United States
Securities and Exchange Commission
Washington, D.C. 20549
Form 8-KSB
Current Report
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of report (Date of earliest event reported): July 12, 1999
(Exact name of Registrant as specified in its charter): Equity
Growth Systems, inc.
(State or other jurisdiction of incorporation): Delaware
(Commission file number): 0-3718
(IRS employer identification number): 11-2050317
(Address of Registrant's principal executive offices,
including zip code):
440 East Sample Road, Suite 204; Pompano Beach, Florida 33060
(Registrant's telephone number, including area code): (561) 998-3435
(Former name or former address, if changed since last report):
8001 DeSoto Woods Drive; Sarasota, Florida 34243
<PAGE>
Table of Contents
Item Page Caption
3 Disclosure of materials incorporated by
reference
3. Safe harbor statement regarding forward
looking information
Item 1. 4 Changes in control of Registrant
4 Election of new directors
5 Additional management & significant
employees as a result of acquisition
5 Biographies
6 Family relationships
6 [Non] involvement in certain legal proceedings
7 Compensation
10 Certain American Internet transactions
11 Principal shareholders of American Internet
12 Revised stockholder data (due to acquisition
of American Internet)
Item 2. 18 Acquisition of Disposition of Assets
(acquisition of American Internet)
18 Date and manner of acquisition
21 Description of the American Internet
subsidiaries
30 [American Internet's] plan of operation;
discussion and analysis of financial
condition and results of operations
35 Summary and pro forma financial data
38 Risk factors
Item 3. * Bankruptcy or Receivership
Item 4. 42 Changes in Registrant's Certifying
Accountant
Item 5. 44 Other Events: (Debenture offering,
spokesperson's employment agreement
and charter amendments)
Item 6 * Resignation's of Registrant's Directors
Item 7. 51 Financial Statements & Exhibits
Item 8. 54 Change in Fiscal Year
Item 9 * Sales of Equity Securities Pursuant to
Regulation S
54 Signatures
55 Exhibits and Additional Information
2
<PAGE>
Sources of Materials Incorporated by Reference
This report includes materials incorporated by reference from the
following previously filed reports or registration statements, as permitted by
Exchange Act Rule 12b-23: report on Form 10-KSB for the year ended December 31,
1998.
Safe Harbor Regarding Forward Looking Statements
As provided for in the Private Litigation Reform Act of 1995 (the
"Reform Act"), this report contains certain "forward-looking statements"
relating to the Registrant and its subsidiaries which represent their current
expectations or beliefs, including, but not limited to, statements concerning
their operations, performance, financial condition and growth. For purpose of
the protection afforded under the Reform Act, any statements contained in this
report that are not statements of historical fact are forward-looking
statements. Without limiting the generality of the foregoing, words such as
"may", "will", "expect", "believe", "anticipate", "intend", "could", "estimate",
or "continue", or the negative or other variation thereof or comparable
terminology are intended to identify forward-looking statements. These
statements by their nature involve substantial risks and uncertainties, such as
credit losses, lack of capital, industry changes, technological advances,
personnel fluctuations, variability of periodic economic factors, competition,
and other factors beyond the Registrant's control which could materially impair
the ability of the Registrant or its subsidiaries to continue their growth
strategies. Should one or more of these risks or uncertainties materialize or
should the Registrant's underlying assumptions prove incorrect, actual outcomes
and results could differ materially from those indicated in the forward looking
statements. With respect to such forward-looking statements, the Registrant
seeks the protections afforded by the Reform Act. These risks include, without
limitation, (1) that the Registrant or its subsidiaries will not retain or grow
its subscriber base, (2) that the Registrant or its subsidiaries will fail to be
competitive with existing or new competitors, (3) that the Registrant or its
subsidiaries will not be able to sustain current growth, (4) that the Registrant
or its subsidiaries will not adequately respond to technological developments
impacting the Internet, and (5) that required financing will not be available if
and as needed. This list is intended to identify certain of the principal
factors that could cause actual results to differ materially from those
described in the forward-looking statements included elsewhere herein. These
factors are not intended to represent all of the risks and uncertainties
inherent in the Registrant or its subsidiaries' businesses and should be read in
conjunction with the more detailed cautionary statements included in this report
and in the Registrant's other publicly filed reports and documents. ITEM 1.
3
<PAGE>
Changes in Control of Registrant
ELECTION OF DIRECTORS
Role of Registrant's & American Internet's Boards of Directors
The Registrant's board of directors sets corporate policies which are
implemented by the Registrant's management and the management of the
Registrant's subsidiaries. In the event that the Registrant's board of directors
determines that a member faces a conflict of interest for any reason it is
expected that the subject director will abstain from voting on the matter which
raised the issue. Similar policies will be implemented for the American Internet
Subsidiary discussed in Items 1 and 2, below. For further information on the
Registrant's Management and Directors, see the Registrant's report on Form
10-KSB for the year ended December 31, 1998, "Item 10: Directors, Executive
Officers, Promoters and Control Persons."
Mark Granville-Smith
In accordance with the terms of a settlement agreement between the
Registrant and Edward Granville-Smith, Jr. (who served as the Registrants
principal officer and sole director from 1995 until November of 1998), the
Registrant elected his son, Mark Granville-Smith as a member of the Registrant's
board of directors, effective July 1, 1999. Details of the settlement agreement
were disclosed in the Registrant's report on Form 10-KSB for the year ended
December 31, 1998 and such agreement was filed as an exhibit thereto.
Mark Granville-Smith, 41 years of age, was elected to the Registrant's
board of director's effective July 1, 1999, to serve until the next annual
meeting of the Registrant's stockholders or until December 31, 1999, whichever
event occurs first. Mr. Granville-Smith graduated from Georgetown University,
Washington, D.C. in 1980 with a bachelor of science degree in business
administration. From 1976 until 1980 he was a commercial pilot for United Bounty
Corporation of Silver Spring, Maryland. In 1980, he went to work in the
commercial real estate syndication industry with his father Edward
Granville-Smith, Jr., the recently retired president, chairman and chief
executive officer of the Registrant. Mr. Mark Granville-Smith served as the
president of corporate general partners in a number of privately placed real
estate syndications during such period, as well as of Milpitas Investors, Inc.
("Milpitas"), the corporate general partner of a public real estate limited
partnership capitalized with $6,000,000, and of a number of privately placed
real estate syndications. In 1986 he also became president of Gran-Mark
Properties, Inc., located in McLean, Virginia, the general partner of Gran-Mark
Income Properties Limited Partnership. In 1987 he left Milpitas and formed his
own real estate syndication company which sponsored private placement
syndications of commercial real estate for two years. Starting in 1989, Mr. Mark
Granville-Smith managed an international underwater diving expedition for
Maryland Marine Recovery Headquarters in Towson, Maryland, to salvage the cargo
of an 1850's sailing ship that sank in the Irish Sea. In 1991, he became
chairman of the board and chief executive officer of Classic Concept Builders,
Inc. ("Classic"), a start-up residential new home construction company. In 1998,
he became involved with the Registrant as a result of his father's decline in
health and during September of 1998, was appointed attorney-in-fact for purposes
of handling certain personal and business affairs for his father (then the
Registrant's sole director and chief executive officer). Since December of 1998
he has participated in the Registrant's board of director's meetings in a
non-voting capacity.
4
<PAGE>
J. Bruce Gleason
In conjunction with the acquisition of American Internet Technical Center,
Inc., a Florida corporation ("American Internet"), as described in response to
Item Two of this report, Mr. J. Bruce Gleason, the president, founder and a
member of the board of directors of American Internet, was elected as a member
of the Registrant's board of directors for a term commencing on July 1, 1999 and
expiring on the earlier of December 31, 1999, or the conclusion of the next
annual meeting of the Registrant's directors. However, the Registrant and its
principal stockholders have agreed to use their best efforts to elect a designee
of American Internet to the Registrant's board of directors for a period of five
years (see the Lock-Up & Voting Agreement filed as an exhibit to this report).
Mr. Gleason's biography is set forth below along with those of American
Internet's other officers and directors.
ADDITIONAL MANAGEMENT & SIGNIFICANT EMPLOYEES AS A RESULT OF
ACQUISITION
In addition to Mr. Gleason, the following persons, all of whom are
employed by American Internet as directors or executive officers, are now deemed
by management of the Registrant to constitute significant employees (as that
concept is reflected in Securities and Exchange Commission Regulation S-B).
Name Age Position
J. Bruce Gleason 56 Chief Executive Officer, Chief
Financial Officer & President
Michael D. Umile 49 Senior Vice President, Secretary
BIOGRAPHIES:
J. Bruce Gleason
Mr. Gleason, age 56, was elected to the Registrant's board of directors,
effective as of July 1, 1999, concurrently with the acquisition of American
Internet on June 25, 1999. He co-founded American Internet with Michael D. Umile
in 1998 and serves on the board of directors of American Internet and as its
president, chief executive officer and chief financial officer. He has a diverse
business background with over 30 years experience in sales, marketing and
finance. In 1972 Mr. Gleason received a certified general accounting designation
from the Certified General Accountants Association located in Ontario Canada.
From 1972 until 1974 he was employed by Crawford, Smith & Swallo, a public
accounting firm located in Toronto, Canada. In 1973 he founded Photo Shack,
Inc., an Ontario corporation which owned and operated a chain of seventy, 24
hour film processing kiosks in Canada which he sold in 1976. In 1982, he founded
Gourmet Galley, Inc., and served as president of frozen food distribution in
Pompano Beach, Florida, until 1990, when he sold Gourmet Galley, Inc. to a
partner. In 1990, he co-founded Southern Telco, Inc., a telecommunications
company headquartered in Lighthouse Point, Florida, in which he served as
president. Southern Telco, Inc., was sold to Public Teleco, Inc. in 1993.From
1994 until 1996, he served as president of Showcase Group, Inc., a construction
company headquartered in Deerfield Beach, Florida which built 27 town houses,
after which he conveyed his interest to a third party in 1996. During 1996, he
received a legal expense insurance license from the State of Florida Department
of Insurance and served as an independent associate for Prepaid Legal Services,
Inc. headquartered in Lighthouse Point, Florida, until 1998.
5
<PAGE>
Michael D. Umile
Mr. Umile, age 49, serves on the board of directors of American Internet
and as its senior vice president, chief operating officer and secretary. He has
been involved in sales and marketing for over 30 years. From 1972 until 1975, he
owned an operated Star Towing, Inc., a used car dealership and towing company
located in Farmingdale, New York and doing business in New York, New Jersey and
New England. From 1977 until 1984, he was a partner in Fantastic Games, Inc.,
and Vulcom Amusements, a video game dealership located in Hicksville, New York.
From 1985 until 1988 he was a co-owner of Phonomatic, Inc., a pay telephone
route in New York with over 180 phones owned outright and 220 additional phones
owned by Mr. Umile and a non-corporate partner. He served as vice president and
general manager of Southern Telco, Inc. a telecommunications company
headquartered in Lighthouse Point, Florida, from 1991 until it was sold in 1994.
From1994 until 1995, he served as Vice-President of Smoking Joe's, Inc., a
restaurant and lounge in Lighthouse Point, Florida. From 1994 until 1996, he
served as vice president of Showcase Group, Inc., a construction company
headquartered in Deerfield Beach, Florida which built 27 town houses. From 1996
until 1997 he was employed by Universal Group of South Florida, a general
merchandise marketing company, located in Lighthouse Point, Florida.
FAMILY RELATIONSHIPS.
There are no family relationships among the new directors, the officers
and directors of American Internet, or between them and any current officers or
directors of the Registrant. However, Mark Granville-Smith is the son of former
officer and director, Edward Granville-Smith, Jr. and was elected in compliance
with obligations of the Registrant under a settlement agreement with Edward
Granville-Smith, Jr.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS.
Based on information provided in response to questionnaires filed as
exhibits to this report (see "Item 7[c], Exhibit Index"), during the past five
years none of the recently elected directors of the Registrant (nor any other
current directors of the Registrant, person nominated to become a director,
executive officer, promoter or control person of the Registrant or of American
Internet) has been a party to or the subject of:
(1) Any bankruptcy petition filed by or against any business of which such
person was a general partner or executive officer either at the time of
the bankruptcy or within two years prior to that time;
6
<PAGE>
(2) Any conviction in a criminal proceeding or has been subject to a pending
criminal proceeding (excluding traffic violations and other minor
offenses);
(3) Any order, judgment, or decree, not subsequently reversed, suspended or
vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his
involvement in any type of business, securities or banking activities;
or
(4) Been found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated
a federal or state securities or commodities law, and the judgment has
not been reversed, suspended, or vacated.
COMPENSATION
Arrangements with Registrant's Directors
No changes have been effected in the arrangements with members of the
Registrant's board of directors, or lack thereof, as disclosed in the
Registrant's report on Form 10-KSB for the year ended December 31, 1998.
Arrangements with American Internet Subsidiaries' Directors or
Executive Officers
Each of the directors and executive officers of American Internet has
understandings with American Internet regarding duties to be performed and
compensation to be received as an employee thereof. Because all of American
Internet's current directors are also executive officers, all relevant
disclosure concerning their compensation arrangements is discussed below.
American Internet has no outside directors; however, it is anticipated
that at least one member will be added to its board of directors by the
Registrant. Pursuant to the terms of the Reorganization Agreement between the
Registrant and the former stockholders of American Internet (the "Subscribers),
the Subscribers have the right to elect 2/3 of the members of American
Internet's board of directors for a period of five years.
Messrs. Gleason and Umile, currently and historically the only members
of American Internet's board of directors, do not receive specific compensation
for services in such roles, rather, they are compensated for services generally
under the terms of employment agreements summarized below. Copies of such
agreements are filed as exhibits to this report (see "Item 7[c], Exhibit
Index").
In the future, especially if American Internet is successful in making
material acquisitions, it is anticipated that additional members will be elected
to its board of directors, and, in some cases, special compensation may be
called for. Such decisions will be made at the time that expansion of membership
on American Internet's board of directors is deemed appropriate and will
probably be based on negotiated arrangements.
7
<PAGE>
Other than as indicated below with reference to employment of Messrs.
Gleason and Umile, there are no arrangements or understandings regarding
compensation for services provided as a director of American Internet, including
any additional amounts payable for committee participation or special
assignments.
Manner of Determining Executive Compensation
American Internet's board of directors will set compensation for the
management of American Internet (other than Messrs. Gleason and Umile) based on
guidelines developed with the Registrant's management. Messrs. Gleason and Umile
are parties to long term employment agreements with American Internet, as
described below. Except for Messrs. Gleason and Umile, no employee, officer or
director of American Internet has been paid in excess of $75,000 per year by
American Internet. American Internet currently has no pensions or profit sharing
arrangements for its officers, directors or employees.
Whenever reasonably feasible, American Internet expects that it will use
compensation formulas in its future employment agreements with executive
officers on a basis that rewards them for success of the areas under their
responsibility through stock and cash bonuses. However, recruitment of qualified
personnel, in most instances, requires that they be provided with a guaranteed
base salary.
Employment Contracts, Termination of Employment & Change-in-control
Arrangements.
The Registrant does not have any compensatory plan or arrangement,
including payments to be received from the Registrant, with respect to a named
executive officer that results or will result from the resignation, retirement
or any other termination of such executive officer's employment with the
Registrant and its subsidiaries or from a change-in-control of the Registrant or
a change in the named executive officer's responsibilities following a
change-in-control, which, including all periodic payments or installments,
exceeds $100,000. However, both Mr. Gleason and Mr. Umile are parties to long
term employment agreements with American Internet, which, except for titles and
responsibilities, reflect virtually identical terms. The following summary of
such agreements is qualified in its entirety by reference to the agreements
themselves, which are filed as exhibits to this report (see "Item 7[c], Exhibit
Index")
Term:
Each agreement is for an initial term of five years, staring on July 1,
1999, subject to earlier termination as described below and to ongoing annual
renewals unless the party desiring not to renew provides the other with at least
30 days prior written notice of intent not to renew.
Compensation:
$75,000 per annum, payable bi-monthly, with increases to $5,000 per year
during the 4th and 5th years.
Benefits:
Three weeks paid vacation during the first three years and four weeks paid
vacation thereafter; reimbursement for travel and other properly documented
business expenses; participation in health and life insurance plan and in all
other benefits generally available to any other employees (e.g., retirement
plans, profit sharing plans);
8
<PAGE>
Indemnification:
Prepayment of all costs, expenses and judgments related to or provided at
the request of American Internet, provided that representation is by legal
counsel selected by the Registrant and that applicable conflicts of interest are
waived.
Early termination:
American Internet can terminate the employment agreements severally, as to
the terminating entity only, for cause (e.g., the inability through sickness or
other incapacity to discharge duties for ninety or more consecutive days or for
a total of one hundred eighty or more days in a period of twelve consecutive
months; refusal to follow directions of the board of directors; dishonesty;
theft; or conviction of a crime; material default in the performance of
obligations, services or duties required under the employment agreement (other
than for illness or incapacity) or materially breach of any provision of the
employment agreement, which continues for twenty days after written notice if it
resulted in material damage); discontinuance of business; and death. In the
event of a dispute concerning termination due to breach or default, compensation
will be continued until resolution of such dispute by a tribunal of competent
jurisdiction, subject to repayment upon final determination that such
compensation was not called for.
The employment agreements contain broad confidentiality and
non-competition covenants subject to judicial restructuring if found to be
legally unenforceable which provide for both injunctive relief and liquidated
damages. The benefits are subject to renegotiation if the Registrant effects
other acquisitions and employees of such acquired entities have benefits on more
favorable terms.
Compensation Under Plans
None of American Internet's executive officers have received or become
entitled to any cash or non-cash compensation under any company plans (as the
term "plan" is defined in Instruction 3 to Item 402 of Regulation SB,
promulgated by the Securities and Exchange Commission) during the last calendar
year, nor have they been awarded any stock options or other forms of indirect
compensation by the Registrant.
Neither the Registrant nor any subsidiary thereof has any long term
incentive plans; however, the Registrant has agreed to make shares of its common
stock available to American Internet at a 15% discount from the applicable
market price thereof for use to effect acquisitions or to recruit or retain
personnel. Consequently it is likely that an LTIP award or other securities
based compensation plan will be developed for American Internet in the future.
9
<PAGE>
1998 Summary Compensation Table
Annual Long Term Compensation
Name Compensation
and Awards LTIP* All
Principal Rewards Pay- Other
Position Salary Bonus Other Stock Options outs Compensation
J. Bruce Gleason (1) $75,000 * * * * * (1)
Michael D. Umile(2) $75,000 * * * * * (2)
--------
(1) Mr. Gleason has served as chief executive officer, chief
financial officer and president of American Internet since its
inception. In addition to his salary, during 1998, Mr. Gleason
received insurance benefits valued at $3,000 for compensation
purposes.
(2) Mr. Umile has served as chief operating officer, vice president
and secretary of American Internet since its inception. In
addition to his salary, during 1998, Mr. Umile received
insurance benefits valued at $3,000 for compensation purposes.
CERTAIN AMERICAN INTERNET TRANSACTIONS
Director, Executive Officer, Nominee for Election as a Director or
Principal Security Holder
Messrs. Gleason and Umile have informed the Registrant's general counsel
that since American Internet's inception, no nominee for election as a director;
principal security holder or any member of their immediate family (including
spouse, parents, children, siblings, and in-laws) had or is to have a direct or
indirect material interest in any material transactions with American Internet.
Parents of American Internet
The following table discloses all persons who are parents of American
Internet (as such term is defined in Securities and Exchange Commission
Regulation C), showing the basis of control and as to each parent, the
percentage of voting securities owned or other basis of control by its immediate
parent if any.
Percentage Other
of Voting Basis
Basis for Securities For
Name Control Owned Control
The Registrant Stock ownership 100% (1)
Bruce J. Gleason Membership on board of directors 0% (2)
Michael D. Umile Membership on board of directors 0% (3)
10
<PAGE>
- - --------
(1) As a result of its stock ownership, the Registrant has the ability to
elect all of American Internet's directors. However, pursuant to the
terms of the Reorganization Agreement and the related Lock-Up & Voting
Agreement (copies of which are filed as exhibits to this report, see
"Item 7[c], Exhibit Index"), the Registrant, its officers, directors and
Principal Stockholders have agreed to elect designees of the former
American Internet stockholders who were parties to the Reorganization
Agreement to 2/3 of the seats on American Internet's board of directors
for a period of at least five years.
(2) Mr. Gleason formerly owned 50.30578% of the common stock in American
Internet and is now the largest current stockholder in the Registrant
(however, see discussion of Yankees options below). The former
stockholders of American Internet (Messrs. Gleason and Umile, and
possibly the Potential Participants) in the aggregate, now hold
approximately 26.3% of the Registrant's outstanding common stock. Mr.
Gleason also serves on the Registrant's board of directors. Pursuant to
the terms of the Reorganization Agreement and the related Lock-Up &
Voting Agreement (copies of which are filed as exhibits to this report,
see "Item 7[c], Exhibit Index"), the Registrant, its officers, directors
and Principal Stockholders have agreed to elect designees of the former
American Internet stockholders who were parties to the Reorganization
Agreement to 2/3 of the seats on the American Internet board of
directors for a period of at least five years. Mr. Gleason, because of
his prior majority ownership of the common stock in American Internet,
will be able to unilaterally determine who a majority of its directors
will be, and therefore, to control American Internet, subject to
compliance with his fiduciary obligations to the Registrant and its
stockholders.
(3) Mr. Umile formerly owned 49.93194% of the common stock in American
Internet and is now the second largest current stockholder in the
Registrant (but see discussion of Yankees options below). Former
stockholders of American Internet (Messrs. Gleason and Umile, and
possibly the Potential Participants), now hold approximately 26.3% of
the Registrant's outstanding common stock. As a result of his close
association with Mr. Gleason, it is probable that Mr. Umile will share
in Mr. Gleason's ability to control American Internet.
Transactions with Promoters, if Organized Within the Past Five Years
Messrs. Gleason and Umile are the persons who should be
deemed the promoters of American Internet. Additional, more
specific information is contained above.
PRINCIPAL SHAREHOLDERS OF AMERICAN INTERNET
Reorganization with the Registrant
The following table sets forth the ownership of shares of American
Internet common stock immediately prior to the closing on the reorganization
agreement with the Registrant and the number of shares of the Registrant's
common stock that American Internet's stockholders received pursuant to the
reorganization agreement.
11
<PAGE>
Before closing After closing
(American Internet) (The Registrant)
Number Number
Name of Owner of Shares Percent of Shares Percent
J. Bruce Gleason 5,100,000 50.3% 1,127,431 13.284%
Michael D. Umile 5,000,000 49.3% 1,105,325 13.024%
Theodore & Susan Gill * 20,000 00.0893% 4,422 ** 00.00052%
Lyn Poppiti. * 16,000 00.0714% 3,538 ** 00.00042%
All Officers As a Group 10,100,000 99.64% 2,232,756 26.3076%
- - ------
* Assumes that they do not elect to retain their shares of common stock in
Ascot and elect to exercise all of their warrants to purchase American
Internet common stock.
** Assumes that they do not elect to retain their shares of
common stock in Ascot, elect to exercise all of their
warrants to purchase American Internet common stock and
elect to participate in the exchange of American Internet
capital stock for the Registrant's common stock If they did
not participate, then both the number and percentage would
be 0. If they elected to participate but did not exercise
their warrants, then they would have half as much stock.
All shares have been rounded up to the next full share.
Additional information concerning the material changes caused to the
Registrant's principal stockholders and their relative ownership of the
Registrant's common stock are disclosed in "Revised Stockholder Data" below.
REVISED STOCKHOLDER DATA
As a result of the acquisition of American Internet, the stockholder
information contained in Item 11 of the Registrant's report on Form 10-KSB for
the calendar year ended December 31, 1998, has been materially changed, as
described below.
Principal Stockholders
The following tables disclose information concerning ownership of the
Registrant's common stock by officers, directors and principal stockholders
(holders of 5% or more of the Registrant's common stock). All footnotes follow
the second table. The Registrant's currently outstanding shares of common stock,
for purposes of these calculations, are deemed to be 8,487,124 because they do
not include the 7,960 shares issuable to the Potential Participants.
12
<PAGE>
Table 1. Principal Stockholders:
As of the date of this report, the following persons (including any
"group") are, based on information available to the Registrant, beneficial
owners of more than five percent of the Registrant's common stock (its only
class of voting securities):
Name and Amount and
Address of Nature of Percent
Beneficial Beneficial of
Owner Ownership Class
J. Bruce Gleason
46 Havenwood Drive; Pompano Beach, Florida 33064 1,127,431(1) 13.28%
Michael D. Umile
210 Oregon Lane; Boca Raton, Florida 33487 1,105,325 (2) 13.02%
Mark and Edward Granville-Smith, Jr. 1,082,000 (3) 12.75%
3821-B Tamiami Trail, Suite 201;
Port Charlotte, Florida, 33952
Jerry C. Spellman 897,691 (4) 10.58%
2510 Virginia Avenue, NW; Washington, D.C. 20037
Charles J. Scimeca 650,000 (5) 07.59%
23698 US Highway 19 North; Clearwater, 34265 (3)
The Tucker Family 847,500 (6)(7) 09.99%
7359 Ballantree Court; Boca Raton, Florida 33487
The Calvo Family 570,500 (7)(8) 06.72%
1941 Southeast 51st Terrace; Ocala, Florida 34471
The Yankee Companies, Inc. 620,000 (6)(7)(8) 07.30%
902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487
Table 2. Security Ownership of Management:
As of the date of this report, the following table discloses, as to the
Registrant's common stock, $0.01 par value per share, the Registrant's only
outstanding class of equity securities or any of its subsidiaries held by any
current officer or director of the Registrant or its subsidiaries, beneficially
owned by all directors and nominees, the names of each executive officer, as
defined in Item 402(a)(2) of Securities and Exchange Commission Regulation S-B,
and directors and executive officers of the Registrant as a group, the total
number of shares beneficially owned and the percent of class so owned. Of the
number of shares shown, the associated footnotes indicate the amount of shares
with respect to which such persons have the right to acquire beneficial
ownership as specified in Securities and Exchange Commission Rule 13(d)(1).
13
<PAGE>
Name and Amount
Address of of Nature of Percent
Beneficial Common Beneficial of
Owner Stock Owned Ownership Class
J. Bruce Gleason 1,127,431 Record (1) 13.28%
Michael D. Umile 1,105,325 Record (2) 13.02%
Mark Granville-Smith 1,082,000 (3) 12.75%
Charles J. Scimeca 650,000 (5) 07.66%
Penny Adams Field 62,500 (9) 00.74%
Anthony Q. Joffe 62,500 (9) 00.74%
G. Richard Chamberlin 175,000 (10) 02.06%
All officers and directors
as a group 4,264,756 (11) 50.25%
Footnotes:
(1) Record & Beneficial. Mr. Gleason obtained his shares in exchange for
shares in American Internet. Messrs. Gleason and Umile now hold the
largest individual blocks of the Registrant's common stock (but see
Yankees options). In the event that all 4,500,000 of the shares of
common stock reserved for the American Internet deferred, contingent
exchange shares are earned, at least 2,264,207 would be allocated to Mr.
Gleason, giving him a total of 3,391,638 shares of the Registrant's
common stock.
(2) Record & Beneficial. Mr. Umile obtained his shares in exchange for
shares in American Internet. Messrs. Gleason and Umile now hold the
largest individual blocks of the Registrant's common stock (but see
Yankees options). In the event that all 4,500,000 of the shares of
common stock reserved for the American Internet deferred, contingent
exchange shares are earned, at least 2,219,810 would be allocated to Mr.
Umile, giving him a total of 3,325,135 shares of the Registrant's common
stock.
(3) Only 20,000 shares are held directly, the balance being attributed to
Mark Granville-Smith as a result of their ownership by his father,
Edward Granville-Smith, Jr., subject to a general power of attorney in
favor of Mark Granville-Smith. Of the shares attributed to but not owned
by Mark Granville-Smith, beneficial ownership is vested in his father,
record ownership being held by K. Walker, Ltd., a Bahamian corporation
except for 110,000 shares of stock in the record name of Warren
McFadden. If only the 20,000 shares were considered, he would hold only
0.005% of the Registrant's common stock.
(4) Beneficial ownership, record ownership is held by Bolina Trading
Company, S.A., a Panamanian corporation, except with reference to 2,701
shares,(2400 shares of record held by Mr. Spellman personally and 301
shares held of record by First Investment Planning Company). Mr.
Spellman is the Managing Director of Bolina Trading Co.,
S.A., a Panamanian corporation, which owns the subject shares. Such
shares comprise the fourth largest block of the Registrant's common
stock held by any single person.
14
<PAGE>
(5) 200,000 of the 650,000 shares represent shares underlying currently
exercisable options, The balance represent 450,000 shares in the record
name of Palmair, Inc., a foreign corporation. The transactions
concerning the transfer of 450,000 shares to Palmair, Inc., and the
December, 1998, warrant agreement with Mr. Scimeca are discussed in Item
12(a) Certain Relationships and Related Transactions, in the
Registrant's report on Form 10-KSB for the year ended December 31, 1998.
Should Mr. Scimeca be deemed not to control the 450,000 shares
transferred to Palmair, Inc., then Mr. Scimeca's percentage of common
stock would be 2.35651% and Palmair, Inc, would be 5.30214%. Mr. Scimeca
currently serves as a director and as the Registrant's acting president.
(6) The Tucker family is comprised of the wife Michelle Tucker, her husband
Leonard Miles Tucker and Shayna and Montana, their minor daughters. Mrs.
Tucker holds 108,750 shares in trust for each of her minor daughters
and, in addition, 630,000 shares are held by Blue Lake Capital Corp., a
Florida corporation owned by Mrs. Tucker. Mr. Tucker serves as the
president of Yankees and he or his family own 50% of its equity
securities, consequently, 50% of the Registrant's securities held or
attributed to Yankees should be attributed to The Tucker family. See
Note (7).
(7) The Yankee Companies, Inc., a Florida corporation, is owned in equal
shares by members of the Calvo and Tucker families. Consequently, half
of its securities could be attributed beneficially to the Calvo family
and half to the Tucker family. See Notes (6) and (8) for additional
shares attributable to the Tucker and Calvo Families. In addition to the
shares currently held, Yankees is entitles to an additional 225,000
shares for having arranged the acquisition of American Internet, and in
addition, is entitled to purchase shares equal to 10% of the
Registrant's outstanding common stock and shares of common stock
reserved for issuance under conditions clearly definable (e.g.,
warrants, options, incentive shares, etc.), at the time of exercise for
an aggregate of $60,000. If currently exercised, the Yankees options
would be exercisable for approximately 1,343,712 shares of the
Registrant's common stock (assuming that all 4,500,000 of the shares of
common stock reserved for the American Internet deferred, contingent
exchange shares are earned). That would give Yankees a total of
2,228,712 shares of the Registrant's common stock, making it the largest
Registrant's single stockholder, and, when combined with the common
stock held by the Tucker and Calvo families, would give them an
aggregate of 3,646,712 shares of the Registrant's common stock.
(8) The Calvo Family is comprised of Cyndi N. Calvo, William A. Calvo, III,
her husband, and their three minor children, William, Alexander and
Edward. Each member of the family
holds 40,000 shares (the children's shares are held by their parents,
in trust) and Mr. and Mrs. Calvo hold 100,000 shares as tenants by the
entireties. In addition, 270,000 shares are held by the Calvo Family
Spendthrift Trust, a Florida trust for the benefit of the Calvo family,
for which Mrs. Calvo serves as trustee. Mr. Calvo serves as the vice
president of Yankees and he or his family own 50% of its equity
securities, consequently, 50% of the Registrant's securities held or
attributed to Yankees should be attributed to The Calvo Family. See Note
(7).
(9) Beneficial and record. Ms. Field and Mr. Joffe serve as
directors.
15
<PAGE>
(10) Beneficial and record. Mr. Chamberlin serves as a director and as the
Registrant's secretary and general counsel.
(11) Does not include shares issued to Messrs. Weiss, Moffett and Homan as to
which the Registrant has advised its transfer agent to decline to honor
any transactions based on failure of consideration. See Items 3 and 10
of the Registrant's report on Form 10-KSB for the year ended December
31, 1998.
Agreements Pertaining to Voting and Transaction's in the
Registrant's Securities.
In conjunction with the Registrant's acquisition of American Internet,
the Registrant's current officers and directors and its principal stockholders
listed below have entered into an agreement restricting their sales of the
Registrant's common stock for a period of nine months and agreeing to vote as
follows:
"First: Voting Agreements
... during the five year period following the Closing (as defined in the
reorganization agreement, ... they will, in their roles as members of the ...
board of directors and as stockholders ... at all meetings of the ...
stockholders or of board of directors, vote in such a manner as to secure
approval of the following covenants made ... to the Subscribers in Section 4.6
of the reorganization agreement, to wit:
During the five years following the Closing, the [Registrant] ... shall use
its best efforts to assure that:
'At least one designee of the Subscribers is nominated for membership on
the [Registrant's] ... board of directors at each meeting of the [Registrant's]
... stockholders or directors at which the membership of its board of directors
is up for election, and to use their best efforts consistent with applicable law
to secure such nominee's election, so that the membership of the [Registrant's]
... board of directors includes at least one designee of the Subscribers;
Designees of the Subscribers are elected to at least two thirds of the
seats on the [American Internet Subsidiary's] ... board of directors; and
On one occasion only, [the Registrant] ... provide "piggy back"
registration rights covering up to an aggregate of 35,000 shares of the [the
Registrant's] ... stock obtained pursuant to this Agreement to Messrs. Bruce
Drezner and Gary Walk; Theodore Gill and Susan Gill, his wife, as tenants by the
entireties; and, Lyn Poppiti.
16
<PAGE>
Second: Stock Lock-Up & Voting Agreements
During the following periods, [the Registrant's] ... Principals
will refrain from any sales of [the Registrant's] ... securities, except
as specified below:
b. During the 90 day period following closing on this Agreement, [the
Registrant's] ... Principals will not engage in any sales of [the
Registrant's] ... common stock; and
c. (1) From the 91st through the 270th day following closing on this
Agreement, [the Registrant's] ... Principals will not engage in any sales
of [the Registrant's] ... common stock in excess of 10,000 shares per
month;
(2) For purposes of this Section 2-b only, the persons or entities
included within each separately numbered subsection shall be deemed to be
acting in concert as part of a related group for purposes of determining
such 10,000 shares per month limitation:
(A) Charles J. Scimeca, on his own behalf and on behalf of his
affiliates.
(B) Anthony Q. Joffe, on his own behalf and on behalf of his
affiliates.
(C) Penny Adams Field, on her own behalf and on behalf of her
affiliates.
(D) G. Richard Chamberlin Esquire, on his own behalf and on behalf of
his affiliates.
(E) Jerry C. Spellman, on his own behalf and on behalf of his
affiliates.
(F) The Yankee Companies, Inc., on its own behalf and on behalf of
its affiliates.
(G) The Granville-Smith Group: Mark Granville-Smith, on his own
behalf and on behalf of his affiliates; and, Edward
Granville-Smith, Jr., on his own behalf and on behalf of his
affiliates.
(H) The Calvo Group: Cyndi N. Calvo, on her own behalf, on behalf of
her affiliates and as a trustee for the Calvo Family Spendthrift
Trust; and, William A. Calvo, III, on his own behalf, on behalf
of his affiliates and as a trustee for his children, William,
Alexander & Edward.
17
<PAGE>
(I) The Tucker Group: Leonard Miles Tucker, on his own behalf, on
behalf of his affiliates and on behalf of Carrington Capital
Corp. (exclusive of the 50,000 shares as to which Equitrade
Securities Corporation has purchase rights under two covered
option/leap agreements, each dated December 18, 1998); and,
Michelle Tucker, on her own behalf, on behalf of her affiliates,
on behalf of Blue Lake Capital Corp., and as a trustee for her
children Shayna and Montana.
(J) The Radcliffe Group: Joseph D. Radcliffe, on his own behalf and
on behalf of his affiliates; Dennis V. Radcliffe, on his own
behalf and on behalf of his affiliates; Michael J. Radcliffe, on
his own behalf and on behalf of his affiliates; and, Vanessa
Radcliffe, on her own behalf and on behalf of her affiliates.
c. Notwithstanding anything in this Agreement to the contrary, nothing in
this Agreement shall be interpreted as an agreement by [the Registrant's] ...
Principals to engage in any concerted or group activities involving [the
Registrant's] ... common stock, as determined for purposes of Commission Rule
144, or Sections 13, 14 or 16 of the Exchange Act."
A copy of the Lock-Up & Voting Agreement is filed as an exhibit to this
report (see "Item 7[c], Exhibit Index").
ITEM 2. Acquisition of Assets
DATE AND MANNER OF ACQUISITION
American Internet was incorporated in Florida on April 15, 1998, as
American Internet Technical Center, Inc., to provide various Internet services.
American Internet's principal executive offices are located at 440 East Sample
Road, Suite 204; Pompano Beach, Florida 33060; Telephone (954) 943-4748.
On April 26, 1999, American Internet was acquired by Ascot Industries,
Inc., a Nevada corporation ("Ascot") in a stock exchange pursuant to which the
stockholders of American Internet acquired 90% of the outstanding capital stock
of Ascot in exchange for all of the capital stock of American Internet. During
June of 1999, after months of negotiations with a number of existing public
companies, Messrs. Gleason and Umile elected to become associated with the
Registrant and on June 25, 1999, a reorganization agreement was executed between
the Registrant, Ascot (then operating as American Internet Technical Centers,
Inc., a Nevada corporation), the former stockholders of American Internet, and
American Internet.
18
<PAGE>
On July 9, 1999, at the request of the Registrant, the parties to the
Reorganization Agreement and the former management and controlling stockholders
of Ascot entered into an agreement rescinding its acquisition of American
Internet as a result of which, control of Ascot was reacquired by its original
stockholders, its name is being changed back to Ascot, and Ascot was carved out
of the Reorganization Agreement. As consideration for the rescission, American
Internet agreed to pay slightly less than $3,000 in legal fees to Ascot's legal
counsel. A copy of the rescission agreement is filed as an exhibit to this
report (see Item 7, Exhibit Index"). As an accommodation to three stockholders
of Ascot who invested $20,000 (with the option of investing an additional
$9,000) because of the American Internet transaction (the "Potential
Participants"), they have been given the option until August 1, 1999, of:
Remaining stockholders of Ascot;
Becoming stockholders in American Internet (holding shares and the right
to acquire shares of common stock totaling 36,000 shares of common
stock, of 10,136,000 which would be outstanding); or
Becoming stockholders in the Registrant, on the same share
exchange basis as Messrs. Gleason and Umile.
In the event that they have not made an election and complied with
documentation requirements by August 1, 1999, the option will expire and they
will remain as stockholders and warrant holders in Ascot.
On June 25, 1999, Messrs. J. Bruce Gleason, Michael D. Umile exchanged
all of their common stock in American Internet for 2,232,756 shares of the
Registrant's common stock, with the right to increase the 2,232,756 shares to
6,732,756 shares if net, pre-tax profit projections over the next five years
were met. As a result, American Internet became a wholly owned subsidiary of the
Registrant.
The transaction was structured to meet the tax free exchange provisions
of Section 368(a)(1)(B) of the Internal Revenue Code of 1986, as amended, and
for accounting purposes, is expected to be treated as a purchase not resulting
in a pooling of interests. The securities were issued in reliance on the
exemptive provisions of Commission Rule 505 of Regulation D, and comparable
state law provisions, based on representations by the parties reflected in the
reorganization agreement. For auditing purposes, American Internet is expected
to be treated as the predecessor entity, since virtually all of the Registrant's
prior operations were transferred to Messrs. Granville-Smith and Spellman, as
disclosed in the Registrant's report on Form 10-KSB for the year ended December
31, 1998.
A copy of the reorganization agreement pursuant to which the Registrant
acquired American Internet, including all exhibits thereto, is filed as an
exhibit to this report (see "Item 7[c], Exhibit Index"). Consolidated financial
data and pro forma financial information reflecting the acquisition of American
Internet required by Item 7(a) will, as permitted by regulations, be provided by
amendment to this report within 60 days after its initial filing.
Pursuant to the terms of the Reorganization Agreement, Messrs. Gleason
and Umile exchanged the 10,100,000 shares in American Internet they would have
had based on an approved plan of recapitalization, with the Registrant for an
aggregate of 2,232,756 shares of the Registrant's common stock. An additional
7,960 shares of the Registrant's common stock has been reserved for issuance to
the Potential Participants should they elect to relinquish all rights to
American Internet and Ascot securities. In addition to the initial shares of the
Registrant's common stock exchanged for the American Internet capital stock, the
exchanging stockholders can receive up to an additional 4,500,000 shares of the
Registrant's common stock over the next five years if American Internet meets
required net profit before taxes criteria determined as of December 31 in each
year set forth below in accordance with generally accepted accounting
principals, consistently applied ("GAAP"), as follows:
19
<PAGE>
A. Net Pre-tax
Profit Goal Time Frame Additional Common Stock to
be Issued
$200,000 1999 500,000 Shares
$500,000 2000 800,000 Shares
$1,000,000 2001 800,000 Shares
$1,500,000 2002 800,000 Shares
$2,000,000 2003 800,000 Shares
$2,500,000 2004 800,000 Shares
B. In the event that the thresholds were not attained and the Registrant
provided American Internet with the anticipated $350,000 in funding for
its operations within 90 days following closing on the American Internet
acquisition then:
1. If the net, pre tax earnings were less than 33% of the required
threshold during the subject 12 month period, the additional
stock issuable for such period would be forfeited;
2. If the net, pre tax earnings were between 33% and 80% of the
required threshold during the subject 12 month period, the
additional stock issuable for such period and the required
threshold would be carried over to the next year, increasing
both the aggregate threshold and the aggregate bonus attainable
for such year; and
3. If the net, pre tax earnings were between 80% and 100% of the
required threshold during the subject 12 month period, the
additional stock issuable for such period would be prorated.
C. In the event that the thresholds were not attained but the
Registrant had not provided American Internet with the
total $350,000 in funding for its operations within 90 days
following closing on the acquisition, then, the additional stock
issuable for such period would be prorated.
As a result of the reorganization with the Registrant, American Internet
became a wholly owned subsidiary of the Registrant, subject to minimal dilution
in the event the Potential Participants elect to become stockholders in the
Registrant, in which case the Registrant would hold 10,100,000 of 10,138,000
shares of American Internet common stock (99.62517%) outstanding.
20
<PAGE>
DESCRIPTION OF AMERICAN INTERNET
Business
American Internet is a Florida based Internet company that offers
Internet services such as e-commerce accounts, hosting services, web site design
and Internet consultation. It also serves as a distributor for Education to Go,
a California enterprise that provides on-line educational and instructional
courses through the Internet. A copy of the agreement with Education to Go is
filed as an exhibit to this report (see "Item 7, Exhibit Index")
American Internet's corporate operations include a web site production
and design division, an Internet presence provider ("IPP"); an on-line education
division; various sales related services, customer relations, administrative,
accounting and management functions. American Internet employs a computerized
management information system to record and manage the various operations of the
business.
American Internet began by offering free web sites primarily for new,
small and medium business. Web sites are designed with the assistance of senior
webmaster students in American Internet's on-line educational and instructional
programs supervised by experienced web designers, who provide such assistance as
part of their graduation requirements. In return, customers are required to use
American Internet's hosting services for their web sites.
In its first nine months of operations American Internet generated 1,175
clients (it is currently averaging 132 new clients per month); trained students
as web masters and established an in house production department. Since
inception, American Internet has experienced an average of 11.23% growth per
month and is in the process of marketing additional Internet services including
e-commerce and marketing programs to its current clients. No customer of
American Internet accounts for more than 5% of its business.
Principal Products or Services and Their Markets
American Internet's primary market is new business throughout the United
States and Canada. American Internet designs web sites, hosts web sites, and
provides e-commerce programs, marketing and other Internet services. American
Internet differs from most competitors in that it is not restricted by
geographical boundaries, solicits smaller accounts and utilizes its students to
perform many routine tasks.
American Internet also serves as a distributor for Education to Go, a
California enterprise which offers on line instructional programs in computer
technology, web design, management and other fields. All courses are conducted
on the Web where students can acquire new skills from the comfort of their own
home.
American Internet offers free web sites for small and medium sized
businesses designed with the assistance of its senior webmaster students
(supervised by experienced web designers), as part of their graduation
requirements to clients who agree to use American Internet's hosting services
for their web sites. New customers are given a choice of either a 6 or 12-month
free web site program, subject to payment for the associated hosting services,
including search engine registration. Currently, the hosting services are
provided at a price of $578 for the six-month contracts and $932 for the annual
contract. Clients who sign up for longer periods receive a free month and one
free site upgrade. The percentage of one-year contracts has gradually increased
to 50% of all current hosting contracts and is expected to maintain that ratio.
The 6-month contracts expire during the first year and the clients are invited
to re-subscribe to the hosting services at reduced (e.g., from $59 per month to
$25 per month). American Internet's management estimates that it will experience
a 75% renewal rate.
21
<PAGE>
In addition to purchase of hosting services, American Internet's clients
are encouraged to purchase a search engine registration option for a charge of
$149. Search engines act in a manner similar to telephone yellow page
directories in conjunction with the Internet and are an important part of the
system. Less than 1% of clients decline the offer. The current version of the
American Internet service agreement provides clients with the following options:
Domain Name Registration, no charge;
Two (2) e-mail addresses, no charge;
Six Month Contract ($75 set-up fee plus $59 monthly) $429; One
Year Contract ($75 set-up fee plus $59 monthly)$783; Search
Engine Registration (over 550 search engines & directories)$149;
4 Page Web Site, no charge with one of the other plans listed.
In addition to services and products offered to clients at flat fee
rates many clients are encouraged to purchase additional features or upgrades,
either in conjunction with the initial sale or during the production stage. The
additional features were not a significant source of income during the initial
three months of operation; however, as additional sample web sites featuring the
additional features and upgrades have been displayed on American Internet's
preview pages, demand has been increasing. American Internet's management
estimates that income from additional features and upgrades should average at
least $100 per client. The more commonly requested additional features and
upgrades available for web sites from American Internet, together with their
current prices, are as follows:
Extra Pages $ 65 per page;
Extra Scans (Picture graphics) $ 10 (reduced for 5 or more
pages to $7 each);
Insert Standard Animations $100 (4 animations);
Custom Created Animations $ 50 per hour;
Additional e-mail addresses $ 10 per month for each 4
addressees;
Auto-responders $ 50 set-up fee plus $10 per
month for each 2;
Additional Domain Registration $150 (exclusive of Internic
fee of $35 per year);
Java Scrolling Text $125;
Glow Buttons/Mouse Over $ 50 (includes all pages);
Framed Web Site $150;
Insert Audio Clip $150;
Secured Server (for credit cards) $150;
Shopping Cart/ e-commerce Prices vary.
