC), a marketing
organization, which is owned by the president of ILDC. ILDC advanced $1,085,448
to National Marketing Corporation during the calendar years 1998 and 1999, which
will not be repaid since operations of NMC have been discontinued. A substantial
portion of the funds advanced to NMC were forwarded to Prepaid Cellular
Services, LLC (Note 6) in the form of loans, advances, and direct payment of
Prepaid Cellular's liabilities. Prepaid Cellular ceased operations during 1999.
As a result, these advances to National Marketing Corporation have been
reflected as uncollectible advances to affiliate in the accompanying
consolidated financial statements.
ILDC has advanced the president $84,060 as of December 31, 1999. No interest is
charged on the advance.
ILDC received advances from a relative of the president totaling $41,985. This
amount is included in accounts payable at December 31, 1999.
Note 6 - Prepaid Cellular Services, LLC
ILDC entered into various transactions with Prepaid Cellular Services, LLC (PCS)
regarding the use of the ILDC, telephone switching and network services. As the
relationship with PCS progressed, the Company also made cash advances to PCS,
purchased equipment for PCS and paid operating expenses of PCS. In addition,
Anthony Overman, the president of ILDC served for a brief period as CEO of PCS.
ILDC also attempted to acquire the stock of PCS and merge PCS into ILDC. The
acquisition of the stock was rejected and irreconcilable differences between the
companies arose. Due to the significant amount invested into PCS, ILDC continued
to fund the operations of PCS in an attempt to reach a point where revenue could
be generated or some of the investment recovered. PCS ultimately failed.
Numerous claims were made against PCS by various creditors and third parties.
Due to the close relationship of ILDC with PCS and the fact that the ILDC
president served as CEO of PCS, claims have been made against ILDC for some of
the PCS debts and obligations (Note 10).
ILDC funded PCS amounts totaling $2,518,149. These amounts include advances by
ILDC to PCS, payment of PCS expenses and obligations, and a settlement of
approximately $468,000 to Garwell Limited Partnership for advances to PCS. The
Garwell claim was settled by issuance of ILDC common stock. Subsequent to
December 31, 1999, ILDC agreed to issue 200,000 shares of common stock to
Garwell or its affiliates in exchange for cancelling the $468,000 claim and in
exchange for $350,000 which had previously been invested in ILDC (Notes 2 and
3). When PCS ceased operations, ILDC took possession of equipment totaling
$506,753. The remaining costs related to PCS, totaling $2,011,396, have been
charged to expense as loss on failed venture
ILDC has assumed responsibility for the portion of the debts incurred by PCS in
cases where management has determined that ILDC has financially benefitted or is
ultimately liable for payment. These liabilities have been recorded in the
accompanying consolidated financial statements.
<PAGE>
International Long Distance Corporation and Subsidiary
(a development stage company)
Notes to Consolidated Audited Financial Statements
December 31, 1999
Note 7 - Short-term debt
At December 31, 1999 short-term notes payable consisted of the following:
<TABLE>
<CAPTION>
<S> <C>
Note payable to Comdial due in monthly installments of $25,550 plus interest at
prime plus 2.5% (10.75% at December 31, 1999)
with remaining principal and interest due at maturity on September 30, 2000. $ 228,859
Note payable to Crafton Matthews originally due January 15th 2000, and extended
to April 19, 2000. The note was paid in full at the extended
due date. 29,000
Note payable to StarTouch International due in one payment
including interest at 10% on June 5, 2000. Additional amounts
totaling $488,000 were borrowed during calender year 2000. 1,579,329
Note payable StarTouch International due in one payment including interest at
10% on June 5, 2000. Additional amounts totaling $488,000 were borrowed during
the calendar year 2000 and are also due on June 5, 2000. The note arose from
advances relating to a proposed joint venture agreement between ILDC Star Touch
(Note 1). When the joint venture was abandoned, all amounts due were converted
to a note payable dated February 5, 2000. Interest accrues from the date of the note. 1,579,329
</TABLE>
Note 8 - Capital lease obligations
Included in long-term debt are lease obligations that have been capitalized for
financial statement purposes. Minimum future lease payments under capital leases
as of December 31, 1999, are as follows:
<PAGE>
Year ending December 31. Amount
----------------------- ------
2000 $175,533
2001 150,464
2002 106,581
2003 53,583
Total minimim lease payments 486,161
Less: amounts representing interest (106,956)
Present value of net minimum
lease payments $379,205
Note 9 - Impairment of assets used in operations
In 1999, during the course of ILDC's review of its operations, the Company
assessed the recoverability of the carrying value of the Compaq Tandem SCP
platform, which resulted in an impairment loss of $279,071. This loss reflects
the amount by which the carrying value exceeds the estimated fair value of the
asset. The impairment loss is reported in the consolidated statement of
operations.