American Internet became a distributor for on-line educational courses
on August 19, 1998. The initial educational program (still being offered) was
titled "Professional Web Design" and includes the following courses:
Introduction to the Internet; Creating web pages; Advanced web pages; Creating
web graphics; Java programming for the web; Microsoft front page and CGI
programming for the web. Sixty-two different courses are currently offered, all
of which feature web-based delivery and administration. Students can take
courses from their own home or business. Requirements for most courses are a
computer, Internet access, e-mail and Netscape or Internet Explorer browser.
Lessons for each course/ syllabus are usually delivered twice weekly either by
e-mail or on the web itself. An instructor is assigned to each course chat room
and students interact with the assigned instructors and other students twice per
week in special chat room environments.
22
<PAGE>
Each course typically runs for six weeks, with 2 lessons per week, for a
total of 12 lessons. Assignments are given each week with a final exam provided
to those seeking course certificates. Currently, the courses involve the
following subjects:
Computer:
14 different courses of study. Average course is 12 lessons, 6 weeks of
study. Course prices $79.00.
Internet:
Internet navigation, creation of web pages and web programming. A total of
8 courses, 12 lessons per course. Each course price $95.00.
Business:
Planning, starting, financing and marketing small to medium sized
businesses. A total of 11 courses, varying numbers of lessons per course.
Average course price $135.00.
Management:
Fundamentals of supervision, communication, motivation, conflict
resolution, and inventory and project management. A total of 23 different
courses, varying numbers of lessons per course. Average course price $195.00.
Miscellaneous:
Preparation for tests, enhancement of medical skills, charting new career
paths. A total of six different courses, varying numbers of lessons per course.
Average course price $275.00.
Demographic Data
The growth in demand for Internet related products and services in the
United States and in most other countries outstrips the population growth.
Demand for the services is being fueled by factors such as more awareness of the
general availability of the service, increased advertising and competition by
service providers, more businesses in the target group, the robust economy, the
advancements in the technology sector and public acceptance of these changes.
Based upon available market data, American Internet's management
believes that the market for Internet services such as those provided by
American Internet will remain strong. Network Solutions, which has the
government contract to register domain names in the United States, reports that
new registrations are increasing at a significant rate. Each day, Internic
registers an average of more than 67,000 new commercial domain names. During
January of 1998 there were 30 million computers on the Internet and
approximately 70 million users. Internet co-designer, Vinton Cert, estimates
that by the Year 2000 there will be 200 million computers on the Internet and
over 400 million users. During 1998, estimates for sales on the Internet by the
year 2000 exceeded $4 billion. AOL recently announced that its sales for the
ten-day Christmas period of 1998 exceeded $1 billion dollars.
23
<PAGE>
While the growth in the domestic market for the service is expected to
continue, overseas markets are showing much more promise. The demographic
information such as rising income levels, higher education levels and more
familiarity with technology are suggesting that overseas markets are ripe for
dramatically higher growth rates. Although the sales in overseas markets are
currently dwarfed by domestic sales, the firms who do sell overseas are
experiencing very fast growth rates and there is every reason to believe that
these fast growth rates will continue for years to come and that eventually the
overseas markets may even be larger than then domestic market.
Distribution Methods of the Products or Services
Over 100,000 new businesses are formed in the United States each month.
Many of these businesses commence operations on a limited budget but are
increasingly aware of the benefits of maintaining a web site. American Internet
concentrates on small and new businesses as its market niche and the area where
it focuses its marketing efforts in order to achieve its strategic goals.
American Internet markets its web sites and other services through
various media throughout the United States and Canada. American Internet's
marketing strategy has been focused around advertising in local newspapers,
direct mail, including postcards and card decks, telemarketing and the Internet.
American Internet maintains its own informative web site and encourages
prospective clients to visit the site where they can obtain information about
American Internet and its services, and to preview approximately ten actual
sites of American Internet's clients. Gross sales for the first nine months of
operations were approximately $850,000.00 to 1,175 clients. American Internet's
short term marketing objective is to increase sales to $4,200,000 and increase
the number of clients to 5,000 by the fiscal year ending March 31, 2000.
American Internet will experiment with cable television advertising on business
networks, such as MSNBC and other networks, press releases, and outbound
telemarketing campaign to new businesses, opt-in e-mailing and other advertising
techniques and methods.
Advertising and marketing costs constitute one of American Internet's
largest expenses. Although American Internet has been successful in handling
marketing and advertising matters internally, it has decided to engage the
services of an advertising agency to handle future marketing responsibilities.
American Internet intends to utilize direct response marketing during calendar
1999, specifically through 60-second television commercials on Internet services
directed to small and medium sized business owners. Management believes that the
television commercials, along with media and print advertising will materially
increase sales of the American Internet products and services.
Business conducted on the Web is not restricted by geographical
boundaries and language barriers are being materially reduced through constantly
improving translation programs. American Internet receives over 100 inquires per
month from foreign countries, even though it concentrates its marketing efforts
in the United States. At the present time, American Internet conducts business
in the United States and Canada, however, American Internet is prepared to
intensify marketing strategies and communication links in order to actively
participate in foreign markets deemed promising. American Internet recently
conducted a test-marketing program in Brazil, one of the larger countries in the
world, and the initial findings were favorable.
24
<PAGE>
Marketing Personnel & Resources
Selling efforts are currently undertaken through an internal staff of
trained web designers whose duties include responding to inquiries generated
through American Internet's marketing and advertising programs. A sales
representative assigned to respond to an inquiry explains the American Internet
program to the prospect and then faxes, e-mails or mails a six page
informational package, including a contract ready for execution. Closing a
prospect normally occurs within one to five days after the initial contact.
American Internet intends to increase and improve its sales force in conjunction
with increased marketing activities in order to maximize the return on marketing
expenses. Currently contemplated improvements include providing each sales
representative with advanced computerized sales equipment permitting them to
service clients quickly and efficiently by providing prompt, accurate answers to
questions; permitting timely tracking of customer progress and rapid responses
to call backs. Integration of the data generated by sales representatives with a
centralized marketing data base is expected to upgrade sales, increase renewals
and expand sales of other services. In addition, improved equipment will allow
sales personnel to increase foreign marketing efforts at reduced costs through
use of Internet telephony to make overseas calls at lower rates than generally
available, and to communicate with foreign prospects in their own languages
using either multi-lingual sales staffers or available translation program
features.
Estimate of the Amount Spent During Each of the Last Two
Fiscal Years on Research and Development Activities, and if
Applicable the Extent to Which the Cost of Such Activities
are Borne Directly by Customers
American Internet is constantly developing and improving its software
products and services because high technological obsolescence is a fundamental
characteristic of the Internet industry, presenting constant challenges but also
constant opportunities. Management believes that the key to American Internet's
success is a focused effort in its niche market; a superior product line that is
constantly upgraded; hands on sales and support by the American Internet's top
executives so they are never far from the marketplace; a positive return on
investment by its clients; and, financial stability to develop new products and
strategies to meet market challenges.
Since inception, management believes that American Internet has spent
approximately $40,000 on research and development activities, none of which has
been borne directly by its customers, although all of it will be amortized as a
portion of the goods and services sold as a result of developments derived from
such research.
Status of any Publicly Announced New Product or Service
American Internet's management is considering the addition of advanced
equipment to create multi-lingual web sites for use in international commerce or
in conjunction with foreign clients; equipment that will create "in house" leads
of its prospect base from county courthouses, public documents and other
records; equipment and programs to generate leads "hits" for its customers using
search engines and other marketing techniques; and, equipment that will ensure
the fastest and most reliable access to the Internet. It is anticipated that
such equipment purchases will be made using funds provided by the Registrant
under its commitment to provide $350,000 in capital within 90 days after
American Internet's audited financial statements are completed.
25
<PAGE>
Patents, Trademarks, Licenses, Franchises, Concessions,
Royalty Agreements or Labor Contracts, Including Duration
American Internet holds no patents, trademarks, licenses, franchises or
concessions and is not a party to any royalty agreements or labor contracts.
Competitive Business Conditions, Competitive Position in the
Industry and Methods of Competition
Although American Internet's business is currently concentrated in the
Southeast United States, it intends to offer its products and services
throughout the United States and Canada by the year 2000 and to start world wide
international marketing efforts, on a test basis, by the last quarter of 1999.
The Internet and its many related commercial opportunities comprise a dynamic
industry subject to frequent and rapid changes in consumer tastes as well as
technological advances. The nature of the rapid change in the Internet industry
means that participants that do not keep pace with advancing technology or
consumer tastes will lose favor with the public and be replaced with other
Internet more technologically advanced and consumer savvy competitors.
American Internet designs its web sites with state of the art software
and well trained web designers who are kept up with current innovative trends in
designs and graphics. American Internet also has an efficient production
department and a knowledgeable sales force that receives on-going technical as
well as marketing training. However, there are no assurances that American
Internet can correctly anticipate consumer tastes or that it can or will
continue to keep pace with changes in technology and consumer demand.
American Internet competes in a variety of market segments in the
Internet services industry and is aware of many other consumer Internet service
companies competing in its selected markets; however, because the market is so
large, dynamic and diverse, American Internet seldom finds itself actively
opposing its competitors. Many of American Internet's clients are new to the
Internet, lack computer literacy or are on limited budgets. American Internet
has endeavored to develop a niche in that market segment and in the manner in
which it services that market segment.
American Internet is aware that it is a part of a very dynamic and
competitive industry. American Internet's management believes that it has an
advantage over many of its competitors because of its non-restrictive boundaries
and of its ability to offer its products and services to new businesses, on a
limited budget at low prices. However, there are other companies that are
offering services, similar to those offered by American Internet, including,
Cyber Graphics Institute, Inc.; WorldWide Web Institute, Inc.; and Web Results
Institute, Inc. While no verifiable sales or operational data is available for
any of the three; it appears that they are all operating successfully.
26
<PAGE>
During the first nine months of American Internet's operations, it
seldom encountered direct competition from any source and was required to
conduct research to find out who its principal competitors were for purposes of
securities law disclosure rather than in reaction to competitive pressures.
American Internet's management attributes such experience to the size of its
selected market which appears currently to be large enough to accommodate a
large number of successful competitive businesses. However, American Internet's
management is also cognizant of the fact that as its operational market becomes
more saturated, competition will intensify and it will have to remain focused on
both new challenges and new opportunities in order to take advantage of and
profit from the anticipated changes and become one of the survivors, as the
industry consolidates.
As a greater number of companies enter the Internet market, American
Internet will experience increased competition in the marketing of its services.
American Internet believes its competitive position will benefit from its
reputation and credibility; its ability to tailor and market new products and
services to meet the ever changing demands in the technology sector; its ability
to profit from low budget and discount services and the geographic expansion its
services world wide. However, the consumer Internet service industry includes
some of the largest and best financed companies in the world. Many potential
competitors have far greater technical, financial, and marketing resources than
American Internet, and such competition may have a material adverse effect on
American Internet's operations and profits.
Sources and Availability of Raw Materials and the Names of
Principal Suppliers
American Internet's services are not reliant on the availability of raw
materials but rather, involve development of software computer applications,
advice on selection of computer hardware and operation of interactive data
networks. Sources for all materials required in conjunction with the foregoing
are readily available from a large number of suppliers, none of which would be
difficult to replace.
Government Regulation
American Internet is subject to all regulations normally incident to
business operations. In addition, its activities are subject to regulation under
the United States Telephone Consumer Protection Act, by the Federal
Communications Commission, by the Federal Trade Commission and by other foreign,
federal, state and local regulatory bodies with jurisdiction over communications
and advertising related activities. In the past, Internet related enterprises
have been targeted by law enforcement agencies for actions taken by their
clients over the Internet, and efforts to regulate the Internet continue at all
levels. Because of the dynamic nature of the Internet and the novel,
multi-jurisdictional nature of its operations, it is not possible to accurately
predict what types of additional regulatory oversight will be imposed in the
future, especially in light of current efforts by many groups to censor
activities on the Internet. Currently, American Internet is regulated in the
State of Florida through the Florida Department of Agriculture and Consumer
Affairs, with which it has filed an Affidavit of Exemption under the Florida
Telemarketing Act. In addition, American Internet is subject to numerous
provisions of state laws designed to protect consumers from unfair advertising
and unsolicited communications.
Prior to its acquisition by the Registrant, American Internet was
required to register under the Florida Telemarketing Act. Although general
advertising (e.g., through newspapers and television) is exempt therefrom;
direct advertising or advertising to specific individuals falls under the
Telemarketing Act guidelines. In the course of its advertising programs American
Internet uses various media such as newspapers, television, direct mail and
e-mail Internet advertising. In all cases the advertising is designed to invite
a call to American Internet for further information and if the call proceeds
favorably a sale may be concluded during a subsequent telephone call. It
appears, however, that subsidiaries of companies with a class of securities
registered under Section 12 of the Exchange Act may be subject to certain
exemptions from such regulation.
27
<PAGE>
Need for Any Government Approval of Principal Products or
Services
To the best of the Registrant's knowledge, except as previously
discussed there are no special requirements for government approval of its
principal products or services not generally applicable to normal business
operations.
Effect of Existing or Probable Governmental Regulations on
the Business
There have been and continue to be numerous efforts at every level of
government to regulate Internet activities, most of which, in the United States,
have been limited by first amendment guarantees. That is not true in other
countries. In addition, the regulation of commercial communication activities,
especially relating to privacy rights, receipt of unsolicited communications and
Internet fraud is likely to expand significantly. Immediately prior to American
Internet's incorporation, its principals, in their initial Internet venture,
conducted a marketing campaign through a third party that resulted in a number
of consumer complaints, one law suit, and contacts and comments from various
states' regulatory authorities. American Internet, upon its incorporation,
immediately established policies designed to avoid such problems in the future;
however, no assurances can be provided that, in the future, inadvertent
activities by American Internet personnel or by American Internet clients will
not subject American Internet to regulatory actions or civil liabilities, or
that prior activities by American Internet's founders will not be imputed to
American Internet (see "Legal Proceedings" above).
Costs and Effects of Compliance with Federal, State and
Local Environmental Laws
American Internet is a service businesses and is not aware of any
expenses directly attributable to compliance with federal, state or local
environmental laws or regulations.
Description of Real Estate
American Internet's offices, production and operating facilities are
located at 440 East Sample Road, Suite 204; Pompano Beach, Florida 33064.
American Internet's telephone number is (954) 943-4748 and its fax number is
(954) 943-4406. American Internet also maintains an Internet web site at
www.aitc.net.
American Internet's current facilities are comprised of approximately
2,500 square feet, 1,000 of which are used for sales, 1,000 are used for
administration and 500 are used for technical operations. The facilities are
leased on a month to month basis, at $2,200 per month and $132 per month in
lease related taxes.
28
<PAGE>
Management is of the opinion that its current facilities are adequate
for its immediate needs. As the Registrant's business increases, however,
additional facilities will be required and meaningful expansion of the business
of American Internet's business cannot be effected without substantial
additional space, especially if American Internet are successful in acquisition
related activities. The Registrant has committed to investing at least $350,000
in American Internet, $100,000 of which was provided shortly after its
acquisition. The balance is expected to be provided from a private placement of
the Registrant's securities to be effected during calendar 1999. No assurances
can, however, be provided that such private placement will be successfully
concluded.
Assuming that adequate funds become available, American Internet's
management believes that adequate facilities are readily available at
competitive prices in the South Florida area.
Description of Furniture, Fixtures & Equipment
The assets of American Internet, as valued for accounting purposes, have
a depreciated book value of $22,266, and a non-depreciated book value of
$26,196. The assets are principally comprised of five categories, fixtures,
furniture, office equipment, communications equipment and computers. Fixtures
and furniture consist of exterior signs, desks, chairs, file cabinets work
stations and room dividers (12); office equipment consists of a Xerox laser
printer, a Xerox copier, a Xerox work center fax unit and 4 regular fax
machines; communications equipment consists of a 16 unit telephone system and
computer equipment consists of 9 computer stations, including monitors and
printers and 3 hosting servers and related software. As indicated previously,
American Internet must regularly upgrade its communications and computer
equipment in order to adequately compete in its industry, and intends to invest
in other equipment to upgrade the capabilities of its sales and marketing staff.
Number of Total Employees and Number of Full Time Employees
As of December 31, 1998, American Internet employed 19 individuals on a
full-time basis, plus 15 people on a part-time basis, including web designers,
independent contractors and 2 consultants, none of whom are employed pursuant to
a collective bargaining or union agreement. American Internet makes extensive
use of services provided by its students as part of their curricula and as a
result of its educational activities has the opportunity to easily recruit
required personnel from a pool of competently trained students and graduates.
From time to time, American Internet also uses the services of independent
contractors in order to avoid premature expansion of its labor force and the
risks associated with premature expansion of ongoing liabilities. American
Internet considers that its relationship with its employees is good.
Legal & Regulatory Matters
American Internet's management has advised the Registrant that it is not
a named defendant in any material legal or regulatory proceedings. It has from
time to time been involved in minor lawsuits and consumer complaints arising in
the ordinary course of business most of which involved an early advertising
campaign conducted using facsimile transmission of offers to potential clients.
A number of recipients complained that the unsolicited facsimile transmissions
violated the Federal Telephone Consumers Protection Act and similar statutes in
the States of Florida, Idaho, Maryland, and Wisconsin. No regulatory actions
were initiated as a result of such complaints and, despite its belief that it
was not legally culpable for any violations by the third party contractor
involved, in order to maintain good public relations, American Internet
contacted all complainants to apologize and believes that it resolved all such
issues with either token payments (less than $200 per instance) or one month's
complimentary service.
29
<PAGE>
In conjunction with such campaign, American Internet was included as a
member of a class of defendants in a civil law suit by Lawrence S. Benjamin,
Esquire, an attorney-plaintiff residing in the State of Ohio (the "Benjamin
Case"). The Benjamin Case was filed on behalf of an unidentifiable class of
plaintiffs against an unidentifiable class of defendants. American Internet, at
the suggestion of the Registrant, agreed to settle the Benjamin Case by paying
Mr. Benjamin the sum of $7,500, while denying any liability. Such decision was
based on the nuisance value of the suit when compared to the potential legal
fees of a successful defense, and on the Registrant's desire that American
Internet be litigation free at the time of its acquisition. In the future, such
matters will probably be litigated using the Registrant's general counsel. A
copy of the Settlement Agreement is filed as an exhibit to this report (see
"Item 7, Exhibit Index").
All marketing activities that gave rise to the consumer complaints and
litigation described above were promptly discontinued and American Internet has
initiated procedures to prevent its recurrence in the future. While the outcome
of the foregoing matters cannot be predicted with absolute certainty, neither
the Registrant nor American Internet expect them to have a materially adverse
effect on American Internet's financial condition, liquidity or results of
operations.
MANAGEMENT'S PLAN OF OPERATION; DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS.
The information required by this item will be provided, together with
the financial statements and pro forma financial information pertaining to the
transaction which is the subject of this report, by an amendment hereto to be
filed by the Registrant with the Securities and Exchange Commission on or before
the sixtieth day following the date of this report. The financial data included
in the following information is based on unaudited data that may not comply with
generally accepted accounting principals, consistently applied and will be
superseded in the subsequent amendment Accordingly, the information may not
prove accurate and should not be relied on other than as a good faith effort by
American Internet's management to provide useful information on an interim
basis.
Plan of Operation:
During the next twelve months, American Internet intends to materially
expand its business operations using the funding that the Registrant has agreed
to provide (up to $350,000) and securities of the Registrant that will be made
available for purposes of acquisitions and personnel recruitment, at a 15%
discount from market price, for internal inter-company accounting purposes,
including determination of net profit before taxes targets pertaining to the
ultimate number of shares of the Registrant's common stock to be issued in
exchange for American Internet's acquisition. Using such resources, as well as
internally generated capital, American Internet intends to purchase additional
electronic equipment and software programs, increase its advertising and
marketing budgets in order to attract more clients to its e-commerce, hosting
and educational programs; and, to hire additional staff in order to properly
service the additional activities generated.
30
<PAGE>
American Internet can meet all anticipated operating expenses during the
next 12 months from internally generated operational income; however, its
proposed expansion is dependent on receipt of $350,000 in proceeds from
Registrant and use of the Registrant's securities for acquisition and personnel
recruitment purposes, as described above. Substantial additional capital may be
required to take optimal advantage of opportunities presented in conjunction
with acquisitions, but such requirement cannot be presently quantified, nor can
the likelihood that required capital will be available.
During the next twelve months, American Internet intends to continue
research and development activities designed to develop and maintain state of
the art capabilities in Internet and Internet related businesses, as well as to
improve its ability to increase and properly serve its client base. Research and
development activities are expected to involve programs designed to capitalize
on the e-commerce aspects of the Internet. American Internet recently began test
marketing "Webstore," a proprietary easy to use web based Internet store program
designed to facilitate sales of goods or services over the World Wide Web.
Twelve stores purchased the program during the two week test period, a result
deemed favorable by American Internet's management.
American Internet's management believes that a material portion of its
future revenue will be derived from Internet marketing activities and in order
to participate in that growing market for web sites (management believes that an
average of more than 67,000 are registered daily) recently hired a full time
Internet marketing manager who is assisted by a full time employee responsible
for preparing search engine submissions.
American Internet anticipates that it will continue to upgrade its
computer and communications equipment during the next twelve months and expects
to spend approximately $50,000 on hosting servers computers and other related
equipment.
American Internet also intends to increase and improve its sales force
in conjunction with increased marketing activities in order to maximize the
return on marketing expenses. Currently contemplated improvements include
providing each sales representative with advanced computerized sales equipment
permitting them to service clients quickly and efficiently by providing prompt,
accurate answers to questions; permitting timely tracking of customer progress
and rapid responses to call backs. Integration of the data generated by sales
representatives with a centralized marketing data base is expected to upgrade
sales, increase renewals and expand sales of other services. In addition,
improved equipment will allow sales personnel to increase foreign marketing
efforts at reduced costs through use of Internet telephony to make overseas
calls at lower rates than generally available, and to communicate with foreign
prospects in their own languages using either multi-lingual sales staffers or
available translation program features.
As its client base increases, American Internet will expand its
technical, marketing and support staff and, during the next twelve months, it
expects to hire up to four additional full time employees in its marketing
division, four in its sales division, three administrative employees and two
part time employees, supplemented by up to three independent contractors and
consultants.
31
<PAGE>
It is anticipated that the additional personnel will cost approximately
$400,000 during the next 12 months, allocated as follows: Marketing personnel,
$125,000; sales personnel, $125,000, administrative personnel, $75,000 and
independent contractors $75,000.
Based on the foregoing plans, American Internet believes that it can
increase its gross earnings substantially while remaining profitable.
Discussion and Analysis of Financial Condition and Results of
Operations
Since its inception, American Internet has generated adequate funds from
operations to pay all of its expenses, although it obtained approximately
$20,000 in 1999 from the sale of 18,000 shares of its common stock and 18,000
common stock purchase warrants to three investors, the proceeds of which were
used for marketing activities. As of December 31, 1998, American Internet had
total liquid assets of $89,328 and total liabilities of $60,030.
Results of Operation
Revenues for the first 9 months, ended December 31, 1998, were $797,502.
Approximately 95% of the revenues were derived from the sale of web sites and
hosting. American Internet anticipates that its revenues will increase over the
next five years and that the percentage of sales from its educational programs,
marketing, hosting and other sources will account for a larger share of revenues
for the foreseeable future.
Cost of revenues consist primarily of web site design and production
costs and hosting expenses. Costs of revenues were $151,502 for the nine months
ended December 31, 1998. American Internet expects its costs of revenues to
increase in dollar amount while declining as a percentage of revenue as American
Internet expands its customer bases and types of services. Operating costs
include selling, general and administrative costs. These are made up primarily
of sales commissions, advertising, administrative salaries and other general
expenses. Operating costs were $458,779 for the nine months ended December
31,1998. American Internet expects that it will incur additional selling,
administrative, marketing and other general expenses in absolute dollars as
American Internet continues to hire personnel and incur expenses related to the
further growth of the business and its operation as a public company. For the
nine months ended December 31, 1998, American Internet's net profit was
$187,221 before Mangements's salaries and $69,206 after Management salaries of
$118,015.
Internal and External Sources of Liquidity
Since its inception, American Internet has financed its operations
through the sales it generated. As of December 31, 1998, American Internet had
$3,694 in cash. American Internet's capital requirements depend on numerous
factors, including market acceptance of American Internet's products and
services, the amount of resources American Internet devotes to investments in
its services, the resources American Internet devotes to marketing and selling
its services and other factors. American Internet has experienced a substantial
increase in its capital expenditures since its inception consistent with the
growth in its operations and staffing, and anticipates that the net proceeds
from to be provided by the Registrant and available funds from operations will
be sufficient to meet its anticipated needs for working capital and capital
expenditures until at least December 31, 1999.
32
<PAGE>
Accounting Policies and Procedures
Revenue Recognition:
Generally, revenues from sales of products are recognized when products are
shipped unless American Internet has obligations remaining under a sales or
license agreement, in which case revenue is either deferred until all
obligations are satisfied or recognized ratably over the term of the contract.
Statements of Cash Flows:
American Internet considers all highly liquid financial instruments with a
maturity of three months or less when purchased to be cash equivalents.
Principles of Consolidation:
The accompanying consolidated financial statements include the accounts of
the Registrant and its subsidiaries. All significant intercompany accounts and
transactions have been eliminated.
Mergers and Acquisitions:
On June 25, 1999, the Registrant acquired all of the outstanding common
stock of American Internet in exchange for 2,236,736 shares of its common stock
issued to two of the stockholders of its parent corporation at the time. The
acquisition was accounted for using the purchase method of accounting and
$1,583,220 in goodwill was recorded which is being amortized over 15 years using
the straight-line method. The results of operations of American Internet will be
included in the Registrant's consolidated statement beginning June 25, 1999, the
date of acquisition.
Income/Loss Per Share:
The computation of loss per share of common stock is based on the weighted
average number of shares outstanding during the periods presented.
Statement Re Computation of Earnings Per Share:
American Internet has a simple capital structure as defined by APB Opinion
Number 15. Accordingly, earnings per share is calculated by dividing net income
by the weighted average shares outstanding.
Provision for Income Taxes:
American Internet was, prior to its acquisition by the Registrant, taxed as
an S Corporation under the Internal Revenue Code and applicable state statutes.
Under an S corporation election, the income of the corporation flows through to
the stockholders to be taxed at the individual level rather than the corporate
level. Accordingly, American Internet will have no tax liability for the periods
that the S Corporation election was in effect.
33
<PAGE>
Year 2000 Compliance
The Problem:
The year 2000 issue is the result of computer programs using two digits
rather than four to define the applicable year. Date-sensitive software may
recognize a date using "00" as the year 1900 rather than the year 2000. This
could result in system failures or miscalculations, causing disruptions of
operations, including, among others, a temporary inability to process
transactions, send invoices or engage in similar normal business activities.
State of Readiness:
In order to address Year 2000 issues, American Internet is evaluating its
information and other systems technology to identify and eliminate Year 2000
issues in order to achieve Year 2000 readiness. American Internet has performed
a review of its more critical Third Party Systems and has surveyed the publicly
available statements issued by vendors of such systems. Most of American
Internet's critical third-party providers have made representations to the
effect that they are, or will be, Year 2000 compliant. American Internet,
however, has not undertaken an in-depth evaluation of its critical or other
third-party providers in relation to the Year 2000 issue, and furthermore
American Internet has no control over whether its third-party providers are, or
will be, Year 2000 compliant.
Costs
There are no significant historical costs associated with American
Internet's Year 2000 readiness efforts and the magnitude of any future costs
will depend upon the nature and extent of any problems that are identified.
These costs are not expected to exceed $10,000.
Risks
The failure by American Internet to correct a material Year 2000 problem
could result in a complete failure or degradation of the performance of American
Internet's network or other systems, including the disruption of operations, a
temporary inability to process transactions, send invoices or engage in similar
normal business activities. Presently, however, American Internet believes that
its most reasonably likely worst case scenario related to the Year 2000 is
associated with potential concerns with third-party services or products.
Specifically, American Internet is heavily dependent on a significant number of
third-party vendors to provide both network services or equipment. A significant
Year 2000-related disruption of the network services or equipment provided to
American Internet by third-party vendors could cause customers to consider
seeking alternate providers or cause an unmanageable burden on customer service
and technical support, which in turn could materially and adversely affect
American Internet's results of operations, liquidity and financial condition.
American Internet is not presently aware of any vendor-related Year 2000 issue
that is likely to result in such a disruption. Although there is inherent
uncertainty in the Year 2000 issue, American Internet expects that as it
progresses with its Year 2000 Plan, the level of uncertainty about the impact of
the Year 2000 issue on American Internet will be reduced and American Internet
should be better positioned to identify the nature and extent of material risk
to American Internet as a result of any Year 2000 disruptions.
34
<PAGE>
Contingency Plans
Due to the current stage of American Internet's Year 2000 Plan, American
Internet is currently unable to fully assess its risks and determine what
contingency plans, if any, need to be implemented. As American Internet
progresses with its Year 2000 Plan and identifies specific risk areas, American
Internet intends to timely implement appropriate remedial actions and
contingency plans.
The estimates and conclusions herein contain forward-looking statements
and are based on management's best estimates of future events. American
Internet's expectations about risks, future costs, and the timely completion of
its Year 2000 efforts are subject to uncertainties that could cause actual
results to differ materially from what has been discussed above. Factors that
could influence risks, amount of future costs and the effective timing of
remediation efforts include American Internet's success in identifying and
correcting potential Year 2000 issues and the ability of third parties to
appropriately address their Year 2000 issues.
The inability of business processes to continue to function correctly
after the beginning of the Year 2000 could have serious adverse effects on
companies and entities throughout the world. American Internet, as an Internet
based business highly reliant on computer and communications equipment would be
extremely vulnerable to such problem directly, in conjunction with its equipment
and programs, and as a result of its reliance on world wide communications
systems, including telephone companies, utilities and the Internet, over which
it exercises no control. Its clients are also extremely vulnerable to year 2000
based computer problems in conjunction with their relationship to American
Internet since its is entirely based on the use of computer systems through
third party communication services.
SUMMARY & PRO FORMA FINANCIAL DATA
The following information attempts to demonstrate in summary and pro
forma fashion, what American Internet and the Registrant's operations reflected
for the year ended December 31, 1998, and what they would have reflected, had
the Registrant owned American Internet since its inception in 1998 but not owned
the operations subsequently divested. The data is based on Registrant's audited
financial statements for the year ended December 31, 1998, and unaudited
financial statements for American Internet for the corresponding period (which
may change materially when its audited statements are prepared in accordance
with generally accepted accounting principals, consistently applied. Such
financial statements must be filed as an amendment to this report within sixty
days following its original filing date, at which time this section will also be
amended, to reflect required corrections.
35
<PAGE>
<TABLE>
<S> <C> <C> <C> <C> <C>
American Pro Forma
Registrant Internet Total Adjustment Combined
Current Assets:
Cash 13,182 3,694 16,876 0 16,876
Accounts receivable 0 85,614 85,614 0 85,614
Prepaid expenses 0 4,461 4,461 0 4,461
Total current assets 13,182 93,769 106,951 0 106,951
Property and equipment
Fixed Assets 0 26,196 26,196 0 26,196
Accumulated Depreciation 0 ( 3,930) (3,930) 0 (3,930)
Total property and equipment 0 22,266 22,266 0 22,266
Other Assets:
Goodwill 0 0 0 1,583,220(1) 1,583,220
Accumulated amortized goodwill 0 0 0 (105,548)(3) (105,548)
Deposits 0 13,000 13,000 0 13,000
Total other assets 0 13,000 13,000 1,477,672 1,490,672
Total assets 13,182 129,035 142,217 1,477,672 1,619,889
Current liabilities:
Accounts payable 4,661 38,174 42,835 0 42,835
Accrued expenses 0 21,856 21,856 0 21,856
Total current liabilities 4,661 60,030 64,691 0 64,691
Stockholders' equity:
Common stock 59,911 200 60,111 22,127(1) 82,238
Additional paid in capital 2,914,395 0 2,914,395 1,629,898(1) 4,544,293
Distributions to stockholders 0 (118,416) (118,416) (118,416)(2) 0
Accumulated deficit (2,566,370) 0 (2,566,370) (68,805)(1) (2,635,175)
Current year income (loss) (399,415) 187,221 (212,194) (223,964) (436,158)
Total stockholders' equity 8,521 69,005 77,526 1,477,672 1,555,198
Total liabilities and
stockholders' equity 13,182 129,035 142,217 1,477,672 1,619,889
36
<PAGE>
American Pro Forma
Registrant Internet Total Adjustment Combined
Fees 0 797,502 757,502 0 757,502
Total revenue 0 797,502 757,502 0 757,502
Cost of sales 0 151,502 151,502 0 151,502
Gross profit 0 646,000 646,000 0 646,000
Operating expenses:
Selling 0 323,762 323,762 0 323,762
General & administrative 0 135,017 135,017 118,416(2) 358,981
Amortized good will 0 0 0 105,548(3) 105,548
Total operating expense 0 458,779 458,779 223,964 682,743
Income (loss) from operations 0 187,221 187,221 (223,964) (36,743)
Loss from discontinued operations (399,415) 0 (399,415) 0 (399,415)
Net loss (399,415) 187,221 (212,194) (223,964) (436,158)
Basic income (loss) per share (4) (0.096) 0.084 0 0 (0.068)
Weighted average shares 4,174,778 2,236,736 6,411,514 0 6,411,514
Fully diluted income
(loss) per share (0.095) 0.084 (0.068) 0 (0.068)
Fully diluted average shares 4,222,199 2,236,736 6,458,935 6,458,935
</TABLE>
- - -------
(1) Record Acquisition if American Internet by the Registrant.
(2) $118,416 is treated as management compensation
(3) Amortize goodwill over 15 years = 1998 amortization expense
= $105,548
(4) Per share data is based on the following assumptions:
That the Registrant's weighted average number of the
shares outstanding for the period was 6,097,191; and
That 2,500,000 shares had been issued at the inception of
American Internet's financial data period (starting April 1,
1998) and that consequently, the weighted average number of the
Registrant's shares outstanding for the period, in the pro forma
calculations, had been increased by 1,875,000 (2,500,000 x 3/4)
to 6,097,191.
37
<PAGE>
RISK FACTORS
Regulatory Problems & Potential Legislation
There have been and continue to be numerous efforts at every level of
government to regulate Internet activities, most of which, in the United States,
have been limited by first amendment guarantees. That is not true in other
countries. In addition, the regulation of commercial communication activities,
especially relating to privacy rights, receipt of unsolicited communications and
Internet fraud is likely to expand significantly. Immediately prior to American
Internet's incorporation, its principals, in their initial Internet venture,
conducted a marketing campaign through a third party that resulted in a number
of consumer complaints, one law suit, and contacts and comments from various
states' regulatory authorities. American Internet, upon its incorporation,
immediately established policies designed to avoid such problems in the future;
however, no assurances can be provided that, in the future, inadvertent
activities by American Internet personnel or by American Internet clients will
not subject American Internet to regulatory actions or civil liabilities, or
that prior activities by American Internet's founders will not be imputed to
American Internet (see "Legal Proceedings" above).
In conjunction with the acquisition of American Internet, the Registrant
has concluded that the following factors involve risks that may materially
affect the acquired operations and consequently, may have a material impact on
the Registrant's business and on the value and liquidity of its securities.
Risks Associated with the Registrant
Dependence on Future Financing
American Internet anticipates that it will receive an aggregate of at
least $350,000 in funding from the Registrant within 90 days after American
Internet's audited financial statements are completed, $100,000 of which was
provided immediately following closing on the Reorganization Agreement using
most of the proceeds of a limited offering of subordinated, convertible
debentures (the "Debentures"). Copies of the Debentures and the related offering
documents are filed as exhibits to this report (see "Item 7[c], Exhibit Index").
American Internet's management advised the Registrant's management that American
Internet requires at least $350,000 in order to negotiate and conclude certain
acquisitions expected to accelerate American Internet's growth and to increase
its profitability. If the Registrant is unable to provide the entire $350,000
anticipated by American Internet, it will be required to reconsider its
strategic plans and its advertising and marketing strategies, all of which could
reduce anticipated growth and profits. The failure by the Registrant to make
such funding available would also affect the basis on which calculations for the
additional common stock issuable to the former American Internet stockholders
will be made (see "Description of American Internet, Background Information"
above).
38
<PAGE>
Competing Capital Requirements
The Registrant's anticipates that it will raise all or a substantial
portion of the financing required for American Internet and other unrelated
acquisitions through a private placement which the Registrant expects to
undertake during 1999. The major portion of the proceeds expected to be derived
from the subsequent private placement will not be allocated to American Internet
directly, but rather, for use in conjunction with capitalizing future
acquisitions of compatible, Internet related businesses. However, there are no
assurances that the Registrant will succeed in effecting such private placement
on favorable terms, if at all, or that the Registrant will be able to raise
sufficient capital from such undertaking. Even if the Registrant successfully
concludes the proposed private placement, there are no assurances that the
Registrant will be able to use those proceeds to generate new favorable
acquisitions or to materially improve the business and business prospects of any
businesses acquired, including American Internet.
Lack of Liquidity in Proposed Private Placement
There will be no public market for the Units being contemplated for the
proposed private placement nor will one develop because they will not be
registered with the Commission or the securities regulatory authorities of any
state; rather, they will be issued in reliance on the exemption from
registration under the Securities Act provided by Section 4(6) thereof
pertaining to sales solely to "accredited investors," as that term is defined in
Commission Rule 501 of regulation D, in reliance on Commission Rule 505 of
Regulation D or in reliance on Section 4(2) of the Securities Act. Consequently,
it may be difficult or impossible for the holders of the subject securities to
pledge, hypothecate or sell them should they desire to do so. In addition, there
will be substantial restrictions on the sale or transfer of the subject
securities imposed by federal and state securities laws. As a result of such
lack of liquidity, it is possible that the Registrant will not be successful in
raising the rest of the capital expected by American Internet's management
(which would very materially affect the prospects of American Internet) or
capital for additional acquisitions contemplated by the Registrant.
Unpredictable Response from Possible Funders
The Registrant anticipates that the proposed private placement will be
offered first to stockholders of the Registrant, then to affiliates of the
Registrant including its officers, directors and consultants, with the balance
offered principally to accredited investors. In addition, the Registrant's
management may endeavor to secure funds through loans and lines of credit,
either directly or through its subsidiaries, including American Internet. No
assurances can be provided that any of the foregoing will participate in the
proposed capital raising, borrowing or credit proposals.
Unexpected Additional Capital Requirements
Even if American Internet obtains all $350,000 in funding which it
expects from the Registrant on a timely basis, American Internet's management
believes that it may require additional financing to properly develop the
businesses of acquired companies, to properly follow up on its direct response
marketing campaigns and for additional working capital related to such factors.
If the Registrant is not able to provide required future financing, American
Internet would be required to obtain required financing on its own and if it
were not successful, it could be required to reduce overall operations, cut back
its direct response marketing campaigns and curtail acquisition activities
deemed materially important to American Internet's growth and potential
profitability.
39
<PAGE>
Risks Associated with American Internet
Development Stage Company
American Internet has completed its first year of business with an
operating profit, however, its future business prospects are subject to all
risks inherent in the establishment of new business enterprises, including the
possibility of operating losses. The likelihood of American Internet's success
must be considered in light of the problems, expenses, difficulties,
complications and delays frequently encountered in connection with the
commencement and growth of new business operations, the implementation of
American Internet's business plan, and the competitive and regulatory
environment in which American Internet operates.
Advertising & Marketing Expenses
American Internet currently has limited advertising and marketing
capabilities based almost entirely on internal personnel and resources. Its
proposed expansion is expected to rely materially on the use of traditional
advertising and marketing professionals to supplement in-house capabilities,
which will require material expenditures without guaranteed results. The
inability to complete a marketing program due to inadequate capital could result
in lowered market perception of American Internet's capabilities and reputation,
rather than in increased sales. In addition, results from marketing campaigns
conducted by outside marketing professionals that prove less positive than
anticipated may result in increased sales but diminished profits or even losses,
due to the costs incurred. Like the use of leverage, the risk of capital on
marketing activities can accelerate both positive growth or the risk of
unaffordable losses.
Technological Obsolescence
The Internet industry involves two of the most obsolescence sensitive
areas of modern business, computers and communications. Changes, especially in
computer systems involving both hardware and software seem to appear weekly and
require a balance between not permitting equipment and software to become stale
and non-competitive, resulting in lost business, and, making premature
expenditures on unproven systems. Failure to make the correct decision, at the
right time, could materially impair American Internet's business prospects and
profitability.
Foreign Currency Fluctuations
To the extent that American Internet succeeds in entering the
international Internet market and generates foreign clients, it may be required
to accept payments in foreign currencies that are, in some instances, subject to
material fluctuations in value, usually negative in nature. In the past, that
has been true of business in Brazil, a country currently targeted for expansion.
In order to protect against currency fluctuations, American Internet will have
to develop currency hedging expertise and implement currency hedging strategies
on an ongoing basis. Currency hedging strategies are not always successful and
if not properly executed, can add to losses due to currency devaluation or
regional inflation.
40
<PAGE>
Dependence on Management
American Internet believes that its success will largely be dependent
upon management's implementation of American Internet's business plan. Although
management has extensive experience in other business ventures, the principals
did not have material previous business experience in the Internet industry when
they founded American Internet. Although, American Internet's business has been
relatively successful to date that does not assure future success.
Projections
American Internet's proposed expansion is largely based on confidential
internal projections predicated primarily on management's expectations to the
future performance of American Internet. The projections are based upon certain
assumptions concerning the economy and potential growth of the Internet and
related industries, which management cannot control, and on anticipated courses
of action that American Internet plans to undertake. One of the material
assumptions is that American Internet's Internet services will be received
favorably in the market, which is based in part upon generation of interest from
qualified buyers. While management studies and discussions with potential
clients have led to optimistic expectations, there are usually differences
between expectations and actual results caused by events and circumstances that
do not occur as expected. There can be no assurance that past or current
indications of interest from potential clients will result in actual sales or
that even if sales are materially increased, they will culminate in increased
profits.
Industry Risks
Reliance upon Product Acceptance
Management believes that the demand for American Internet's Internet
services will be materially affected by consumers increasing acceptance of the
Internet as a transaction option for services such as advertising, marketing,
distribution of products, and the dissemination of information. However, there
are no assurances that American Internet's services will find acceptance with
consumers even if such trends continue. While the conclusions of American
Internet's market research have been favorable, there are no assurances that
actual operating results will reach the levels indicated by such research.
Competition
The industry in which American Internet operates is highly competitive.
Many other companies that provide similar services have substantially greater
technical, financial and marketing resources than American Internet. In some
cases, its competitors appear to have been successful in using questionable
tactics to win and maintain market share by, among other things, denying
competitors access to technology and important segments of the computer,
communications and Internet market. Consequently, there can be no assurances
that American Internet's services will be competitive with service providers
using technology developed by American Internet's competitors or that American
Internet will be able to penetrate targeted segments of the Internet market,
even if its services and technology are competitive with those of alternative
providers (see the more detailed discussion of competition at "Description of
American Internet, Competitive Business Conditions, Competitive Position in the
Industry and Methods of Competition" above).
41
<PAGE>
The Industry
American Internet competes in the Internet services industry where new
technologies and markets are constantly being introduced. In many instances,
existing services and products are being replaced. Such innovation can prove
either positive or negative for American Internet, based on its ability to
predict and participate in such changes, rather than to be replaced by them.
Consumer's tastes and desires fluctuate and are difficult to predict. There are
no assurances that American Internet will be able to accurately predict industry
trends or to keep pace with industry changes.
General Economic Conditions
The financial success of American Internet may be detrimentally affected
by a number of factors wholly outside of its control, such as general or special
economic conditions, whether or not such changes are generally perceived as
negative (e.g., recession, inflation, unemployment and interest rates). Changes
can affect the costs of supplies, insurance, transportation, labor and other
expenses and will affect American Internet's business either directly or because
they affect the business of American Internet's clients. Changes can provide new
or improved opportunities but they can also negatively change the financial
environment in which American Internet and its clients operate. To the extent
that changes increase American Internet's net operating expenses, or those of
its clients, without permitting at least corresponding increases in prices
charged, such changes could reduce demands in the marketplace for American
Internet's services creating losses of business or could result in payment
delays creating a liquidity crisis with which American Internet could not
successfully deal. While the Registrant's and American Internet's management try
to keep informed concerning economic trends and developments and to develop
plans for dealing with them, no assurances can be provided that such efforts
will succeed in predicting or dealing with uncontrollable economic forces.
ITEM 4. Changes in Registrant's Certifying Accountant
In conjunction with the acquisition described in response to Item Two, the
Registrant's management elected to replace its certified public accountants with
the certified public accountants employed by American Internet, since, for
accounting purposes, the bulk of the Registrant's auditing work will involve the
operations of American Internet and their auditors are closer geographically and
have substantially greater familiarity with the bulk of the books, records,
procedures and historical data required for future audits. There were no
disputes of any kind with the Registrant's prior auditors of which current
management is aware, after diligent inquiry, except for a dispute concerning the
language of footnotes to the financial statements for the year ended December
31, 1998, as disclosed in the Registrant's report on Form 10-KSB for such
period. Such disclosure (Item 8) is hereby incorporated by reference hereto and
a copy of the report on Form 10-KSB is filed as an exhibit to this report (see
"Item 7[c], Exhibit Index"). In conjunction therewith, while the Registrant
disclosed its differences in Item 8, the footnotes retained the language
selected by the auditor, Bowman & Bowman, P.A.
42
<PAGE>
In amplification of the foregoing, current management, except as
disclosed in the preceding paragraph, has no reason to believe that:
(i) The Registrant's former auditors resigned, declined to stand
for re-election or were dismissed;
(ii) The principal accountant's report on the financial statements for either
of the past two years contained an adverse opinion or disclaimer of
opinion, or was modified as to uncertainty, audit scope, or accounting
principles
(iii) (A) There were any disagreements with the former accountant, whether
or not resolved, on any matter of accounting principles or practices,
financial statement disclosure, or auditing scope or procedure, which,
if not resolved to the former accountant's satisfaction, would have
caused it to make reference to the subject matter of the
disagreement(s) in connection with its report; or
(B) The former accountant advised the Registrant that:
(i) internal controls necessary to develop reliable
financial statements did not exist; or
(ii) information has come to the attention of the former
accountant which made the accountant unwilling to rely
on management's representations, or unwilling to be
associated with the financial statements prepared by
management; or
(iii) the scope of the audit should be expanded significantly,
or information had come to the accountant's attention
that the accountant had concluded would, or if further
investigated might, materially impact the fairness or
reliability of a previously issued audit report or the
underlying financial statements, or the financial
statements issued or to be issued covering the fiscal
period(s)subsequent to the date of the most recent
audited financial statements (including information
that might preclude the issuance of an unqualified audit
report), and the issue was not resolved to the
accountant's satisfaction prior to its resignation or
dismissal.
The decision to change accountants was approved by the Registrant's board of
directors on July 1, 1999. The Registrant's new auditors are expected to be
Daszkal, Bolton & Manela, P.A., certified public accountants with offices at 240
West Palmetto Park Road, Suite 300; Boca Raton, Florida 33432, who currently
serve as American Internet's auditors. Their telephone number is (561) 367-1040;
their fax number is (561) 750-3236; and, their Internet web site is located at
www.dbmsys.usa.com. The proposed auditor's engagement agreement is filed as an
exhibit to this report (see "Item 7[c], Exhibit Index").
The chairperson of the Registrant's audit committee has attempted to
reach Bowman & Bowman, P.A., the Registrant's former auditor to discuss this
matter and to obtain a letter from it pertaining to whether or not it agrees
with the foregoing disclosure; however, the auditor has not returned telephone
calls or replied to fax requests for contact. Copies of the foregoing disclosure
have been provided to Bowman & Bowman, P.A., by fax, e-mail and letter and the
Registrant anticipates that it will reply to such contacts as soon as it is
available. The Registrant has no basis for believing that Bowman & Bowman, P.A.,
will not agree with the foregoing disclosure or that Bowman & Bowman, P.A., will
not provide the required letter, which will be filed as an exhibit to this
report immediately after it is received.
43
<PAGE>
ITEM 5. Other Events
Recent Offering of Unregistered Securities
On or about June 25, 1999, in contemplation of the closing on the
acquisition of American Internet, the Registrant authorized a private placement
of $200,000 in a newly authorized class and series of subordinated convertible
debentures. The private placement was structured to comply with the exemption
from registration provided by Section 4(6) of the Securities Act, as an offering
solely to accredited investors. As of the date of this report, $100,000 in
principal amount of the Debentures have been paid for by four subscribers, one
of which was Yankees, which paid $10,000. Because of certain rights in its
consulting agreement with the Registrant, Yankees conversion rights are
materially better than those available to other Debenture Holder in that Yankees
conversion price is half of that otherwise applicable. The Debentures issued to
date are currently the Registrant's only outstanding debt securities. The
Debentures are designated as Class A, Series A, Convertible, Subordinated
Debentures, are for a term of one year, with simple interest at the annual rate
of 8% payable with principal at maturity in one lump sum. The Debentures are
convertible into the Registrant's common stock at the holders' option at the
rate of $0.50 per share (but see Yankees special rights above). There are no
prepayment penalties. The Debentures are subordinate to all debt designated by
the Registrant as senior indebtedness. Neither a trustee nor an indenture was
used in connection with the Debentures based on exemptions from the Trust
Indenture Act of 1939, as amended, provided under Sections 304(a)(8) and 304(b)
thereof. The proceeds of the Debenture placement proceeds received to date were
used to provide the funds to American Internet required at closing on the
reorganization agreement ($100,000, see Item 2). The balance of the proceeds
received, if any, will be used for working capital by the Registrant. No
commissions were paid nor did the Registrant incur material expenses in
conjunction with the private placement. Copies of the subscription agreement for
the Debenture private placement and the form of Debenture used are filed as
exhibits to this report (see "Item 7[c], Exhibit Index").
Carmen Piccolo Agreement
In light of an anticipated increase in public inquiries concerning the
Registrant, its board of directors determined that one person should be given
responsibilities for coordinating all required information, securing required
approvals for its release, and acting as the Registrant's spokesperson to its
stockholders and the investment community. Consequently, the Registrant has
entered into an employment agreement with Ms. Carmen Piccolo to act as its
spokesperson.
Ms. Piccolo is required to devote substantially all of her business
time, energies and abilities to the proper and efficient management and
execution of her job with the Registrant but will have no authority to act as an
agent of the Registrant or to bind it or its subsidiaries as a principal or
agent. She will serve as the principal point of contact between the Registrant
and the media (print, electronic, voice and picture), the investment community
and its security holders and will be responsible for the collection and
maintenance of all information concerning the Registrant and for verification of
the accuracy and completeness thereof; she will assist in the preparation and
distribution of regular reports of the activities of the Registrant to the
investment community, the press, its securities holders and the general public;
assist in development and implementation of all public relations programs
required by the Registrant. Ms. Piccolo will be responsible for securing prior
44
<PAGE>
written approval for the release of any information concerning the Registrant
from any regulatory authorities (e.g., the Securities and Exchange Commission
[the "Commission") or self regulatory organizations (e.g., the National
Association of Securities Dealers, Inc. [the "NASD"]) having jurisdiction over
dissemination of such information; the Registrant's board of directors and chief
executive officer, and from its general counsel. She will also be responsible
for maintaining orderly and easy to find records of all corporate information
released by her and for performing such other duties as are assigned to her by
the Registrant's president and board of directors, subject to compliance with
all applicable laws and fiduciary obligations.
Ms. Piccolo informed the Registrant that she is not subject to legal,
self regulatory organization (e.g., National Association of Securities Dealers,
Inc.) or regulatory impediments to the provision of the services called for by
her agreement or to receipt of the compensation called for. Acknowledging that
important responsibilities and obligations are imposed by federal and state
securities laws and by the applicable rules and regulations of stock exchanges,
the National Association of Securities Dealers, Inc., in-house "due diligence"
or "compliance" departments of licensed securities firms, etc., Ms. Piccolo has
agreed that she will not release any financial or other material information or
data about the Registrant without the prior written consent and approval of its
general counsel; conduct any meetings with financial analysts without informing
the Registrant's general counsel and board of directors in advance of the
proposed meeting and the format or agenda of such meeting; or release any
information or data about the Registrant to any selected or limited person(s),
entity, or group if she is aware that such information or data has not been
generally released or promulgated.
In addition, Ms. Piccolo agreed that:
(1) If she describes the Registrant's securities to any third parties, she
will disclose to such person all compensation received from the
Registrant to the extent required under any applicable laws, including,
without limitation, Section 17(b) of the Securities Act of 1933, as
amended;
(2) She will not disclose to any third party any confidential non-public
information furnished by the Registrant or otherwise obtained by her
with respect to the Registrant;
(3) She will restrict or cease all efforts on the Registrant's behalf,
including all dissemination of information, immediately upon receipt of
instructions (in writing by fax or letter) to that effect.
(4) If she learns of any pending public securities offering to be made or
expected to be by made the Registrant, she will immediately cease any
public relations activities on behalf of the Registrant until receipt of
written instructions from its general counsel as to how to proceed, and
thereafter shall proceed only in accordance with such written
instructions.
45
<PAGE>
(5) She will not take any action which would in any way adversely affect the
reputation, standing or prospects of the Registrant or which would cause
the Registrant to be in violation of applicable laws.
As consideration for Ms. Piccolo's services to the Registrant she will
receive a gross monthly salary of $2,000 payable in bi-monthly installments of
$1,000 less related taxes and withholding obligations (the "Base Salary"). In
addition to the Base Salary, Ms. Piccolo was granted a series of 12 month
options to purchase up to an aggregate of 48,000 shares of the Registrant's
common stock at an exercise price of $1.00 per share (the price on the date the
agreement was signed), vesting at the rate of 4,000 shares per month, provided
that she is in the employ of the Registrant at the time of exercise. The option
was issued in reliance on the exemption from registration under Section 5 of the
Securities Act and the Florida Securities and Investor Protection Act pursuant
to Section 4(2) of the Securities Act and Section 517.061(11) of the Florida
Act. However, in the event that Equity Growth files a registration or
notification statement with the Commission or any state securities regulatory
authorities registering or qualifying any of its securities for sale or resale
to the public as free trading securities, it is required to notify Ms. Piccolo
of such intent at least 15 business days prior to such filing and if requested
by her, include any shares theretofore issued upon exercise of the options in
such registration or notification statement, provided that she cooperates in a
timely manner with any requirements therefor. Ms. Piccolo is also entitled to
any benefits generally made available to all other employees of the Registrant
and is entitled to indemnification for liabilities, suits, judgments, fines,
penalties or disabilities, including expenses associated directly, therewith
(e.g. legal fees, court costs, investigative costs, witness fees, etc.)
resulting from any reasonable actions taken by her in good faith on behalf of
the Registrant, its affiliates provided that she permits the Registrant to
select and supervise all personnel involved in such defense and that she waives
any conflicts of interest that such personnel may have as a result of also
representing the Registrant, its stockholders or other personnel and agrees to
hold them harmless from any matters involving such representation, except such
as involve fraud or bad faith.
A copy of Ms. Piccolo's employment agreement is filed as an exhibit
hereto (see "Item 7, Exhibit Index").
Amendments to Certificate of Incorporation
In conjunction with the implementation of the Registrant's acquisition
program, the Registrant's board of directors determined that it should
materially modify its certificate of incorporation, in order to provide a name
more in line with its current activities and to make it more secure for
worthwhile companies and individuals to become associated with it by providing
them assurances of continuity and protection from meritless litigation. With the
cooperation of stockholders holding approximately 6,246,947 shares of the
Registrant's common stock who acted by written consent in lieu of special
meeting (as permitted pursuant to Sections 222 and 242 of the Delaware General
Corporation Law, the Registrant approved an amendment to its certificate of
incorporation on July 9, 1999, as follows:
First, articles 1, 2, 3, 5 and 10 were repealed and replaced by the
following new articles:
46
<PAGE>
FIRST: Name:
(A) The name of the Corporation is "AmeriNet Group.com,
Inc."
(B) The Corporation's Board of Directors is hereby authorized,
without stockholder approval, to amend this Certificate from
time to time, in order to change the name of the Corporation."
SECOND: Registered Agent
(A) The street address of the registered office of this Corporation
in the state of Delaware is 25 Greystone Manor, Lewes Delaware
19958, situate in Sussex County, and the name of the initial
registered agent of this Corporation at such address is Harvard
Business Services, Inc.
(8) The registered agent's telephone number is 1-800-345-2677 and
its E-Mail address is [email protected].
THIRD: Purposes:
This Corporation is organized for the purpose of transacting any and all
lawful business; provided, however, that it shall not:
(A) Engage in any activities that would subject it to regulation as
an investment company under the Federal Investment Company Act
of 1940 (the "Investment Company Act"), as amended, unless it
shall have first qualified and elected to be regulated as a
small business development company pursuant to Sections 54 et.
seq., thereof, and limits its investment company activities to
those permitted thereby; or
(B) Engage in any activities which would subject the Corporation to
regulation as a broker dealer in securities subject to
regulation under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") or as an investment advisor subject to
regulation under the Investment Advisors Act of 1940, as amended
(the "Investment Advisor's Act"); or
(C) Engage in any other activities requiring the Corporation to
comply with governmental registration and supervision, unless it
has completed such registration and conducts itself in full
compliance with such supervisory requirements.
FIFTH: Amendments of Certificate by Board of Directors:
The Corporation's Board of Directors is hereby authorized, without
stockholder approval, to amend this Certificate from time to time, in
order to:
(1) Effect splits or reverse splits of the Corporation's common or
preferred stock;
(2) Increase the Corporation's authorized capital; and
47
<PAGE>
(3) Decrease the Corporation's authorized capital; provided that
such decrease may not affect any issued and outstanding shares.
TENTH: Quorum:
Unless otherwise provided for in the Corporation's Bylaws, a majority of
the shares entitled to vote, represented in person or by proxy, shall be
required to constitute a quorum at a meeting of stockholders.
Except for providing the board of directors to amend the Registrant's
certificate of incorporation without stockholder consent in order to change its
name and to modify its capital structure, and to restrict it from engaging in
certain regulated activities, the foregoing amendments did not involve any
material matters. The amendment pertaining to change in capital was based on
concerns over certain aspects of Delaware's corporate franchise taxes that
penalize corporations for authorized but unissued securities and will permit the
Registrant to increase its authorized capital as required to effect
acquisitions, without maintaining a large quantity of authorized but unissued
securities, or to expend funds on legal, auditing printing mailing and
facilities required to conduct numerous stockholders meetings at which the only
topics for action would be increases in authorized capital and possibly name
changes.
In addition, the Registrant adopted the following new articles:
ELEVENTH: Indemnification
(4) The Corporation shall indemnify its Officers, Directors and
authorized agents for all liabilities incurred directly,
indirectly or incidentally to services performed for the
Corporation, to the fullest extent permitted under Delaware law
existing now or hereinafter enacted.
(5) Funds required to pay expenses reasonably necessary to defend
allegations that would raise the foregoing right of
indemnifications shall be advanced by this Corporation at any
time that the person claiming such expenses appears reasonably
likely to become entitled to indemnification and enters into a
binding agreement with this Corporation to repay advances for
such expenditures in the event that he, she or it is eventually
found not to be entitled to indemnification.
TWELFTH: Limitation on Stockholder Actions
(3) Stockholders shall not have a cause of action against the
Corporation's Officers, Directors or agents as a result of any
action taken, or as a result of their failure to take any
action, unless deprivation of such right is deemed a nullity
because, in the specific case, deprivation of a right of action
would be impermissibly in conflict with the public policy of the
State of Delaware.
(4) No stockholder may assert a derivative cause of action on behalf
of the Corporation, rather, any claims that would give rise to
48
<PAGE>
derivative causes of action shall be submitted in writing,
specifying the nature of the cause of action and providing all
evidence associated with such claim, to a special committee of
the Board of Directors comprised of members who do not also
serve as officers of the Corporation and are not reasonably
involved with the subject cause of action, or if no such
directors are serving, to legal counsel designated by the
Corporation in which no attorney holds shares of the
Corporation's securities, holds any office or position with the
Corporation or is related by marriage or through siblings,
parents or children to any officer or director of the
Corporation, and the decision to litigate, or not to litigate by
such special committee or special counsel shall be binding on
the Corporation and the submitting stockholder or stockholders;
unless the foregoing procedure has not been followed within 90
days after completion of the submission by the subject
stockholder.
(5) The fact that this Article shall be inapplicable in certain
circumstances shall not render it inapplicable in any other
circumstances and the Courts of the State of Delaware are hereby
granted the specific authority to restructure this Article, on a
case by case basis or generally, as required to most fully give
legal effect to its intent.
THIRTEENTH: Take Over Defenses:
(A) The Board of Directors of this orporation shall have the
broadest possible authority and discretion in adopting and
maintaining resistance to, and defenses against, takeover bids
that it deems not to be in the best interests of the Corporation
including (without limitation) adopting and maintaining any form
of shareholder rights plan or "poison pill" comprised of such
terms and features as the Board of Directors deems to be in the
best interests of the Corporation.
(B) Without limitation on the foregoing, the Board of Directors
shall have the authority and discretion to adopt and maintain a
shareholder rights plan or other defensive mechanism that may be
deactivated or redeemed only:
(1) By vote of continuing directors (i.e., the directors who
put such shareholder rights plan or other defensive
mechanism in place or the designated successors of such
directors) to the exclusion of newly elected directors
nominated or supported by a takeover bidder or bidders;
(2) After a prescribed delay period following election of
directors making up a majority of the Board of Directors
if such new directors are nominated or supported by a
takeover bidder or bidders; or
(3) Before election of directors making up a majority of the
Board of Directors if such new directors are nominated
or supported by a takeover bidder or bidders.
49
<PAGE>
(C) No bylaw shall limit in any way the authority of the Board of
Directors of this Corporation to adopt or maintain any
shareholder rights plan or otherwise to resist or defend against
any takeover bid that the Board of Directors finds not to be in
the best interests of the Corporation."
FOURTEENTH: Affiliated Transactions:
This Corporation shall not be subject to the restrictions or
requirements for affiliated transactions imposed by Section 203 of the
Delaware General Corporation Law, as permitted by the waiver provisions
of Section (b)(1) thereof.
FIFTEENTH: Compromise & Arrangement
(A) Whenever a compromise or arrangement is proposed between this
Corporation and its creditors or any class of them and /or
between this Corporation and its stockholders or any class of
them, any court of equitable jurisdiction within the State of
Delaware may, on the application in a summary way of this
Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for this
Corporation under Section 291 of Title 8 of the Delaware Code or
on the application of trustees in dissolution or of any receiver
or receivers appointed for this Corporation under Section 279 of
Title 8 of the Delaware Code order a meeting of the creditors or
class of creditors, and/or of the stockholders or class of
stockholders of this Corporation, as the case may be, to be
summoned in such manner as the said court directs.
(B) If a majority in number representing three fourths in value of
the creditors or class of creditors, and/or of the stockholders
or class of stockholders of this Corporation, as the case may be,
agree to compromise or arrangement and to any reorganization of
this Corporation as consequence of such the said compromise or
arrangement and the said reorganization compromise or
arrangement, the said compromise or arrangement and the said
reorganization shall, if sanctioned by the court to which the
said application has been made, be binding on all the creditors
or class of creditors, and or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and also
on this Corporation.
As a result of the foregoing amendments, the Registrant's board of
directors and officers, as well as officers and directors of its subsidiaries,
employees, agents and advisors, have material protection from suits by
stockholders, have significant rights to indemnification and legal defense,
including the right to receive advances for related expenses. Such protection
could make them less careful and less considerate of the rights of stockholders,
and could result in a drain of corporate resources. However, in light of
concerns in the high technology sector over what is perceived to be destructive
and abusive litigation, the Registrant's board of directors and a majority of
its existing stockholders (even excluding its current officers and directors)
believed that such risks were outweighed by the need to assure potential
acquisition candidates and employees that to the extent legally possible, they
would be shielded from such risks, should they elect to become associated with
the Registrant.
50
<PAGE>
In addition, the fourteenth and fifteenth articles makes it potentially
very difficult for a third party to take over the Registrant without the consent
of its board of directors. Such provision, if employed by directors who did not
have the best interests of the Registrant's stockholders at heart, or by
directors who, while in good faith, were wrong about the best interests of the
Registrant's stockholders, could deprive its stockholders of favorable business
opportunities, while permitting the subject directors and the Registrant's
management to remain entrenched in office. Again, the Registrant's board of
directors believed that such risks were justified because such provision
provides material assurances to companies acquired and personnel hired by the
Registrant or its subsidiaries that they will be able to rely on the commitments
made to them and to effectuate long term plans, without undue concerns for about
disruptive short term speculators.
None of the provisions in the second series of articles adopted were
based on concerns over currently likely take over attempts or over anticipated
acquisitions involving affiliated parties. Indeed, the affiliation related
restrictions waived in article fifteen are frequently viewed as methods to
discourage hostile takeovers. Although the Registrant's officers and directors
owe its stockholders strong fiduciary obligations, no assurances can be provided
that in the future, unscrupulous or incompetent people will not abuse or misuse
such powers, to the stockholders detriment.
The Registrant expects that the certificate of amendment described above
will be filed with the Secretary of State of Delaware on or about July 14, 1999,
and that it will become effective on such date. A copy of the certificate
amending the Corporation's certificate of incorporation is filed as an exhibit
hereto (see "Item 7, Exhibit Index").
ITEM 7. Financial Statements & Exhibits
(A) Financial statements of business acquired.***
Unaudited financial statements for American Internet as of December 31, 1998,
are filed as exhibits to the reorganization agreement. However, such financial
statements do not comply with the requirements of Regulation SB. The financial
statements required for American Internet in response to this item will, as
permitted by applicable Securities and Exchange Commission rules, be filed by
amendment to this report on or before the 60th day following the date hereof.
(B) Pro forma financial information. ***
Unaudited financial statements for American Internet as of December 31, 1998,
are filed as exhibits to the reorganization agreement. However, such financial
statements do not comply with the requirements of Regulation SB. The pro forma
financial information required for American Internet in response to this item
will, as permitted by applicable Securities and Exchange Commission rules, be
filed by amendment to this report on or before the 60th day following the date
hereof.
51
<PAGE>
(C) Exhibit Index:
Regulation
SB Exhibit Sequential
Table Page Number
Number or Source * Exhibit Description
2 PLAN OF ACQUISITION, REORGANIZATION,
ARRANGEMENT, LIQUIDATION OR SUCCESSION:
.6 55 Stock exchange agreement dated
February 28, 1999, between the
Ascot, Industries, Inc. and American
Internet Technical Center, Inc.
.7 74 Rescission Agreement between
American Internet and Ascot dated
July 9, 1999.
.8 89 Reorganization agreement dated June
25, 1999, between the Registrant and
American Internet Technical Centers,
Inc.
3 (I) ARTICLES OF INCORPORATION
.30 172 Amendments to Registrant's
Certificate of Incorporation
Dated July 7, 1999.
.31 178 Articles of incorporation of
American Internet, as amended
(ii) Bylaws
.41 186 Bylaws of American Internet,
as amended
4 INSTRUMENTS DEFINING THE RIGHTS OF
SECURITY HOLDERS, INCLUDING INDENTURES.
.11 223 Form of Class A, Series A,
Convertible, Subordinated Debenture
.12 240 Form of Subscription agreement for
Debenture private placement to
accredited investors.
52
<PAGE>
Regulation
SB Exhibit Sequential
Table Page Number
Number or Source * Exhibit Description
10 MATERIAL CONTRACTS: (4)
.33 252 Lock-up & voting agreement.
.34 263 Registrant's engagement
agreement with Daszkal, Bolton &
Manela, P.A., certified public
accountants, dated July 9, 1999.
.35 266 American Internet employment
agreement with J. Bruce Gleason.
.35 277 American Internet employment
agreement with Michael D. Umile.
.36 289 Registrant's employment agreement
with Carmen Piccolo.
.37 305 Distributor agreement between
American Internet and Education to
Go, dated August 4, 1998.
11 (2) STATEMENT RE COMPUTATION OF EARNINGS
PER SHARE.
13 PERIODIC OR CURRENT EXCHANGE ACT
REPORTS:
.1 **** Form 10-KSB for the year ended
December 31, 1998.
16 *** LETTER RE CHANGE IN CERTIFYING
ACCOUNTANT.
21 (3) SUBSIDIARIES OF THE REGISTRANT.
22 308 CONSENT OF EXPERTS AND COUNSEL:
CONSENT OF DASZKAL, BOLTON & MANELA,
P.A., CERTIFIED PUBLIC ACCOUNTANTS.
99 ADDITIONAL EXHIBITS:
.34 309 Officers & directors questionnaires
(J. Bruce Gleason).
.35 314 Officers & directors questionnaires
(Michael D. Umile).
.36 319 Officers & directors questionnaires
(Mark Granville-Smith).
.37 325 Lawerence S, Benjamin Settlement
Agreement.
.38 329 Notice of Election of Rights
pursuant to Section 4.9 of American
Internet Reorganization Agreement.
53
<PAGE>
- - -------
* Page numbers refer to sequentially numbered pages, starting with the
report cover.
** Not applicable.
*** To be filed by subsequent amendment.
**** Not required for reports on 8-KSB.
(1) Incorporated by reference from the Registrant's report on Form 10-KSB
for the year ended December 31, 1998.
(2) Incorporated from page 33 of this report.
(3) Incorporated from page 18 of this report.
(4) Additional American Internet agreements are to be provided to the
Registrant's legal counsel and if deemed material will be filed as
amendments to this report.
ITEM 8. Change in Fiscal Year
The Registrant has, subject to compliance with any Internal Revenue Service or
Securities and Exchange Commission Requirements, elected to change its fiscal
year to June 30, in order to avoid the difficulties in competing for auditing
services with the severe demands placed on the auditing profession during the
first quarter of every calendar year as a result of the federal tax filing
deadline on April 15, and the Commission's heaviest filing date of the year for
reports on Form 10-KSB on March 30. The Registrant believes that such change
will permit it to negotiate better auditing fees and to receive more timely and
less distracted attention from its auditors.
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, as amended, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Equity Growth Systems, inc.
July 12, 1999
By: /s/ Charlkes J. Scimeca /s/
____________________________
Charles J. Scimeca
President
54
EXHIBIT 2.6 STOCK EXCHANGE AGREEMENT
THE SECURITIES WHICH ARE THE SUBJECT OF THIS AGREEMENT HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 (THE " 1933 ACT"), NOR REGISTERED UNDER ANY
STATE SECURITIES LAW, AND ARE "RESTRICTED SECURITIES" AS THAT TERM IS DEFINED IN
RULE 144 UNDER THE 1933 ACT. THE SECURITIES MAY NOT BE OFFERED FOR SALE, SOLD OR
OTHERWISE TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION STATEMENT
UNDER THE 1933 ACT, OR PURSUANT TO AN EXEMPTION FROM REGISTRATION UNDER THE 1933
ACT, THE AVAILABILITY OF WHICH IS TO BE ESTABLISHED TO THE SATISFACTION OF THE
COMPANY.
AGREEMENT FOR THE EXCHANGE OF COMMON STOCK
AGREEMENT made this 28th day of February 1999, by and between Ascot
Industries, Inc., a Nevada corporation, (the "ISSUER") and American Internet
Technical Centers, Inc. and the individuals listed in Exhibit A attached hereto,
(the "SHAREHOLDERS"), which SHAREHOLDERS own all of the issued and outstanding
shares of American Internet Technical Centers, Inc., a Florida corporation.
("AIT")
In consideration of the mutual promises, covenants, and representations
contained herein, and other good and valuable consideration,
THE PARTIES HERETO AGREE AS FOLLOWS:
1. EXCHANGE OF SECURITIES. Subject to the terms and conditions of this
Agreement, the ISSUER agrees to issue to SHAREHOLDERS, 10,000,000 shares of the
common stock of ISSUER, $.001 par value (the "Shares"), in exchange for 100% of
the issued and outstanding shares of the AIT, such that AIT shall become a
wholly owned subsidiary of the ISSUER.
2. REPRESENTATIONS AND WARRANTIES. ISSUER represents and warrants to
SHAREHOLDERS and AIT the following:
i. Organization. ISSUER is a corporation duly organized, validly
existing, and in good standing under the laws of Nevada, and has all
necessary corporate powers to own properties and carry on a business, and
is duly qualified to do business and is in good standing in Nevada. All
actions taken by the Incorporators, directors and shareholders of ISSUER
have been valid and in accordance with the laws of the State of Nevada.
ii. Capital. The authorized capital stock of ISSUER cornetists of
20,000,000 shares of common stock, $.001 par value, of which 11,600,000 are
issued and outstanding, and 1,000,000 shares of preferred stock, par value
$.001, none of which are issued. All outstanding shares are fully paid and
non assessable, free of liens, encumbrances, options, restrictions and
legal or equitable rights of others not a party to this Agreement. At
closing, there will be no outstanding subscriptions, options, rights,
warrants, convertible securities, or other agreements or commitments
obligating ISSUER to issue or to transfer from treasury any additional
shares of its capital stock. None of
55
<PAGE>
the outstanding shares of ISSUER are subject to any stock restriction
agreements. All of the shareholders of ISSUER have valid title to such
shares and acquired their shares in a lawful transaction and in accordance
with the laws of Nevada.
iii. Financial Statements. Exhibit B to this Agreement includes the
balance sheet of ISSUER as of February 28, 1999, and the related statements of
income and retained earnings for the period then ended. The financial statements
have been prepared in accordance with generally accepted accounting principles
consistently followed by ISSUER throughout the periods indicated, and fairly
present the financial position of ISSUER as of the date of the balance sheet in
the financial statements, and the results of its operations for the periods
indicated.
iv. Absence of Changes. Since the date of the financial statements,
there has not been any change in the financial condition or operations of
ISSUER, except changes in the ordinary course of business, which changes have
not in the aggregate been materially adverse.
v. Liabilities. ISSUER does not have any debt, liability, or obligation
of any nature, whether accrued, absolute, contingent, or otherwise, and whether
due or to become due, that is not reflected on the ISSUERS' financial statement.
ISSUER is not aware of any pending, threatened or asserted claims, lawsuits or
contingencies involving ISSUER or its common stock. There is no dispute of any
kind between ISSUER and any third party, and no such dispute will exist at the
closing of this Agreement. At closing, ISSUER will be free from any and all
liabilities, liens, claims and/or commitments.
vi. Ability to Carry Out Obligations. ISSUER has the right, power, and
authority to enter into and perform its obligations under this Agreement. The
execution and delivery of this Agreement by ISSUER and the performance by ISSUER
of its obligations hereunder will not cause, constitute, or conflict with or
result in (a) any breach or violation or any of the provisions of or constitute
a default under any license, indenture, mortgage, charter, instrument, articles
of incorporation, bylaw, or other agreement or instrument to which ISSUER or its
shareholders are a party, or by which they may be bound, nor will any consents
or authorizations of any party other than those hereto be required, (b) an event
that would cause ISSUER to be liable to any party, or (c) an event that would
result in the creation or imposition or any lien, charge or encumbrance on any
asset of ISSUER or upon the securities of ISSUER to be acquired by SHAREHOLDERS.
vii. Full Disclosure. None of representations and warranties made by
the ISSUER, or in any certificate or memorandum furnished or to be furnished by
the ISSUER, contains or will contain any untrue statement of a material fact, or
omit any material tact the omission of which would be misleading.
viii. Contract and Leases. ISSUER is not currently carrying on any
business and is not a party to any contract, agreement or lease. No person holds
a power of attorney from ISSUER.
ix. Compliance with Laws. ISSUER has complied with, and is not in
violation of any federal, state, or local statute, law, and/or regulation
pertaining to ISSUER . ISSUER has complied with all federal and state securities
laws in connection with the issuance, sale and distribution of its securities.
x. Litigation. ISSUER is not (and has not been) a party to any suit,
action, arbitration, or legal, administrative, or other proceeding, or pending
governmental investigation. To the best knowledge of the ISSUER, there is no
basis for any such action or proceeding and no such action or proceeding is
threatened
56
<PAGE>
against ISSUER and ISSUER is not subject to or in default with respect to any
order, writ, injunction, or decree of any federal, state, local, or foreign
court, department, agency, or instrumentality.
xi. Conduct of Business. Prior to the closing, ISSUER shall conduct its
business in the normal course, and shall not (1) sell, pledge, or assign any
assets (2) amend its Articles of Incorporation or Bylaws, (3) declare dividends,
redeem or sell stock or other securities, (4) incur any liabilities, (5) acquire
or dispose of any assets, enter into any contract, guarantee obligations of any
third party, or (6) enter into any other transaction.
xii. Corporate Documents. Copies of each of the following documents,
which are true complete and correct in all material respects, will be attached
to and made a part of this Agreement:
(1) Articles of Incorporation;
(2) Bylaws;
(3) Minutes of Shareholders Meetings;
(4) Minutes of Directors Meetings;
(5) List of Officers and Directors;
(6) Balance Sheet as of February 28, 1999 together with other financial
statements described in Section 2(iii);
(7) Stock register and stock records of ISSUER and a current, accurate
list of ISSUER's shareholders.
xiii. Documents. All minutes, consents or other documents pertaining to
ISSUER to be delivered at closing shall be valid and in accordance with the laws
of Nevada.
xiv. Title. The Shares to be issued to SHAREHOLDERS will be, at
closing, free and clear of all liens, security interests, pledges, charges,
claims, encumbrances and restrictions of any kind. None of such Shares are or
will be subject to any voting trust or agreement. No person holds or has the
right to receive any proxy or similar instrument with respect to such shares,
except as provided in this Agreement, the ISSUER is not a party to any agreement
which offers or grants to any person the right to purchase or acquire any of the
securities to be issued to SHAREHOLDERS I here is no applicable local, state or
federal law, rule, regulation, or decree which would, as a result of the
issuance of the Shares to SHAREHOLDERS, impair, restrict or delay SHAREHOLDERS'
voting rights with respect to the Shares.
3. SHAREHOLDERS and AIT represent and warrant to ISSUER the following:
i. Organization. AIT is a corporation duly organized, validly
existing, and in good standing under the laws of Florida, has all necessary
corporate powers to own properties and carry on a business, and is duly
qualified to do business and is in good standing in Florida. All actions
taken by the Incorporators, directors and shareholders of AIT have been
valid and in accordance with the laws of Florida.
ii. Shareholders and Issued Stock. Exhibit A annexed hereto sets forth
the names and share holdings of 100% of AIT's shareholders.
iii. Listing Stock for Trading. Upon closing, SHAREHOLDERS and AIT
shall take all steps reasonably necessary to get the ISSUER's common stock
listed for trading in NASD Automated Bulletin Board and to, as soon as
practicably possible, have the company listed with Standard and Poors or
Moodys in their Accelerated Corporate Report.
57
<PAGE>
iv. Counsel. SHAREHOLDERS and AIT represent and warrant that prior to
Closing, that they are represented by independent counsel or have had the
opportunity to retain independent counsel to represent them in this
transaction and that prior to Closing, the law offices of Donald F.
Mintmire & Associates has acted as exclusive counsel to the ISSUER and has
not represented either the SHAREHOLDERS or AIT in any manner whatsoever.
4. INVESTMENT INTENT. SHAREHOLDERS agrees that the Shares being issued
pursuant to this Agreement may be sold, pledged, assigned, hypothecate or
otherwise transferred, with or without consideration ( a "Transfer"), only
pursuant to an effective registration statement under the Act, or pursuant to an
exemption from registration under the Act, the availability of which is to be
established to the satisfaction of ISSUER. SHAREHOLDERS agrees, prior to any
Transfer, to give written notice to ISSUER expressing his desire to effect the
transfer and describing the proposed transfer.
5. CLOSING. The closing of this transaction shall take place at the law
offices of Donald F. Mintmire, 265 Sunrise Ave., Suite 204, Palm Beach, Florida.
Unless the closing of this transaction takes place on or before February 28,
1999, then either party may terminate this Agreement.
6. DOCUMENTS TO BE DELIVERED AT CLOSING.
i. By the ISSUER
(1) Board of Directors Minutes authorizing the issuance of a
certificate or certificates for 10,000,000 Shares, registered in the names of
the SHAREHOLDERS equal to their pro-rata holdings in AIT.
(2) The resignation of all officers of ISSUER.
(3) A Board of Directors resolution appointing such person as
SHAREHOLDERS designate as a director(s) of ISSUER.
(4) The resignation of all the directors of ISSUER, except
that of SHAREHOLDER'S designee, dated subsequent to the resolution described in
3, above.
(5) Unaudited financial statements of ISSUER, which shall
include a balance sheet dated as of February 28, 1999 and statements of
operations, stockholders equity and cash flows for the twelve month period then
ended.
(6) All of the business and corporate records of ISSUER,
including but not limited to correspondence files, bank statements, checkbooks,
savings account books, minutes of shareholder and directors meetings, financial
statements, shareholder listings, stock transfer records, agreements and
contracts.
(7) Such other minutes of ISSUER's shareholders or directors
as may reasonably be required by SHAREHOLDERS.
(8) Within 30 days of closing, a private placement memorandum
pursuant to Rule 504 of Regulation D as promulgated under the Securities Act of
1993.
58
<PAGE>
(9) An Opinion Letter from ISSUER's Attorney attesting to the validity
and condition of the ISSUER.
ii. By SHAREHOLDERS AND AIT:
(1) Delivery to the ISSUER, or to its Transfer Agent, the
certificates of this Agreement representing 100% of the issued and outstanding
stock of AIT.
(2) Consents signed by all the shareholders of AIT consenting
to the terms
7. REMEDIES.
i. Arbitration. Any controversy or claim arising out of, or relating
to, this Agreement, or the making, performance, or interpretation thereof, shall
be settled by arbitration in Palm Beach County, Florida in accordance with the
Commercial Rules of the American Arbitration Association then existing. The
arbitrator assigned shall have authority and power to decide all arbitratible
issues. Judgment on the arbitration award may be entered in any court having
jurisdiction over the subject matter of the controversy. The prevailing party in
such claim or controversy shall be entitled to recover all costs and expenses of
such claim or controversy, including attorneys fees from the non-prevailing
party.
8. MISCELLANEOUS.
i. Captions and Headings. The Article and paragraph headings
throughout this Agreement are for convenience and reference only, and shall
in no way be deemed to define, limit, or add to the meaning of any
provision of this Agreement.
ii. No oral Change. This Agreement and any provision hereof, may not
be waived, changed, modified, or discharged orally, but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, or discharge is sought.
iii. Non Waiver. Except as otherwise expressly provided herein, no
waiver of any covenant, condition, or provision of this Agreement shall be
deemed to have been made unless expressly in writing and signed by the
party against whom such waiver is charged; and (I) the failure of any party
to insist in any one or more cases upon the performance of any of the
provisions, covenants, or conditions of this Agreement or to exercise any
option herein contained shall not be construed as a waiver or
relinquishment for the future of any such provisions, covenants, or
conditions, (ii) the acceptance of performance of anything required by this
Agreement to be performed with knowledge of the breach or failure of a
covenant, condition, or provision hereof shall not be deemed a waiver of
such breach or failure, and (iii) no waiver by any party of one breach by
another party shall be construed as a waiver with respect to any other or
subsequent breach
iv. Time of Essence. Time is of the essence of this Agreement and of
each and every provision hereof.
v. Entire Agreement. This Agreement contains the entire Agreement and
understanding between the parties hereto, and supersedes all prior
agreements and understandings.
59
<PAGE>
vi. Counterparts. This Agreement may be executed simultaneously in one
or more counterparts, each of which shall be deemed an original, but all of
which together shall constitute one and the same instrument.
vii. Notices. All notices, requests, demands, and other communications
under this Agreement shall be in writing and shall be deemed to have been
duly given on the date of service if served personally on the party to whom
notice is to be given, or on the third day after mailing if mailed to the
party to whom notice is to be given, by first class mail, registered or
certified, postage prepaid, and properly addressed, and by fax, as follows:
ISSUER: Dale B. Finfrock
P.O. Box 669
Palm Beach, FL 33480
Copy to: Donald F. Mintmire, Esquire
265 Sunrise Ave., Suite 204,
Palm Beach, Florida 33480
AIT: J. Bruce Gleason
1500 E. Atlantic Blvd.
Pompano Beach, FL 33060
IN WITNESS WHEREOF, the undersigned has executed this Agreement this
28th day of February, 1999.
ASCOT INDUSTRIES, INC.
By Dale B. Finfrock, President
AMERICAN INTERNET TECHNICAL CENTERS, INC.
By: J. Bruce Gleason, President
Exhibits to the Stock Exchange Agreement
ASCOT INDUSTRIES, INC
Formed in Nevada
Federal Employer Identification Number (Tax ID):
65-08 1 5743
Corporate Creations
(305) 672-0686
60
<PAGE>
CORPORATE CHARTER
I, DEAN HELLER, the duly elected and qualified Nevada Secretary of State, do
hereby certify that ASCOT INDUSTRIES, INC. did on February 24, 1998, file in
this office the original Articles of Incorporation; that said Articles are now
on file and of record in the office of the Secretary of State of the State of
Nevada, and further, that said Articles contain all the provisions required by
the law of said State of Nevada.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the Great Seal of
State, at my office, in Carson City, Nevada, on February 25,1998.
/s/ Secretary of State
/s/ Certification Clerk
Articles of Incorporation
(PURSUANT TO NRS 78)
State of Nevada
1. NAME OF CORPORATION: Ascot Industries, Inc.
2. RESIDENT AGENT:
Name of Resident Agent: National Registered Agents, Inc. of Nevada .
Street Address: 400 West King Street Carson City, NV 89703
Mailing Address (if different):
3. AUTHORIZED SHARES. (number of shares the Corporation is authorized to issue)
Number of shares with per value 20,000,000 Par value:$.001
Number of shares without par value:
4. GOVERNING BOARD: shall be styled as (check one): X Directors
__ Trustees
The FIRST BOARD OF DIRECTORS shall consist of one members and the names and
addresses are as follows:
Dale B. Finfrock, Jr. P.O. Box 669 Palm Beach FL 33480
5. PURPOSE: The purpose of the corporation is to conduct or promote any lawful
business or purposes.
6. NRS 78.037: States that the articles of Incorporation may also contain a
provision eliminating or limiting the personal liability of a directors or
officer of the corporation or its stockholders for damages for breach of
fiduciary duty as a director or officer except acts or omissions which include
misconduct
61
<PAGE>
or fraud. Do you want this provision to be part of your articles? Please
check one of the following: YES
7. OTHER MATTERS: This form includes the minimal statutory requirements to
incorporate under NRS 78. You may attach additional information noted on
separate pages. But, if any of the additional information is contradictory to
this form it cannot be filed and will be returned to you for correction.
NUMBER OF PASTES ATTACHED 1
8. SIGNATURES OF INCORPORATORS: The names and address of each of the
incorporators signing the articles:
Corporate Creations International Inc.
941 Fourth Street #200 Miami Bach, Fl 33139
CORPORATE CREATIONS INTERNATIONAL, INC.
Greg K. Kuroda, Vice President
9 CERTIFICATE OF ACCEPTANCE OF APPOINTMENT OF RESIDENT AGENT
National Registered Agents, Inc.of Nevada hereby accepts appointment as Resident
Agent for the above named corporation.
NATIONAL REGISTERED AGENTS, INC. OF NEVADA DATE: 2/23/98
Articles of Incorporation
(PURSUANT TO NRS 78)
State of Nevada
STATE OF NEVADA Secretary of State
In Edition to the shares specified in Section 3, the Corporation shall have the
authority to issue 1,000,000 shares of preferred stock, par value $.001 per
share, which may be divided into series and with the preferences, limitations
and relative rights determined by the Board of Directors. The Corporation elects
not to be governed by the provisions of AIRS 78.378 to 78.3793 governing the
acquisition of a controlling interest in the Corporation.
62
<PAGE>
Written Consent of Directors to Organize
ASCOT INDUSTRIES, INC.
The Board of Directors hereby takes the following actions by unanimous written
consent to organize this Nevada corporation:
1. Articles of Incorporation. The articles of incorporation of the
Corporation are approved.
2. Officers. The following persons are appointed to the offices set
forth opposite their names to serve until their successors are appointed:
President Dale B. Finfrock, Jr.
Secretary Dale B. Finfrock, Jr.
Treasurer Dale B. Finfrock, Jr.
3. Bylaws. The bylaws that are in the Corporate Records binder adopted
and approved as the bylaws of the Corporation.
4. Stock Certificates. The common stock certificates that are in the
Corporate Records binder are approved as the form to be used in issuing shares
of common stock of the Corporation.
5. Bank Account. The officers are directed to open an account with a
bank or other financial institution and to deposit in that account all funds of
the Corporation. All resolutions required to open an account in accordance with
this paragraph are adopted as the action of the Board of Directors.
6. Organizational and Start-up Expenditures. The officers of the
Corporation are authorized to elect to amortize organizational and qualified
start-up expenditures in accordance with Sections 248 and 195 of the Internal
Revenue Code, as amended.
7. Approval of Prior Actions. All lawful actions by the incorporator
and its representatives which were taken on behalf of the Corporation prior to
the effective date of this written consent are approved.
8. Subscription For Shares of the Corporation. For the consideration
determined by the Board of Directors to be adequate, the Corporation will issue
a stock certificate for shares of the Corporation's common stock to each person
named below:
Shares Shareholder
Dale B. Finfrock, Jr.
The undersigned, constituting the Corporation's entire Board of Directors
executed this written consent effective as of the 27 day of February, 1998 .
/s/ Dale B. Finfrock /s/
63
<PAGE>
Bylaws
of
ASCOT INDUSTRIES, INC.
ARTICLE I. DIRECTORS
Section 1. Function. All corporate powers shall be exercised by or under the
authority of the Board of Directors. The business and affairs of the Corporation
shall be managed under the direction of the Board of Directors. Directors must
be natural persons who are at least 18 years of age but need not be shareholders
of the Corporation. Residents of any state may be directors.
Section 2. Compensation. The shareholders shall have authority to fix the
compensation of directors. Unless specifically authorized by a resolution of the
shareholders, the directors shall serve in such capacity without compensation.
Section 3. Presumption of Assent. A director who is present at a meeting of the
Board of Directors or a committee of the Board of Directors at which action on
any corporate matter is taken shall be presumed to have assented to the action
taken unless he objects at the beginning of the meeting (or promptly upon
arriving) to the holding of the meeting or transacting the specified business at
the meeting, or if the director votes against the action taken or abstains from
voting because of an asserted conflict of interest.
Section 4. Number. The Corporation shall have at least the minimum number of
directors required by law. The number of directors may be increased or decreased
from time to time by the Board of Directors.
Section 5. Election and Term. At each annual meeting of shareholders, the
shareholders shall elect directors to hold office until the next annual meeting
or until their earlier resignation, removal from office or death. Directors
shall be elected by a plurality of the votes cast by the shares entitled to vote
in the election at a meeting at which a quorum is present.
Section 6. Vacancies. Any vacancy occurring in the Board of Directors, including
a vacancy created by an increase in the number of directors, may be filled by
the shareholders or by the affirmative vote of a majority of the remaining
directors though less than a quorum of the Board of Directors A director elected
to fill a vacancy shall hold office only until the next election of directors by
the shareholders. If there are no remaining directors, the vacancy shall be
filled by the shareholders.
Section 7. Removal of Directors. At a meeting of shareholders, any director or
the entire Board of Directors may be removed, with or without cause, provided
the notice of the meeting states that one of the purposes of the meeting is the
removal of the director.
A director may be removed only if the number of votes cast to remove him exceeds
the number of votes cast against removal.
Section 8. Quorum and Voting. A majority of the number of directors fixed by
these Bylaws shall constitute a quorum for the transaction of business. The act
of a majority of directors present at a meeting at which a quorum is present
shall be the act of the Board of Directors.