<PAGE>
International Long Distance Corporation and Subsidiary
(a development stage company)
Notes to Consolidated Audited Financial Statements
December 31, 1999
Note 10 - Legal matters
ILDC is currently being sued by Compaq Computer Corporation for $820,439 which
includes interest and court costs, for equipment purchased and currently in the
possession of ILDC. The full amount of this potential liability is included in
accounts payable in the accompanying consolidated financial statements. The
Company and the plaintiff are currently engaged in negotiations in an attempt to
settle this liability.
There is a possibility that the Company could be included in the numerous claims
asserted against Prepaid Cellular Services, LLC (Note 6) due to the relationship
between the two entities. The potential liability from these claims can not be
estimated in the opinion of management and its counsel.
Note 11 - BDR Consulting, Inc.
On February 16, 2000, BDR Consulting, Inc ("BDR") entered into an agreement with
ILDC where BDR would assist ILDC in raising at least $1,500,000 for its
operations and in negotiating a merger between ILDC and a publicly traded
company. For its services and the financing, BDR will receive shares of ILDC
equal to the then outstanding shares of the Company which would make BDR a 50%
shareholder. As of May 31, 2000, BDR has raised approximately $3,600,000 in
financing for ILDC. Shares of ILDC will be issued in a simultaneous transaction
with the merger. Until that time all funds received from BDR are being treated
as advances.
Note 12 - Commitments
ILDC currently leases an office building for $5,000 per month under a 24 month
lease agreement due to expire October 31, 2001. The lease contains an absolute
purchase option requiring the Company to purchase the building upon expiration
of the lease for $750,000. The lease was originally in the name of a company
owned by ILDC's sole shareholder. The lease was assigned to ILDC during the
development period.
ILDC also leases office space in Atlanta, Georgia for $2,797 per month under a
26-month lease assumed from the prior lessee, Prepaid Cellular Services, LLC
(Note 6). The lease was due to expire April 30, 2001. The lease was renegotiated
in June 2000. Additional space was added to the original lease. The current
lease is for $13,870 per month for a term of five years, to expire in May 2005,
with one renewal option of five years.
As of December 31, 1999, ILDC has outstanding purchase orders totaling
approximately $5,500,000 for the purchase of additional telephone switching
equipment
Note 13 - Financial instruments
The Financial Accounting Standards Board requires disclosure of information
about financial instruments and related off-balance sheet risk and
concentrations of credit risk. The Company places its cash with insured
financial institutions. However, at times during the year, the cash balances
exceeded the federally insured limits of the Federal Deposit Insurance
Corporation.
Note 14 - Continuation as a going concern
The Company incurred operating losses of $7,685,699 for the period from
inception through December 31, 1999. These consolidated financial statements are
presented on the basis which assumes the continued existence of International
Long Distance Corporation as a going concern. Continuation as a going concern
contemplates the realization of assets and the satisfaction of liabilities in
the normal course of business over a reasonable length of time. The financial
statements do not include any adjustments that might be necessary if the Company
is unable to continue as a going concern. Continuation of the Company as a going
concern is contingent upon completion of the merger (Note 3), continued
financial support from investors and creditors and upon achieving and
maintaining profitable operations.
<PAGE>
EXHIBIT E
NXGEN NETWORKS, 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 NxGen Networks, 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.
(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.
<PAGE>
(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.
(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;
<PAGE>
(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.
(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.
<PAGE>
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.
(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:
<PAGE>
(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. 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.
(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.
<PAGE>
(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.
(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.
<PAGE>
(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 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.
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.
<PAGE>
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
stockholders 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.
NxGen Networks, 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.
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").
<PAGE>
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.
4. Restrictions on Exercise. This Option may not be exercised until such time as
the Plan has been approved by the stockholders 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.
<PAGE>
(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:
(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.
<PAGE>
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.
OPTIONEE: NxGen Networks, 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
<PAGE>
EXHIBIT A
2000 STOCK PLAN
EXERCISE NOTICE
NxGen Networks, 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 NxGen Networks, 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
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: NxGen Networks, Inc.
--------------------------------- ---------------------------------
Signature By:_______________________
--------------------------------- ---------------------------------
Print Name Title
---------------------------------
Social Security Number
Date Received: _____________________