Section 9. Executive and Other Committees. The Board of Directors, by resolution
adopted by a majority of the full Board of Directors, may designate from among
its members one or more committees each of which must have at least two members.
Each committee shall have the authority set forth in the resolution designating
the committee.
64
<PAGE>
Section 10. Place of Meeting. Regular and special meetings of the Board of
Directors shall be held at the principal place of business of the Corporation or
at another place designated by the person or persons giving notice or otherwise
calling the meeting
Section 11. Time, Notice and Call of Meetings. Regular meetings of the Board of
Directors shall be held without notice at the time and on the date designated by
resolution of the Board of Directors Written notice of the time, date and place
of special meetings of the Board of Directors shall be given to each director by
mail delivery at least two days before the meeting.
Notice of a meeting of the Board of Directors need not be given to a
director who signs a waiver of notice either before or after the meeting.
Attendance of a director at a meeting constitutes a waiver of notice of that
meeting and waiver of all objections to the place of the meeting, the time of
the meeting, and the manner in which it has been called or convened, unless a
director objects to the transaction of business (promptly upon arrival at the
meeting) because the meeting is not lawfully called or convened Neither the
business to be transacted at, nor the purpose of, any regular or special meeting
of the Board of Directors must be specified in the notice or waiver of notice of
the meeting
A majority of the directors present, whether or not a quorum exists,
may adjourn any meeting of the Board of Directors to another time and place
Notice of an adjourned meeting shall be given to the directors who were not
present at the time of the adjournment and, unless the time and place of the
adjourned meeting are announced at the time of the adjournment, to the other
directors Meetings of the Board of Directors may be called by the President or
the Chairman of the Board of Directors. Members of the Board of Directors and
any committee of the Board may participate in a meeting by telephone conference
or similar Directors and participate in a meeting by telephone communications
equipment if all persons participating in the meeting can hear each other at the
same time. Participation by these means constitutes presence in person at a
meeting.
Section 12. Action by Written Consent. Any action required or permitted to be
taken at a meeting of directors may be taken without a meeting if a consent in
writing setting forth the action to be taken and signed by all of the directors
is filed in the minutes of the proceedings of the Board. The action taken shall
be deemed effective when the last director signs the consent, unless the consent
specifies otherwise.
ARTICLE II. MEETINGS OF SHAREHOLDERS
Section 1. Annual Meeting. The annual meeting of the shareholders of the
corporation for the election of officers and for such other business as may
properly come before the meeting shall be held at such time and place as
designated by the Board of Directors.
Section 2. Special Meeting. Special meetings of the shareholders shall be held
when directed by the President or when requested in writing by shareholders
holding at least 10% of the Corporation's stock having the right and entitled to
vote at such meeting. A meeting requested by shareholders shall be called by the
President for a date not less than 10 nor more than 60 days after the request is
made. Only business within the purposes described in the meeting notice may be
conducted at a special shareholders' meeting.
Section 3. Place. Meetings of the shareholders will be held at the principal
place of business of the Corporation or at such other place as is designated by
the Board of Directors.
65
<PAGE>
Section 4. Notice. A written notice of each meeting of shareholders shall be
mailed to each shareholder having the right and entitled to vote at the meeting
at the address as it appears on the records of the Corporation. The meeting
notice shall be mailed not less than 10 nor more than 60 days before the date
set for the meeting. The record date for determining shareholders entitled to
vote at the meeting will be the close of business on the day before the notice
is sent. The notice shall state the time and place the meeting is to be held. A
notice of a special meeting shall also state the purposes of the meeting. A
notice of meeting shall be sufficient for that meeting and any adjournment of
it. If a shareholder transfers any shares after the notice is sent, it shall not
be necessary to notify the transferee. All shareholders may waive notice of a
meeting at any time.
Section 5. Shareholder Quorum. A majority of the shares entitled to vote,
represented in person or by proxy, shall constitute a quorum at a meeting of
shareholders. Any number of shareholders, even if less than a quorum, may
adjourn the meeting without further notice until a quorum is obtained.
Section 6. Shareholder Voting. If a quorum is present, the affirmative vote of a
majority of the shares represented at the meeting and entitled to vote on the
subject matter shall be the act of the shareholders. Each outstanding share
shall be entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. An alphabetical list of all shareholders who are entitled to
notice of a shareholders' meeting along with their addresses and the number of
shares held by each shall be produced at a shareholders' meeting upon the
request of any shareholder.
Section 7. Proxies. A shareholder entitled to vote at any meeting of
shareholders or any adjournment thereof may vote in person or by proxy executed
in writing and signed by the shareholder or his attorney-in-fact. The
appointment of proxy will be effective when received by the Corporation's
officer or agent authorized to tabulate votes. No proxy shall be valid more than
11 months after the date of its execution unless a longer term is expressly
stated in the proxy.
Section 8. Validation. If shareholders who hold a majority of the voting stock
entitled to vote at a meeting are present at the meeting, and sign a written
consent to the meeting on the record, the acts of the meeting shall be valid,
even if the meeting was not legally called and noticed.
Section 9. Conduct of Business By Written Consent. Any action of the
shareholders may be taken without a meeting if written consents, setting forth
the action taken, are signed by at least a majority of shares entitled to vote
and are delivered to the officer or agent of the Corporation having custody of
the Corporation's records within 60 days after the date that the earliest
written consent was delivered. Within 10 days after obtaining an authorization
of an action by written consent, notice shall be given to those shareholders who
have not consented in writing or who are not entitled to vote on the action. The
notice shall fairly summarize the material features of the authorized action. If
the action creates dissenters' rights, the notice shall contain a clear
statement of the right of dissenting shareholders to be paid the fair value of
their shares upon compliance with and as provided for by the state law governing
corporations.
ARTICLE III. OFFICERS
Section 1. Officers: Election
1; Resignation; Vacancies. The Corporation shall have the orders and assistant
officers that the Board of Directors appoint from time to time Except as
otherwise provided in an employment agreement which the Corporation has with an
officer, each officer shall serve until a successor is chosen by the directors
at a regular or special meeting of the directors or until removed. Officers and
agents shall be chosen, serve for the terms, and have the duties determined by
the directors. A person may hold two or more Offices.
66
<PAGE>
Any officer may resign at any time upon written notice to the Corporation The
resignation shall be effective upon receipt, unless the notice specifies a later
date If the assignation is effective at a later date and the Corporation accepts
the future effective date, the Board of Directors may fill the pending vacancy
before the effective date provided the successor officer does not take office
until the future effective date. Any vacancy occurring in any office of the
Corporation by death, resignation, removal or otherwise may be filled for the
unexpired portion of the term by the Board of Directors at any regular or
special meeting.
Section 2. Powers and Duties of Officers. The officers of the Corporation shall
have such powers and duties in the management of the Corporation as may be
prescribed by the Board of Directors and, to the extent not so provided, as
generally pertain to their respective offices, subject to the control of the
Board of Directors.
Section 3. Removal of Officers. An officer or agent or member of a committee
elected or appointed by the Board of Directors may be removed by the Board with
or without cause whenever in its judgment the best interests of the Corporation
will be served thereby, but such removal shall be without prejudice to the
contract rights, if any, of the person so removed. Election or appointment of an
officer, agent or member of a committee shall not of itself create contract
rights. Any officer, if appointed by another officer, may be removed by that
officer.
Section 4. Salaries. The Board of Directors may cause the Corporation to enter
into employment agreements with any officer of the Corporation. Unless provided
for in an employment agreement between the Corporation and an officer, all
officers of the Corporation serve in their capacities without compensation.
Section 5. sank Accounts. The Corporation shall have accounts with financial
institutions as determined by the Board of Directors.
ARTICLE IV. DISTRIBUTIONS
The Board of Directors may, from time to time, declare distributions to
its shareholders in cash, property, or its own shares, unless the distribution
would cause (i) the Corporation to be unable to pay its debts as they become due
in the usual course of business, or (ii) the Corporation's assets to be less
than its liabilities plus the amount necessary, if the Corporation were
dissolved at the time of the distribution, to satisfy the preferential rights of
shareholders whose rights are superior to those receiving the distribution. The
shareholders and the Corporation may enter into an agreement requiring the
distribution of corporate profits, subject to the provisions of law.
67
<PAGE>
ARTICLE V. CORPORATE RECORDS
Section 1 Corporate Records. The corporation shall maintain its records in
written form or in another form capable of conversion into written form within a
reasonable time. The Corporation shall keep as permanent records minutes of all
meetings of its shareholders and Board of Directors, a record of all actions
taken by the shareholders or Board of Directors without a meeting, and a record
of all actions taken by a committee of the Board of Directors on behalf of the
Corporation. The Corporation shall maintain accurate accounting records and a
record of its shareholders in a form that permits preparation of a list of the
names and addresses of all shareholders in alphabetical order by class of shares
showing the number and series of shares held by each.
The Corporation shall keep a copy of its articles or restated articles
of incorporation and all amendments to them currently in effect; these Bylaws or
restated Bylaws and all amendments currently in effect; resolutions adopted by
the Board of Directors creating one or more classes or series of shares and
fixing their relative rights, preferences, and limitations, if shares issued
pursuant to those resolutions are outstanding; the minutes of all shareholders'
meetings and records of all actions taken by shareholders without a meeting for
the past three years; written communications to all shareholders generally or
all shareholders of a class of series within the past three years, including the
financial statements furnished for the last three years; a list of names and
business street addresses of its current directors and officers; and its most
recent annual report delivered to the Department of State.
Section 2. Shareholders' Inspection Rights. A shareholder is entitled to inspect
and copy, during regular business hours at a reasonable location specified by
the Corporation, any books and records of the Corporation. The shareholder must
give the Corporation written notice of this demand at least five business days
before the date on which he wishes to inspect and copy the record(s). The demand
must be made in good faith and for a proper purpose. The shareholder must
describe with reasonable particularity the purpose and the records he desires to
inspect, and the records must be directly connected with this purpose. This
Section does not affect the right of a shareholder to inspect and copy the
shareholders' list described in this Article if the shareholder is in litigation
with the Corporation. In such a case, the shareholder shall have the same rights
as any other litigant to compel the production of corporate records for
examination.
The Corporation may deny any demand for inspection if the demand was
made for an improper purpose, or if the demanding shareholder has within the two
years preceding his demand, sold or offered for sale any list of shareholders of
the Corporation or of any other corporation, has aided or abetted any person in
procuring any list of shareholders for that purpose, or has improperly used any
information secured through any prior examination of the records of this
Corporation o. any other corporation.
Section 3. Financial Statements for Shareholders Unless modified by resolution
of the shareholders within 120 days after the close of each fiscal year, the
Corporation shall furnish its shareholders with annual financial statements
which may be consolidated or combined statements of the Corporation and one or
more of its subsidiaries, as appropriate, that include a balance sheet as of the
end of the fiscal year, an income statement for that year, and a statement of
cash flows for that year. If financial statements are prepared for the
Corporation on the basis of generally accepted accounting principles, the annual
financial statements must also be prepared on that basis.
If the annual financial statements are reported upon by a public accountant, his
report must accompany them. If not, the statements must be accompanied by a
statement of the President or the person responsible for the Corporation's
accounting records stating his reasonable belief whether the statements were
prepared on the basis of generally accepted accounting principles and, if not,
describing the basis of preparation and
68
<PAGE>
describing any respects in which the statements were not prepared on a basis of
accounting consistent with the statements prepared for the preceding year. The
Corporation shall mail the annual financial statements to each shareholder
within 120 days after the close of each fiscal year or within such additional
time thereafter as is reasonably necessary to enable the Corporation to prepare
its financial statements. Thereafter, on written request from a shareholder who
was not mailed the statements, the Corporation shall mail him the latest annual
financial statements.
Section 4. Other Reports to Shareholders. If the Corporation indemnifies or
advances expenses to any director, officer, employee or agent otherwise than by
court order or action by the shareholders or by an insurance carrier pursuant to
insurance maintained by the Corporation, the Corporation shall report the
indemnification or advance in writing to the shareholders with or before the
notice of the next annual shareholders meeting, or prior to the meeting if the
indemnification or advance occurs after the giving of the notice but prior to
the time the annual meeting is held. This report shall include a statement
specifying the persons paid, the amounts paid, and the nature and status at the
time of such payment of the litigation or threatened litigation.
If the Corporation issues or authorizes the issuance of shares for
promises to render services in the future, the Corporation shall report in
writing to the shareholders the number of shares authorized or issued, and the
consideration received by the corporation, with or before the notice of the next
shareholders' meeting
ARTICLE V: STOCK CERTIFICATES
Section 1 Issuance The Board of Directors may authorize the issuance of some or
all of the shares of any or all of its classes or series without certificates.
Each certificate issued shall be signed by the President and the Secretary (or
the Treasurer) The rights and obligations of shareholders are identical whether
or not their shares are represented by certificates.
Section 2.
Registered Shareholders.
No certificate shall be issued for any share until the share is fully paid. The
Corporation shall be entitled to treat the holder of record of shares as the
holder in fact and, except as otherwise provided by law, shall not be bound to
recognize any equitable or other claim to or interest in the shares.
Section 3. Transfer of Shares. Shares of the Corporation shall be transferred on
its books only after the surrender to the Corporation of the share certificates
duly endorsed by the holder of record or attorney-in-fact. If the surrendered
certificates are canceled, new certificates shall be issued to the person
entitled to them, and the transaction recorded on the books of the Corporation.
Section 4. Lost, Stolen or Destroyed Certificates. If a shareholder claims to
have lost or destroyed a certificate of shares issued by the Corporation, a new
certificate shall be issued upon the delivery to the Corporation of an affidavit
of that fact by the person claiming the certificate of stock to be lost, stolen
or destroyed, and, at the discretion of the Board of Directors, upon the deposit
of a bond or other indemnity as the Board reasonably requires.
69
<PAGE>
ARTICLE VI I . INDEMNIFICATION
Section 1 Right to Indemnification. The Corporation hereby indemnifies each
person (including the heirs, executors, administrators, or estate of such
person) who is or was a director or officer of the Corporation to the fullest
extent permitted or authorized by current or future legislation or judicial or
administrative decision against all fines, liabilities, costs and expenses,
including attorneys' fees, arising out of his or her status as a director,
officer, agent, employee or representative. The foregoing right of
indemnification shall not be exclusive of other rights to which those seeking an
indemnification may be entitled. The Corporation may maintain insurance, at its
expense, to protect itself and all officers and directors against fines,
liabilities, costs and expenses, whether or not the Corporation would have the
legal power to indemnify them directly against such liability.
Section 2. Advances. Costs, charges and expenses (including attorneys fees)
incurred by a person referred to in Section 1 of this Article in defending a
civil or criminal proceeding shall be paid by the Corporation in advance of the
final disposition thereof upon receipt of an undertaking to repay all amounts
advanced if it is ultimately determined that the person is not entitled to be
indemnified by the Corporation as authorized by this Article, and upon
satisfaction of other conditions required by current or future legislation.
Section 3 Savings Clause
If this Article or any portion of 1 is invalidated on any ground by a court of
competent jurisdiction, the Corporation nevertheless indemnifies each person
described in Section 1 of this Article to the fullest extent permitted by all
portions of this Article that have not been invalidated and to the fullest
extent permitted by law.
ARTICLE VIII. AMENDMENT
These Bylaws may be altered, amended or repealed, and new Bylaws
adopted, by a majority vote of the directors or by a vote of the shareholders
holding a majority of the shares.
I certify that these are the Bylaws adopted by the Board of Directors
of the Corporation
Dale B. Finfrock Jr.
---------------------
Secretary
Date: 2/27/98
70
<PAGE>
CERTIFICATE OF CHANGE OF RESIDENT AGENT AND LOCATION OF REGISTERED
OFFICE
(Corporations Only)
Ascot Industries, Inc.
The change below is effective upon the filing of this document with the
Secretary of State. Reason for change is change of resident agent.
Resident Agent Name: CSC Services of Nevada, INC.
Street & Suite: 502 East John Street
City, State, Zip: Carson City, NV 89706
The resident agent and location of the registered office is changed to:
Resident agent name: CHQ Incorporated
Street Address: 1555 E. Flamingo Rd. Suite 155, Las Vegas, Nevada 89119
Mailing Address: P.O. BOX 19118, Las Vegas, Nevada 89132
NOTE: For a corporation to file this certificate, the signature of one officer
is required. This certificate does not need to be notarized.
/s/ Dale B. Finfrock, President /s/
Certificate of Acceptance of Appointment by Resident Agent: I, CHQ Incorporated,
a Nevada corporation hereby accept the appointment as Resident Agent for the
above-named corporation.
______________________________ Date ____________
CONSENT OF THE SOLE DIRECTOR OF
AMERICAN INTERNET TECHNICAL CENTERS, INC.
The undersigned, being the sole director of American Internet Technical
Centers, Inc., a Nevada corporation (hereinafter the Company") does hereby
unanimously consent to the following actions taken and done at 10:00 A.M. on
March 15, 1999.
RESOLVED: To enter into an Agreement for the Exchange of Common Stock
(the Agreement) with the shareholders of American Internet Technical Centers,
Inc., a Florida corporation, pursuant to which in exchange for 100% of the
issued and outstanding stock of American Internet Technical Centers, Inc., the
Company will issue 10,160,000 shares of the Company's common stock to the
shareholders of American Internet Technical Centers, Inc. as follows.
Name Number of Shares
See attached list 10,160,000
RESOLVED: That Dale B. Finfrock, Jr. as president of the Company Is
authorized to execute the Agreement, and to execute any and all documents in
connection therewith, including to effectuate the issuance of the shares of
common stock of the Company as called for in the Agreement to effectuate said
exchange.
RESOLVED: To elect the following persons as additional directors of the
Company, to serve in such capacities until their successors are elected:
71
<PAGE>
J. Bruce Gleason Chairman
RESOLVED: To elect those persons to those offices set forth after their
respective names, to serve in such capacities until their successors are
elected:
J. Bruce Gleason President
RESOLVED: To retire and cancel the 10,000,000 shares of the Company's
common stock which were previously issued.
RESOLVED: At the close of this meeting, to accept the resignation of Dale
B. Finfrock, Jr. as an officer and director of the Company.
There being no further business before this Board at this time, the Meeting
was adjourned.
/s/ Dale B. Finfrock, Jr. Sole Director /s/
ANNUAL LIST OF OFFICERS, DIRECTORS AND AGENTS OF:
ASCOT INDUSTRIES, INC.
FOR THE PERIOD FEB 1999 TO 2000. DUE BY FEB 28, 1999. RA# 61182
The Corporation's duly appointed resident agent in the
State of Nevada upon whom process can be served is:
NATIONAL REGISTERED AGENTS OF NV
202 S MINNESOTA
CARSON CITY NV 89703
If the above information is incorrect, please check this box and a change of
resident agent/address form will be sent.
PLEASE READ INSTRUCTIONS BEFORE COMPLETING AND RETURNING THIS FORM.
1. Include the name and address, either residence or business, for all
officers and directors. A President, Secretary, Treasurer and all
Directors must be named. There must be at least one director. Last year
information may have been preprinted. If you need to make changes,
cross out the incorrect information and insert the new information
above it. An officer must sign the form. Form will be returned if
unsigned.
2. If there are additional directors, attach a list of them to this form.
3. Return the completed form with the $85.00 filing fee. A $15 penalty
must be added for failure to file this form by the deadline. An annual
list received more than 60 days before its due date shall be deemed and
amended list for the previous year .
72
<PAGE>
(4) Make your check payable to the Secretary of State. Your canceled check
will constitute a certificate to transact business per NRS 78.155. If
you need the below attachment stamped, enclose a self addressed stamped
envelope. To receive a certified copy of this completed form, an
additional $10.00 and appropriate instructions.
(5) Return the completed form to : Secretary of State , 101 North Carson
Street, Suite #3, Carson City, NV 89701-4786. (702) 687-5203
FILING FEE $85.00 PENALTY $15.00
PRESIDENT: Dale B. Finfrock, Jr.; PO Box 669; Palm Beach, FL 33480
SECRETARY: Dale B. Finfrock, Jr.; PO Box 669; Palm Beach, FL 33480
TREASURER: Dale B. Finfrock, Jr.; PO Box 669; Palm Beach, FL 33480
I hereby certify this annual list.
/s/ Dale B. Finfrock, Jr. President Date: 2/24/99
ASCOT INDUSTRIES, INC.
BALANCE SHEET
FEBRUARY 28, 1999
ASSETS
Current Assets:
Cash 0
Total Current Assets 0
Organizational Costs $16,000.00
Total Assets $16,000.00
SHAREHOLDERS' EQUITY
Shareholder's Equity:
Common Stock, par value $.001 per share;
20,000,000 shares authorized,
11,600,000 shares issued and outstanding 11,600.00
Additional paid-in capital 4,400.00
Total Shareholders' Equity $16,000.00
EXHIBIT A
SHAREHOLDERS OF AMERICAN INTERNET TECHNICAL CENTERS, INC.
NAME SHARES
PRINCIPAL SHAREHOLDERS
The following table sets forth the ownership of Shares of Common Stock as of the
date of this Memorandum by Company's officers and directors. All of the officers
and directors as a group and each person who is known by the Company to
beneficially own more that 5% of the outstanding Shares of Common Stock. The
table indicates the number of shares beneficially owned and the percentage of
ownership, respectively, assuming that the Offering is fully subscribed and all
shares of Preferred Stock are converted into shares of Common Stock.
Percentage Percentage
Prior to After
Name of Owner Number of Shares Offering Offering
J. Bruce Gleason 5,100,000 50.19 46.5%
Michael Umile 5,000,000 49.2% 45.6%
Gary Walk 30,000 .3% .27%
Bruce Drezner 30,000 .3% .27%
All Officers
As a Group 10,160,000 100% 92.64%
73
EXHIBIT 2.7 RESCISSION AGREEMENT
Rescission Agreement
This Rescission Agreement (the "Agreement") is made and entered into by
and among American Internet Technical Centers, Inc., a Nevada corporation
originally organized as Ascot Industries, Inc. ("American Internet Nevada");
American Internet Technical Center, Inc., a Florida corporation (American
Internet Florida"); Dale B. Finfrock, Jr., a Florida resident also sometimes
known as "Dale B. Finfrock" ("Mr. Finfrock"); Donald F. Mintmire, Esquire, an
attorney residing in the State of Florida ("Mr. Mintmire"); Mintmire &
Associates, an entity engaged in the practice of law in the State of Florida
controlled by Mr. Mintmire ("Mintmire & Associates"); J. Bruce Gleason, a
Florida resident ("Mr. Gleason"); and, Michael D. Umile, a Florida resident
("Mr. Umile;" Mr. Umile and Mr. Gleason being collectively hereinafter referred
to as the "Original American Internet Florida Stockholders"; Mr. Finfrock, Mr.
Mintmire and Mintmire & Associates (being hereinafter collectively referred to
as the "Original Ascot Group"), the Original Ascot Group, American Internet
Nevada, American Internet Florida and the Original American Internet Florida
Stockholders being sometimes hereinafter collectively referred to as the
"Parties" and each being sometimes hereinafter generically referred to as a
"Party").
Preamble:
WHEREAS, American Internet Nevada, American Internet Florida and the
Original American Internet Florida Stockholders have entered into and closed
upon a reorganization agreement (the "Reorganization Agreement") with Equity
Growth Systems, inc., a publicly held Delaware corporation with a class of
securities registered under Section 12(g) of the Securities Exchange Act of
1934, as amended ("Equity Growth" and the "Exchange Act," respectively), a copy
of which (without exhibits) is annexed hereto and made a part hereof as exhibit
0.1, as a result of which Equity Growth has acquired 90% of the capital stock of
American Internet Nevada, with the unilateral right under Section 4.9 of the
Reorganization Agreement to change the transaction to an acquisition of 100% of
the capital stock of American Internet Florida and all the assets of American
Internet Nevada; and
WHEREAS, Equity Growth has elected its rights under Section 4.9 of the
Reorganization Agreement, and requires that the Original American Internet
Florida Stockholders, American Internet Nevada and American Internet Florida
facilitate such election by entry into this Agreement; and
74
<PAGE>
WHEREAS, the Original American Internet Florida Stockholders, the
Original Ascot Group, American Internet Florida and American Internet Florida
desire rescind the agreement between Ascot Industries, Inc. ("Ascot," the former
name of American Internet Nevada) and the Original American Internet Florida
Stockholders, a copy of which is annexed hereto and made a part hereof as
exhibit 0.2 (the "Stock Exchange Agreement"), subject only to payment of
$2,581.86 by American Internet Florida to Mintmire & Associates for legal
services related to the Stock Exchange Agreement:
NOW, THEREFORE, in consideration of the premises, as well as the mutual
covenants hereinafter set forth, the Parties, intending to be legally bound,
hereby agree as follows:
Witnesseth:
Article One
Rescission Provisions
1.1 Recitation of Applicable facts and Conclusions
(D) Annexed hereto and made a part hereof as exhibit 1.1(a) is the
statement of fees due from American Internet Nevada to Mintmire &
Associates, which American Internet Florida hereby agrees to assume and
pay immediately following execution of this Agreement.
(E) The Parties hereby acknowledge that there were material
misunderstandings concerning the Exchange Agreement which have led them
to elect to rescind it, but that this Agreement does not constitute an
admission by any Party concerning the conclusions of any other Party or
Parties as to the reasons for such misunderstandings.
1.2 No Admission of Liability
Without limiting the generality of the foregoing, no Party to this
Agreement admits any of the claims, allegations or conclusions of any other
Party in conjunction with the Exchange Agreement or any transactions by any
other Party involving Ascot.
75
<PAGE>
1.3 Effectuating Actions by Ascot, the Original Ascot Group and American
Internet Nevada Ascot, the Original Ascot Group and American Internet Nevada
hereby:
(A) Irrevocably consent to the rescission of the Stock Exchange Agreement,
ab initio.
(B) Relinquish all rights to the name American Internet Technical Centers,
hereby assign it to American Internet Florida, and agree to immediately
change American Internet Nevada's name back to Ascot Industries, Inc.,
by repealing its recent change of name amendment;
(C) Hereby transfer and assign all of its right, title and interest to any
and all of Ascot's or American Internet Nevada's assets, wherever
located, whether tangible or intangible, current or inchoate, to
American Internet Florida;
(D) Waive the arbitration rights reflected in the Exchange Agreement;
(E) Recognize Mr. Bruce Drezner ("Mr. Drezner") and Mr. Gary D. Walk ("Mr.
Walk"), as holders of 30,000 shares of American Internet Nevada's
common stock each (60,000 shares in the aggregate), received as
compensation for their introduction of the Original American Internet
Florida Stockholders to the Original Ascot Group;
(F) If they so elect, recognize Mr. Theodore Gill and Mrs. Susan Gill, his
wife , both residents of the State of New Jersey ("Mr. & Mrs. Gill"),
as holders of 10,000 shares of American Internet Nevada's common stock
and warrants to purchase an additional 10,000 shares of American
Internet Nevada's common stock at $0.50 per share, in consideration of
their payment of $10,000 therefor;
(G) If she so elects, recognize Ms. Lyn Poppiti, a resident of the State of
Florida, as the holder of 8,000 shares of American Internet Nevada's
common stock and warrants to purchase an additional 10,000 shares of
American Internet Nevada's common stock at $0.50 per share, in
consideration of her payment of $8,000 therefor;
(H) Agree to immediately notify all Ascot and American Internet Nevada
stockholders other than the Original American Internet Florida
Stockholders of the foregoing.
(I) Agree to return to American Internet Florida all American Internet
Florida documents, agreements, stock certificates, (including but not
limited to original stock certificates in the names of Mr. Gleason or
Mr. Umile,) stock powers, stock ledgers, including but not limited to
all such items in the possession of Mintmire & Associates.
1.4 Effectuating Actions by the Original American Internet Florida
Stockholders & American Internet Florida
The Original American Internet Florida Stockholders and American Internet
Florida hereby:
(A) Irrevocably consent to the rescission of the Stock Exchange Agreement,
ab initio.
76
<PAGE>
(B) Relinquish all rights to the name Ascot Industries, Inc., and hereby
assign it to the Original Ascot Group, and agree to immediately change
American Internet Nevada's name back to Ascot Industries, Inc., by
repealing its recent change of name amendment;
(C) Waive the arbitration rights reflected in the Exchange Agreement;
(D) Agree, immediately after receipt of a completely executed copy of this
Agreement, tender to Mintmire & Associates an American Internet Florida
check in the amount of $2,852.86.
1.5 Special Covenants of the Parties
Each of the Parties, as a material inducement to entry into this
Agreement by all of the other Parties, hereby covenants and agrees, as follows:
(A) Each of the Parties, on its own behalf and on behalf of his, her or its
family and affiliates, hereby relinquish all rights, whether accrued or
inchoate, under any instruments, indentures, charters, agreements,
understandings, commitments, promises or any other basis between him,
her, her or its family or his, her or its affiliates and all the other
Parties and their affiliates, other than those created by this
Agreement.
(B) Each of the Parties hereby irrevocably covenants and agrees that he,
she or its will maintain all information heretofore shared with him,
her or its by any other Party, or any other Party's members, officers,
directors, stockholders, employees, agent or affiliates, whether
related to the business of any of the Parties or to other business or
financial matters or to personal matters, totally confidential and
shall not disclose any such information to any other person or entity,
for any reason whatsoever, unless compelled to do so under process of
law.
(C) Each of the Parties hereby irrevocably covenants and agrees that he,
she or it will refrain from making any disparaging remarks, directly or
indirectly, specifically, through innuendo or by inference, whether or
not true, about any other Party, or any other Party's members,
officers, directors, stockholders, employees, agent or affiliates,
whether related to the business of the Parties, to other business or
financial matters or to personal matters.
(D) In consideration for the exchange of covenants reflected above but
excepting only the obligations created by this Agreement, the Parties
hereby each release, discharge and forgive each other Party, and his,
her or its affiliates, members, officers, directors, partners, agents
and employees from any and all liabilities, whether current or
inchoate, from the beginning of time until the date of this Agreement.
(E) Each Party hereby irrevocably agrees to indemnify and hold the other
Parties harmless from any and all liabilities and damages (including
legal or other expenses incidental thereto), contingent, current, or
inchoate to which they or any one of them may become subject as a
direct, indirect or incidental consequence of any action by the
indemnifying Party or as a consequence of the failure of the
indemnifying Party to act, whether pursuant to requirements of this
Agreement or otherwise; provided that, such claims are asserted by
third parties unrelated to the Parties.
(F) In the event it becomes necessary to enforce this indemnity through an
attorney, with or without litigation, the successful Party shall be
entitled to recover from the indemnifying Party, all costs incurred
including reasonable attorneys' fees throughout any negotiations,
trials or appeals, whether or not any suit is instituted.
77
<PAGE>
Article Two
Reorganization Agreement Ratification
(A) Except as modified by Equity Growth Systems, inc., a publicly held
Delaware corporation with a class of securities registered under
Section 12(g) of the Securities Exchange Act of 1934, as amended
("Equity Growth" and the "Exchange Act," respectively) through
exercise of its rights under Section 4.9 of the reorganization
agreement entered into by Equity Growth, American Internet Florida,
American Internet Nevada and the Original American Internet Florida
Stockholders on or about June 25, 1999 (the "Reorganization
Agreement"), and as a result of the rescission of the Exchange
Agreement, nothing in this Agreement shall be interpreted as
detrimentally affecting the rights of Equity Growth, American Internet
Florida or Messrs. Gleason or Umile under the Reorganization
Agreement, including the rights to receipt of deferred contingent
shares of Equity Growth's common stock, and to Equity Growth's full
ownership of all of the capital stock of American Internet Florida and
American Internet Florida's ownership of all assets formerly belonging
to American Internet Nevada.
(B) American Internet Florida hereby agrees that if they so elect, to
treat Mr. Theodore Gill and his wife Susan Gill, both residents of the
State of New Jersey ("Mr. & Mrs. Gill"), and Ms. Lyn Poppiti, a
resident of the State of Florida (Ms. Poppiti"), as stockholders of
American Internet Florida entitled to receive common stock in Equity
Growth, at their option, in lieu of common stock in American Internet
Florida or American Internet Nevada, as if they were parties to the
Reorganization Agreement who held 10/10,178ths (Mr. & Mrs. Gill) and
8/10,178ths (Ms. Poppiti), of the common stock in American Internet
Florida prior to the closing on the Reorganization Agreement.
(C) Equity Growth shall be deemed a third party beneficiary of this
Agreement for all purposes and shall be copied in all notices to
Parties or other required by this Agreement, as if it were directly a
Party hereto; however, no Party herein shall be deemed in privity of
contract with Equity Growth for purposes of enforcing any rights
against it not otherwise enforceable solely pursuant to the provisions
of the Reorganization Agreement.
Article Three
American Internet Nevada
Messrs. Gleason and Umile, currently the only executive officers and
the only members of the Board of Directors of American Internet Nevada (the
"Directors") and the holders of 10,100,000 shares of the common stock of
American Internet Nevada, being in excess of 80% of its outstanding common
stock; and, Mr. Finfrock, formerly the sole executive officer and the only
member of the Board of Directors of Ascot and then American Internet Nevada, and
with Mr. Mintmire, the holders, on their own behalf and as the trustee or agent
for a number of other persons of a majority of the common stock of American
Internet Nevada and Ascot, prior to the Exchange Agreement, in their respective
roles as
78
<PAGE>
directors and stockholders, by execution of this Agreement hereby convene a
special meeting of the Board of Directors and of the stockholders of American
Internet Nevada, waiving notice thereof, and hereby adopt the following
resolution:
RESOLVED, that pursuant to authority granted under Sections 78.315 and
78.320 of the Nevada general Corporation Law and as permitted by its constituent
documents, this Corporation hereby adopts ratifies and confirms the rescission
agreement between American Internet Technical Centers, Inc., a Nevada
corporation originally organized as Ascot Industries, Inc. ("American Internet
Nevada"); American Internet Technical Center, Inc., a Florida corporation
(American Internet Florida"); Dale B. Finfrock, Jr., a Florida resident also
sometimes known as "Dale B. Finfrock" ("Mr. Finfrock"); Donald F. Mintmire,
Esquire, an attorney residing in the State of Florida ("Mr. Mintmire"); Mintmire
& Associates, an entity engaged in the practice of law in the State of Florida
controlled by Mr. Mintmire ("Mintmire & Associates"); J. Bruce Gleason, a
Florida resident ("Mr. Gleason"); and, Michael D. Umile, a Florida resident
("Mr. Umile;" Mr. Umile and Mr. Gleason being collectively hereinafter referred
to as the "Original American Internet Florida Stockholders"; Mr. Finfrock, Mr.
Mintmire and Mintmire & Associates (being hereinafter collectively referred to
as the "Original Ascot Group"), the Original Ascot Group, American Internet
Nevada, American Internet Florida and the Original American Internet Florida
Stockholders being sometimes hereinafter collectively referred to as the
"Parties" and each being sometimes hereinafter generically referred to as a
"Party"); concurrently with the promulgations of this resolution by written
consent in lieu of special meeting of the Corporation's Board of Directors and
in lieu of special meeting of the Corporation's stockholders (the "Rescission
Agreement" and this "Instrument," respectively); and be it FURTHER
RESOLVED, that Mr. Finfrock be, and he is hereby, elected to this
Corporation's Board of Directors, effective immediately ; and be it FURTHER
RESOLVED, that pursuant to its obligations under the Rescission
Agreement, this Corporation hereby repeals the amendment to its certificate of
incorporation changing its name from "Ascot Industries, Inc." to "American
Internet technical Centers, Inc." originally adopted and implemented on or about
February 28, 1999, as a result of which its name shall again be "Ascot
Industries, Inc." and that Mr. Gleason is hereby appointed as the president of
this Corporation and Mr. Umile is hereby appointed the secretary of this
Corporation for the purpose of executing all documents, certificates,
resolutions or other instruments required to effect the foregoing on behalf of
this Corporation; and be it FURTHER
RESOLVED, that pursuant to its obligations under the Rescission
Agreement, this Corporation hereby assigns to American Internet Technical
Center, Inc., a Florida corporation, all right title and interest in and to the
name American Internet Technical Centers and to all of its assets, wherever
located, whether tangible or intangible, current or inchoate; and be it FURTHER
RESOLVED, that pursuant to its obligations under the Rescission
Agreement, this Corporation hereby waives the arbitration rights reflected in
the Exchange Agreement and agrees to indemnify and hold the Original American
Internet Florida Stockholders, American Internet Florida and its affiliates,
officers, directors, stockholders, employees, agents and advisors, harmless from
any and all liabilities pertaining, directly or indirectly, to any actions or
failures to act by this Corporation, the Original Ascot Group or as a result of
the Parties' entry into this Agreement; and be it FURTHER
RESOLVED, that Mr. Finfrock be, and he is hereby, directed to immediately
notify all Ascot and American Internet Nevada stockholders other than the
Original American Internet Florida Stockholders of the foregoing.
79
<PAGE>
Article Five
American Internet Florida
Messrs. Gleason and Umile, currently the only executive officers and
the only members of the Board of Directors of American Internet Florida (the
"Directors") and the holders of a proxy pursuant to the terms of the
Reorganization Agreement, from Equity Growth, the holder of at least 10,100,000
shares of the common stock of American Internet Florida, being in excess of 80%
of its outstanding common stock to vote such securities in the manner set forth
below (the "Equity Growth Proxy"), in their respective roles as directors and
proxies for the stockholders of this Corporation, by execution of this Agreement
hereby convene a special meeting of the Board of Directors and of the
stockholders of American Internet Florida, waiving notice thereof, and hereby
adopt the following resolution:
RESOLVED, that pursuant to authority granted under Sections 607.0704
and .0821 of the Florida Business Corporation Act and as permitted by its
constituent documents, this Corporation hereby adopts ratifies and confirms the
rescission agreement between American Internet Technical Centers, Inc., a Nevada
corporation originally organized as Ascot Industries, Inc. ("American Internet
Nevada"); American Internet Technical Center, Inc., a Florida corporation
(American Internet Florida"); Dale B. Finfrock, Jr., a Florida resident also
sometimes known as "Dale B. Finfrock" ("Mr. Finfrock"); Donald F. Mintmire,
Esquire, an attorney residing in the State of Florida ("Mr. Mintmire"); Mintmire
& Associates, an entity engaged in the practice of law in the State of Florida
controlled by Mr. Mintmire ("Mintmire & Associates"); J. Bruce Gleason, a
Florida resident ("Mr. Gleason"); and, Michael D. Umile, a Florida resident
("Mr. Umile;" Mr. Umile and Mr. Gleason being collectively hereinafter referred
to as the "Original American Internet Florida Stockholders"; Mr. Finfrock, Mr.
Mintmire and Mintmire & Associates (being hereinafter collectively referred to
as the "Original Ascot Group"), the Original Ascot Group, American Internet
Nevada, American Internet Florida and the Original American Internet Florida
Stockholders being sometimes hereinafter collectively referred to as the
"Parties" and each being sometimes hereinafter generically referred to as a
"Party"); concurrently with the promulgations of this resolution by written
consent in lieu of special meeting of the Corporation's Board of Directors and
in lieu of special meeting of the Corporation's stockholders (the "Rescission
Agreement" and this "Instrument," respectively); and be it FURTHER
RESOLVED, that pursuant to its obligations under the Rescission
Agreement, this Corporation hereby assigns to American Internet Technical
Centers, Inc., a Nevada corporation, all right title and interest in and to the
name Ascot Industries; and be it FURTHER
RESOLVED, that pursuant to its obligations under the Rescission
Agreement, this Corporation hereby waives the arbitration rights reflected in
the Exchange Agreement and agrees to indemnify and hold the Original Ascot Group
and American Internet Nevada and its affiliates, officers, directors,
stockholders, employees, agents and advisors, harmless from any and all
liabilities pertaining, directly or indirectly, to any actions or failures to
act by this Corporation or the Original American Internet Florida or as a result
of the Parties' entry into this Agreement.
80
<PAGE>
Article Four
Miscellaneous
4.1 Amendment.
No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is evinced by a written instrument,
subscribed by the Party against which such modification, waiver, amendment,
discharge or change is sought.
4.2 Notice.
(a) All notices, demands or other communications given hereunder shall be
in writing and shall be deemed to have been duly given on the first
business day after mailing by United States registered or unaudited
mail, return receipt requested, postage prepaid, addressed as follows:
To Equity Growth:
Equity Growth Systems, inc.
8001 DeSoto Woods Drive; Sarasota, Florida 34243;
Telephone (941) 358-8182; Fax (941) 358-8423
Attention: Charles J. Scimeca, President; with a
copy to
The Yankee Companies, Inc.
902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487
Attention: Leonard Miles Tucker, President
Telephone (561) 998-2025, Fax (561) 998-3425;
and, e-mail [email protected]; and to
G. Richard Chamberlin, Esquire; General Counsel
Equity Growth Systems, inc.
14950 South Highway 441; Summerfield, Florida
34491 Telephone (352) 694-6714, Fax (352) 694-9178; and,
e-mail, [email protected].
To the Former American Internet Florida Stockholders:
J. Bruce Gleason and Michael D. Umile
440 East Sample Road; Pompano Beach, Florida 33056
Telephone (954) 943-4748; Fax (954) 943-4046;
e-mail [email protected]; and to
To American Internet Nevada:
American Internet Technical Centers, Inc.
440 East Sample Road; Pompano Beach, Florida 33056
Attention: J. Bruce Gleason, President.
Telephone (954) 943-4748; Fax (954) 943-4046;
e-mail [email protected]; and to
In care of Mintmire & Associates
265 Sunrise Avenue, Suite 204; Palm Beach, Florida 33480;
Telephone (561) 832-5696, Fax (561) 832-5371
81
<PAGE>
Attention Donald F. Mintmire, Esquire, Agent
To American Internet Florida:
American Internet Technical Center, Inc.
440 East Sample Road; Pompano Beach, Florida 33056
Attention: J. Bruce Gleason, President.
Telephone (954) 943-4748; Fax (954) 943-4046; e-mail [email protected];
To Ascot or the Original Ascot Group:
In care of Mintmire & Associates
265 Sunrise Avenue, Suite 204; Palm Beach, Florida 33480
Attention Donald F. Mintmire, Esquire, Agent
Telephone (561) 832-5696, Fax (561) 832-5371
or such other address or to such other person as any Party shall
designate to the other for such purpose in the manner hereinafter set
forth.
(b) (1) The Parties acknowledge that Yankees serves as a strategic
consultant to Equity Growth and, together with general counsel
to Equity Growth (who also serves as general counsel to
Yankees) has acted as scrivener for the Parties in this
transaction but that Yankees is neither a law firm nor an
agency subject to any professional regulation or oversight.
(2) Because of the inherent conflict of interests involved,
Yankees has advised all of the Parties to retain independent
legal counsel to review this Agreement and its exhibits and
incorporated materials on their behalf.
(C) The decision by any Party not to use the services of legal
counsel in conjunction with this transaction shall be solely
at their own risk, each Party acknowledging that applicable
rules of the Florida Bar prevent Equity Growth's general
counsel, who has reviewed, approved and caused modifications
to this Agreement on behalf of Equity Growth, from
representing anyone other than Equity Growth in this
transaction.
4.3 Merger.
This instrument, together with the instruments referred to herein,
contains all of the understandings and agreements of the Parties with respect to
the subject matter discussed herein. All prior agreements whether written or
oral are merged herein and shall be of no force or effect.
4.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and the Closing hereon and
shall be effective regardless of any investigation that may have been made or
may be made by or on behalf of any Party.
82
<PAGE>
4.5 Severability.
If any provision or any portion of any provision of this Agreement,
other than one of the conditions precedent or subsequent, or the application of
such provision or any portion thereof to any person or circumstance shall be
held invalid or unenforceable, the remaining portions of such provision and the
remaining provisions of this Agreement or the application of such provision or
portion of such provision as is held invalid or unenforceable to persons or
circumstances other than those to which it is held invalid or unenforceable,
shall not be affected thereby.
4.6 Governing Law.
This Agreement shall be construed in accordance with the substantive
and procedural laws of the State of Delaware (other than those regulating
taxation and choice of law) but any proceedings pertaining directly or
indirectly to the rights or obligations of the Parties hereunder shall, to the
extent legally permitted, be held in Broward County, Florida.
4.7 Indemnification.
Each Party hereby irrevocably agrees to indemnify and hold the other
Parties harmless from any and all liabilities and damages (including legal or
other expenses incidental thereto), contingent, current, or inchoate to which
they or any one of them may become subject as a direct, indirect or incidental
consequence of any action by the indemnifying Party or as a consequence of the
failure of the indemnifying Party to act, whether pursuant to requirements of
this Agreement or otherwise. In the event it becomes necessary to enforce this
indemnity through an attorney, with or without litigation, the successful Party
shall be entitled to recover from the indemnifying Party, all costs incurred
including reasonable attorneys' fees throughout any negotiations, trials or
appeals, whether or not any suit is instituted.
4.8 Litigation.
(a) Except as provided below in conjunction with reduction of this Agreement to
a judgment:
(1) In any action between the Parties to enforce any of the terms
of this Agreement or any other matter arising from this
Agreement, the prevailing Party shall be entitled to recover
its costs and expenses, including reasonable attorneys' fees
up to and including all negotiations, trials and appeals,
whether or not litigation is initiated.
(B) In the event of any dispute arising under this Agreement, or
the negotiation thereof or inducements to enter into the
Agreement, the dispute shall, at the request of any Party, be
exclusively resolved through the following procedures:
(C) (A) First, the issue shall be submitted to mediation
before a mediation service in Broward County, Florida
to be selected by lot from six alternatives to be
provided, one by Mr. Finfrock, one by Mr. Mintmire,
one by Ascot, one by Yankees as agent for the current
Directors and stockholders of Equity Growth, one by
American Internet Florida and one by the Original
American Internet Florida Stockholders acting by
majority vote (based on their relative stock
ownership in Equity Growth).
83
<PAGE>
(B) The mediation efforts shall be concluded within ten
business days after their in itiation unless the
Parties unanimously agree to an extended mediation
period;
(4) In the event that mediation does not lead to a resolution of
the dispute then at the request of any Party, the Parties
shall submit the dispute to binding arbitration before an
arbitration service located in Broward County, Florida to be
selected by lot, from six alternatives to be provided, one by
Mr. Finfrock, one by Mr. Mintmire, one by Ascot, one by
Yankees as agent for the current Directors and stockholders of
Equity Growth, one by American Internet Florida and one by the
Original American Internet Florida Stockholders acting by
majority vote (based on their relative stock ownership in
Equity Growth).
(5) (A) Expenses of mediation shall be borne by the parties
to the mediation equally, if successful.
(B) Expenses of mediation, if unsuccessful and of
arbitration shall be borne by the Party or Parties
against whom the arbitration decision is rendered.
(C) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration shall be borne equally by
the Parties involved.
4.9 Benefit of Agreement.
The terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the Parties, their successors, assigns, personal
representatives, estate, heirs and legatees.
4.10 Captions.
The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
4.11 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
4.12 Further Assurances.
The Parties agree to do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged or delivered and to perform all such acts and
deliver all such deeds, assignments, transfers, conveyances, powers of attorney,
assurances, stock certificates and other documents, as may, from time to time,
be required herein to effect the intent and purpose of this Agreement.
84
<PAGE>
4.13 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, employer-employee relationship or lessor-lessee
relationship.
4.14 Counterparts.
(a) This Agreement may be executed in any number of counterparts.
(b) All executed counterparts shall constitute one Agreement
notwithstanding that all signatories are not signatories to the
original or the same counterpart.
(c) Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for
aesthetic purposes, prepare a fully executed original version of this
Agreement which shall be the document filed with the Commission.
4.15 License.
(a) This Agreement is the property of Yankees and the use hereof by the
Parties is authorized hereby solely for purposes of this transaction.
(b) The use of this form of agreement or of any derivation thereof without
Yankees' prior written permission is prohibited.
(c) This Agreement shall not be construed more strictly against any Party
as a result of its authorship.
4.16 Exhibit Index.
Exhibit Description
0.1 The Reorganization Agreement
0.2 The Exchange Agreement
1.1(a) The Mintmire & Associates Statement
In Witness Whereof, the Parties have caused this Agreement to be
executed effective as of the date last set forth below.
Signed, sealed and delivered
In Our Presence:
American Internet Technical Centers, Inc.
(A Nevada corporation)
- - ---------------------------------
_________________________________ By: _______________________________
J. Bruce Gleason, President
(Corporate Seal)
Attest: __________________________
Michael D. Umile, Secretary
Dated: July 8, 1999
85
<PAGE>
------------------------------
Dale B. Finfrock, Jr., Director
American Internet Technical Center, Inc.
(A Florida corporation)
________________________________
________________________________ By: _______________________________
J. Bruce Gleason, President
(Corporate Seal)
Attest: ______________________________
Michael D. Umile, Secretary
Dated: July 8, 1999
Original American Internet Florida
Stockholders
- - ---------------------------------
- - --------------------------------- ------------------------------
J. Bruce Gleason
- - ---------------------------------
- - --------------------------------- ------------------------------
Michael D. Umile
Dated: July 8, 1999
86
<PAGE>
Original Ascot Group
- - ---------------------------------
- - --------------------------------- ------------------------------
Dale B. Finfrock, Jr.
- - ---------------------------------
- - -------------------------------- -----------------------------
Donald F. Mintmire, Esquire, on his
own behalf and as the authorized
agent for Mintmire & Associates
Dated: July 8, 1999
Exhibit 0.1for the Rescission Agreement
The Reorganization Agreement
(See Exhibit 2.8 of the 8-KSB)
Exhibit 0.2 for the Rescission Agreement
The Exchange Agreement
(See Exhibit 2.6 of the 8-KSB)
Exhibit 1.1(a) for the Recission Agreement
The Mintmire & Associates Statement
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
American Internet Technical Center, Inc.
1500 East Atlantic Blvd.
Pompano Beach, FL 33060
7/2/1999
Date DESCRIPTION Hours AMOUNT
of Service
2/3/1999 Conference- clients 0.5 100.00
2/23/1999 General Corporate 504 Private Placement 1.6 320.00
Memorandum
2/23/1999 Draft of Document- 504PPM 1.5 300.00
2/23/1999 Telephone Conference with client 0.1 20.00
3/1/1999 Telephone conference- client 0.2 40.00
3/8/1999 Telephone conference- Mike Umile 0.1 20.00
3/15/1999 Telephone conference- Dale Finfrock 0.1 20.00
3/17/1999 Draft document- 504 Private Placement 1.25 250.00
87
<PAGE>
Memorandum
3/18/1999 Draft document- 504 Private Placement 1 200.00
Memorandum
3/19/1999 Draft document- Private Placement Memorandum 2.1 420.00
3/22/1999 Telephone Conference- Mike Umile 0.1 20.00
3/22/1999 Telephone conference- Mike Umile 0.1 20.00
3/24/1999 General corporate- 504 Private Placement 1.2 240 00
Memorandum
3/25/1999 General corporate 0.4 80.00
3/30/1999 General corporate 0.4 80 00
3/31/1999 Telephone conference- David Gunning 0.2 40.00
4/2/1999 Review document-fax from David Gunning 0.1 20.00
4/4/1999 Renew document- Complaint 0.25 50.00
4/9/1999 Telephone conference- Dale Finfrock 0.2 40.00
Page 1
Mintmire & Associates
265 Sunrise Avenue, Suite 204
Palm Beach, FL 33480
American Internet Technical Center, Inc.
1500 East Atlantic Blvd.
Pompano Beach, FL 33060
7/2/1999
Date DESCRIPTION Hours AMOUNT
of Service
4/13/1999 Telephone conference- clients 0.8 160.00
4/15/1999 General corporate 0.2 40.00
4/29/1999 Draft document- opinion 0.5 100.00
5/6/1999 Conference-Interoffice 0.1 20.00
6/29/1999 Document review letter 0.1 20.00
7/1/1999 Telephone conference-Richard Chamberlain 0.2 40.00
7/1/1999 Conference-Interoffice 0.1 20.00
7/1/1999 Document review-file 0.1 20.00
Total attorneys fees 2,700.00
Costs Advanced (photocopies, long distance calls,
postage, epic.) 135.00
Expenses
6/3/1999 Federal Express charges, 16.86
$2,851.86
Page 2
88
EXHIBIT 2.8 REORGANIZATION AGREEMENT
Reorganization Agreement
This Reorganization Agreement (the "Agreement") is made and entered
into by and among Equity Growth Systems, inc., a Delaware corporation with a
class of securities registered under Section 12 of the Securities Exchange Act
of 1934, as amended (the "Holding Company" and the "Exchange Act,"
respectively); American Internet Technical Centers, Inc., a Nevada corporation
originally organized as Ascot Industries, Inc. (the "Target Company"); American
Internet Technical Center, Inc., a Florida corporation wholly owned by the
Target Company (the "Subsidiary") and, J. Bruce Gleason, a Florida resident
("Mr. Gleason"), on his own behalf and as attorney-in-fact for the individuals
and entities which are listed in exhibit 0.1 annexed hereto and made a part
hereof, each of whom has executed a power of attorney so designating Mr. Gleason
(collectively hereinafter referred to together with Mr. Gleason as the
"Subscribers"; the Holding Company, the Target Company, the Subsidiary and the
Subscribers being sometimes hereinafter collectively referred to as the
"Parties" and each being sometimes hereinafter generically referred to as a
"Party"). This Agreement is also executed by The Yankee Companies, Inc., a
Florida corporation ("Yankees"), for the limited purposes specifically set forth
in this Agreement directly involving Yankees.
Preamble:
WHEREAS, the Subscribers own 90% of the authorized issued and
outstanding shares of common stock, $0.001 par value (there being no other
securities) of the Target Company; the "Target Company Stock"); and
WHEREAS, the Target Company, through the Subsidiary, is engaged in the
business more particularly described in the private placement memorandum dated
January 15, 1999 heretofore filed by the Holding Company with the United States
Securities and Exchange Commission (the "Commission") as an exhibit to its
report on Form 10-KSB for the year ended December 31, 1998 (the "Memorandum");
and
WHEREAS, the Subscribers desire to acquire 2,250,000 shares of the
Holding Company's common stock, par value $0.01 per share, in exchange for their
conveyance of all of their shares of the Target Company Stock and the Target
Company is agreeable to issuing such additional shares of its common stock as
may be required to equal when aggregated with the shares to be conveyed by the
Subscribers, 90%of the Target Company's reserved, issued and outstanding
securities, in a transaction intended to meet the requirements of Section
368(a)(1)(B) of the Internal Revenue Code of 1986, as amended (the "Code"):
NOW, THEREFORE, in consideration of the premises, as well as the mutual
covenants hereinafter set forth, the Parties, intending to be legally bound,
hereby agree as follows:
89
<PAGE>
Witnesseth:
Article One
Exchange Provisions
1.1 Exchange
Subject to the hereinafter described conditions:
AGE>
(a) The Holding Company hereby agrees to exchange 2,250,000 shares of its
Common Stock, $0.01 par value (the "Holding Company Stock"), with the
Subscribers for all of the capital stock in the Target Company held by
them;
(1) The Subscribers hereby agree to exchange all of the shares of
the Target Company's capital stock held by them with the
Holding Company for the Holding Company Stock; and
(2) The Target Company hereby agrees to issue to the Holding
Company such additional shares of its capital stock as may be
required, when aggregated with the shares of capital stock
being exchanged by the Subscribers, to equal 90% of the Target
Company's capital stock (all of the Target Company's capital
stock to be conveyed by Subscribers to the Holding Company and
issued to the Holding Company by the Target Company being
hereinafter included within the defined term "Target Company
Stock").
(b) Concurrently with the closing on this Agreement (as set forth in
Article Three of this Agreement, hereinafter referred to as the
"Closing") and delivery of the Target Company Stock to the Holding
Company, the Holding Company shall instruct its transfer agent, to
issue 2,250,000 shares of the Holding Company Stock to the Subscribers,
allocated to each Subscriber in proportion to their ownership of the
Target Company Stock, inter se.
(c) In addition to the 2,250,000 shares of Stock to be issued to the
Subscribers at the Closing, the Holding Company shall immediately
instruct its transfer agent to reserve an additional 4,500,000 shares
of its common stock, $0.01 par value, for possible issuance to the
Subscribers as a contingent part of the exchange being effected through
this Agreement, based on the Target Company's attainment of the
hereinafter defined "Performance Criteria."
(d) Notwithstanding the foregoing, in the event that during the initial 60
days following the Closing the Holding Company's publicly traded
common stock, $0.01 par value per share, does not retain an average
price per share of at least $0.50 based on the average daily closing
offering price therefor reported by members of the National
Association of Securities Dealers, Inc., a Delaware corporation
registered as a self regulatory organization by the Commission (the
"NASD") on the over the counter electronic bulletin board (the "OTC
Bulletin Board") and such failure is not due to unusual market
conditions or improprieties or irregularities in the trading of the
Holding Company's securities, then, the Holding Company and the
Subscribers (acting by majority of Holding Company shares of common
stock held by them) will either:
(1) Agree to an adjustment in the amount of Stock exchanged, or,
(2) Permit the Subscribers to rescind this Agreement, provided
that any decision to rescind
90
<PAGE>
must be made in writing, signed by Subscribers holding a
majority of the shares of the Holding Company's common stock,
inter se, and delivered to the Holding Company in the manner
hereinafter provided for delivery of notices generally, not
later than the 90th day following the Closing and must be
accompanied by concurrent payment to the Holding Company, in
United States legal tender, of all sums theretofore advanced
or invested in the Target Company, the Subsidiary, or any
affiliates of either of them (excluding the Holding Company),
by or on behalf of the Target Company.
AGE>
1.2 Exemption From Registration & Representations as to Title
(a) The Subscribers each severally hereby represent, warrant, covenant and
acknowledge, after consultation with their advisors, that:
(1) The Holding Company Stock is being issued without registration
under the provisions of Section 5 of the Securities Act of
1933, as amended (the "Act"), the Delaware Securities Act, or
the securities acts of the Subscribers' states of domicile
(the "Subscribers' State Blue Sky Laws") pursuant to
exemptions provided by Section 4(2) of the Act and comparable
sections of the Subscribers' State Blue Sky Laws pertaining to
private placements;
(2) All of the Holding Company Stock will bear legends restricting
its transfer, sale, conveyance or hypothecation unless such
Stock is either registered under the provisions of Section 5
of the Act and the Subscribers' State Blue Sky Laws, or an
opinion of legal counsel, in form and substance satisfactory
to legal counsel to the Holding Company is provided by the
Subscribers to the effect that such registration is not
required as a result of applicable exemptions therefrom;
(3) The Holding Company's transfer agent shall be instructed not
to transfer any of the Holding Company Stock unless the
Holding Company advises it that such transfer is in compliance
with all applicable laws;
(4) The Subscribers are each acquiring the Holding Company Stock
for their own account, for investment purposes only, and not
with a view to further sale or distribution;
(5) The Subscribers or their advisors have examined the Holding
Company's securities acts filings as posted on the
Commission's EDGAR Internet web site and prior to the Closing
will have become fully familiar with the Holding Company and
its operations as a result of their pre-Closing due diligence
investigations during which they will have been provided with
access to all of the Holding Company's books and records and
have been provided with the opportunity to question the
Holding Company's officers and directors as to such matters
involving the Holding Company as the Subscribers' deemed
appropriate; and
(6) The Subscribers will, on the date of the Closing, own the
Target Company Stock, registered in their names and subject to
no liens, pledges or encumbrances, and will convey good title
thereto to the Holding Company, there being no outstanding
subscriptions, options, warrants or other agreements or
commitments obligating the Subscribers to sell any of their
shares of the Target Company's Stock or any options or rights
with respect thereto.
91
<PAGE>
(b) The Holding Company hereby represents, warrants, covenants and acknowledges
that:
(1) The Target Company Stock is being transferred or issued
without registration under the provisions of Section 5 of the
Act or under the Delaware Securities Act or the Subscribers'
State Blue Sky Laws pursuant to exemptions provided by Section
4(2) of the Act and comparable provisions of the Delaware
Securities Act and the Subscribers' State Blue Sky Laws;
(2) All of the Target Company Stock will bear legends restricting
its transfer, sale, conveyance or hypothecation unless such
Target Company Stock is either registered under the provisions
of Section 5 of the Act and under applicable state securities
laws, or an opinion of legal counsel is provided by the
Holding Company certifying that such registration is not
required as a result of applicable exemptions therefrom;
(3) The Holding Company shall not transfer any of the Target
Company Stock except in compliance with all applicable laws;
and
(4) The Holding Company is acquiring the Target Company Stock for
its own account, for investment purposes only and not with a
view to further sale or distribution.
(c) In the event that the restructuring provisions of Section 4.9 become
applicable, then the representations in Section 1.2(b) shall be deemed
to refer to the Subsidiary's common stock rather than the Target
Company's common stock.
1.3 Liabilities.
(a) Any liabilities in any manner encumbering or affecting the Target
Company, the Subsidiary (the Target Company and the Subsidiary being
hereinafter collectively or generically referred to as the "Target
Companies") or their assets are disclosed on exhibit 1.3 annexed hereto
and made a part hereof (the "Disclosed Liabilities").
(b) The Target Companies and the Subscribers hereby covenant and agree to
indemnify and hold the Holding Company harmless from any liabilities
of the Target Companies or affecting the Target Companies' assets
other than the Disclosed Liabilities ("Undisclosed Liabilities") and
the Holding Company may, in addition to all other legal or equitable
remedies that may be available, offset from any funds, securities or
other things of value due to the Target Companies, the Subscribers or
the Subscribers' affiliates (as that term is most liberally defined
for federal securities law purposes), such sums as may be required to
make the Holding Company whole as a result of the assertion of any
Undisclosed Liability against the Target Companies or their assets.
Article Two
Representations And Warranties
2.1 The Holding Company.
The Holding Company hereby represents and warrants to the Subscribers, the
Target Company and the Subsidiary, as a material inducement to their entry into
this Agreement, that, except as disclosed in exhibit 2.1 (the "Holding Company's
Warranty Exceptions") or in the Holding Company's Exchange Act Reports provided
filed with the Commission prior to the date of this Agreement (the "Exchange Act
Reports"), that, to the best of current management's knowledge and except for
matters that are not material:
92
<PAGE>
(a) All of the Holding Company's assets are described in the Exchange Act
Reports.
(b) The Holding Company has 20,000,000 shares of Common Stock $0.01 par
value authorized, not more than 6,238,448 shares of which are expected
to be outstanding as of the Closing, there being no other outstanding
securities of any class or of any kind or character of the Holding
Company, there being no outstanding subscriptions, options, warrants or
other agreements or commitments obligating the Holding Company to issue
or sell any additional shares of the Holding Company's Stock or any
options or rights with respect thereto, or any securities convertible
into any shares of Stock of any class, except as follows:
(1) 200,000 shares of common stock are reserved for issuance
pursuant to currently existing obligations disclosed in the
Exchange Act Reports, to the Holding Company's president;
(2) An undetermined additional number of shares of common stock
are reserved for issuance to Yankees, as described in the
Exchange Act Reports or disclosed in this Agreement; and
(3) The Holding Company has 5,000,000 shares of preferred stock of
undefined characteristics authorized, $0.01 par value per
share, none of which has been issued or reserved.
(c) Except as described in the preceding paragraph, the Holding Company is
not a party to any written or oral agreement which grants an option or
right of first refusal or other arrangement to acquire any of its
securities or to any agreement that affects the voting rights of any of
its securities, nor has the Holding Company made any commitment of any
kind relating to the issuance of shares of any of the Holding Company's
securities, whether by subscription, right of conversion, option or
otherwise;
(d) The Holding Company is not a party to any agreement or understanding
for the sale or exchange of inventory or services for consideration
other than cash or at a discount in excess of normal discount for
quantity or cash payment, except in the ordinary course of business;
(e) There are presently no contingent liabilities, factual circumstances,
threatened or pending litigation, contractually assumed obligations or
unasserted possible claims which might result in a material adverse
change in the future financial condition or operations of the Holding
Company;
(f) (1) The execution, delivery and performance of this Agreement
and the transactions con templated hereby do not require the
consent, authority or approval of any other person or entity
except such as have been obtained;
(2) Notwithstanding the generality of the foregoing, the entering
into of this Agreement and the performance thereof has been
duly and validly authorized by all required corporate action;
(g) No transactions have been entered into either by or on behalf of the
Holding Company, other than
93
<PAGE>
in the ordinary course of business nor have any acts been performed
(including within the definition of the term performed the failure to
perform any required acts) which would adversely affect the goodwill of
the Holding Company;
(h) (1) The audited, consolidated financial statements of the Holding
Company including statements of operations, stockholders
investment and cash flows and balance sheets since inception, and
unaudited financial statements for the period from the last
audited financial statement until the end of the Holding
Company's fiscal quarter closest to the date of this Agreement,
all prepared in accordance with generally accepted accounting
principles, consistently applied, are included in the Holding
Company's Exchange Act Reports (the "Holding Company's Financial
Statements").
(2) To the best of the Holding Company's knowledge, the Holding
Company's Financial Statements, as contained in its Exchange
Act Reports, fairly present the Holding Company's financial
condition as of their respective dates and its results of
operations for their respective periods in accordance with
generally accepted accounting principles, consistently
applied;
(i) Except as and to the extent reflected or reserved against in the
unaudited interim balance sheet of the Holding Company (the "Holding
Interim Company's Balance Sheet), the Holding Company had no
liabilities or legal obligations of a nature required to be reflected
on a corporate balance sheet prepared in accordance with generally
accepted accounting principles or disclosed in the notes thereto,
whether absolute, accrued, contingent, or otherwise and whether due or
to become due;
(j) To the best of the Holding Company's knowledge, there is no material
reasonable basis for the assertion against the Holding Company or any
of its subsidiaries of any liability or obligation which is not fully
reflected or reserved against in the Holding Company's Interim Balance
Sheet or disclosed in the notes thereto, except liabilities or
obligations incurred since the date thereof in the ordinary course of
the Holding Company's business;
(k) Since the date of the Holding Company's Financial Statements no events
have occurred nor have any facts been discovered which materially alter
in a detrimental manner the financial status or prospects of the
Holding Company;
(l) The Holding Company does not have any liabilities which constitute a
lien or charge on their securities or assets;
(m) The Holding Company has good, valid and marketable title to all of its
assets, subject to no mortgage, pledge, lien, encumbrance, security
interest or charge, except as disclosed in the Holding Company's
Financial Statements, and can and will retain free and clear title
thereto after the Closing, free and clear of any claims whatsoever;
94
<PAGE>
(n) There are no claims, actions, suits, proceedings or investigations
pending or threatened against the Holding Company and the Holding
Company does not know of any basis for any such claim, action, suit,
proceeding or investigation;
(o) The Holding Company has filed with the appropriate governmental
agencies all tax returns and tax reports required to be filed; all
federal, state and local income, profits, franchise, sales, use,
occupation, property or other taxes due have been fully paid, and, the
Holding Company is not a party to any action or proceeding by any
governmental authority for assessment or collection of taxes, nor has
any claim for assessments been asserted against the Holding Company or
its assets;
(p) The Holding Company is, as of the date of this Agreement, a validly
existing corporation, organized pursuant to the laws of the State of
Delaware with all legal and corporate authority and power to conduct
its business and to own its properties and possesses all necessary
permits and licenses required in connection with the conduct of its
business;
(q) The conduct of the Holding Company's business is in full compliance
with all applicable federal, state and local governmental statutes,
rules, regulations, ordinances and decrees;
(r) The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and compliance with the terms of this
Agreement will not conflict with or result in a breach in any of the
terms or provisions of, or constitute a default under, the certificate
of incorporation or bylaws of the Holding Company; any indenture, other
agreement or instrument to which the Holding Company or its assets are
bound; or, any applicable regulation, judgment, order or decree of any
governmental instrumentality or court, domestic or foreign, having
jurisdiction over the Holding Company, its securities or its
properties;
(s) This Agreement constitutes a binding obligation of the Holding Company,
enforceable against it in accordance with the terms hereof;
(t) (1) None of the employees of the Holding Company are
represented by labor unions, nor does the Holding Company have
any reason to believe that any of its employees desire to be
represented by labor unions; and
(2) The Holding Company has no reason to believe that any of its
employees have any potential claims against the Holding
Company based on violations of equal employment laws,
occupational health and safety standards, restrictions against
sexual harassment or any other legally protected rights;
(u) (1) The Holding Company has no reason to believe that it has
generated any hazardous wastes or engaged in activities which
could be interpreted as potential violations of laws,
statutes, regulations ordinances or judicial decrees in any
manner regulating the generation or disposal of hazardous
waste.
(2) There are no on-site or off-site locations where the Holding
Company has stored, disposed or arranged for the disposal of
chemicals, pollutants, contaminants, wastes, toxic substances,
petroleum or petroleum products; there are no underground
storage tanks lo cated on property owned or leased by the
Holding Company; and, no polychlorinated hiphenyle are used or
stored at any property owned or leased by the Holding Company;
(v) There are no impediments to obtaining hazard and liability insurance
covering all of the Holding Company's assets and operations, at
commercially reasonable insurance rates, nor does the Holding Company
have any basis for believing that such insurance, at such rates, will
not be obtainable by the Holding Company in the future;
95
<PAGE>
(w) All of the information reflected in the foregoing representations and
warranties is complete and accurate, and does not omit any information
required to make the information provided non-misleading, accurate and
meaningful, in light of the nature of this transaction.
2.2 The Subscribers, the Subsidiary and The Target Company.
The Subscribers, the Subsidiary and the Target Company hereby
represents and warrants to the Holding Company, as a material inducement to the
Holding Company's entry into this Agreement, that, except as specified on
exhibit 2.2 annexed hereto and made a part hereof (the "Target Companies'
Warranty exceptions"), to the best of current management's knowledge and except
for matters that are not material:
(a) Exhibit 2.2(a) contains a complete and accurate list of all real,
personal and intellectual property owned by the Target Companies,
whether tangible or intangible, current or inchoate, and the principal
terms of thereof, including, without limitation, all patents,
copyrights, trademarks, service marks, all leases pursuant to which the
Target Companies lease property (including identification of the
property, the annual rentals payable thereunder, the expiration dates,
and other terms of any extensions or renewals permitted thereunder);
(b) (1) The Target Company has 20,000,000 shares of Common Stock,
$0.001 par value, authorized, 11,600,000 of which are
currently issued and outstanding, there being no other
authorized or outstanding securities of any class or of any
kind or character of the Target Company; and
(2) The Subsidiary has 7,500 shares of Common Stock, $1.00 par
value, authorized, all of which are currently issued and
outstanding solely to the Target Company, there being no other
authorized or outstanding securities of any class or of any
kind or character of the Subsidiary;
(3) There are no outstanding subscriptions, options, warrants or
other agreements or commitments obligating the Target
Companies or the Subscribers to issue or sell any additional
shares of Target Companies' capital stock or any options or
rights with respect thereto, or any securities convertible
into any shares of Target Companies' capital stock of any
class;
(c) (1) Upon conveyance of the Target Company Stock by the
Subscribers, the Holding Company will become the owner of 90%
of the Target Company's authorized, issued and outstand ing
equity securities;
(3) On and after the Closing, the Target Company will continue to
own all of the Subsidiary's capital stock and securities, and
the Subsidiary will continue to own all of the assets and to
engage in all of the operations described or projected in the
memorandum, subject solely to dispositions in the ordinary
course of business and dispositions, if any, approved in
writing by the Holding Company; and
(4) In the event that the restructuring provisions of Section 4.9
become applicable:
(A) The Holding Company will be the direct owner of all
of the Subsidiary's securities and neither the Target
Company nor any affiliate, stockholder or person
claiming thereunder shall have any interests orrights
therein, thereto or thereunder;
96
<PAGE>
(B) All of the assets of the Target Companies will be
irrevocably vested in the Subsidiary and the Target
Company will have no interests or rights therein,
thereto or thereunder;
(d) As of the Closing, the Target Companies will not be a party to any
written or oral agreement which grants any option or right of first
refusal or other arrangement to acquire any of their securities or to
any agreement that will affect the voting rights of any of their
securities, nor have the Subscribers or the Target Companies made any
commitment of any kind relating to the issuance of shares of any of the
Target Companies' securities, whether by subscription, right of
conversion, option or otherwise;
(e) The Target Companies are not a party to any agreement or understanding
for the sale or exchange of inventory or services for consideration
other than cash or at a discount in excess of normal discounts for
quantity or cash payment;
(f) There are presently no contingent liabilities, factual circumstances,
threatened or pending litigation, contractually assumed obligations or
unasserted possible claims which might result in a material adverse
change in the future financial condition or operations of the Target
Companies, other than, as to the Target Company, the hereinafter
defined Ascot 504 offering, and as to that, the restructure provisions
of Section 4.9 of this Agreement provide the Holding Company with full
protection therefrom;
(g) (1) The execution, delivery and performance of this Agreement
and the transactions con templated hereby do not require the
consent, authority or approval of any other person or entity,
except such as have been obtained;
(2) Without limiting the generality of the foregoing, the entering
into of this Agreement and the performance required hereunder
has been duly and validly authorized by all required corporate
action;
(h) No transactions have been entered into either by or on behalf of the
Target Companies, other than in the ordinary course of business nor
have any acts been performed (including within the definition of the
term performed the failure to perform any required acts) which would
materially adversely affect the goodwill of the Target Companies;
(i) (1) Annexed hereto and made a part hereof as composite exhibit
2.2(i) are: (a) an unaudited balance sheet of the Subsidiary as
of December 31, 1998, with the related unaudited statement of
operations and accumulated deficit and unaudited statements of
cash flows since inception, and unaudited quarterly updates
thereto for each calendar quarter ending since such time, other
than the current calendar quarter, all of which have been
prepared in accordance with generally accepted accounting
purposes, consistently applied (such balance sheets, statements
of operations, statements of cash flow, statements of
stockholders equity and other statements required by generally
accepted accounting principals are referred to herein as the
"Subsidiary's Financial Statements");
97
<PAGE>
(2) The addition of all required financial data concerning the
Target Company necessary for preparation of audited financial
statements and pro forma financial information required by
Commission Regulation SB in conjunction with the acquisition
of the Target Companies by the Holding Company (the "Required
SEC Statements") will not materially differ from the
Subsidiary's Financial Statements because the Target Company
does not have and has not historically had any material assets
or operations independent of the Subsidiary's, and the
addition of information concerning the Target Company will not
render preparation of the Required SEC Statements materially
more difficult or expensive;
(3) The Subsidiary's Financial Statements fairly present the
financial condition of the Target Companies as of the dates
thereof, and the results of operations of the Target Companies
for the periods indicated, in each case in accordance with
generally accepted accounting principles applied on a
consistent basis;
(4) Except as disclosed in the Subsidiary's Financial Statements,
the Target Companies have no liabilities or legal obligations
of a nature required to be reflected on a corporate balance
sheet prepared in accordance with generally accepted
accounting principles or disclosed in the notes thereto,
whether absolute, accrued, contingent, or otherwise and
whether due or to become due (including, without limitation,
liabilities for taxes and interest, penalties, and other
charges payable with respect thereto (a) in respect of or
measured by the income of the Target Companies through such
date, or (b) arising out of any transaction entered into prior
thereto).
(5) There is no basis for the assertion against the Target
Companies of any liability or obligation which is not fully
reflected or reserved against in the Subsidiary's Financial
Statements, except liabilities or obligations incurred since
the date of the Acquired Company's Financial Statements in the
ordinary course of the Target Companies' business consistent
with its past practices, other than, as to the Target Company,
the hereinafter defined Ascot 504 offering, and as to that,
the restructure provisions of Section 4.9 of this Agreement
provide the Holding Company with full protection therefrom;
(6) There are no impediments to the certification and auditing of
the Target Companies' financial statements, since the earlier
of inception (including the inception of any predecessors
under applicable securities laws and generally accepted
accounting procedures ["GAAP"]) for the last two fiscal or
calendar years, and the Target Companies have heretofore
retained the firm of Daszkal, Bolton & Manela, certified
public accountants who are members of the AICPA's Securities
Practice Section and have successfully completed a peer review
of their auditing procedures, to commence a certified audit of
at least the last two fiscal or calendar years of their
operations, as required for filings under Section 12(g) of the
Exchange Act and Regulations SB of the Exchange Act, and will
not replace such accountants except with accountants meeting
similar competency requirements.
(j) Except as reflected in the Subsidiary's Financial Statements, since the
date of the Subsidiary's Financial Statements the Target Companies have
not suffered any material adverse change in their financial condition,
assets, liabilities or business; or suffered any material casualty loss
(whether or not insured);
98
<PAGE>
(k) On the date of the Closing, the Target Companies' aggregate
liabilities, whether accrued or inchoate, shall not exceed its current
cash assets by more than $15,000 and such liabilities shall not require
any payments, other than as specifically disclosed in exhibit 1.3;
(l) None of the properties or assets used in the business of the Target
Companies are subject to any mortgage, pledge, lien, security interest,
conditional sale agreement, encumbrance, or charge of any kind, except
as disclosed in exhibit 1.3;
(m) Except as set forth in Exhibit 2.2 annexed hereto and made a part hereof:
(1) (a) There are no claims, actions, suits, proceedings or
investigations pending or threatened by or against
the Target Companies; and
(b) The Target Companies do not know of any basis for any
such claim, action, suit, proceeding, or
investigation, other than, as to the Target Company,
the hereinafter defined Ascot 504 offering effected
by prior management prior to Ascot's acquisition of
the Subsidiary, could in the future result in an
investigation or regulatory proceedings if not
resolved, and as to that, the restructure provisions
of Section 4.9 of this Agreement provide the Holding
Company with full protection therefrom;
(2) The Target Companies are not subject to any liabilities or
potential liabilities that will subject the Holding Company,
or its affiliates, stockholders, officers, directors, agents
or advisors to any claims or liabilities predicated or
emanating from torts or violations of law attributable to the
Target Companies or for which the Target Companies assumed
responsibility or which can in any manner be imputed to the
Target Companies or their assets; except that, prior to its
acquisition of the Subsidiary, conducted an offering of it
securities in reliance on Commission Rule 504 of Regulation D
which the Registrant's legal counsel has determined may not
have met the requirements of such rule and consequently, the
Parties have agreed that if such deficiency is not corrected
to their mutual satisfaction within 30 days following the
Closing, this Agreement may be restructured by eliminating the
Target Company therefrom, in the manner set forth in Section
4.9;
(n) The Target Companies have no liabilities involving expenses
attributable directly, indirectly or incidentally to any litigation;
(o) (1) Except as otherwise disclosed in the Subsidiary's
Financial Statements and exhibit 1.3, the Target Companies
have good, valid, and marketable title to all their properties
and assets, real, personal and mixed, tangible and intangible;
(2) Prior to the Closing, the Target Companies shall have acquired
and fully paid for all of the securities, assets and
operations of all affiliated businesses, if any;
(p) Since their respective inceptions the Target Companies have not
disposed of any assets or contractual rights which disposition has had
or will in the future have a materially adverse effect on the business
of the Target Companies and no such disposition will be made by the
Target Companies outside the ordinary course of business during the
interim between execution of this Agreement and the Closing, unless
this Agreement shall have been terminated, without the prior written
consent of the Holding Company;
99
<PAGE>
(q) The Target Companies have filed or will, prior to the Closing, arrange
to file with the appropriate governmental agencies all tax returns and
tax reports required to be filed; all federal, state and local income,
profits, franchise, sales, use, occupation, property or other taxes due
have been fully paid, except as listed on exhibit 1.3; and, the Target
Companies are not a party to any action or proceeding by any
governmental authority for assessment or collection of taxes, nor has
any claim for assessments been asserted against the Target Companies or
their assets;
(r) The Target Companies are, as of the date of this Agreement, validly
existing corporations, organized pursuant to the laws of the States of
Nevada (the Target Company) and Florida (the "Subsidiary"), with all
legal and corporate authority and power to conduct their businesses and
to own their properties and possess all necessary permits and licenses
required in connection with the conduct of their business;
(s) The conduct of the Target Companies' business is in full compliance
with all applicable federal, state and local governmental statutes,
rules, regulations, ordinances and decrees, other than, as to the
Target Company, the hereinafter defined Ascot 504 offering effected by
prior management prior to Ascot's acquisition of the Subsidiary, could
in the future result in an investigation or regulatory proceedings if
not resolved, and as to that, the restructure provisions of Section 4.9
of this Agreement provide the Holding Company with full protection
therefrom;
(t) The execution and delivery of this Agreement, the consummation of the
transactions herein contemplated and compliance with the terms of this
Agreement will not conflict with or result in a breach in any of the
terms or provisions of, or constitute a default under, the Articles of
Incorporation or By-Laws of the Target Companies; any indenture, other
agreement or instrument to which the Target Companies or their
stockholders are a party or by which the Target Companies or their
assets are bound; or, any applicable regulation, judgment, order or
decree of any governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Target Companies, their
securities or properties;
(u) This Agreement constitutes the valid and binding agreement of the
Target Company and is enforceable in accordance with its terms, except
as enforcibility may be limited by applicable bankruptcy,
reorganization, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general equitable principles
(whether enforcement is sought by proceedings in equity or at law, no
such proceeding being anticipated or under consideration);
(v) (1) The Target Companies have not experienced any material
difficulties with the management or recruiting of employees
for their businesses, nor do the Target Companies have any
reason to believe that any such difficulties will arise in the
future.
(2) None of the employees of the Target Companies are represented
by labor unions, nor do the Target Companies have any reason
to believe that any of their employees desire to be
represented by labor unions; and
(3) The Target Companies have no reason to believe that any of
their employees have any potential claims against the Target
Companies or their successors in interest based on
100
<PAGE>
violations of equal employment laws, occupational health and
safety standards, restrictions against sexual harassment or
any other legally protected rights;
(w) (1) The Target Companies have no reason to believe that they
have generated any hazardous wastes or engaged in activities
which violate or could be interpreted as violating any laws,
statutes, regulations ordinances or judicial decrees in any
manner regulating the generation or disposal of hazardous
waste.
(2) There are no on-site or off-site locations where the Target
Companies have stored, disposed or arranged for the disposal
of chemicals, pollutants, contaminants, wastes, toxic
substances, petroleum or petroleum products; there are no
underground storage tanks located on property owned or leased
by the Target Companies; and, no polychlorinated hiphenyle are
used or stored at any property owned or leased by the Target
Companies;
(x) (1) There are no impediments to obtaining hazard and liability
insurance covering all of the Target Companies' assets and
operations, at commercially reasonable insurance rates, nor do
the Target Companies have any basis for believing that such
insurance, at such rates, will not be obtainable by the Target
Companies in the future.
(2) Annexed hereto and made a part hereof as composite exhibit
2.2(x) are current copies of all policies of insurance or
binders therefor covering the Target Companies and their as
sets, all of which will remain in full force and effect after
the Closing.
(y) All of the information reflected in the foregoing representations and
warranties is complete and accurate, and does not omit any information
required to make the information provided non-misleading, accurate and
meaningful, in light of the nature of this transaction.
Article Three
Conditions & Closing
3.1 Conditions Precedent
(a) The obligations of the Holding Company under this Agreement are subject
to the Target Companies' (the term "Target Companies" in the context of
this Article being deemed to include all subsidiaries of the Target
Company and sibling business entities of the Target Company, the assets
and operations of which are to be included among the subjects of this
Agreement) and Subscribers' satisfaction, or the written waiver by the
Holding Company, of the following conditions prior to the Closing (the
"Conditions Precedent"). That:
(1) All covenants, agreements, actions, proceedings, instruments
and documents required to be carried out or delivered by a
Subscriber or the Target Companies pursuant to this Agreement
shall have been performed, complied with or delivered to the
Holding Company in accordance with the terms thereof.
(2) The warranties and representations made by the Subscribers and
the Target Companies in this Agreement shall be true and
correct in all material respects on and as of the date of the
Closing and shall be deemed to be made on and as of such date.
101
<PAGE>
(3) There are no material violations nor are the Subscribers or
the Target Companies aware of any potential material
violations of any laws, statutes, ordinances, orders,
regulations or requirements of any governmental authority
affecting the Target Companies or their assets, other than, as
to the Target Company, the hereinafter defined Ascot 504
offering effected by prior management prior to Ascot's
acquisition of the Subsidiary, and as to that, the restructure
provisions of Section 4.9 of this Agreement provide the
Holding Company with full protection therefrom.
(4) There is no action, suit or proceeding pending or threatened
against or affecting the Target Companies or their assets in
any court or before or by any federal, provincial, state,
county or municipal department, commission, board, bureau,
agency or other governmental instrumentality which would
affect a Subscriber's or the Target Companies' ability to
perform hereunder or which could affect the business of the
Target Companies in a materially adverse manner, other than,
as to the Target Company, the hereinafter defined Ascot 504
offering effected by prior management prior to Ascot's
acquisition of the Subsidiary, and as to that, the restructure
provisions of Section 4.9 of this Agreement provide the
Holding Company with full protection therefrom.
(5) The Target Companies are in material compliance with all
applicable federal, provincial, state or local statutes,
regulations, rules or ordinances applicable to the it, its
securities or assets and that the transactions contemplated
hereby will not result in any violations thereof, other
than, as to the Target Company, the hereinafter defined
Ascot 504 offering effected by prior management prior to
Ascot's acquisition of the Subsidiary, and as to that, the
restructure provisions of Section 4.9 of this Agreement
provide the Holding Company with full protection therefrom.
(6) The issuance of the Holding Company Stock and the transfer of
the Target Company Stock complies with the requirements for
exemption from registration under the statutes, regula tions
and rules applicable thereto and of comparable provisions of
the laws of the Holding Company's and the Subscribers' states
or provinces of domicile.
(7) All licenses, patents and intellectual property rights
heretofore used, held or owned by the Target Companies
continue to be in good standing and not subject to legal or
other challenges, and that after the Closing, they will
continue to remain in full force, effect and validity.
(8) The operations of the several affiliated entities which
comprise the total business of which the Target Companies have
been a part have been consolidated as to ownership and control
under the Target Company, in a manner resulting in the control
and ownership thereof by the Target Company, and, that as a
consequence of the transactions contemplated by this
Agreement, all such assets and operations shall become the
indirect property (through ownership of the Target Company's
capital stock) of the Holding Company.
(9) (A) The draft current report on Commission Form 8-KSB
prepared by the Registrant's legal counsel with
information provided by the management of the Target
Companies, as it pertains to the Target Companies and
their related personnel, completely and truthfully
addresses each item of information called for by the
102
<PAGE>
Commission's Regulation SB, and the Holding Company
may use all such information in conjunction with
preparation and filing of the current report on
Commission Form 8-KSB to be filed with the Commission
within 15 days after the Closing (hereinafter
referred to as the Target Companies Disclosure
Responses").
(B) The Target Companies Disclosure Responses have been
completed and answered in an accurate and complete
fashion, and do not fail to disclose any information
necessary to render the information provided, not
misleading.
(b) The obligations of the Subscribers under this Agreement are subject to
the Holding Company's satisfaction, or the written waiver thereof by
the Subscribers (acting by majority of Target Company shares of common
stock held by them immediately prior to the Closing), of the following
conditions prior to the Closing (the "Subscribers' Conditions
Precedent"):
(1) That all covenants, agreements, actions, proceedings,
instruments and documents required to be carried out or
delivered by the Holding Company pursuant to this Agreement
shall have been performed, complied with or delivered to the
Subscriber in accordance with the terms thereof.
(2) That the warranties and representations made by the Holding
Company in this Agreement shall be true and correct in all
material respects on and as of the date of the Closing and
shall be deemed to be made on and as of such date.
(3) That the issuance of the Holding Company Stock and the
transfer of the Target Company Stock complies with the
requirements for exemption from registration under the
statutes, regulations and rules applicable thereto, including,
without limitation, the provisions of Sections 4(1), 4(2) or
4(6) of the Securities Act of 1933, as amended, of Regulation
D promulgated thereunder, and of comparable provisions of the
laws of the Holding Company's and the Subscriber's states or
provinces of domicile.
3.2 Conditions Subsequent
(a) The obligations of the Parties are subject to the condition subsequent
that the Subsidiary's Financial Statements and all financial data
concerning the Target Company (assuming that the restructure provisions
of Section 4.9 doe not become applicable) complies or can within the 75
day period following the Closing be made to comply with the
requirements of Regulation S-B promulgated under the Exchange Act;
provided that:
(1) In the event that the Commission advises the Holding Company
that the Target Companies' financial statements (excluding pro
forma financial statements) filed with the Form 8-KSB of the
Holding Company relating to the acquisition of the Target
Company, os an amendment thereto fail to comply in a material
respect with generally accepted accounting principals or the
requirements of Regulation S-B and the Commission is unwilling
to waive such deficiencies, the Holding Company, the
Subscribers and the Target Companies will use their best
efforts to correct the subject financial statements in such
manner as will satisfy the Commission's objections thereto or
cause the Commission to withdraw its objections;
103
<PAGE>
(2) If such corrections are not affected or such objections
withdrawn within three months after any deficiencies are
raised by the Commission, the Holding Company may elect to
rescind this Agreement, ab initio, unless the Parties can, at
such time, agree on a restructuring of this transaction in a
manner meeting the applicable reporting requirements imposed
by applicable federal and state securities law requirements;
(3) If prior to the expiration of the three month correction
period set forth in the preceding paragraph, the Commission
advises the Holding Company that it intends to take
enforcement action or to disrupt trading in the Holding
Company's securities as a result of deficiencies in the Target
Companies' financial statements, then, at the Holding
Company's option, it may elect to rescind this Agreement, ab
initio, unless the Parties and the Commission can, at such
time, agree on a restructuring of this transaction in a manner
meeting the reporting requirements imposed by applicable
federal and state securities law requirements, as a result of
which the Commission will refrain from taking the actions
threatened.
(4) In the event that this condition subsequent becomes applicable
and this Agreement is rescinded, ab initio, then all sums
advanced to or invested in the Target Companies by the Holding
Company shall be converted into secured promissory notes of
the Target Companies, as co-makers, with a term calling for
balloon installments of principal and interest at the annual
rate of 10%, due and payable on the 30th day prior to the date
for payment of the Holding Company's Class A, Series A,
Convertible, Subordinated Debentures (the "American Internet
Notes"), the American Internet Notes to be secured by a first
lien on all of the Target Companies' assets (tangible,
intangible, current or inchoate), subject only to such prior
liens as currently exist as of the date of this Agreement.
(b) This Agreement is subject to the condition subsequent that the offering
effected by the Target Company in reliance on Commission Rule 504 prior
to its acquisition of the Subsidiary under prior management fully
complied with all requirements of applicable state and federal
securities laws, provided that, if the Parties are not mutually
satisfied that this condition has been met within 30 days following the
Closing, then this Agreement shall be restructured as called for under
Section 4.9 of this Agreement, such restructuring to be deemed
effective ab initio.
3.3 Closing.
The Closing on this transaction shall take place as follows:
(a) The Closing on this transaction will take place on the business day
following the date on which each of the Parties have advised the others
that all conditions precedent have been complied with, but not later
that June 30, 1999, with all required Closing documents to be
pre-cleared and exchanged by overnight post by legal counsel to the
Parties within one business day prior to any scheduled Closing, it
being currently contemplated that such closing will take place on
Thursday, June 24, 1999, at the offices of Yankees in Boca Raton,
Florida.
(b) The Closing may be adjourned and reconvened at another physical
location, if required, at the request of any Party, provided that it is
completed prior to July 15, 1999.
104
<PAGE>
(c) In the event that the Closing has not taken place by July 15, 1999,
then any Party may terminate this Agreement by provision of notice of
such election to all other Parties, in the manner hereinafter set forth
for provision of notice generally, in which case, all rights and
obligations under this Agreement shall be terminated, no Party having
any rights against another Party, or incurring any liabilities to
another Party, as a result of this Agreement.
3.4 Items to be Delivered at the Closing by the Target Company,
the Subsidiary and the Subscribers.
At the Closing, Mr. Gleason, on behalf of the Target Company, the
Subsidiary and the Subscribers, will deliver the following items to the Holding:
(a) (1) Certificates for the shares of the Target Company Stock,
duly endorsed or with stock power attached with appropriate
signature guarantees (except for any original issue shares by
the Target Company required to adjust the total Target Company
shares delivered to equal the 90% requirement heretofore set
forth), in form and substance adequate to permit immediate
transfer thereof to the Holding Company;
(2) For purposes of facilitating the restructuring called for by
Section 4.9, should it become applicable, certificates for all
of the shares of the Subsidiary's capital stock, duly endorsed
or with stock power attached with appropriate signature
guarantees in form and substance adequate to permit immediate
transfer thereof to the Holding Company or in the name of the
Holding Company;
(b) Certification from an officer of the Target Company to the effect that
the management of the Target Companies have been urged to consult with
legal counsel in conjunction with all aspects of the transactions
reflected in this Agreement and that either after consulting with
counsel or having determined to proceed without counsel, he or they
reasonably believe that:
(1) The issuance of the Holding Company Stock to the Subscribers
will not require any actions in the Subscriber's states or
provinces of domicile, other than such actions as have been
taken no later than the day prior to the Closing, in order to
comply with such states' or provinces' laws, regulations and
rules governing private placements, and that such issuance
will not violate any such laws, regulations or rules; and
(2) The transfer of the Target Company Stock as contemplated by
this Agreement meets the requirements of the exemption from
registration requirements provided by Sections 4(1), 4(2) or
4(6) of the Securities Act of 1933, as amended.
(c) Certification from the Target Company's chief financial officer
indicating that, after a review of the Target Companies' books and
records from the date of the Subsidiary's latest financial statements
annexed hereto until the fifth day prior to the Closing, such review
did not give such officer cause to believe that any materially
detrimental matters have occurred, or that there have been any
materially detrimental changes in the financial condition of the Target
Companies, other than as disclosed in this Agreement.
(d) An investment letter executed by each Subscriber in the form annexed
hereto as exhibit 3.4(d).
(e) Certified officers' certificates of resolutions of the boards of
directors of the Target Companies irrevocably and unqualifiedly
approving this Agreement and all instruments and agreements called for
hereby, and authorizing, empowering and directing the officers of the
Target Companies to enter into this Agreement and to take all actions
required to comply with the terms hereof.
105
<PAGE>
3.5 Items to be Delivered at the Closing by the Holding Company.
At the Closing, the Holding Company will deliver the following to Mr.
Gleason, receiving them on behalf of the Subscribers:
(a) Certified Board of Directors resolutions and signed, irrevocable
instructions to the Holding Company's transfer agent instructing it to
immediately issue certificates in the aggregate amount of 2,250,000
shares in the names of the Subscribers, allocated in proportion to
their ownership of the Target Company Stock on the date of the Closing,
and to reserve 4,500,000 shares of the Holding Company's common stock
for potential future issuance, as provided for in this Agreement.
(b) An opinion from the Holding Company's legal counsel that the issuance
of the Holding Company Stock as contemplated by this Agreement will
meet the requirements of the exemption from registration requirements
provided by Section 4(2) of the Securities Act of 1933, as amended.
(c) A certification from the Holding Company's chief financial officer
indicating that, after a review of the Holding Company's books and
records from the date of the Holding Company's latest financial
statements annexed hereto until the fifth day prior to the Closing,
such review did not give such officer cause to believe that any
materially detrimental matters have occurred, or that there have been
any materially detrimental changes in the financial condition of the
Holding Company, other than as disclosed in this Agreement.
(d) Certified officers' certificates of resolutions of the Holding
Company's board of directors irrevocably and unqualifiedly approving
this Agreement and all instruments and agreements called for hereby,
and authorizing, empowering and directing the officers of the Holding
Company to enter into this Agreement and to take all actions required
to comply with the terms hereof.
3.6 Closing Costs.
Except as expressly provided in this Agreement, each Party shall pay
their own Closing costs.
3.7 Brokers.
(a) This transaction has been brought about with the assistance of Yankees
which is entitled to compensation from the Holding Company in
accordance with the terms of its consulting agreement with the Holding
Company, heretofore filed as an exhibit to the Holding Company's
Exchange Act Reports (the "Yankees Agreement").
(b) Except as set forth in this Agreement:
(1) The Subscribers, the Target Company and the Subsidiary hereby
represent and warrant to the Holding Company that it will not
be subject to and will indemnify and hold it harmless against
any claims of brokers for commissions or other compensation in
connection with this Agreement and the consummation of the
transactions contemplated hereby.
106
<PAGE>
(2) The Holding Company hereby represents and warrants to the
Subscribers, the Target Company and the Subsidiary that,
except as disclosed in this Agreement, it has dealt with no
brokers in conjunction with its contemplated acquisition of
the Target Companies.
Article Four
Covenants
4.1 Post Closing Performance Criteria.
(a) Whether or not the restructuring provisions of Section 4.9 become
operative, the Holding Company will issue additional shares of its
common stock to the Subscribers as additional shares exchanged for the
Target Company Stock or if applicable pursuant to Section 4.9, all of
the Subsidiary's capital stock (the "Additional Exchange Shares"),
predicated on the Target Companies' attaining the following annual net,
pre-tax profit thresholds determined as of December 31 of each year in
accordance with generally accepted accounting principals, consistently
applied ("GAAP"), as follows:
Goal Time Frame Additional Exchange Shares
$200,000 1999 500,000 Shares
$500,000 2000 800,000 Shares
$1,000,000 2001 800,000 Shares
$1,5000,000 2002 800,000 Shares
$2,000,000 2003 800,000 Shares
$2,500,000 2004 800,000 Shares
(b) In the event that the thresholds are not attained and the Holding
Company has provided the Target Companies with at least $250,000 in
funding for their operations, then:
(1) If the net, pre tax earnings are less than 33% of the required
threshold during the subject 12 month period, the Additional
Exchange Shares for such period will be forfeited;
(2) If the net, pre tax earnings are between 33% and 80% of the
required threshold during the subject 12 month period, the
Additional Exchange Shares for such period and the required
threshold will be carried over to the next year, increasing
both the aggregate threshold and the aggregate bonus
attainable for such year; and
(3) If the net, pre tax earnings are between 80% and 100% of the
required threshold during the subject 12 month period, the
Additional Exchange Shares for such period shall be prorated.
(c) In the event that the thresholds are not attained but the Holding
Company has not provided the Target Companies with at least $250,000 in
funding for its operations, then, the Additional Exchange Shares for
such period shall be prorated.
107
<PAGE>
4.2 Employment of Certain Subscribers.
(a) The Holding Company hereby acknowledges that two of the Subscribers,
Mr. Gleason and Michael D. Umile ("Mr. Umile") are parties to long term
employment agreements with the Target Companies which call for an
aggregate of annual compensation in the amount of $75,000 each, copies
of each employment agreement being annexed hereto and made a part
hereof as composite exhibit 4.2 (the "Subscribers' Employment
Agreements").
(b) The Holding Company hereby covenants and agrees that it will not take
any actions compelling the Target Companies to terminate the
Subscribers' Employment Agreements, except in the event of material
cause, as defined therein, or as may otherwise be required by law.
4.3 Maintenance of Target Companies.
Except as approved by the Holding Company's Board of Directors, on a
case by case basis during the interim between execution of this Agreement and
either the Closing or termination thereof:
(a) The Target Companies shall not sell or transfer any of their material
assets, real, personal, tangible or intangible, other than in the
ordinary course of business, without the Holding Company's explicit
prior written consent.
(b) The Target Companies will keep all of their material assets in good
standing, order and repair and shall cause any and all necessary
remedies and repairs thereto to be made on or before the Closing.
(c) The Target Companies will use all reasonable efforts to assure that all
of their material employees remain in their employ following the
Closing;
(d) The Target Companies will use all reasonable efforts to assure that all
of their material contracts and business relationships remain in good
standing and in full force and effect following the Closing.
4.4 Cooperation.
(a) The Parties and their agents shall have reasonable access to the
premises and assets of the others for the purpose of familiarizing
themselves with the operations of each others businesses.
(b) The Parties agree to cooperate with each other and to render a
reasonable amount of assistance in the orderly integration of the
business of the Target Companies into the Holding Company's operations
and the familiarization of the Parties therewith.
4.5 Post Closing Legal Activities.
(a) The Holding Company's general counsel shall prepare and file all
required reports of the transactions contemplated by this Agreement
with the Commission, such reports to include a detailed report of
special event on Commission Form 8-KSB, Commission Forms 3, 4 and 5 and
Commission Schedules 13D or 13G for the Subscribers and any current
control persons of the target Companies, and such other materials, and
such other matters as, in the opinion of the Holding Company's
management, may be required.
108
<PAGE>
(b) The Parties hereby covenant and agree to fully cooperate with the
Holding Company's general counsel in the timely preparation and filing
of all such materials and reports, all of which are due on or before
the fifteenth day following the Closing.
4.6 Covenants of the Holding Company
(b) During the five years following the Closing, the Holding Company shall
use its best efforts to assure that:
(1) At least one designee of the Subscribers is nominated for
membership on the Holding Company's Board of Directors at each
meeting of the Holding Company's stockholders or directors at
which the membership of its Board of Directors is up for
election, and to use their best efforts consistent with
applicable law to secure such nominee's election, so that the
membership of the Holding Company's Board of Directors
includes at least one designee of the Subscribers;
(2) Designees of the Subscribers are elected to at least two thirds
of the seats on the Target Companies' boards of directors; and
(3) On one occasion only, provide "piggy back" registration rights
covering up to an aggregate of 35,000 shares of the Holding
Company's Stock obtained pursuant to this Agreement to Messrs.
Bruce Drezner and Gary Walk; Theodore Gill and Susan Gill, his
wife, as tenants by the entireties; and, Ms. Lyn Poppiti.
(c) The Holding Company will use its best efforts to fully enforce the
stock lock up and voting agreement in the form annexed hereto and made
a part hereof as exhibit 4.6(b) (the "Lock-Up & Voting Agreement,
entered into by the Holding Company's current officers, directors and
principal stockholders (the "Holding Company's Principals").
4.7 Additional Covenants of the Holding Company
(a) Within five business days following the Closing, the Holding Company
will make a direct equity investment in the Target Company of $100,000
and will use its best efforts to increase its direct equity investments
in the Target Company to $250,000 within 90 days after the Target
Companies provide the Holding Company with the Target Companies'
financial statements required for filing with the Commission, as
described in Articles Two and Three.
(b) The Subscribers and the Target Companies hereby covenant and agree to
use their best efforts to assist the Holding Company in developing and
effecting its capital raising activities by, among other things,
providing and disseminating all information required in conjunction
therewith on a timely basis and participating in meetings, telephone
conferences and other events with potential funding sources, as
arranged by or for the Holding Company.
(c) The Holding Company may from time to time, at the request of the Target
Companies, make available shares or units of the Holding Company's
securities for purposes of acquisitions by the Target Companies or for
use as compensation to the Target Companies' employees, provided that
109
<PAGE>
in each such instance, the Target Companies shall be charged a price
equal to 85% of the price of such securities determined on the basis of
the last transaction price reported therefor by any NASD member firm on
the OTC Bulletin Board, or such superior market or exchange on which
the Holding Company's securities are then traded, or, if no such market
exists due to the non-trading nature of the securities involved, then
at the last price therefor recorded by the Holding Company, adjusted
based on the change in the value in the Holding Company's stockholders'
equity per share, since such date, such price to be charged as an
expense against the Target Companies' earnings for purposes of
determining eligibility for the additional exchange shares compensation
issuable to the Subscribers and any other purposes required by GAAP.
4.8 Additional Covenants of the Subscribers and the Target Companies.
(a) Being aware of the continuing information disclosure obligations
applicable to publicly held companies, the Subscribers and the Target
Companies hereby covenant and agree that they will develop, implement
and maintain record development and retention systems and compliance
procedures compatible with any procedures developed, implemented or
maintained by the Holding Company, for purposes of assuring timely
compliance with reporting requirements under federal and state
securities laws, federal, state and local tax laws and any other laws,
regulations, rules, ordinances or orders which may be applicable to
the business operations of the Holding Company and its subsidiaries.
(b) The Subscribers and the Target Companies hereby covenant and agree that
they will assist the Holding Company to develop and implement an
acquisition program designed to assist the Holding Company to develop
into a diversified Internet and related activity holding company with
the goal of becoming a material participant in the emerging Internet
based global communications and commerce industry; and, to assist the
Holding Company to develop, implement and engage in periodic fund
raising efforts required to properly capitalize such acquisition
activities.
4.9 Restructuring Covenant.
Notwithstanding anything in this Agreement to the contrary:
(a) In the event that within 30 days after the Closing the Parties are not
satisfied as to the legality of the offering of the Target Company's
securities by prior management of the Target Company in reliance on
Commission Rule 504 effected during the period staring on or about
March 2, 1998 and ending on or about August 20, 1998, as reflected in
the Form D, subscription execution records and transfer agency records
annexed hereto and made a part hereof as composite exhibit 4.9(a) (the
"Ascot Rule 504 offering" and the "504 Documents," respectively), then
this Agreement shall, without any further required action by any Party
other than delivery of a notice to the Parties by the Registrant's
legal counsel (after the fact), be restructured by the withdrawal of
the Target Company as a party hereto other than for the limited
purpose of consenting to the assignment and transfer of all of the
Subsidiary's common stock directly to the Holding Company and the
releases, acknowledgments and covenants and set forth in this Section
4.9, in consideration for the release by the Holding Company of the
Target Company from any liability to the Holding Company arising from
expenses associated with negotiating this Agreement, preparing the
instruments and documents required hereby and effecting the
transactions called for hereby, it being the clear agreement and
understanding of the Parties that as a result of such restructuring:
110
<PAGE>
(1) All rights of the Target Company granted and obligations
assumed hereby will devolve on the Subsidiary;
(2) The Subsidiary shall become a direct wholly owned subsidiary
of the Holding Company;
(3) The Target Company will have no rights to any compensation or
of any other kind under this Agreement or from the
Subscribers, the Subsidiary or the Holding Company, from any
cause or reason whatsoever;
(4) The restructuring will be irrevocably considered as full,
complete and adequate consideration for a general release from
any and all liabilities, whether current or inchoate, of the
Subscribers, the Subsidiary or the Holding Company to the
Target Company;
(5) All liabilities of the Target Company to the Subscribers or
the Subsidiary as a result of any misrepresentation, breach
of covenants or breach of conditions under the exchange
agreement between some of the Subscribers, the Subsidiary
and the Target Company dated February 28, 1999, a copy of
which is annexed hereto and made a part hereof as composite
exhibit 4.9(a)(5) (the "Exchange Agreement"), including any
arising as a result of legal deficiencies in the Ascot Rule
504 offering, will be preserved for subsequent disposition
in conjunction with ultimate disposition of the Target
Company, as described below;
(6) All assets of the Target Company used directly or indirectly
by the Subsidiary in the operation of its business or which
the Subsidiary or the Holding Company believe to be reasonably
necessary for the operations or management of the Subsidiary
shall be deemed unconditionally conveyed to the Subsidiary by
the Target Company, as of the Closing;
(7) The Target Company will become a shell temporarily controlled
by the Subscribers until they, with the assistance of the
Registrant, Yankees and their legal counsel, can make
arrangements to either dissolve the Target Company or rescind
all transactions pursuant to which the Target Company
originally acquired the Subsidiary, returning control thereof
to the former management and subscribers to the Ascot Rule 504
offering.
(b) Such restructuring will have no effect on the rights of the Subscribers
hereunder, all of which shall remain intact.
(c) The Target Company hereby grants to the Holding Company, with full
power of delegation and substitution, an irrevocable power of attorney
coupled with an interest, in the Form annexed hereto and made a part
hereof as exhibit 4.9(c) (the "Target Company's Power of Attorney"), to
take any acts or execute any documents, instruments, certificates,
forms of releases, confessions of judgment or other documents or
instruments on behalf of the Target Company, reasonably designed to
effect the provisions of this Section 4.9, such power of attorney to
survive the Closing and the restructuring described in this Section
4.9.
(d) No Party shall be required to initiate any proceedings or actions of
any kind as a condition to exercise any of the rights granted in this
Section 4.9.
(e) The Holding Company shall, in the event of any disagreement concerning
the applicability or interpretation of this Section 4.9, be
irrevocably deemed the final authority on such decision, to be made in
its sole and exclusive discretion.
111
<PAGE>
Article Five
Miscellaneous
5.1 Amendment.
No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is evinced by a written instrument,
subscribed by the Party against which such modification, waiver, amendment,
discharge or change is sought.
5.2 Notice.
(a) All notices, demands or other communications given hereunder shall be
in writing and shall be deemed to have been duly given on the first
business day after mailing by United States registered or unaudited
mail, return receipt requested, postage prepaid, addressed as follows:
To the Holding Company:
Equity Growth Systems, inc.
8001 DeSoto Woods Drive; Sarasota, Florida 34243;
Telephone (941) 358-8182; Fax (941) 358-8423
Attention: Charles J. Scimeca, President; with a copy to
G. Richard Chamberlin, Esquire; General Counsel
Equity Growth Systems, inc.
14950 South Highway 441; Summerfield, Florida
34491 Telephone (352) 694-6714, Fax (352) 694-9178; and,
e-mail, [email protected].
To the Subscribers:
At such addresses as they provide the
Holding Company's transfer agent for such purpose.
To the Target Company:
American Internet Technical Centers, Inc.
440 East Sample Road; Pompano Beach, Florida 33056
Attention: J. Bruce Gleason, President.
Telephone (954) 943-4748; Fax (954) 943-4046; e-mail [email protected]
To the Subsidiary:
American Internet Technical Center, Inc.
440 East Sample Road; Pompano Beach, Florida 33056
Attention: J. Bruce Gleason, President.
Telephone (954) 943-4748; Fax (954) 943-4046; e-mail [email protected]
112
<PAGE>
To Yankees:
The Yankee Companies, Inc.
902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487
Attention: Leonard Miles Tucker, President
Telephone (561)998-2025, Fax (561) 998-3425; and, e-mail [email protected];
or such other address or to such other person as any Party shall
designate to the other for such purpose in the manner hereinafter set
forth.
(b) (1) The Parties acknowledge that Yankees serves as a strategic
consultant to the Holding Company and has acted as scrivener
for the Parties in this transaction but that Yankees is
neither a law firm nor an agency subject to any professional
regulation or oversight.
(2) Because of the inherent conflict of interests involved,
Yankees has advised all of the Parties to retain independent
legal and accounting counsel to review this Agreement and its
exhibits and incorporated materials on their behalf.
(3) The decision by any Party not to use the services of legal
counsel in conjunction with this transaction shall be solely
at their own risk, each Part acknowledging that applicable
rules of the Florida Bar prevent the Holding Company's general
counsel, who has reviewed, approved and caused modifications
on behalf of the Holding Company, from representing anyone
other than the Holding Company in this transaction.
5.3 Merger.
This instrument, together with the instruments referred to herein,
contains all of the understandings and agreements of the Parties with respect to
the subject matter discussed herein. All prior agreements whether written or
oral are merged herein and shall be of no force or effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and the Closing hereon and
shall be effective regardless of any investigation that may have been made or
may be made by or on behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Agreement,
other than one of the conditions precedent or subsequent, or the application of
such provision or any portion thereof to any person or circumstance shall be
held invalid or unenforceable, the remaining portions of such provision and the
remaining provisions of this Agreement or the application of such provision or
portion of such provision as is held invalid or unenforceable to persons or
circumstances other than those to which it is held invalid or unenforceable,
shall not be affected thereby.
113
<PAGE>
5.6 Governing Law.
This Agreement shall be construed in accordance with the substantive
and procedural laws of the State of Delaware (other than those regulating
taxation and choice of law) but any proceedings pertaining directly or
indirectly to the rights or obligations of the Parties hereunder shall, to the
extent legally permitted, be held in Broward County, Florida.
5.7 Indemnification.
Each Party hereby irrevocably agrees to indemnify and hold the other
Parties harmless from any and all liabilities and damages (including legal or
other expenses incidental thereto), contingent, current, or inchoate to which
they or any one of them may become subject as a direct, indirect or incidental
consequence of any action by the indemnifying Party or as a consequence of the
failure of the indemnifying Party to act, whether pursuant to requirements of
this Agreement or otherwise. In the event it becomes necessary to enforce this
indemnity through an attorney, with or without litigation, the successful Party
shall be entitled to recover from the indemnifying Party, all costs incurred
including reasonable attorneys' fees throughout any negotiations, trials or
appeals, whether or not any suit is instituted.
5.8 Litigation.
(a) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the
prevailing Party shall be entitled to recover its costs and expenses,
including reasonable attorneys' fees up to and including all
negotiations, trials and appeals, whether or not litigation is
initiated.
(b) In the event of any dispute arising under this Agreement, or the
negotiation thereof or inducements to enter into the Agreement, the
dispute shall, at the request of any Party, be ex clusively resolved
through the following procedures:
(1) (A) First, the issue shall be submitted to mediation
before a mediation service in Broward County, Florida
to be selected by lot from six alternatives to be
provided, three by Yankees as agent for the current
Directors and stockholders of the Holding Company and
three by the Subscribers acting by majority vote
(based on their relative stock ownership in the
Holding Company).
(B) The mediation efforts shall be concluded within ten
business days after their in itiation unless the
Parties unanimously agree to an extended mediation
period;
(2) In the event that mediation does not lead to a resolution of
the dispute then at the request of any Party, the Parties
shall submit the dispute to binding arbitration before an
arbitration service located in Broward County, Florida to be
selected by lot, from six alternatives to be provided, three
by Yankees as agent for the current Directors and stockholders
of the Holding Company and three by the Subscribers acting by
majority vote (based on their relative stock ownership in the
Holding Company).
(3) (A) Expenses of mediation shall be borne by the Subsidiary
if successful.
114
<PAGE>
(B) Expenses of mediation, if unsuccessful and of
arbitration shall be borne by the Party or Parties
against whom the arbitration decision is rendered.
(C) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration shall be borne equally by
the Parties involved.
5.9 Benefit of Agreement.
The terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the Parties, their successors, assigns, personal
representatives, estate, heirs and legatees.
5.10 Captions.
The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
5.11 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
5.12 Further Assurances.
The Parties agree to do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged or delivered and to perform all such acts and
deliver all such deeds, assignments, transfers, conveyances, powers of attorney,
assurances, stock certificates and other documents, as may, from time to time,
be required herein to effect the intent and purpose of this Agreement.
5.13 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, employer-employee relationship, lessor-lessee
relationship, or principal-agent relationship, rather, the relationships
established hereby are those of exchanging stockholders in a transaction meeting
the requirements of Section 368)(a)(1)(B) of the Code, and parties incidental
thereto.
5.14 Counterparts.
(a) This Agreement may be executed in any number of counterparts.
(b) All executed counterparts shall constitute one Agreement
notwithstanding that all signatories are not signatories to the
original or the same counterpart.
(c) Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for
aesthetic purposes, prepare a fully executed original version of this
Agreement which shall be the document filed with the Commission.
115
<PAGE>
5.15 License.
(a) This Agreement is the property of Yankees and the use hereof by the
Parties is authorized hereby solely for purposes of this transaction.
(b) The use of this form of agreement or of any derivation thereof without
Yankees' prior written permission is prohibited.
(c) This Agreement shall not be construed more strictly against any Party
as a result of its authorship.
5.16 Exhibit Index.
Exhibit Description
0.1 Subscribers' Data & Powers of Attorney
1.3 Target Company's Disclosed Liabilities
2.1 Holding Company's Warranty Exceptions
2.2 Target Companies' Warranty Exceptions
2.2(a) List of Real and Personal Property Owned or Leased by Target
Company
2.2(i) Target Companies' Unaudited Consolidated Financial Statements
2.2(x) Target Company's Insurance Policies or Binders
3.4(d) Form of Investment Letters
4.2 Subscribers' Employment Agreements
4.6(b) The Lock-Up & Voting Agreement
4.9(a) The 504 Documents
4.9(a)(5) The [Target Companies] Exchange Agreement
4.9(c) Target Company's Power of Attorney
Signatures Subscribers' Powers of Attorney
In Witness Whereof, the Parties have caused this Agreement to be
executed effective as of the date last set forth below.
Signed, sealed and delivered
In Our Presence:
Equity Growth Systems, inc.
- - ---------------------------------
_________________________________ By: ________________________________
Charles J. Scimeca, President
(Corporate Seal)
Attest: ______________________________
G. Richard Chamberlin, Secretary
Dated: June 25, 1999
116
<PAGE>
American Internet Technical Centers, Inc.
(A Nevada corporation)
_________________________________
_________________________________ By: _______________________________
J. Bruce Gleason, President
(Corporate Seal)
Attest: ______________________________
Michael D. Umile, Secretary
Dated: June 24, 1999
American Internet Technical Center, Inc.
(A Florida corporation)
_________________________________
_________________________________ By: _______________________________
J. Bruce Gleason, President
(Corporate Seal)
Attest: ______________________________
Michael D. Umile, Secretary
Dated: June 25, 1999
Subscribers
- - ---------------------------------
_________________________________ By: ______________________________
. Bruce Gleason, their duly designated
and serving attorney-in-fact, pursuant
to the powers of attorney annexed
hereto and made a part hereof.
Dated: June 25, 1999
The Yankee Companies, Inc.
for the limited purposes specifically
set forth in this Agreement
- - ---------------------------------
_________________________________ By: _______________________________
Leonard Miles Tucker, President
(Corporate Seal)
Attest: ____________________________
William A. Calvo, III, Secretary
Dated: June 25, 1999
117
<PAGE>
EXHIBIT 0.1 of the Reorganization Agreement
Limited Power of Attorney
State of Florida }
County of Palm Beach } Ss.:
I, Michael D. Umile, hereby appoint J. Bruce Gleason, an individual
residing at 44 Havenwood Drive; Pompano Beach, Florida 33064 as my
attorney-in-fact to negotiate and execute all documents, agreements, instruments
and corrective instruments on my behalf and in my name, as if I myself had
undertaken such functions personally, with full recourse against me, in
conjunction with all matters concerning the Reorganization Agreement with Equity
Growth Systems, inc. and all instruments and agreements called for in the
agreement, and I hereby authorize, direct and empower Mr. Gleason to enter into
the Reorganization Agreement on my behalf and for him to take all actions
required to comply with the terms, thereof, and I hereby further authorize,
empower and direct Mr. Gleason to handle all related stock issuance,
cancellations, reservations and expenditures related to my American Internet
Technical Centers, Inc. stock.
IN WITNESS WHEREOF, I have executed this Indenture, on this ____ day of
________, 1999.
Signed, Sealed & Delivered
In Our Presence
- - ----------------------
- - ---------------------- ----------------------
Michael D. Umile
SWORN TO BEFORE ME, an official duly authorized by the State of Florida
to administer oaths, on the date first above written by the above referenced
grantor, who provided me with personal identification, as follows:.
My Commission expires:
[SEAL]
----------------------
Notary Public
Limited Power of Attorney
State of Florida }
County of } Ss.:
I, Lynn Poppiti, hereby appoint J. Bruce Gleason, an individual
residing at 44 Havenwood Drive; Pompano Beach, Florida 33064 as my
attorney-in-fact to negotiate and execute all documents, agreements, instruments
and corrective instruments on my behalf and in my name, as if I myself had
undertaken such functions personally, with full recourse against me, in
conjunction with all matters concerning the Reorganization Agreement with Equity
Growth Systems, inc. and all instruments and agreements called for in the
agreement, and I hereby authorize, direct and empower Mr. Gleason to enter into
the Reorganization Agreement on my behalf and for him to take all actions
required to comply with the terms, thereof, and I hereby further authorize,
empower and direct Mr. Gleason to handle all related stock issuance,
cancellations, reservations and expenditures related to my American Internet
Technical Centers, Inc. stock.
118
<PAGE>
IN WITNESS WHEREOF, I have executed this Indenture, on this ____ day of
________, 1999.
Signed, Sealed & Delivered
In Our Presence
- - ----------------------
- - ---------------------- ----------------------
Lyn Poppiti
SWORN TO BEFORE ME, an official duly authorized by the State of Florida
to administer oaths, on the date first above written by the above referenced
grantor, who provided me with personal identification, as follows:.
My Commission expires:
[SEAL]
----------------------
Notary Public
EXHIBIT 1.3 of the Reorganization Agreement
OFFICER'S CERTIFICATION
for
AMERICAN INTERNET TECHNICAL CENTER, INC.,
a Florida corporation
Exhibit 1.3: Disclosed Liabilities
We, J. Bruce Gleason, President, and Michael D. Umile, Secretary, both
duly elected and currently serving officers of American Internet Technical
Center, Inc., a Florida corporation,(hereinafter referred to as the
"Corporation"), hereby certify, they reasonably believe that the following is a
true and correct listing of all long term Liabilities, other than with Equity
Growth Systems, inc. or other than with each other, as of June 24, 1999 for the
Corporation:
2. Arbour Building: Lease is month to month, disclosed on contracts
certification of even date.
3. Marketing Agreement dated June 15, 1999, with Amazia's MarketPlace
disclosed on contracts certification of even date.
4. Life Insurance Premiums disclosed on Insurance binders and contract
certification of even date.
5. Workman's Comp. and Employment Liability on Insurance binders and
contract certification of even date.
6. Life Insurance premiums disclosed in insurance certification
7. Lawrence S. Benjamin v. American Internet Technical Center, (Ohio, case
no. 755845). Settlement Agreement without the admission of liability
anticipated. Copy of proposed settlement agreement is attached.
$7,500.00
119
<PAGE>
8. Buckingham, Doolittle, Burroughs, LLP, attorney's fees. $4,000.00
9. Daszkal, Bolton & Manela, CPA firm, $3,500.00
Total: $15,000.00
IN WITNESS WHEREOF, we have hereunto set our hand and seal, effective
as of the 25th day of June , 1999.
American Internet Technical Center, Inc.
-------------------- ----------------------
J. Bruce Gleason Michael D. Umile
President Secretary
BEFORE ME, the undersigned authority, on this date personally appeared
J. Bruce Gleason and Michael D. Umile, who first being duly sworn, deposes, and
says: that they are both duly elected officers of AMERICAN INTERNET TECHNICAL
CENTER, INC., a Florida corporation, and that they have read the same, know the
contents thereof, and that the same is true and correct to the best of their
knowledge and belief. Sworn to and subscribed before me this 25th day of June
1999.
My commission expires:
----------------------
Notary Public
Personally Known or produced I.D. Type of I.D. Produced:
120
<PAGE>
OFFICER'S CERTIFICATION
for
AMERICAN INTERNET TECHNICAL CENTERS, INC.,
a Nevada corporation
Exhibit 1.3: Disclosed Liabilities
We, J. Bruce Gleason, President, and Michael D. Umile, Secretary, both duly
elected and currently serving officers of American Internet Technical Centers,
Inc., a Nevada, corporation, (hereinafter referred to as the "Corporation"),
hereby certify, they reasonably believe that the following is a true and correct
listing of all long term Liabilities, other than with Equity Growth Systems,
inc. or other than with each other, as of June 24, 1999 for the Corporation:
None
IN WITNESS WHEREOF, we have hereunto set our hand and seal, effective
as of the 25th day of June , 1999.
American Internet Technical Centers, Inc.
-------------------- ----------------------
J. Bruce Gleason Michael D. Umile
President Secretary
BEFORE ME, the undersigned authority, on this date personally appeared
J. Bruce Gleason and Michael D. Umile, who first being duly sworn, deposes, and
says: that they are both duly elected officers of AMERICAN INTERNET TECHNICAL
CENTERS, INC., a Nevada, corporation ; and that they have read the same, know
the contents thereof, and that the same is true and correct to the best of their
knowledge and belief. Sworn to and subscribed before me this 25th day of June
1999.
My commission expires:
----------------------
Notary Public
Personally Known or produced I.D. Type of I.D. Produced:
EXHIBIT 2.1 of the Reorganization Agreement
OFFICER'S CERTIFICATION
for
Equity Growth Systems, inc.
A publicly held Delaware corporation
Exhibit 2.1: Warranty Exceptions
We, Charles J. Scimeca, President, and G. Richard Chamberlin,
Secretary, both duly elected and currently serving officers of Equity Growth
Systems, inc., a publicly held Delaware corporation, (hereinafter referred to as
the "Corporation"), hereby certify, they reasonably believe that the following
is a true and correct listing of all Warranty Exceptions as of June 24, 1999 for
the Corporation:
General: We call your attention to the fact that any information filed
with the Securities and Exchange Commission to the extent that it is contrary to
the information provided in this Reorganization Agreement, is a warranty
exception to the Reorganization Agreement signed and executed between the
parties.
121
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hand and seal, effective
as of the 25th day of June , 1999.
Equity Growth Systems, inc.
---------------------- -----------------------
Charles J. Scimeca, President G. Richard Chamberlin
President Secretary
BEFORE ME, the undersigned authority, on this date personally appeared
Charles J. Scimeca and G. Richard Chamberlin, who first being duly sworn,
deposes, and says: that they are both duly elected and currently serving
officers of EQUITY GROWTH SYSTEMS, inc., a publicly held Delaware, corporation ;
and that they have read the same, know the contents thereof, and that the same
is true and correct to the best of their knowledge and belief. Sworn to and
subscribed before me this 25th day of June 1999.
My commission expires:
---------------------------
Notary Public
Personally Known or produced I.D. Type of I.D. Produced:
EXHIBIT 2.2 of the Reorganization Agreement
OFFICER'S CERTIFICATION
for
AMERICAN INTERNET TECHNICAL CENTER, INC.,
a Florida corporation
Exhibit 2.2: Warranty Exceptions
We, J. Bruce Gleason, President, and Michael D. Umile, Secretary, both
duly elected and currently serving officers of American Internet Technical
Center, Inc., a Florida corporation, (hereinafter referred to as the
"Corporation"), hereby certify, they reasonably believe that the following is a
true and correct listing of all Warranty Exceptions as of June 24, 1999 for the
Corporation:
Litigation: Although none of the following lists the Corporation as a
Defendant, there is a possibility that the Corporation could be adversely
affected by the following:
1. The case of Lawrence S. Benjamin v. American Internet Technical
Center, (Ohio, case no. 355845), wherein a non-corporate affiliate of
the Company is a named party defendant in a class action law suit
alleging certain facsimile transmissions violate state and federal
law. Settlement negotiations have been conducted in the range of
$3,500.00 (initial offer of the Corporation) to $14,000.00, (initial
offer of Plaintiff.) The parties have orally agreed to execute a final
settlement agreement for $7,500.00. Copy of proposed settlement
agreement is attached. The Corporation admits no wrong doing.
122
<PAGE>
2. In addition to the above mentioned case, citizen complaints as to
certain unsolicited facsimile advertising have been filed in certain
states. There exists a potential liability for each complaint of
$500.00 per complaint. Complaints have been filed against a
non-corporate affiliate in the following states: State of Idaho:
Office of State Attorney General, complaint letter January 7, 1999,
(Patricia Rohwer, fax on 8/11/98); State of Florida: Office of the
State Attorney, letter dated June 18, 1998; State of Maryland: Office
of State Attorney, letter dated June 16, 1998, Suzanne Dale, fax dated
June 9, 1998; State of Wisconsin: Dept of Agriculture, letter dated
January 25, 1999, Peter Chappori, fax on June 22, 1998; Pear,
Sperling, Eggan: Michigan attorney's letter dated May 6, 1998, with
demand for $500.00, (Domino's Pizza and the Law firm).
IN WITNESS WHEREOF, we have hereunto set our hand and seal, effective
as of the 25th day of June , 1999.
American Internet Technical Center, Inc.
-------------------- ----------------------
J. Bruce Gleason Michael D. Umile
President Secretary
BEFORE ME, the undersigned authority, on this date personally appeared
J. Bruce Gleason and Michael D. Umile, who first being duly sworn, deposes, and
says: that they are both duly elected officers of AMERICAN INTERNET TECHNICAL
CENTER, INC., a Florida corporation, and that they have read the same, know the
contents thereof, and that the same is true and correct to the best of their
knowledge and belief. Sworn to and subscribed before me this 25th day of June
1999.
My commission expires:
----------------------
Notary Public
Personally Known or produced I.D. Type of I.D. Produced:
123
<PAGE>
OFFICER'S CERTIFICATION
for
AMERICAN INTERNET TECHNICAL CENTERS, INC.,
a Nevada corporation
EXHIBIT 2.2: Warranty Exceptions
We, J. Bruce Gleason, President, and Michael D. Umile, Secretary, both duly
elected and currently serving officers of American Internet Technical Centers,
Inc., a Nevada, corporation, (hereinafter referred to as the "Corporation"),
hereby certify, they reasonably believe that the following is a true and correct
listing of all Warranty Exceptions as of June 24, 1999 for the Corporation:
Litigation: Although none of the following lists American Internet Technical
Center, Inc., a Florida Corporation (hereinafter referred to as "American
Internet [Florida]") as a Defendant, there is a possibility that the Corporation
could be adversely affected by the following:
1. The case of Lawrence S. Benjamin v. American Internet [Florida],
(Ohio, case no. 355845), wherein a non-corporate affiliate of American
Internet [Florida] is a named party defendant in a class action law
suit alleging certain facsimile transmissions violate state and
federal law. Settlement negotiations have been conducted in the range
of $3,500.00 (initial offer of American Internet [Florida]) to
$14,000.00, (initial offer of Plaintiff.) The parties have orally
agreed to execute a final settlement agreement for $7,500.00. Copy of
proposed settlement agreement is attached. American Internet [Florida]
admits no wrong doing.
2. In addition to the above mentioned case, citizen complaints as to
certain unsolicited facsimile advertising have been filed in certain
states. There exists a potential liability for each complaint of
$500.00 per complaint. Complaints have been filed against a
non-corporate affiliate in the following states: State of Idaho:
Office of State Attorney General, complaint letter January 7, 1999,
(Patricia Rohwer, fax on 8/11/98); State of Florida: Office of the
State Attorney, letter dated June 18, 1998; State of Maryland: Office
of State Attorney, letter dated June 16, 1998, Suzanne Dale, fax dated
June 9, 1998; State of Wisconsin: Dept of Agriculture, letter dated
January 25, 1999, Peter Chappori, fax on June 22, 1998; Pear,
Sperling, Eggan: Michigan attorney's letter dated May 6, 1998, with
demand for $500.00, (Domino's Pizza and the Law firm).
IN WITNESS WHEREOF, we have hereunto set our hand and seal, effective
as of the 25th day of June , 1999.
American Internet Technical Centers, Inc.
-------------------- ----------------------
J. Bruce Gleason Michael D. Umile
President Secretary
BEFORE ME, the undersigned authority, on this date personally appeared
J. Bruce Gleason and Michael D. Umile, who first being duly sworn, deposes, and
says: that they are both duly elected officers of AMERICAN INTERNET TECHNICAL
CENTERS, INC., a Nevada, corporation ; and that they have read the same, know
the contents thereof, and that the same is true and correct to the best of their
knowledge and belief. Sworn to and subscribed before me this 25th day of June
1999.
My commission expires:
----------------------
Notary Public
Personally Known or produced I.D. Type of I.D. Produced:
124
<PAGE>
EXHIBIT 2.2(a) of the Reorganization Agreement
OFFICER'S CERTIFICATION
for
AMERICAN INTERNET TECHNICAL CENTER, INC.,
a Florida corporation
Exhibit 2.2(a): Real and Personal Property List
We, J. Bruce Gleason, President, and Michael D. Umile, Secretary, both
duly elected officers of American Internet Technical Center, Inc., a Florida
corporation, (hereinafter referred to as the "Corporation"), hereby certify,
they reasonably believe that the following is a true and correct listing of the
real and personal property as of June 24, 1999 for he Corporation:
Real property: None
Lease: Month to Month
Personal property:
Computer Stations including
monitors and printers 9 $10.800.00
Hosting servers and software 3 $ 7,400.00
Xerox laser printer 1 $ 640.00
Xerox photocopier 1. $ 810.00
Xerox work center fax unit 1 $ 385.00
Regular fax machines 4 $ 615.00
Telephone and phone system 16 $ 750.00
Work stations/room dividers 12 stations $ 2,100.00
Miscellaneous, Desks, Chairs,
File Cabinets $ 1,946.00
Exterior Signs 1 $ 750.00
Total: $26,196.00
125
<PAGE>
IN WITNESS WHEREOF, we have hereunto set our hand and seal, effective
as of the 25th day of June , 1999.
American Internet Technical Center, Inc.
-------------------- ----------------------
J. Bruce Gleason Michael D. Umile
President Secretary
BEFORE ME, the undersigned authority, on this date personally appeared
J. Bruce Gleason and Michael D. Umile, who first being duly sworn, deposes, and
says: that they are both duly elected officers of AMERICAN INTERNET TECHNICAL
CENTER, INC., a Florida corporation, and that they have read the same, know the
contents thereof, and that the same is true and correct to the best of their
knowledge and belief. Sworn to and subscribed before me this 25th day of June
1999.
My commission expires:
----------------------
Notary Public
Personally Known or produced I.D. Type of I.D. Produced:
OFFICER'S CERTIFICATION
for
AMERICAN INTERNET TECHNICAL CENTERS, INC.,
a Nevada corporation
Exhibit 2.2(a): Real and Personal Property List
We, J. Bruce Gleason, President, and Michael D. Umile, Secretary, both
duly elected officers of American Internet Technical Centers, Inc., a Nevada,
corporation, (hereinafter referred to as the "Corporation"), hereby certify,
they reasonably believe that the following is a true and correct listing of the
real and personal property as of June 24, 1999 for the Corporation:
Real property: None
Lease: None
Personal property: None
IN WITNESS WHEREOF, we have hereunto set our hand and seal, effective
as of the 25th day of June , 1999.
American Internet Technical Centers, Inc.
-------------------- ----------------------
J. Bruce Gleason Michael D. Umile
President Secretary
BEFORE ME, the undersigned authority, on this date personally appeared
J. Bruce Gleason and Michael D. Umile, who first being duly sworn, deposes, and
says: that they are both duly elected officers of AMERICAN INTERNET TECHNICAL
CENTERS, INC., a Nevada, corporation ; and that they have read the same, know
the contents thereof, and that the same is true and correct to the best of their
knowledge and belief. Sworn to and subscribed before me this 25th day of June
1999.
My commission expires:
----------------------
Notary Public
Personally Known or produced I.D. Type of I.D. Produced:
126
<PAGE>
EXHIBIT 2.2(i) of the Reorganization Agreement
UNAUDITED FINANCIALS
AMERICAN INTERNET TECHNICAL CENTER, INC.
BALANCE SHEET
DECEMBER 31, 1998
ASSETS
Current assets:
Cash $ 3,694
Accounts receivable -
net of allowance for doubtful accounts $24,914 85,614
Prepaid expenses 4,461
Total current ass 93,769
Property and equipment: 26,196
Less: accumulated depreciation (3,930)
Total property and equipment 22,266
Other assets:
Deposits 13,000
Total assets $ 129,035
LIABILITIES AND STOCKHOLDER'S EQUITY
Current liabilities:
Accounts payable $ 38,174
Accrued expenses 21,856
Total current liabilities 60,030
Stockholder's equity:
Common stock, $1.00 par value, 200 shares authorized,
issued and outstanding
200
Retained earnings 68,805
Total stockholder's equity 69,005
Total liabilities and stockholder's equity $ 129,035
==========
Unaudited-For Management Purposes Only
Page 1
127
<PAGE>
AMERICAN INTERNET TECHNICAL CENTER, INC.
STATEMENT OF INCOME AND RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1998
Revenues earned $ 797,502
Costs of revenues earned 151,502
Gross profit 646,000
Operating expenses:
Selling 323,762
General Administrative expenses 135,017
Total Operating Expenses 458,779
Net income $ 187,221
============
Unaudited-For Management Purposes Only
Page 2
128
<PAGE>
AMERICAN INTERNET TECHNICAL CENTER, INC.
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
YEAR ENDED DECEMBER 31, 1998
<TABLE>
<S> <C> <C> <C> <C> <C>
Number of Additional
Shares Common Paid-in Retained
Stock Capital Earnings Total
Balance (deficit), April 15, 1998 200 $ 200 $ - $ - $ 200
Distributions to stockholders - - - (118,416) (118,416)
Net income - 1998 - - - 187,221 187,221
Balance (deficit), December 31, 1998 200 $ 200 $ - $ 68,805 $ 69,005
</TABLE>
Unaudited-For Management Purposes Only
Page 3
AMERICAN INTERNET TECHNICAL CENTER, INC.
STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998
Cash flows from operating activities:
Net income $ 187,221
Adjustments to reconcile net income to net cash provided
by operating activities
Depreciation and amortization 3,930
(Increase) decrease in:
Accounts receivables (85,614)
Prepaid expenses (4,461)
Deposits (13,000)
Increase (decrease) in:
Accounts payable 38,174
Accrued expenses 21,856
Net cash provided by operating activities 148,106
Cash flow from investing activities:
Purchases of property and equipment (26,196)
Cash flows from financing activities:
Issuance of common stock 200
Distributions to stockholders (118,416)
Net cash used by financing activitie (118,216)
Net increase in cash 3,694
Cash at beginning of period -
Cash at end of period $ 3,694
=============
Additional cash payment information:
Interest paid
$ -
================
Income taxes $ -
================
Unaudited-For Management Purposes Only
Page 4
129
<PAGE>
EXHIBIT 2.2(x) of the Reorganization Agreement
OFFICER'S CERTIFICATION
for
AMERICAN INTERNET TECHNICAL CENTER, INC.,
a Florida corporation
Exhibit 2.2(x): Insurance Binders and Contracts
We, J. Bruce Gleason, President, and Michael D. Umile, Secretary, both
duly elected officers of American Internet Technical Center, Inc., a Florida
corporation, (hereinafter referred to as the "Corporation"), hereby certify,
they reasonably believe that the following is a true and correct listing of all
insurance binders or contracts of any kind as of June 25, 1999 for the
corporation:
Life Insurance: Bruce J. Gleason
Banner Life, policy number 17B022746,
$300,000 (death benefit), $1,784.00 (Annual premium)
Michael Umile
Banner Life, policy number 17B022745,
$300,000 (death benefit), $1,521.00 (Annual premium)
Workman's Comp. and Employment Liability
Binder dated 06-12-99: Reliance Insurance Company
Code: 0851587
Each accident, 100,000
Disease; each employee: 100,000
Disease policy limit 500,000
Estimated annual premium $1,720.00
IN WITNESS WHEREOF, we have hereunto set our hand and seal, effective
as of the 25th day of June , 1999.
American Internet Technical Center, Inc.
---------------------- -----------------------
J. Bruce Gleason Michael D. Umile
President Secretary
BEFORE ME, the undersigned authority, on this date personally appeared
J. Bruce Gleason and Michael D. Umile, who first being duly sworn, deposes, and
says: that they are both duly elected officers of AMERICAN INTERNET TECHNICAL
CENTER, INC., a Florida corporation, and that they have read the same, know the
contents thereof, and that the same is true and correct to the best of their
knowledge and belief. Sworn to and subscribed before me this 25th day of June
1999.
My commission expires:
- - ----------------------------------
Notary Public
Personally Known or produced I.D. Type of I.D. Produced:
130
<PAGE>
OFFICER'S CERTIFICATION
for
AMERICAN INTERNET TECHNICAL CENTERS, INC.,
a Nevada corporation
Exhibit 2.2(x): Insurance Binders and Contracts
We, J. Bruce Gleason, President, and Michael D. Umile, Secretary, both
duly elected officers of American Internet Technical Centers, Inc., a Nevada,
corporation, (hereinafter referred to as the "Corporation"), hereby certify,
they reasonably believe that the following is a true and correct listing of all
insurance binders or contracts of any kind as of June 25, 1999 for the
corporation:
NONE
IN WITNESS WHEREOF, we have hereunto set our hand and seal, effective
as of the 25th day of June , 1999.
American Internet Technical Centers, Inc.
------------------------ ----------------------
J. Bruce Gleason Michael D. Umile
President Secretary
BEFORE ME, the undersigned authority, on this date personally appeared
J. Bruce Gleason and Michael D. Umile, who first being duly sworn, deposes, and
says: that they are both duly elected officers of AMERICAN INTERNET TECHNICAL
CENTERS, INC., a Nevada, corporation ; and that they have read the same, know
the contents thereof, and that the same is true and correct to the best of their
knowledge and belief. Sworn to and subscribed before me this 25th day of June
1999.
My commission expires:
-------------------------
Notary Public
Personally Known or produced I.D. Type of I.D. Produced:
131
<PAGE>
EXHIBIT 3.4(d) of the Reorganization Agreement
FORM OF INVESTMENT LETTER
Charles J. Scimeca
President
Equity Growth Systems, inc.
8001 DeSoto Woods Drive
Sarasota, Florida 34243
Dear Sir:
I hereby certify and warrant that I am acquiring 1,127,431 shares of
Equity Growth Systems, inc.'s (the "Company") unregistered common stock (the
"Stock"). I hereby certify under penalty of perjury that upon receipt of the
Stock, I will be accepting it for my own account for investment purposes without
any intention of selling or distributing all or any part thereof. I represent
and warrant that I qualify as an accredited investor (as that term is defined in
rule 501 of Regulation D promulgated under authority of the Securities Act of
1933, as amended) or have been specifically excused from such requirement, in
writing by the Company's management, or, in the alternative, that I am
sophisticated in financial affairs, or have relied on the advice of someone
sophisticated in financial affairs, and I able to bear the economic risks of
this investment and I do not have any reason to anticipate any change in my
circumstances, financial or otherwise, nor any other particular occasion or
event which should cause me to sell or distribute, or necessitate or require my
sale or distribution of the Stock. No one other than me has any beneficial
interest in the Stock.
I further certify that I have consulted with my own legal counsel who,
after having been apprized by me of all the material facts surrounding this
transaction, opined to me, for the benefit of
132
<PAGE>
the Company, that this transaction was being effected in full compliance with
the applicable securities laws of my state of domicile.
I agree that I will in no event sell or distribute any of the Stock
unless in the opinion of your counsel (based on an opinion of my legal counsel)
the Stock may be legally sold without registration under the Securities Act of
1933, as amended, and/or registration and/or other qualification under
then-applicable State and/or Federal statutes, or the Stock shall have been so
registered and/or qualified and an appropriate prospectus, shall then be in
effect.
I am fully aware that the Stock is being offered and sold by the
corporation to me in reliance on the exemption provided by Sections 3(b), 4(2)
or 4(6) or the Securities Act of 1933, as amended, which exempts the sale of
securities by an issuer where no public offering is involved, and on my
certifications and warranties.
In connection with the foregoing, I consent to your legending my
certificates representing the Stock to indicate my investment intent and the
restriction on transfer contemplated hereby and to your placing a "stop
transfer" order against the Stock in the Company's stock transfer books until
the conditions set forth herein shall have been met.
I acknowledge by my execution hereof that I have had access to your
books, records and properties, and have inspected the same to my full and
complete satisfaction prior to my acquisition of the Stock. I represent and
warrant that because of my experience in business and investments, I am
competent to make an informed investment decision with respect thereto on the
basis of my inspection of your records and my questioning of your officers.
I further certify that my domicile is located at the address listed in
this letter.
Very truly yours,
/s/ J. Bruce Gleason /s/
-------------------
J. Bruce Gleason
44 Havenwood Drive
Pompano Beach, Florida 33064
Accepted:
This 25 day of June, 1999.
/s/ Charles J. Scimeca /s/
- - ----------------
Charles J. Scimeca, President
Equity Growth Systems, inc.
133
<PAGE>
FORM OF INVESTMENT LETTER
Charles J. Scimeca
President
Equity Growth Systems, inc.
8001 DeSoto Woods Drive
Sarasota, Florida 34243
Dear Sir:
I hereby certify and warrant that I am acquiring 1,105,325 shares of
Equity Growth Systems, inc.'s (the "Company") unregistered common stock (the
"Stock"). I hereby certify under penalty of perjury that upon receipt of the
Stock, I will be accepting it for my own account for investment purposes without
any intention of selling or distributing all or any part thereof. I represent
and warrant that I qualify as an accredited investor (as that term is defined in
rule 501 of Regulation D promulgated under authority of the Securities Act of
1933, as amended) or have been specifically excused from such requirement, in
writing by the Company's management, or, in the alternative, that I am
sophisticated in financial affairs, or have relied on the advice of someone
sophisticated in financial affairs, and I able to bear the economic risks of
this investment and I do not have any reason to anticipate any change in my
circumstances, financial or otherwise, nor any other particular occasion or
event which should cause me to sell or distribute, or necessitate or require my
sale or distribution of the Stock. No one other than me has any beneficial
interest in the Stock.
I further certify that I have consulted with my own legal counsel who,
after having been apprized by me of all the material facts surrounding this
transaction, opined to me, for the benefit of the Company, that this transaction
was being effected in full compliance with the applicable securities laws of my
state of domicile.
I agree that I will in no event sell or distribute any of the Stock
unless in the opinion of your counsel (based on an opinion of my legal counsel)
the Stock may be legally sold without registration under the Securities Act of
1933, as amended, and/or registration and/or other qualification under
then-applicable State and/or Federal statutes, or the Stock shall have been so
registered and/or qualified and an appropriate prospectus, shall then be in
effect.
I am fully aware that the Stock is being offered and sold by the
corporation to me in reliance on the exemption provided by Sections 3(b), 4(2)
or 4(6) or the Securities Act of 1933, as amended, which exempts the sale of
securities by an issuer where no public offering is involved, and on my
certifications and warranties.
In connection with the foregoing, I consent to your legending my
certificates representing the Stock to indicate my investment intent and the
restriction on transfer contemplated hereby and to your placing a "stop
transfer" order against the Stock in the Company's stock transfer books until
the conditions set forth herein shall have been met.
I acknowledge by my execution hereof that I have had access to your
books, records and properties, and have inspected the same to my full and
complete satisfaction prior to my acquisition of the Stock. I represent and
warrant that because of my experience in business and investments, I am
134
<PAGE>
competent to make an informed investment decision with respect thereto on the
basis of my inspection of your records and my questioning of your officers.
I further certify that my domicile is located at the address listed in
this letter.
Very truly yours,
/s/ Michael D. Umile /s/
-------------------
Michael D. Umile
210 Oregon Lane
Boca Raton, Florida 33487
Accepted:
This 25th day of June, 1999.
/s/ Charles J. Scimeca /s/
- - ----------------
Charles J. Scimeca, President
Equity Growth Systems, inc.
FORM OF INVESTMENT LETTER
Charles J. Scimeca
President
Equity Growth Systems, inc.
8001 DeSoto Woods Drive
Sarasota, Florida 34243
Dear Sir:
I hereby certify and warrant that I am acquiring ________ shares of
Equity Growth Systems, inc.'s (the "Company") unregistered common stock (the
"Stock"). I hereby certify under penalty of perjury that upon receipt of the
Stock, I will be accepting it for my own account for investment purposes without
any intention of selling or distributing all or any part thereof. I represent
and warrant that I qualify as an accredited investor (as that term is defined in
rule 501 of Regulation D promulgated under authority of the Securities Act of
1933, as amended) or have been specifically excused from such requirement, in
writing by the Company's management, or, in the alternative, that I am
sophisticated in financial affairs, or have relied on the advice of someone
sophisticated in financial affairs, and I able to bear the economic risks of
this investment and I do not have any reason to anticipate any change in my
circumstances, financial or otherwise, nor any other particular occasion or
event which should cause me to sell or distribute, or necessitate or require my
sale or distribution of the Stock. No one other than me has any beneficial
interest in the Stock.
I further certify that I have consulted with my own legal counsel who,
after having been
135
<PAGE>
apprized by me of all the material facts surrounding this transaction, opined to
me, for the benefit of the Company, that this transaction was being effected in
full compliance with the applicable securities laws of my state of domicile.
I agree that I will in no event sell or distribute any of the Stock
unless in the opinion of your counsel (based on an opinion of my legal counsel)
the Stock may be legally sold without registration under the Securities Act of
1933, as amended, and/or registration and/or other qualification under
then-applicable State and/or Federal statutes, or the Stock shall have been so
registered and/or qualified and an appropriate prospectus, shall then be in
effect.
I am fully aware that the Stock is being offered and sold by the
corporation to me in reliance on the exemption provided by Sections 3(b), 4(2)
or 4(6) or the Securities Act of 1933, as amended, which exempts the sale of
securities by an issuer where no public offering is involved, and on my
certifications and warranties.
In connection with the foregoing, I consent to your legending my
certificates representing the Stock to indicate my investment intent and the
restriction on transfer contemplated hereby and to your placing a "stop
transfer" order against the Stock in the Company's stock transfer books until
the conditions set forth herein shall have been met.
I acknowledge by my execution hereof that I have had access to your
books, records and properties, and have inspected the same to my full and
complete satisfaction prior to my acquisition of the Stock. I represent and
warrant that because of my experience in business and investments, I am
competent to make an informed investment decision with respect thereto on the
basis of my inspection of your records and my questioning of your officers.
I further certify that my domicile is located at the address listed in
this letter.
Very truly yours,
/s/ Lynn Poppiti /s/
-------------------
Lynn Poppiti
487 Ocean Drive
Ocean Beach, Florida
Accepted:
This 25 day of June, 1999.
/s/ Charles J. Scimeca /s/
- - ----------------
Charles J. Scimeca, President
Equity Growth Systems, inc.
136
<PAGE>
EXHIBIT 4.2 of the Reorganization Agreement
Subscribers Employment Agreements
(See Exhibit 2.8 of the 8-KSB)
EXHIBIT 4.6(b) of the Reorganization Agreement
Lock-Up & Voting Agreement
(See Exhibit 10.33 of the 8-KSB)
EXHIBIT 4.9(a) of the Reorganization Agreement
The 504 Documents
137
<PAGE>
Offering Memorandum
Dated March 2, 1998 Confidential
Ascot Industries, Inc.
(A Nevada Corporation)
1,600,000 Shares
At a Price of S.01 Per Share
Ascot Industries Inc., a Nevada corporation (the "Company"), is a
company which is in the Internet, advertising and communications business.
The Company's principal office is located at 222 Lakeview Avenue, Suite
160-124, West Palm Beach, FL 33401.
AN INVESTMENT IN THE COMPANY IS SPECULATIVE AND INVOLVES A HIGH DEGREE
OF RISK. INVESTMENT IN THE SECURITIES OFFERED HEREBY IS SUITABLE ONLY FOR
PERSONS OF SUBSTANTIAL FINANCIAL MEANS WHO CAN AFFORD A TOTAL LOSS OF THEIR
INVESTMENT AND WILL BE SOLD ONLY TO ACCREDITED OR OTHERWISE QUALIFIED INVESTORS.
FOR A DISCUSSION OF THE MATERIAL RISKS IN CONNECTION WITH THE PURCHASE OF THE
SHARES, SEE "INVESTMENT RISK CONSIDERATIONS".
THE SECURITIES ARE BEING OFFERED WITHOUT REGISTRATION UNDER THE
SECURITIES ACT OF 1933 AS AMENDED (THE"ACT'), IN RELIANCE UPON THE EXEMPTION
FROM REGISTRATION AFFORDED BY SECTIONS 4(2) AND 3(B) OF THE SECURITIES ACT AND
REGULATION D PROMULGATED THEREUNDER.
THIS MEMORANDUM HAS NOT BEEN REVIEWED OR APPROVED OR DISAPPROVED, NOR
HAS THE ACCURACY OR ADEQUACY OF THE INFORMATION SET FORTH HEREIN BEEN PASSED
UPON BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES
ADMINISTRATOR. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE. THIS
OFFERING IS BEING MADE PURSUANT TO THE EXEMPTIONS AFFORDED BY SECTIONS 4(2! OR
3(B) OF THE SECURITIES ACT OF 1933 AN RULE 504 PROMULGATED THEREUNDER AND STATE
SMALL CORPORATE OFFERING REGISTRATION PROVISIONS. PURSUANT TO RULE 504 THE
SHARES SOLD HEREBY WILL NOT BE SUBJECT TO ANY LIMITATIONS ON RESALE THEREOF
UNDER FEDERAL LAW. THE SHARES MAY HOWEVER, BE SUBJECT TO LIMITATIONS ON THE
OFFER AND SALE AND THE RESALE OF THE SHARES IMPOSED BY THE BLUE SKY LAWS OF
INDIVIDUAL STATES IN ADDITION THE COMPANY INTENDS TO FILE THE REQUIRED DOCUMENTS
IN CERTAIN OTHER STATES IDENTIFIED BY MANAGEMENT AS HAVING POSSIBLE INVESTOR
INTEREST AND USE ITS BEST EFFORTS TO QUALIFY THE SHARES FOR SECONDARY TRADING IN
SUCH STATES, THOUGH NO ASSURANCE CAN BE GIVEN THAT IT WILL BE ABLE TO QUALIFY
THE SHARES FOR SECONDARY TRADING IN ANY SUCH STATES IN WHICH IT SUBMITS SUCH
APPLICATIONS AND DOCUMENTS. AN INABILITY TO QUALIFY THE SHARES FOR SECONDARY
TRADING WILL CREATE SUBSTANTIAL RESTRICTION ON THE TRANSFERABILITY OF SUCH
SHARES
138
<PAGE>
WHICH MAY NEGATE THE BENEFIT OF THE EXEMPTION PROVIDED BY RULE 504 OF REGULATION
D. SEE "RISK FACTORS." THE COMPANY WILL USE ITS BEST EFFORTS TO CAUSE THE SHARES
TO BE LISTED ON THE ELECTRONIC BULLETIN BOARD OPERATED BY THE NATIONAL
ASSOCIATION OF SECURITIES DEALERS INC AS A MARKET IN WHICH THEY MAY BE TRADED.
THERE IS NO ASSURANCE THAT SUCH LISTING WILL BE OBTAINED OR THAT IF A LISTING IS
OBTAINED THAT ANY MARKET FOR THE SHARES WILL DEVELOP, OR IF DEVELOPED, THAT IT
WILL BE SUSTAINED.
Subscription Proceeds to the
Price Commissions(1 ) Company
Per Share $0.01 $ -0- $ 16,000
( 1 ) The Shares are being sold by the Company's sole Officer and no commissions
will be paid in connection with the Offering.
Ascot Industries, Inc.
222 Lakeview Avenue
Suite 160-124
West Palm Beach, FL 33401
(561) 833-5092
NOTICES TO PROSPECTIVE INVESTORS
THIS OFFERING MEMORANDUM IS SUBMITTED IN CONNECTION WITH THE OFFERING
OF THE SHARES AND MAY NOT BE REPRODUCED OR USED FOR ANY OTHER PURPOSE. BY
ACCEPTING DELIVERY OF THIS OFFERING MEMORANDUM, EACH RECIPIENT AGREES TO RETURN
THIS OFFERING MEMORANDUM AND ALL OTHER DOCUMENTS. IF THE RECIPIENT DOES NOT
AGREE TO PURCHASE ANY OF THE SHARES, TO THE COMPANY AT ITS ADDRESS LISTED ON THE
COVER OF THE OFFERING MEMORANDUM.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND
RESALE AND MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED BY THE
SECURITIES ACT OF 1933, AS AMENDED AND THE APPLICABLE STATE SECURITIES LAWS,
PURSUANT TO REGISTRATION OR EXEMPTION THEREFROM. INVESTORS SHOULD DE AWARE THAT
THEY WILL BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME.
IN MAKING AN INVESTMENT DECISION, INVESTORS MUST RELY ON THEIR OWN
EXAMINATION OF THE PERSON OR ENTITY CREATING THE SECURITIES AND THE TERMS OF THE
OFFERING, INCLUDING THE MERITS AND RISKS INVOLVED. THESE SECURITIES HAVE NOT
BEEN RECOMMENDED BY ANY FEDERAL OR STATE SECURITIES COMMISSION OR REGULATORY
AUTHORITIES. FURTHERMORE THE FOREGOING AUTHORITIES HAVE NOT CONFIRMED THE
ACCURACY OR DETERMINED THE ADEQUACY OF THIS DOCUMENT. ANY REPRESENTATION TO THE
CONTRARY IS A CRIMINAL OFFENSE.
139
<PAGE>
THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO PURCHASE SHARES TO ANY PERSON IN ANY STATE OR IN ANY
JURISDICTION IN WHICH SUCH AN OFFER OR SOLICITATION IS UNLAWFUL. SUBJECT TO THE
PRECEDING SENTENCE, THIS OFFERING MEMORANDUM IS INTENDED FOR THE EXCLUSIVE USE
OF THE PERSON TO WHOM IT IS DELIVERED OR AN AUTHORIZED AGENT OF THE COMPANY ON
BEHALF OF THE COMPANY.
PROSPECTIVE INVESTORS ARE NOT TO CONSTRUE THE CONTENTS OF THIS
CONFIDENTIAL OFFERING MEMORANDUM OR ANY PRIOR ON SUBSEQUENT COMMUNICATIONS AS
LEGAL, TAX OR INVESTMENT ADVICE. EACH INVESTOR SHOULD CONSULT HIS OWN COUNSEL,
ACCOUNTANT OR BUSINESS ADVISOR AS TO LEGAL, TAX AND RELATED MATTERS COVERING HIS
INVESTMENT.
THE SHARES ARE OFFERED SUBJECT TO THE ACCEPTANCE BY THE COMPANY OF
OFFERS BY PROSPECTIVE INVESTORS, ALLOCATION OF SHARES BY THE COMPANY AND OTHER
CONDITIONS SET FORTH HEREIN. THE COMPANY MAY REJECT ANY OFFER IN WHOLE OR IN
PART AND NEED NOT ACCEPT OFFERS IN THE ORDER RECEIVED.
THIS CONFIDENTIAL OFFERING MEMORANDUM DOES NOT CONTAIN AN UNTRUE
STATEMENT OF A MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE
THE STATEMENTS MADE IN LIGHT OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE,
NOT MISLEADING. IT CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS
PURPORTED TO BE SUMMARIZED HEREIN.
THE SHARES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED , OR THE SECURITIES LAWS OF CERTAIN STATES AND ARE BEING
OFFERED AND SOLD IN RELIANCE ON EXEMPTIONS FROM THE REGISTRATION REQUIREMENTS OF
SAID ACT AND SUCH LAWS. THE SHARES UNDERLYING THE SHARES ARE SUBJECT TO
RESTRICTIONS ON TRANSFERABILITY AND RESALE AND MAY NOT TRANSFERRED OR RESOLD
EXCEPT AS PERMITTED UNDER SAID ACT AND SUCH LAWS PURSUANT TO REGISTRATION OR
EXEMPTION THEREFROM. THE SHARES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION OR OTHER REGULATORY AUTHORITIES. NOR HAVE ANY
OF THE FOREGOING AUTHORITIES PASSED UPON ON ENDORSED THE MERITS OF THIS OFFERING
OR THE ACCURACY OR ADEQUACY OF THE OFFERING MEMORANDUM. ANY REPRESENTATION TO
THE CONTRARY IS UNLAWFUL.
THE SUBSCRIPTION PRICE FOR THE SHARES IS PAYABLE IN FULL UPON
SUBSCRIPTION. THE OFFERING PRICE WAS DETERMINED ARBITRARILY BY THE COMPANY AND
BEARS NO RELATIONSHIP TO ASSETS, EARNINGS, BOOK VALUE ON ANY OTHER CRITERIA OF
VALUE. NO REPRESENTATION IS MADE THAT THE SHARES HAVE A MARKET VALUE OF, ON
COULD BE RESOLD AT, THAT PRICE (SEE "RISK FACTORS')
THE SHARES WILL BE OFFERED BY THE COMPANY ON A BEST EFFORTS BASIS TO
A SELECT GROUP OF INVESTORS WHO MEET CERTAIN SUITABILITY STANDARDS. NO
COMMISSIONS AND NO NON-ACCOUNTABLE OR ACCOUNTABLE EXPENSE ALLOWANCE
140
<PAGE>
OF ANY KIND WILL BE PAID FROM OR DEDUCTED FROM THE PROCEEDS RAISED HEREBY.
THE COMPANY WILL ADSORB ALL MARKETING EXPENSES ASSOCIATED WITH THIS
OFFERING (SEE "USE OF PROCEEDS ).
THE COMPANY HAS AGREED TO PROVIDE, PRIOR TO THE CONSUMMATION OF THE
TRANSACTIONS CONTEMPLATED HEREIN, TO EACH POTENTIAL PURCHASER OF SECURITIES (OR
HIS REPRESENTATIVES OR BOTH) THE OPPORTUNITY TO ASK QUESTIONS OF, AND RECEIVE
ANSWERS FROM, THE COMPANY OR ANY PERSON ACTING ON ITS BEHALF CONCERNING THE
TERMS AND CONDITIONS OF THIS OFFERING AND TO OBTAIN ANY ADDITIONAL INFORMATION,
TO THE EXTENT THEY POSSESS SUCH INFORMATION OR CAN ACQUIRE IT WITHOUT
UNREASONABLE EFFORT ON EXPENSE, NECESSARY TO VERIFY THE ACCURACY OF THE
INFORMATION SET FORTH HEREIN.
THIS OFFERING MEMORANDUM DOES NOT CONSTITUTE AN OFFER TO ANY PERSON
WHO DOES NOT MEET THE SUITABILITY STANDARDS DESCRIBED HEREIN. REPRODUCTION
OF THIS OFFERING MEMORANDUM IS STRICTLY PROHIBITED.
NO PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS OFFERING MEMORANDUM EXCEPT AS NOTED ABOVE
WITH REGARD TO QUESTIONS ASKED OF THE COMPANY AND OF THOSE AUTHORIZED TO ACT ON
ITS BEHALF. NO OFFERING LITERATURE OR ADVERTISING HAS BEEN AUTHORIZED BY THE
COMPANY EXCEPT THE INFORMATION CONTAINED HEREIN. ANY INFORMATION ON
REPRESENTATION NOT CONTAINED HEREIN MUST NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY OR ITS OFFICERS AND DIRECTORS. EXCEPT AS OTHERWISE
INDICATED, THIS OFFERING MEMORANDUM SPEAKS AS OF THE DATE ON THE COVER PAGE.
NEITHER THE DELIVERY OF THIS OFFERING MEMORANDUM NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES. CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE RESPECTIVE DATES AT WHICH THE
INFORMATION IS GIVEN HEREIN OR THE DATE HEREOF.
ANY UNSOLD SHARES MAY BE PURCHASED BY THE COMPANY OR ITS AFFILIATES ON
THE SAME TERMS AS SHARES PURCHASED BY OTHER INVESTORS.
NOTICES TO RESIDENTS OF CERTAIN STATES
NOTICE TO ALABAMA RESIDENTS
THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE
ALABAMA SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS NOT BEEN FILED WITH THE ALABAMA SECURITIES COMMISSION. THE COMMISSION DOES
NOT RECOMMEND OR ENDORSE THE PURCHASE OF ANY SECURITIES, NOR DOES IT PASS UPON
THE ACCURACY OR COMPLETENESS OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
ANYTHING TO THE CONTRARY HEREIN NOTWITHSTANDING THE INVESTMENT OF
141
<PAGE>
AN ALABAMA PURCHASER WHO IS NOT AN ACCREDITED INVESTOR MAY NOT EXCEED
TWENTY (20%) PER CENT OF SUCH PURCHASER S NET WORTH, EXCLUSIVE OF PRINCIPAL
RESIDENCE, FURNISHINGS AND AUTOMOBILES.
NOTICE TO ALASKA RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE ALASKA SECURITIES
ACT AND MAY NOT SE SOLD WITHOUT REGISTRATION UNDER THAT ACT OR EXEMPTION
THEREFROM.
NOTICE TO ARIZONA RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE ARIZONA SECURITIES
ACT AND ARE BEING SOLD IN RELIANCE UPON THE EXEMPTION CONTAINED IN SECTION
44-1844(1) OF SUCH ACT. THESE SECURITIES MAY NOT BE SOLD WITHOUT REGISTRATION
UNDER SUCH ACT OR EXEMPTION THEREFROM.
ARIZONA RESIDENTS MUST HAVE EITHER (I) A MINIMUM NET WORTH OF AT LEAST
SEVENTY FIVE THOUSAND ($75,000) DOLLARS (EXCLUDING HOME, HOME FURNISHINGS AND
AUTOMOBILES) AND A MINIMUM ANNUAL GROSS INCOME OF SEVENTY FIVE THOUSAND
($75,000) DOLLARS; ON (II) A NET WORTH OF AT LEAST TWO HUNDRED TWENTY FIVE
THOUSAND ($225,000) DOLLARS (AS COMPUTED ABOVE).
NOTICE TO ARKANSAS RESIDENTS
THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER
SECTION 14(L))(14) OF THE ARKANSAS SECURITIES ACT AND SECTION 4(2) OF THE
SECURITIES ACT OF 1933. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES
HAS NOT BEEN FILED WITH THE ARKANSAS SECURITIES DEPARTMENT OR WITH THE
SECURITIES AND EXCHANGE COMMISSION. NEITHER THE DEPARTMENT NOR THE COMMISSION
HAS PASSED UPON THE VALUE OF THESE SECURITIES, MADE ANY RECOMMENDATIONS AS TO
THEIR PURCHASE, APPROVED OR DISAPPROVED THE OFFERING, OR PASSED UPON THE
ADEQUACY OR ACCURACY OF THIS OFFERING MEMORANDUM. ANY REPRESENTATION TO THE
CONTRARY IS UNLAWFUL.
NOTWITHSTANDING ANYTHING TO THE CONTRARY HEREIN, AN INVESTMENT BY A NON
ACCREDITED INVESTOR MAY NOT EXCEED TWENTY (20%) PER CENT OF THE INVESTORS NET
WORTH AT THE TIME OF PURCHASE, ALONE OR JOINTLY WITH SPOUSE.
NOTICE TO CALIFORNIA RESIDENTS
IF THE COMPANY ELECTS TO SELL SHARES IN THE STATE OF CALIFORNIA. IT IS
UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THE SHARES, OR OTHER INTEREST
THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR WITHOUT THE PRIOR WRITTEN
CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA, EXCEPT
AS PERMITTED IN THE COMMISSIONERS RULES.
142
<PAGE>
NOTICE TO CONNECTICUT RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE CONNECTICUT
SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION OR
EXEMPTION THEREFROM.
NOTICE TO DELAWARE RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE DELAWARE
SECURITIES ACT AND MAY NOT BE SOLD ON TRANSFERRED WITHOUT REGISTRATION OR
EXEMPTION THEREFROM.
NOTICE TO FLORIDA RESIDENTS
THE SHARES REFERRED TO HEREIN WILL BE SOLD TO, AND ACQUIRED BY, THE
HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061 OF THE FLORIDA SECURITIES
ACT. THE SHARES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF FLORIDA.
IN ADDITION, ALL FLORIDA RESIDENTS SHALL HAVE THE PRIVILEGE OF VOIDING THE
PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER OF CONSIDERATION IS MADE
BY SUCH PURCHASER TO THE ISSUER, AN AGENT OR THE ISSUER, AN ESCROW AGENT OR
WITHIN THREE (3) DAYS AFTER THE AVAILABILITY OF THAT PRIVILEGE IS COMMUNICATED
TO SUCH PURCHASER, WHICH EVER OCCURS LATER.
NOTICE TO GEORGIA RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE GEORGIA SECURITIES
ACT OF 1973 AS AMENDED. IN RELIANCE UPON AN EXEMPTION FROM REGISTRATION SET
FORTH IN SECTION 9(M) OF SUCH ACT AND THE SECURITIES CANNOT BE SOLD OR
TRANSFERRED EXCEPT IN A TRANSACTION WHICH IS EXEMPT UNDER SUCH ACT OR PURSUANT
TO AN EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT OR IN A TRANSACTION WHICH
IS OTHERWISE IN COMPLIANCE WITH SAID ACT.
NOTICE TO IDAHO RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE CONNECTICUT
SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION OR
EXEMPTION THEREFROM.
ANYTHING TO THE CONTRARY NOTWITHSTANDING, THE INVESTMENT BY A NON-
ACCREDITED INVESTOR MAY NOT EXCEED TEN (10%) PER CENT OF THE INVESTOR'S NET
WORTH.
NOTICE TO INDIANA RESIDENTS
EACH INVESTOR PURCHASING SHARES MUST WARRANT THAT HE HAS EITHER (I)
143
<PAGE>
A NET WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) EQUAL TO AT
LEAST THREE (3) TIMES THE AMOUNT OF HIS INVESTMENT BUT IN NO EVENT LESS THAN
SEVENTY FIVE THOUSAND ($75,000) DOLLARS OR (II) A NET WORTH (EXCLUSIVE OF HOME,
HOME FURNISHINGS AND AUTOMOBILES OF TWO (2) TIMES HIS INVESTMENT BUT IN NO EVENT
LESS THAN THIRTY THOUSAND ($30,000) DOLLARS AND A GROSS INCOME OF THIRTY
THOUSAND ($30.00.0) DOLLARS.
NOTICE TO IOWA RESIDENTS
IOWA RESIDENTS MUST HAVE EITHER (I) A NET WORTH OF AT LEAST FORTY
THOUSAND ($40,000) DOLLARS EXCLUDING HOME, HOME FURNISHINGS AND AUTOMOBILES} AND
A MINIMUM ANNUAL GROSS INCOME OF FORTY THOUSAND ($40,000) DOLLARS, OR (II) A NET
WORTH OF AT LEAST ONE HUNDRED TWENTY FIVE THOUSAND ($125,000) DOLLARS AS
COMPUTED ABOVE.
NOTICE TO KANSAS RESIDENTS
AN INVESTMENT BY A NON-ACCREDITED INVESTOR SHALL NOT EXCEED TWENTY
(20%) PER CENT OF THE INVESTOR'S NET WORTH; EXCLUDING PRINCIPAL RESIDENCE,
FURNISHINGS THEREIN AND PERSONAL AUTOMOBILES.
NOTICE TO KENTUCKY RESIDENTS
THESE SECURITIES REPRESENTED BY THIS CERTIFICATE (OR OTHER DOCUMENT),
HAVE BEEN ISSUED PURSUANT TO A CLAIM OF EXEMPTION FROM THE REGISTRATION OR
QUALIFICATION PROVISIONS OF FEDERAL AND STATE SECURITIES LAWS AND MAY NOT BE
SOLD OR TRANSFERRED WITHOUT COMPLIANCE WITH THE REGISTRATION OR QUALIFICATION
PROVISIONS OF APPLICABLE FEDERAL AND STATE SECURITIES LAWS OR APPLICABLE
EXEMPTIONS THEREIN.
ANYTHING TO THE CONTRARY HEREIN NOTWITHSTANDING, THE INVESTMENT BY
A NON-ACCREDITED INVESTOR MAY NOT EXCEED TEN (10%) OF THE INVESTOR'S NET
WORTH.
NOTICE TO MAINE RESIDENTS
THESE SECURITIES ARE BEING SOLD PURSUANT TO THE EXEMPTION FROM
REGISTRATION WITH THE BANK SUPERINTENDENT OF THE STATE OF MAINE UNDER SECTION
10520(2)(R) OF TITLE 32 OF THE MAINE REVISED STATUTES. THESE SECURITIES MAY BE
DEEMED RESTRICTED SECURITIES AND AS SUCH THE HOLDER MAY NOT BE ABLE TO RESELL
THE SECURITIES UNLESS PURSUANT TO REGISTRATION UNDER STATE OR FEDERAL SECURITIES
LAWS OR UNLESS AN EXEMPTION UNDER SUCH LAWS ENLISTS.
NOTICE TO MARYLAND RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE MARYLAND
144
<PAGE>
SECURITIES ACT IN RELIANCE UPON THE EXEMPTION FROM REGISTRATION SET FORTH IN
SECTION 11-602(9) OF SUCH ACT. UNLESS THESE SECURITIES ARE REGISTERED, THEY MAY
NOT BE REOFFERED FOR SALE OR RESOLD IN THE STATE OF MARYLAND, EXCEPT AS A
SECURITY, OR IN A TRANSACTION EXEMPT UNDER SUCH ACT.
NOTICE TO MASSACHUSETTS RESIDENTS
MASSACHUSETTS RESIDENTS MUST HAVE HAD EITHER (1) A MINIMUM NET WORTH OF
AT LEAST FIFTY THOUSAND ($50,000) DOLLARS EXCLUDING HOME, HOME FURNISHINGS AND
AUTOMOBILES AND HAD DURING THE LAST YEAR, OR IT IS ESTIMATED THAT THE SUBSCRIBER
WILL HAVE DURING THE CURRENT TAX YEAR, TAXABLE INCOME OF FIFTY THOUSAND
($50,000) DOLLARS, OR (2) A NET WORTH OF AT LEAST ONE HUNDRED FIFTY THOUSAND
($150,000) DOLLARS (AS COMPUTED ABOVE).
NOTICE TO MICHIGAN RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE MICHIGAN
SECURITIES ACT AND MAY NOT BE SOLD OR TRANSFERRED WITHOUT REGISTRATION
UNDER THAT ACT OR EXEMPTION THEREFROM.
THE COMPANY SHALL PROVIDE ALL MICHIGAN INVESTORS WITH A DETAILED
WRITTEN STATEMENT OF THE APPLICATION OF THE PROCEEDS OF THE OFFERING WITHIN SIX
(6) MONTHS AFTER COMMENCEMENT OF THE OFFERING OR UPON COMPLETION, WHICHEVER
OCCURS FIRST, AMD WITH ANNUAL CURRENT BALANCE SHEETS AND INCOME STATEMENTS
THEREAFTER.
NOTICE TO MINNESOTA RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER CHAPTER 80 OF THE
MINNESOTA SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED ON OTHERWISE DISPOSED
OF FOR VALUE EXCEPT PURSUANT TO REGISTRATION OR OPERATION OF LAW.
NOTICE TO MISSISSIPPI RESIDENTS
THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE
MISSISSIPPI SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO THESE
SECURITIES HAS NOT BEEN FILED WITH THE MISSISSIPPI SECRETARY OF STATE OR WITH
THE SECURITIES AND EXCHANGE COMMISSION. NEITHER THE SECRETARY OF STATE NOR THE
COMMISSION HAS PASSED UPON THE VALUE OF THESE SECURITIES, NOR HAS APPROVED OR
DISAPPROVED THE OFFERING. THE SECRETARY OF STAT E DOES NOT RECOMMEND THE
PURCHASE OF THESE OR ANY OTHER SECURITIES.
THERE IS NO ESTABLISHED MARKET FOR THESE SECURITIES AND THERE MAY NOT
BE ANY MARKET FOR THESE SECURITIES IN THE FUTURE. THE SUBSCRIPTION PRICE OF
THESE SECURITIES HAS BEEN ARBITRARILY DETERMINED BY THE ISSUER AND IS NOT AN
INDICATION OF THE ACTUAL VALUE OF THESE SECURITIES.
145
<PAGE>
THE PURCHASER OF THESE SECURITIES MUST MEET CERTAIN SUITABILITY
STANDARDS AND MUST BE ABLE TO BEAR THE ENTIRE LOSS OR HIS INVESTMENT.
ADDITIONALLY. ALL PURCHASERS WHO ARE NOT ACCREDITED INVESTORS MUST HAVE A NET
WORTH OF AT LEAST THIRTY THOUSAND ($30,000) DOLLARS AND INCOME OF THIRTY
THOUSAND ($30,000) DOLLARS OR A NET WORTH OF SEVENTY FIVE THOUSAND ($75.000)
DOLLARS. THESE SECURITIES MAY NOT BE TRANSFERRED FOR A PERIOD OF ONE (1) EXCEPT
IN A TRANSACTION WHICH IS EXEMPT UNDER THE MISSISSIPPI SECURITIES ACT OR IN A
TRANSACTION IN COMPLIANCE WITH THE MISSISSIPPI SECURITIES ACT.
NOTICE TO MISSOURI RESIDENTS
THESE SECURITIES ARE SOLD TO, AND BEING ACQUIRED BY, THE HOLDER IN A
TRANSACTION EXEMPTED UNDER SECTION 10, SUBSECTION 409.402(B), MISSOURI
UNIFORM SECURITIES ACT (RMSO 1969).
THE SHARES HAVE NOT BEEN REGISTERED UNDER SAID ACT IN THE STATE OF
MISSOURI. UNLESS THE SHARES ARE REGISTERED, THEY MAY NOT BE REOFFERED OR RESOLD
IN THE STATE OF MISSOURI, EXCEPT AS A SECURITY, OR IN A TRANSACTION EXEMPT UNDER
SAID ACT.
ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTOR MUST HAVE A MINIMUM ANNUAL
INCOME OF THIRTY THOUSAND ($30,000) DOLLARS AND A NET WORTH OF AT LEAST THIRTY
THOUSAND ($30,000) DOLLARS,(EXCLUSIVE OF HOME, FURNISHINGS AND AUTOMOBILES) OR A
NET WORTH OF SEVENTY FIVE THOUSAND ($75,000) DOLLARS EXCLUSIVE OF HOME,
FURNISHINGS AND AUTOMOBILES.
AN INVESTMENT BY A NON-ACCREDITED INVESTOR SHALL NOT EXCEED TWENTY
(20%) PER CENT OF THE INVESTOR'S NET WORTH.
NOTICE TO MONTANA RESIDENTS
EACH MONTANA RESIDENT WHO SUBSCRIBES FOR THE SECURITIES BEING
OFFERED HEREBY AGREES NOT TO SELL THESE SECURITIES FOR A PERIOD OF TWELVE
(12) MONTHS AFTER DATE OF PURCHASE.
ANYTHING TO THE CONTRARY NOTWITHSTANDING, THE INVESTMENT BY A NON-
ACCREDITED INVESTOR MAY NOT EXCEED TWENTY (20) PER CENT OF THE INVESTOR'S
NET WORTH.
NOTICE TO NEBRASKA RESIDENTS
THESE SHARES HAVE NOT BEEN REGISTERED UNDER THE NEBRASKA SECURITIES
ACT AND MAY NOT BE SOLD WITHOUT REGISTRATION UNDER THAT ACT OR EXEMPTION
THEREFROM.
NOTICE TO NEW HAMPSHIRE RESIDENTS
146
<PAGE>
EACH NEW HAMPSHIRE INVESTOR PURCHASING SHARES MUST WARRANT THAT HE HAS
EITHER (I) A NET WORTH (EXCLUSIVE OF HOME, HOME FURNISHINGS AND AUTOMOBILES) OF
TWO HUNDRED FIFTY THOUSAND ($250,000) DOLLARS OR (2) A NET WORTH (EXCLUSIVE OF
HOME, HOME FURNISHINGS AND AUTOMOBILES OF ONE HUNDRED TWENTY FIVE THOUSAND
($125,000) DOLLARS AND FIFTY THOUSAND ($50,000) DOLLARS ANNUAL INCOME.
NOTICE TO NEW JERSEY RESIDENTS
THE ATTORNEY GENERAL OF THE STATE HAS NOT PASSED ON OR ENDORSED THE
MERITS OF THIS OFFERING. THE FILING OF THE WITHIN OFFERING DOES NOT CONSTITUTE
APPROVAL OF THE ISSUE OR THE SALE THEREOF BY THE BUREAU OF SECURITIES OR THE
DEPARTMENT OF LAW AND PUBLIC SAFETY OF THE STATE OF NEW JERSEY. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
NOTICE TO NORTH DAKOTA RESIDENTS
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES COMMISSIONER OF THE STATE NORTH DAKOTA NOR HAS THE COMMISSIONER
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
NOTICE TO NEW YORK RESIDENTS
THIS OFFERING MEMORANDUM HAS NOT BEEN REVIEWED BY THE ATTORNEY
GENERAL. PRIOR TO ITS ISSUANCE AND USE. THE ATTORNEY GENERAL OF THE STATE OF
NEW YORK HAS NOT PASSED ON OR ENDORSED THE MERITS OF THIS OFFERING. ANY
REPRESENTATION TO THE CONTRARY IS UNLAWFUL.
THIS OFFERING MEMORANDUM DOES NOT CONTAIN AN UNTRUE STATEMENT OF A
MATERIAL FACT OR OMIT TO STATE A MATERIAL FACT NECESSARY TO MAKE THE STATEMENTS
MADE IN OF THE CIRCUMSTANCES UNDER WHICH THEY WERE MADE, NOT MISLEADING. IT
CONTAINS A FAIR SUMMARY OF THE MATERIAL TERMS AND DOCUMENTS PURPORTED TO BE
SUMMARIZED HEREIN.
NOTICE TO NORTH CAROLINA RESIDENTS
THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE
NORTH CAROLINA SECURITIES ACT. THE NORTH CAROLINA SECURITIES ADMINISTRATOR
NEITHER RECOMMENDS NOR ENDORSES THE PURCHASE OF ANY SECURITY, NOR HAS THE
ADMINISTRATOR PASSED ON THE ACCURACY OR ADEQUACY OF THE INFORMATION PROVIDED
HEREIN. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOTICE TO OKLAHOMA RESIDENTS
147
<PAGE>
THE SECURITIES RENDERED BY THIS CERTIFICATE NAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933 OR THE OKLAHOMA SECURITIES ACT. THE SECURITIES
HAVE BEEN ACQUIRED FOR INVESTMENT AND MAY NOT BE SOLD OR TRANSFERRED FOR VALUE
IN THE ABSENCE OF AN EFFECTIVE REGISTRATION OF THEM UNDER THE SECURITIES ACT OF
1933 AND/OR THE OKLAHOMA SECURITIES ACT OF AN OPINION OF COUNSEL TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED UNDER SUCH ACT OR ACTS.
ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTMENT BY A NON-
ACCREDITED INVESTOR SHALL NOT EXCEED TEN (10) PER CENT OF THE INVESTOR'S NET
WORTH.
NOTICE TO OREGON RESIDENTS
THE SECURITIES OFFERED HAVE BEEN REGISTERED WITH THE DIRECTOR OF THE
STATE OF OREGON UNDER THE PROVISIONS OF OAR 441-65-240, THE INVESTOR IS ADVISED
THAT THE DIRECTOR HAS MADE ONLY A CURSORY REVIEW OF THE REGISTRATION STATEMENT
AND HAS NOT REVIEWED THIS DOCUMENT SINCE THIS DOCUMENT IS NOT REQUIRED TO BE
FILED WITH THE DIRECTOR.
THE INVESTOR MUST RELY ON THE INVESTOR'S OWN EXAMINATION OF THE COMPANY
CREATING THE SECURITIES, AND THE TERMS OF THE OFFERING INCLUDING THE MERITS AND
RISKS INVOLVED IN MAKING AN INVESTMENT DECISION ON THESE SECURITIES.
NOTICE TO PENNSYLVANIA RESIDENTS
ANY PERSON WHO ACCEPTS AN OFFER TO PURCHASE THE SECURITIES IN THE
COMMONWEALTH OF PENNSYLVANIA IS ADVISED, THAT PURSUANT TO SECTION 207(1N) OF
THEE PENNSYLVANIA SECURITIES ACT, HE SHALL HAVE THE RIGHT TO WITHDRAW HIS
ACCEPTANCE, AND RECEIVE A FULL REFUND OF ANY CONSIDERATION PAID, WITHOUT
INCURRING ANY LIABILITY, WITHIN TWO (2) BUSINESS DAYS FROM 'THE TIME THAT HE
RECEIVES NOTICE OF THIS WITHDRAWAL RIGHT AND RECEIVES THE PLACEMENT OFFERING
MEMORANDUM. ANY PERSON WHO WISHES TO EXERCISE SUCH RIGHTS OF WITHDRAWAL IS
ADVISED TO GIVE NOTICE BY LETTER OR TELEGRAM SENT AND POSTMARKED BEFORE THE END
OF THE SECOND BUSINESS DAY AFTER EXECUTION. IF THE REQUEST FOR WITHDRAWAL IS
TRANSMITTED ORALLY, WRITTEN CONFIRMATION MUST BE GIVEN. ANY PERSON WHO PURCHASES
INTERESTS WHO IS A PENNSYLVANIA RESIDENT WILL NOT SELL SUCH INTERESTS FOR A
PERIOD OF TWELVE (12) MONTHS BEGINNING WITH THE CLOSING DATE. PENNSYLVANIA
RESIDENTS MUST HAVE EITHER (I) A MINIMUM NET WORTH OF THIRTY THOUSAND ($30.000)
DOLLARS EXCLUDING HOME, HOME FURNISHINGS AND AUTOMOBILES AND A MINIMUM ANNUAL
GROSS INCOME OF THIRTY THOUSAND ($30.000) DOLLARS, OR (II) A NET WORTH OF AT
LEAST SEVENTY FIVE THOUSAND ($75,000) DOLLARS (AS COMPUTED ABOVE), AND MAY NOT
INVEST MORE THAN TEN (10%) PER CENT OF THEIR NET WORTH (EXCLUSIVE OF THE
SUBSCRIBER'S HOME, HOME FURNISHINGS AND AUTOMOBILES.
148
<PAGE>
NOTICE TO SOUTH CAROLINA RESIDENTS
THESE SECURITIES ARE OFFERED PURSUANT TO A CLAIM OF EXEMPTION UNDER THE
SOUTH CAROLINA UNIFORM SECURITIES ACT. A REGISTRATION STATEMENT RELATING TO
THESE SECURITIES HAS NOT BEEN FILED WITH THE SOUTH CAROLINA SECURITIES
COMMISSIONER. THE COMMISSIONER DOES NOT RECOMMEND OR ENDORSE THE PURCHASE OF ANY
SECURITIES, NOR DOES IT PASS UPON THE ACCURACY OR COMPLETENESS OF THIS OFFERING
MEMORANDUM. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
NOTICE TO SOUTH DAKOTA RESIDENTS
THE SHARES HAVE NOT BEEN REGISTERED UNDER CHAPTER 47-31 OF THE SOUTH
DAKOTA SECURITIES LAWS AND MAY NOT BE SOLD, TRANSFERRED ON OTHERWISE DISPOSED OF
FOR VALUE EXCEPT PURSUANT TO REGISTRATION, EXEMPTION THEREFROM OR OPERATION OF
LAW.
SOUTH DAKOTA RESIDENTS MUST HAVE EITHER (I) A MINIMUM NET WORTH OF AT
LEAST SIXTY THOUSAND ($60,000) DOLLARS (EXCLUDING HOME, HOME FURNISHINGS AND
AUTOMOBILES) AND A MINIMUM GROSS INCOME OF SIXTY THOUSAND ($60,000) DOLLARS, OR
(II) A NET WORTH OF AT LEAST TWO HUNDRED TWENTY FIVE THOUSAND ($225,000) DOLLARS
(AS COMPUTED ABOVE).
NOTICE TO TENNESSEE RESIDENTS
ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTMENT BY ANY INVESTOR
SHALL NOT EXCEED TEN (10%) PER CENT OR THE INVESTOR'S NET WORTH.
NOTICE TO TEXAS RESIDENTS
THIS OFFERING MEMORANDUM IS FOR THE INVESTOR'S CONFIDENTIAL USE AND MAY
NOT BE REPRODUCED. ANY ACTION CONTRARY TO THESE RESTRICTIONS MAY PLACE SUCH
INVESTOR AND THE ISSUER IN VIOLATION OR THE TEXAS SECURITIES ACT.
ANYTHING TO THE CONTRARY NOTWITHSTANDING, AN INVESTMENT BY ANY INVESTOR
SHALL NOT EXCEED TEN (10%) PER CENT OF THE INVESTOR'S NET WORTH.
NOTICE TO UTAH RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE UTAH SECURITIES
ACT AND MAY NOT BE SOLD WITHOUT REGISTRATION UNDER THAT ACT ON EXEMPTION
THEREFROM.
NOTICE TO WASHINGTON RESIDENTS
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE WASHINGTON
149
<PAGE>
SECURITIES ACT AND THE ADMINISTRATOR OF SECURITIES OF THE STATE OF
WASHINGTON AS NOT REVIEWED THE OFFERING OR OFFERING MEMORANDUM. THESE
SECURITIES MAY NOT BE SOLD WITHOUT REGISTRATION UNDER THE ACT OR EXEMPTION
THEREFROM.
IT IS THE RESPONSIBILITY OF ANY INVESTOR PURCHASING SHARES TO SATISFY
ITSELF AS TO FULL OBSERVANCE OF THE LAWS OF ANY RELEVANT TERRITORY OUTSIDE THE
UNITED STATES IN CONNECTION WITH ANY SUCH PURCHASE, INCLUDING OBTAINING ANY
REQUIRED GOVERNMENTAL OR OTHER CONSENTS OR OBSERVING ANY OTHER APPLICABLE
REQUIREMENTS.
OFFERING MEMORANDUM
Ascot Industries, Inc.
(A Nevada Corporation)
Offering Memorandum Dated March 2, 1998
1,600,000 Shares
Ascot Industries, Inc., (the Company corporation, is offering on a
"best efforts, no minimum basis. up to a maximum of 1,600,000 shares of common
stock (~Common Stock ), $ 001 par value, at $0.01 per Share. Since there is no
minimum, no proceeds will be held in escrow account and all funds will be
immediately available to the Company.
The Company intends to apply for inclusion of the Common Stock on the
Over the Counter Electronic Bulletin Board. There can be no assurances that an
active trading market will develop, even if the securities are accepted for
quotation. Additionally, even if the Company's securities are accented for
quotation and active trading develops, the Company is still required to maintain
certain minimum criteria established by NASDAQ, of which there can be no
assurance that the company will be able to continue to fulfill such criteria.
Prior to this offend, there has been no public market for the common
stock of the Company. The price of the Shares offered hereby was arbitrarily
determined by the Company and does not bear any relationship to the Company's
assets, book value, net worth, results of operations or any other recognized
criteria of value. For additional information regarding the factors considered
in determining the offering price of the Shares, see "Risk Factors - Arbitrary
Offering Price",. "Description of Securities".
The Company does not presently file reports or other information with
the Securities and Exchange Commission ("Commission"). However, following
completion of this offering, the Company intends to furnish its security holders
with annual reports containing audited financial statements and such interim
reports, in each case as it may determine to furnish or as may be required by
law.
150
<PAGE>
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
COMMISSION OF ANY STATES ECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROS PECTUS.ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL
OFFENSE.
THE SECURITIES ARE OFFERED BY THE COMPANY SUBJECT TO PRIOR SALE,
ACCEPTANCE OR AN OFFER TO PURCHASE, WITHDRAWAL, CANCELLATION OR MODIFICATION OF
THE OFFER WITHOUT NOTICE THE COMPANY RESERVES THE RIGHT TO REJECT ANY ORDER, IN
WHOLE OR In PART, FOR THE PURCHASE OF ANY OF THE SECURITIES OFFERED HEREBY.
This offering involves special risks concerning the Company (see "Risk
Factors"). Investors should carefully review the entire Memorandum and should
not invest any funds in this Offering unless they can afford to lose their
entire investment. In making an investment decision, investors must rely on
their own examination of the issuer and the terms of the Offering, including the
merit and risks involved.
OFFERING SUMMARY
The following summary information is qualified in its entirety by the
detailed information and financial statements and notes thereto appearing
elsewhere in this Memorandum.
The Company is in the Internet, advertising and communications
business. The Company was incorporated in the State of Nevada and its principal
executive office is located at 222 Lakeview Avenue, Suite 160--124, West Palm
Beach, FL 33401 and its telephone number is (561 ) 833-5092
RISK FACTORS
THE SECURITIES OFFERED HEREBY ARE SPECULATIVE AND INVOLVE A HIGH DEGREE OF
RISK. ONLY THOSE PERSONS ABLE TO LOSE THEIR ENTIRE INVESTMENT SHOULD PURCHASE
THESE SECURITIES. PROSPECTIVE INVESTORS,PRIOR TO MAKING AN INVESTMENT DECISION.
SHOULD CAREFULLY READ THIS PROSPECTUS AND CONSIDER, ALONG WITH OTHER MATTERS
REFERRED TO HEREIN, THE FOLLOWING RISK FACTORS:
Risk Factors Relating to the Business of the Company
Start-up or Development Stage Company. The Company did not have any
operations before its organization and is a "start-up" or "development stage"
company No assurances can be Liven that the Company will the able to compete
with other companies in its industry The purchase of the securities offered
hereby must be regarded as the placing of funds at a high risk in a new or
"start-up" venture with all the unforeseen costs. expenses, problems. and
difficulties to which such ventures are subject See "Use of Proceeds to Issuer"
and "Description of Business "
No Assurance of Profitability To date the Company has not generated any
revenues from operations. The Company does not anticipate any significant
revenues in the near future The Company's
151
<PAGE>
ability to successfully implement its business plan is dependent on the
completion of this Offering There can be no assurance that the Company will be
able to develop Into a successful or profitable business
No Assurance of Payment of Dividends. No assurances can be made that
the future operations of the Company will result in additional revenues or will
be profitable. Should the operations of the Company become profitable it Is that
the Company would retain much or all of its earnings in order to finance future
growth and expansion Therefore, the Company does not presently intend to pay
dividends, and it is not likely that any dividends win be paid in the
foreseeable future. See "Dividend Policy".
Possible Need for Additional Financing . The Company intends to fund
its operations and other capital needs for the next 12 months substantially from
the operations and proceeds of this Offering, but there can be no assurance that
such funds will be sufficient for these purposes. The Company may require
additional amounts of capital for its future expansion, operating costs and
working capital. The Company has made no arrangements to obtain future
additional financing, and if required there can be no assurance that such
financing will be available, or that such financing will be available on
acceptable terms. See "Use of Proceeds.
Dependence on Management. The Company's success is principally dependent
on its current management personnel for the operation of its business.
Broad Discretion in Application of Proceeds. The management of the
Company has broad discretion to adjust the application and allocation of the net
proceeds of this offering, in order to address chanced circumstances and
opportunities As a result of the foregoing, the success of the Company will be
substantially dependent upon the discretion and judgment of the management of
the Company with respect to the application and allocation of the net proceeds
hereof. Pending use of such proceeds, the net proceeds of this offering will be
invested by the Company in temporary, short-term interest-bearing obligations.
See "Use of Proceeds.
Arbitrary Offering Price. There has been no prior public market for the
Company's securities. The price to the public of the Shares offered hereby has
been arbitrarily determined by the Company and bears no relationship to the
Company's earnings, book value or any other recognized criteria of value.
Immediate and Substantial Dilution. An investor in this offering will
experience immediate and substantial dilution.
Lack of Poor Market for Securities of the Company. No prior market has
existed for the securities being offered hereby and no assurance can be given
that a market will develop subsequent to this offering.
No Escrow of Investors' Funds. This offering is being made on a "best
efforts, no minimum basis As such all the funds from this Offering will be
immediately available to the Company.
No assurance of acquisition While it is the company's intend to acquire
either all of the shares or assets of other industry related companies in
addition to expanding its own operations, there is no assurance that the company
will be able to achieve this goal. That event would cause a materially adverse
effect on the future of the company
152
<PAGE>
USE OF PROCEEDS
The Company will receive the proceeds from the Offering for working capital.
DIVIDEND POLICY
Holders of the Company's Common Stock are entitled to dividends when,
as and if declared by the Board of Directors out of funds legally available
therefor. The Company does not anticipate the declaration or payment of any
dividends in the foreseeable future. The Company intends to retain earnings, if
any to finance the development and expansion of its business. Future dividend
policy will be subject to the discretion of the Board of Directors and will be
contingent upon future earnings, if any, the Company's financial condition,
capital requirements, general business conditions and other factors Therefore,
there can be no assurance that any dividends of any kind will ever be paid.
THE COMPANY
The Company is in the Internet, advertising and communications
business. In addition, the company is negotiating with other companies in the
Internet, advertising and communications field with the intent of acquiring all
of the shares or assets of one or more of these companies However, if the
company is unable to complete the acquisition/acquisitions it will continue to
operate its existing business and expand its activities through internal growth.
Management
Dale B. Finfrock, Jr., is the Company's sole Director, and its President
and Secretary
EXECUTIVE COMPENSATION
Since the Company was recently incorporated, it has no historical
information with respect to executive compensation. At the conclusion of the
Offering, the Company does not intend to compensate its officers for services to
the Company from the proceeds of this Offering and will only do so when and if
the Company generates profits.
Compensation of Directors
Directors are not paid fees for their services nor reimbursed for expenses of
attending board meetings.
DESCRIPTION OF SECURITIES
Shares
The Company is offering hereby a "best efforts, no minimum basest' up to
1,600,000 shares of Commo n Stock at $.01 per Share.
Common Stock
153
<PAGE>
The authorized capital stock of the Company consists of 20,000, 000
shares of Common Stock, $. 001 par value. Holders of the Common Stock do not
have preemptive rights to purchase additional shares of Common Stock or other
subscription rights. The Common Stock carries no conversion rights and is not
subject to redemption or to any sinking fund provisions. All shares of Common
Stock are entitled to share equally in dividends from sources legally available
therefor when, as and if declared by the Board of Directors and, upon
liquidation or dissolution of the Company, whether voluntary or involuntary, to
share equally in the assets of the Company available for distribution to
stockholders All outstanding shares of Common Stock are validly authorized and
issued, fully paid and non-assessable, and all shares to be sold and issued as
contemplated hereby, will be validly authorized and issued, fully paid and
non-assessable. The Board of Directors is authorized to issue additional shares
of Common Stock, not to exceed the amount authorized by the Company's
Certificate of Incorporation, on such terms and conditions and for such
consideration as the Board may deem appropriate without further stockholder
action. The above description concerning the Common Stock of the Company does
not purport to be complete. Reference is made to the Company's Certificate of
Incorporation and Bylaws which are available for inspection upon proper notice
at the Company's offices, as well as to the applicable statutes of the State of
Nevada for a more complete description concerning the rights and liabilities of
stockholders.
Prior to this offering there has been no market for the Common Stock of
the Company' and no predictions can be made of the effect, if any, that market
sales of shares or the availability of shares for sale will have on the market
price prevailing from time to time. Nevertheless, sales of significant amounts
of the Common Stock of the Company in the public market may adversely affect
prevailing market paces, and may impair the Company's ability to raise capital
at that time through the sale of its equity securities.
Each holder of Common Stock is entitled to one vote per share on all
matters on which such stockholders are entitled to vote. Since the shares of
Common Stock do not have cumulative voting rights, the holders of more than 50
percent of the shares voting for the election of directors can elect all the
directors if they choose to do so and, in such event, the holders of the
remaining shares will not be able to elect any person to the Board of Directors.
PLAN OF DISTRIBUTION
The Company has no underwriter for this Offering. The Offering is
therefore a self-underwriting. The Shares will be offered by the Company at the
offering price of $.01 per Share.
Price of the Offering.
There is no, and never has been, a market for the Shares, and there is
no guaranty that a market will ever develop for the Company's shares.
Consequently the offering price has been determined by the Company. Among other
factors considered in such determination were estimates of business potential
for the Company, the Company's financial condition, an assessment of the
Company's management and the general condition of the securities market at the
time of this Offering. However, such price does not necessarily bear any
relationship to the assets, income or net worth of the Company.
The offering price should not be considered an indication of the actual
value of the Shares. Such price is subject to change as a result of market
conditions and other factors, and no assurance can be given that the Shares can
be resold at the Offering Price.
154
<PAGE>
There can be no assurance that an active trading market will develop
upon completion of this Offering, or if such market develops, that it will
continue. Consequently, purchasers of the Shares offered hereby may not find a
ready market for Shares.
ADDITIONAL INFORMATION
Each investor warrants and represents to the Company that, prior to
making an investment in the Company, that he has had the opportunity to inspect
the books and records of the Company and that he has had the opportunity to make
inquiries to the officers and directors of the Company and further that he has
been provided full access to such information.
INVESTOR SUITABILITY STANDARDS AND
INVESTMENT RESTRICTIONS
Suitability
Shares will be offered and sold pursuant an exemption under the
Securities Act, and exemptions under applicable state securities and Blue Sky
laws. There are different standards under these federal and state exemptions
which must be met by prospective investors in the Company.
The Company will sell Shares only to those Investors it reasonably
believes meet certain suitability requirements described below.
Each prospective Investor must complete a Confidential Purchaser
questionnaire and each Purchaser Representative, if any, must complete a
Purchaser Representative Questionnaire.
EACH INVESTOR MUST BE RESPONSIBLE FOR DETERMINING THAT IT IS PERMITTED
TO INVEST IN THE COMPANY, THAT ALL APPROPRIATE ACTIONS TO AUTHORIZE SUCH AN
INVESTMENT HAVE BEEN TAKEN, AND THAT ANY REQUIREMENTS THAT ITS INVESTMENTS BE
DIVERSIFIED OR SUFFICIENTLY LIQUID HAVE BEEN MEET.
An Investor will qualify as an Accredited Investor if it falls within
any one of the following categories at the time of the sale of the Shares to
that Investor.
( 1 ) A bank as defined in Section 3(a)(2) of the Securities Act, or a
savings and loan association or other institution as defined in Section
3(a)(5)(A) of the Securities Act whether acting in its individual or fiduciary
capacity; a broker or dealer registered pursuant to Section 15 of the Securities
Exchange Act of 1934; an insurance company as defined in Section 2(13) of the
Securities Act; an investment company registered the Investment Company Act of
1940 or a business development company as defined in Section 2(a)(48) of that
Act; a Small Business Investment Company licensed by the United States Small
Business Administration under Section 301(c)or(d)of the Small Business
Investment Act of 1958; a plan established and maintained by a state, its
political subdivisions, or any agency or instrumentality of a state or its
political subdivisions, for the benefit of its employees, if such plan has total
assets in excess of $5,000,000; an employee benefit plan within the meaning of
the Employee Retirement Income Security Act of 1974, if the investment decision
is made by a plan fiduciary, as defined in Section 3(21) of that Act, which is
either a bank, savings and loan association, insurance company, or registered
investment adviser, of the
155
<PAGE>
employee benefit plan has total assets in excess of $5,000,000, or, if a
self-directed plan with the investment decisions made solely by persons that are
accredited investors;
(2) A private business development company as defined in Section
202(a)(22) of the Investment Advisers Act of 1942;
(3) An organization described in Section 501(c)(3) of the internal
Revenue Code with total assets in excess of $5,000,000;
(4) A director or executive officer of the Company.
(5) A natural person whose individual net worth, or joint net worth
with that person's spouse, at the time of such person's purchase of the Shares
exceeds $1,100,000;
(6) A natural person who had an individual income in excess of $200,000
in each of the two most recent years or joint income with that person's spouse
in excess of $300,000 in each of those years and has a reasonable expectation of
reaching the same income level in the current year;
(7) A trust with total assets in excess of $5,000,000, not formed for
the specific purpose of acquiring the securities offered, whose purchase is
directed by a sophisticated person as describe in Rule 506(b)(2)(ii) of
Regulation D; and
(8) An entity in which all of the equity owners are accredited
investors (as defined above).
As used in this Memorandum the term "net worth" means the excess of
total assets over total liabilities. In computing net worth for the purpose of
(5) above, the principal residence of the investor must be valued at cost,
including cost of improvements, or at recently appraised value by an
institutional lender making a secured loan, net of encumbrances. In determining
income an Investor should add to the investor's adjusted gross income any
amounts attributable to tax exempt income received, losses claimed as a limited
partner in any limited partnership, deductions claimed for depletion,
contributions to an IRA or KEOGH retirement plan, alimony payments, and any
amount by which income form long-term capital gains has been reduced in arriving
at adjusted gross income.
In order to meet the conditions for exemption from the registration
requirements under the securities laws of certain jurisdictions, investors who
are residents of such jurisdiction may be required to meet additional
suitability requirements.
An investor that does not qualify as an accredited investor is a
non-accredited investor and may acquire Shares only if:
(1) The Investor is knowledgeable and experienced with respect to
investments in limited partnerships either alone or with its Purchaser
Representative, if any; and
(2) The Investor has been provided access to all relevant documents it
desires or needs; and
156
<PAGE>
(3) The Investor is aware of its limited ability to sell and/or transfer
its Shares in the Company; and
(4) The investor can bear the economic risk(including loss of the
entire investment)without impairing its ability to provide for its financial
needs and contingencies in the same manner as it was prior to making such
investment.
THE COMPANY RESERVES THE RIGHT IN ITS ABSOLUTE DISCRETION TO
DETERMINE IF A POTENTIAL INVESTOR MEETS OR FAILS TO MEET THE SUITABILITY
STANDARDS SET FORTH IN THIS SECTION.
Additional Suitability Requirements for Benefit Plan Investors
In addition to the foregoing suitability standards generally applicable
to all Investors, the Employee Retirement Income Security Act of 1934, as
amended ("ERISA"), and the regulations promulgated thereunder by the Department
of Labor impose certain additional suitability standards for Investors that are
qualified pension, profit-sharing or stock bonus plans ("Benefit Plan
Investor"). In considering the purchase of Shares, a fiduciary with respect to a
prospective Benefit Pl an I investor must consider whether an investment in the
Shares will satisfy the prudence requirement of section 404(a)(1)(B) of ERISA,
since there is not expected to be any market created in which to sell or
otherwise dispose of the Shares In addition, the fiduciary must consider whether
the investment in Shares will satisfy the diversification requirement of Section
404(a)(1)(C) of ERISA
Restrictions on Transfer or Resale of Shares
The Availability of federal and state exemptions and the legality of
the offers and sales of the Shares are conditioned upon, among other things, the
fact that the purchase of Shares by all Investors are for investment purposes
only and not with a view lo resale or distribution. Accordingly each prospective
Investor will be required to represent in the Subscription Agreement that it is
purchasing the Shares for its own account and for the purpose of investment
only, not with a view to, or in accordance with, the distribution of sale of the
Shares and that it we not sell pledge. assign or transfer or offer to sell,
pledge, assign or transfer any of its Shares without an effective registration
statement under the Securities Act, or an exemption there from and an opinion of
counsel acceptable to the Company that registration under the Securities Act is
not required and that the transaction complies with elf other applicable federal
and state securities or Blue Sky laws.
157
<PAGE>
Ascot Industries, Inc.
(A Nevada Corporation)
Subscription Documents
March 2, 1998
INSTRUCTION FOR COMPLETION:
In connection with your subscription for Ascot Industries, Inc. (the
Company), enclosed herewith are the following documents which must be properly
and fully completed and signed:
1. INVESTMENT AGREEMENT. Fully completed and signed. Please make your
check payable to the Company. (Note to partnerships who wish to subscribe: each
general partner of the partnership must fully complete and sign the Investment
Agreement).
NOTES TO SUBSCRIBERS:
(a) Please indicate on the Subscription Agreement and the Confidential
Purchaser Questionnaire how the Units are to be held (e.g. joint tenants with
rights of survivorship, tenants by the entireties, etc).
(b) Please return Subscription Documents and checks to the Company at
P.O. Box 669, Palm Beach, FL 33480. Checks should be made payable to the Ascot
Industries, Inc.
(c) Additional copies of the required forms are available from the
Company at P.O. Box 669, Palm Beach, FL 33480, or by calling the Company at
(561) 833-5092.
INVESTMENT SUBSCRIPTION AGREEMENT
To: Ascot Industries, Inc.
P.O. Box 669
Palm Beach, FL 33480
Gentlemen:
You have informed me that the Company is offering shares of the
Company's common stock at a price of $0.01 per share.
1. Subscription. Subject to the terms and conditions of this
Subscription Agreement (the Agreement.), the undersigned hereby tenders this
subscription, together with the payment (in cash or by bank check in lawful
funds of the United States) of an amount equal to $0.01 per Share, and the other
subscription documents, all in the forms submitted to the undersigned.
2. Acceptance of Subscription: Adoption and Appointment. It is
understood and agreed that this Agreement is made subject to the following terms
and conditions:
(a) The Company shall have the right to accept or reject subscriptions
in any order it shall determine, in whole or in part, for any reason (or for no
reason).
(b) Investments are not binding on the Company until accepted by the
Company. The Company will refuse any subscription by giving written notice to
the purchaser by personal delivery or first-class mail. In its sole discretion,
the Company may establish a limit on the purchase of Units by a particular
purchaser.
158
<PAGE>
(c) The undersigned hereby intends that his signature hereon shall
constitute an irrevocable subscription to the Company of this Agreement. subject
to a three day right of rescission for Florida residents pursuant to Section 517
061 of the Florida Securities and Investor Protection Act. Each Florida resident
has a right to withdraw his or her subscription for Units, without any liability
whatsoever, and receive a full refund of all monies paid, within three days
after the execution of this Agreement or payment for the Units has been made,
whichever is later. To accomplish this withdrawal, a subscriber need only send a
letter or telegram to the Company at the address set forth in this Agreement,
indicating his or her intention to withdraw. Such letter or telegram should be
sent and postmarked prior to the end of the aforementioned third day. It is
prudent to send such letter by certified mail, return receipt requested, to
ensure that is received and also to evidence the time when it was mailed. If the
request is made orally (in person or by telephone) to the Company a written
confirmation that the request has been received should be requested.
Upon satisfaction of the all the conditions referred to herein, copies
of this Agreement, duly executed by the Company, will be delivered to the
undersigned.
3. Representations and Warranties of the Undersigned The undersigned
hereby represents and warrants to the Company as follows:
(a) The undersigned (I) has adequate means of providing for his current
needs and possible personal contingencies, and he has no need for liquidity of
his investment in the Company;(ii) is an Accredited Investor, as defined below,
or has the net worth sufficient to bear the risk of losing his entire
investment, and (iii) has, alone or together with his Purchaser
Representative(as herein after defined), such knowledge end experience
nonfinancial matters that the undersigned is capable of evaluating the relative
risks and merits of this investment
"Accredited Investors" include (I) accredited investors as defined in
Regulation D under the Securities Act of 1933, as amended ("Reg D") i. e. (a)
$1,000,000 in net worth (including spouse) or (b) $200,000 in annual income for
the last two years end projected for the current year; and (ii)the Company or
affiliates of the Company.
"Non-Accredited Investors" are all subscribers who are not"Accredited Investors"
All investors must have either a preexisting personal or business
relationship with the Company or any of its affiliates, or by reason of their
business or financial experience (or the business or financial experience of
their unaffiliated professional advisors)would reasonably be assumed to have the
capacity to protect their own interests in connection with this investment. Each
subscriber must represent that he is purchasing for his own account not with a
view to or for resale in connection with any distribution of the Units.
(b) The address set forth in his Purchaser Questionnaire is his true
and correct residence, and he has no present intention of becoming a resident of
any other state or jurisdiction.
159
<PAGE>
(c) The undersigned acknowledges that if a Purchaser Representative.,
as defined in Regulation D, has been utilized by the undersigned, (i) the
undersigned has completed and executed the Acknowledgment of Use of Purchaser
Representative; (ii) in evaluating his investment as contemplated hereby, the
undersigned has been advised by his Purchaser Representative as to the merits
and risks of the investment in general and the suitability of the investment for
the undersigned in particular; and (ii) the undersigned's Purchaser
Representative has completed and executed the Purchaser Representative
Questionnaire.
(d) The undersigned has received and read or reviewed with his
Purchaser Representative, if any, and represents he is familiar with this
Agreement, the other Subscription Documents and the Memorandum accompanying
these documents. The undersigned confirms that all documents, records and books
pertaining to the investment in the Company and requested by the undersigned or
his Purchaser Representative have been made available or have been delivered to
the undersigned and/or the undersigned's Purchaser Representative.
(e) The undersigned and/or his Purchaser Representative have had an
opportunity to ask questions of and receive answers from the Company or a person
or persons acting on its behalf, concerning the terms and conditions of this
investment and the financial condition, operations and prospects of the Company.
(f) The undersigned understands that the Units have not been registered
under the Securities Act of 1933, as amended (the "Securities Acts) or any state
securities laws and are instead being offered and sold in reliance on exemptions
from registration; and the undersigned further understands that he is purchasing
an interest in a Company without being furnished any offering literature or
prospectus other than the material furnished hereby.
(g) The Units for which the undersigned hereby subscribed are being
acquired solely for his own account, and are not being purchased with a view to
or for the resale, distribution, subdivision, or fractionalization hereof. He
has no present plans to enter into any such contract, undertaking, agreement or
arrangement. In order to induce the Company to sell and issue the Units
subscribed for hereby to the undersigned, it is agreed that the Company will
have no obligation to recognize the ownership, beneficial or otherwise, of such
Units by anyone but the undersigned.
(h) The undersigned has received, completed and returned to the Company
the Purchaser Questionnaire relating to his general ability to bear the risks of
an investment in the Company and his suitability as an investor in a private
offering; and the undersigned hereby affirms the correctness of his answers to
such Confidential Purchaser Questionnaire and all other written or oral
information concerning the undersigned's so it ability provided to the Company
by, or on behalf of, the undersigned.
(i) The person, if any, executing the Purchaser Representative
Questionnaire, a copy of which has been received by the undersigned, is acting
and is hereby designated to act as the undersigned's Purchaser Representative in
connection with the offer and sale of the Units to the undersigned. This
designation of a Purchaser Representative was made with the knowledge of the
representations and disclosures made in such Purchaser Representative
Questionnaire and other Subscription Documents.
160
<PAGE>
(j) The undersigned acknowledges and is aware of the following:
(i) That there are substantial restrictions on the transferability of the
Units and the Units will not be, and Investors in the Company have no rights to
require that, the Units be registered under the Securities act, the undersigned
may not be able to avail himself of certain of the provisions of Rule 144
adopted by the Securities and Exchange Commission under the Securities Act with
respect to the resale of the Units and, accordingly, the undersigned may be
required to hold the Units for a substantial period of time and it may not be
possible for the undersigned to liquidate his Investment In the Company.
(ii) That no federal or state agency has made any finding or determination
as to the fairness of the Offering of Units for investment or any recommendation
or endorsement of the Units.
(1) The approximate or exact length of time that he will be required to
remain as owner of the Units.
(2) The poor performance on the part of the Company or any Affiliate
(as defined in Rule 405 under the Securities Act), or its associates, agents, or
employees or of any other person, will in any way indicate the predictable
results of the ownership of the Units or of the overall Company.
(3) Subscriptions will be accepted in the order in which they are
received.
(iii) That the Company shall incur certain costs and expenses and undertake
other actions in reliance upon the irrevocability of the subscription (following
the three day rescission period described in Paragraph 2 C of this Agreement)
for the Units made hereunder.
The foregoing representations and warranties are true and accurate as
of the date of delivery of the Funds to the Company and shall survive such
delivery. If, in any respect, such representations and warranties shall not
betrueandaccuratepriortothedeliveryoftheFundspursuanttoParagraph1 hereof, the
undersigned shall give written notice of such fact to his Purchaser
Representative, if any, specifying which representations and warranties are not
true and accurate and the reasons therefor, with a copy to the Company and
otherwise to give the same information to the Company directly.
4. Indemnification. The undersigned acknowledges that he understands
the meaning and legal consequences of the representations and warranties
contained in Paragraph 3 hereof, and he hereby indemnifies and holds harmless
the Company, agents, employees and affiliates, from and against any and all
losses, claims, damages or liabilities due to or arising out of a breach of any
representations(s) or warranty(s) of the undersigned contained in this
Agreement.
5. No Waiver. Notwithstanding any of the representations, warranties,
acknowledgment or agreements made herein by the undersigned, the undersigned
does not thereby or in any other manner waive any rights granted to him under
federal or sate securities laws
6. Transferability. The undersigned agrees not to transfer or assign
this Agreement, or any of his interest herein. Further, an investor in the Units
pursuant to this Agreement and applicable law, wilt not be permitted to transfer
or dispose of the Units unless they are registered or unless such transaction is
exempt from registration under the Securities Act or other securities laws and
in the case of the purportedly exempt sale, such investor provided (at his own
expense) an opinion of counsel reasonably satisfactory to the Company that such
exemption is, in fact available.
161
<PAGE>
7. Revocation. The undersigned acknowledges and agrees that his
subscription for the Units made by the execution and delivery of this Agreement
by the undersigned is irrevocable and subject to the three day right of
rescission in Florida described in Section 2c herein, and that such subscription
shall survive the death or disability of the undersigned, except as provided
pursuant to the blue sky laws of the states in which the Units may be offered,
or any other applicable state statutes or regulations
8. Miscellaneous.
(a) All notices or other communications given or made hereunder shall
be in writing and shall be delivered or mailed by registered or certified mail,
return receipt requested, postage prepaid, to the undersigned at his address set
forth below and to
(b) Notwithstanding the place where this Agreement may be executed by
any of the parties hereto, the parties expressly agree that all the terms and
provisions hereof shall be construed in accordance with and shall be govern by
the laws of the State of Florida
(c) This Agreement constitutes the entire agreement among the parties
hereto with respect to the subject matter hereof any may be amended only by
writing executed by all parties
(d) This Agreement shall be binding upon the heirs, estates, legal
representatives, successors and assigns of all parties hereto
(e) All terms used herein shall be deemed to include the masculine and
the feminine and the singular and the plural as the context requires
ASCOT INDUSTRIES, INC.
SUBSCRIPTION AGREEMENT SIGNATURE PAGE
Accredited
Non Accredited
Number of Shares Subscribed for:
Amount tendered at $0.01 per Share:
(Signature of Subscriber) (Signature of Spouse, or joint tenant, if any)
(Printed Name of Subscriber) (Printed Name of Spouse, or other joint tenant
if any)
(Address) (Address)
(Social Security Number) (Social Security Number)
Subscription accepted
Ascot Industries, Inc.
162
<PAGE>
The following people signed a Subscription Agreement Signature Page:
2. Josephine Finfrock
3. Mark H. Finfrock
4. Dale B. Finfrock, Jr.
5. Kirk D. Finfrock
6. Bryan & Debra French
7. Linda L. Freidman
8. King Trust
9. Advantage Management Reserves, LTD. Charles A. Gaudio, Pres.
9. Gloria Austin, Trustee Trust Dated 5/24/95
10. Rod C. Ball
11. Lauren E. Bennett Trust
12. Madeline J. Bennett Trust
13. Blake J. Bennett Trust No. 1 U/A 7/15/86
14. Blake Bennett T-U-A 7/15/86
15. Brian & Irene Bennett
16. Virginia S. Burke
17. Edwin M. Burke
18. Angela W. Callback
19. Paul J. Chase
20. Carol A. Chihocky Rev Living Trust
21. Timothy A. & Ellen Cornell
22. Country Woods Development Corp. Clyde P. Didier, President
23. Mary Cowden
24. Herbert Gorka, Jr. TTEE UAD 12/22/1992 Colton Charitable Remainder
Unitrust FBO Ernest Colton (Recipient)
25. Michael & Mary Lou Dolezel
26. Ellen Epstein, Trustee
27. Euro First Capital Corporation Dale B. Finfrock, President
28. Helen H. Finfrock
29. Peter M. Finfrock
30. Morris M. Garrett, Jr.
31. Charles A. Gaudio
32. Graig T. Gaudio
33. Robert Gingras
34. John T. Hamilton II
163
<PAGE>
35. Gloria S. Hamilton
36. Robert K. Havilano
37. Mike J. & Christi Helms
38. D. Victor Knight, Jr.
39. John D. Mashek, Jr.
40. James R. McCarthy
41. Robert W. McMichael
42. Mr. & Mrs. Glen R. Meloni
43. Scott D. Miller
44. Gerald J. Millstein, M.D.
45. Marie-Pascale MOLEMA
46. Howrey Trust 2/5/952 & Thelma N. Howrey, TR
47. One Capital Corporation, Dale B. Finfrock, Jr., President
48. OTC Horizon Group, Dale B. Finfrock, Jr., President
49. Carole S. Parson, Trustee U/A DTD 11/23/92
50. The Doris J. Patzwald Living Trust UTD 6/3/96
51. Charles H. Powell
52. E. Dianne Reed
53. John G. Reimer
54. Elton L. & Shirley A. Reneau
55. Wiley R. Reynolds
56. Stanley M. Rumbough, Jr.
57. Robert J. Schhchter
58. Omer Scrock
59. Scroggie Holdings, Inc., George A. Scroggie, President
60. Pamela W. Sissin
61. James F. Smith
62. Keith Steele
63. James W. & Annette E. Stephens
64. TVI Capital Corporation; Dale E, Finfrock, Jr. President
65. Jerry & Toni Wakefield
66. Mary L. Wallace
67. Morgan Warren
68. Lawrence P. Westfield
69. White Lake Enterprises; Clyde P. Didier, President
70. Marcene & Ann Williscroft
71. J. Lloyd & Mildred Woods
72. Legal Computer Technology Inc., Donald F. Mintmire
73. Donald F. Mintmire
164
<PAGE>
FORM D
U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
NOTICE OF SALE OF SECURITIES
PURSUANT TO REGULATION D,
SECTION 4(6), AND/OR
UNIFORM LIMITED OFFERING EXEMPTION
FILED WITH THE COMMISSION ON MARCH 16, 1998
- - --------------------------------------------------------------------------------
Name of Offering ( check if this is an amendment and name has changed, and
indicate change.) Ascot Industries, Inc.
- - --------------------------------------------------------------------------------
Filing Under (Check box(es) that apply): (X ) Rule 504 ( ) Rule 505 ( ) Rule 506
( ) Section 4(6) (X ) ULOE Type of Filing: (X) New Filing Amendment
- - --------------------------------------------------------------------------------
A. BASIC IDENTIFICATION DATA
- - --------------------------------------------------------------------------------
1. Enter the information requested about the issuer
- - --------------------------------------------------------------------------------
Name of Issuer ( check if this is an amendment and name has changed, and
indicate change.) Ascot Industries, Inc.
- - --------------------------------------------------------------------------------
Address of Executive Offices (Number and Street, City, State, Zip Code,
Telephone Number (Including Area Code) P.O. Box 669, Palm Beach, FL 34480
561-833-5092
- - --------------------------------------------------------------------------------
Address of Principal Business Operations (Number and Street, City, State, Zip
Code, Telephone Number (Including Area Code) Same as above (if different from
Executive Offices)
- - --------------------------------------------------------------------------------
Brief Description of Business
- - --------------------------------------------------------------------------------
Type of Business Organization (X) corporation limited partnership, already
formed other (please specify): business trust limited partnership, to be formed
- - --------------------------------------------------------------------------------
Month Year Actual or Estimated Date of Incorporation or Organization: 2 98 (X)
Actual
- - --------------------------------------------------------------------------------
Jurisdiction of Incorporation or Organization: (Enter two-letter U.S. Postal
Service abbreviation for State: NV
- - -------------------------------------------------------------------------------
GENERAL INSTRUCTIONS Federal: Who Must File: All issuers making an offering of
securities in reliance on an exemption under Regulation D or Section 4(6), 17
CFR 230.501 et seq. or 15 U.S.C. 77d(6). When to File: A notice must be filed no
later than 15 days after the first sale of securities in the offering. A notice
is deemed filed with the U.S. Securities and Exchange Commission (SEC) on the
earlier of the date it is received by the SEC at the address given
165
<PAGE>
below or, if received at that address after the date on which it is due, on the
date it was mailed by United States registered or certified mail to that
address. Where to File: U.S. Securities and Exchange Commission, 450 Fifth
Street, N.W., Washington, D.C. 20549. Copies Required: Five (5) copies of this
notice must be filed with the SEC, one of which must be manually signed. Any
copies not manually signed must be photocopies of manually signed copy or bear
typed or printed signatures. Information Required: A new filing must contain all
information requested. Amendments need only report the name of the issuer and
offering, any changes thereto, the information requested in Part C, and any
material changes from the information previously supplied in Parts A and B. Part
E and the Appendix need not be filed with the SEC. Filing Fee: There is no
federal filing fee. State: This notice shall be used to indicate reliance on the
Uniform Limited Offering Exemption (ULOE) for sales of securities in those
states that have adopted ULOE and that have adopted this form. Issuers relying
on ULOE must file a separate notice with the Securities Administrator in each
state where sales are to be, or have been made. If a state requires the payment
of a fee as a precondition to the claim for the exemption, a fee in the proper
amount shall accompany this form. This notice shall be filed in the appropriate
states in accordance with state law. The Appendix in the notice constitutes a
part of this notice and must be completed. ATTENTION
- - --------------------------------------------------------------------------------
Failure to file notice in the appropriate states will not result in a loss of
the federal exemption. Conversely, failure to file the appropriate federal
notice will not result in a loss of an available state exemption unless such
exemption is predicated on the filing of a federal notice.
- - --------------------------------------------------------------------------------
A. BASIC IDENTIFICATION DATA
- - --------------------------------------------------------------------------------
2. Enter the information requested for the following: o Each promoter of the
issuer, if the issuer has been organized within the past five years; o Each
beneficial owner having the power to vote or dispose, or direct the vote or
disposition of, 10% or more of a class of equity securities of the issuer; o
Each executive officer and director of corporate issuers and of corporate
general and managing partners of partnership issuers; and o Each general and
managing partner of partnership issuers.
- - --------------------------------------------------------------------------------
Check Box(es) that Apply: ( ) Promoter ( ) Beneficial Owner (X ) Executive
Officer (X) Director ( ) General and/or Managing Partner
- - --------------------------------------------------------------------------------
Full Name (Last name first, if individual) Finfrock, Jr., Dale B.
- - --------------------------------------------------------------------------------
Business or Residence Address (Number and Street, City, State, Zip Code) P.O.
Box 669, Palm Beach, FL 33480
- - --------------------------------------------------------------------------------
(Use blank sheet, or copy and use additional copies of this sheet, as
necessary.)
166
<PAGE>
- - --------------------------------------------------------------------------------
B. INFORMATION ABOUT OFFERING
- - --------------------------------------------------------------------------------
1. Has the issuer sold, or does the issuer intend to sell, to Yes No
non-accredited investors in this offering? .................... (X ) ( )
Answer also in Appendix, Column 2, if filing under ULOE.
2. What is the minimum investment that will be accepted from any
individual? ....................................................... $0
3. Does the offering permit joint ownership of a single unit? .... Yes No
(X ) ( )
4. Enter the information requested for each person who has been or will be paid
or given, directly or indirectly, any commission or similar remuneration for
solicitation of purchasers in connection with sales of securities in the
offering. If a person to be listed is an associated person or agent of a broker
or dealer registered with the SEC and/or with a state or states, list the name
of the broker or dealer. If more than five (5) persons to be listed are
associated persons of such a broker or dealer, you may set forth the information
for that broker or dealer only.
- - --------------------------------------------------------------------------------
Full Name (Last name first, if individual)
- - --------------------------------------------------------------------------------
Business or Residence Address (Number and Street, City, State, Zip Code)
- - --------------------------------------------------------------------------------
Name of Associated Broker or Dealer
- - --------------------------------------------------------------------------------
States in Which Person Listed Has Solicited or Intends to Solicit Purchasers
(Check "All States" or check individual States) ............. ( ) All States
[AL] [AK] [AZ] [AR] [CA] [CO] [CT] [DE] [DC] [FL] [GA] [HI] [ID]
[IL] [IN] [IA] [KS] [KY] [LA] [ME] [MD] [MA] [MI] [MN] [MS] [MO]
[MT] [NE] [NV] [NH] [NJ] [NM] [NY] [NC] [ND] [OH] [OK] [OR] [PA]
[RI] [SC] [SD] [TN] [TX] [UT] [VT] [VA] [WA] [WV] [WI] [WY] [PR]
- - --------------------------------------------------------------------------------
(Use blank sheet, or copy and use additional copies of this sheet, as
necessary.)
- - --------------------------------------------------------------------------------
C. OFFERING PRICE, NUMBER OF INVESTORS, EXPENSES AND USE OF PROCEEDS
- - --------------------------------------------------------------------------------
1. Enter the aggregate offering price of securities included in this offering
and the total amount already sold. Enter "0" if answer is "none" or "zero". If
the transaction is an exchange offering, check this box ( ) and indicate in the
columns below the amounts of the securities offered for exchange and already
exchanged.
167
<PAGE>
Aggregate Amount Already
Type of Security Offering Price Sold
Debt .............................. $0 $0
Equity ............................ $16,000 $0
(X) Common ( ) Preferred
Convertible Securities (including
warrants) Convertible debentures $0 $0
Partnership Interests ............. $0 $0
Other (Specify_____________)................ $0 $0
Total ........................... $0 $0
Answer also in Appendix, Column 3, if filing under ULOE.
2. Enter the number of accredited and non-accredited investors who have
purchased securities in this offering and the aggregate dollar amounts of their
purchases. For offerings under Rule 504, indicate the number of persons who have
purchased securities and the aggregate dollar amount of their purchases on the
total lines. Enter "0" if answer is "none" or "zero".
Aggregate
Number Dollar Amount
Investors of Purchases
Accredited Investors .............. 0 $0
Non-accredited Investors .......... 0 $0
Total (for filings under Rule 504
only) ............................... 0 $0
Answer also in Appendix, Column 4, if filing under ULOE.
3. If this filing is for an offering under Rule 504 or 505, enter the
information requested for all securities sold by the issuer, to date, in
offerings of the types indicated, the twelve (12) months prior to the first sale
of securities in this offering. Classify securities by type listed in Part
C-Question 1.
Type of Dollar Amount
Type of offering Security Sold
Rule 505 ..........................
Regulation A ......................
Rule 504 ..........................
Total ...........................
168
<PAGE>
4. a. Furnish a statement of all expenses in connection with the issuance and
distribution of the securities in this offering. Exclude amounts relating solely
to organization expenses of the issuer. The information may be given as subject
to future contingencies. If the amount of an expenditure is not known, furnish
an estimate and check the box to the left of the estimate.
Transfer Agents Fees ............. [X] $0
Printing and Engraving Costs ...... [X] $0
Legal Fees ........................ [X] $1,500.00
Accounting Fees ................... [X] $0
Engineering Fees .................. [X] $0
Sales Commissions (specify finders
fees separately) .................... [X] $0
Other Expenses (identify)
Faxes, telephone, paper,
office expenses [ ] $
Total ........................... [ ] $
- - --------------------------------------------------------------------------------
C. OFFERING PRICE, NUMBER OF INVESTORS, EXPENSES AND USE OF PROCEEDS
- - --------------------------------------------------------------------------------
b. Enter the difference between the aggregate offering price given in
response to Part C - Question 1 and total expenses furnished in response to Part
C - Question 4.a. This difference is the "adjusted gross proceeds to the issuer"
............ $14,500
5. Indicate below the amount of the adjusted gross proceeds to the issuer used
or proposed to be used for each of the purposes shown. If the amount for any
purpose is not known, furnish an estimate and check the box to the left of the
estimate. The total of the payments listed must equal the adjusted gross
proceeds to the issuer set forth in response to Part C -Question 4.b above.
Payments to
Officers,
Directors, & Payments To
Affiliates Others
Salaries and fees ................ $ 0 $ 0 [ ]
Purchase of real estate .......... $ 0 $ 0 [ ]
Purchase, rental or leasing and
installation of machinery and $ 0 $ 0 [ ]
equipment ........................
Construction or leasing of plant $ 0 $ 0 [ ]
buildings and facilities ...........
169
<PAGE>
Acquisition of other businesses
(including the value of securities
involved in this offering that may
be used in exchange for the
assets or securities of another $ 0 $ 0 [ ]
issuer pursuant to a merger) .......
Repayment of indebtedness ........ $ 0 $ 0 [ ]
Working capital .................. $ 0 $14,500.00 [X]
Other (specify): Advertising & promoting
Programs including hosting marketing on line $ 0 $ 0 [ ]
Column Totals .................... $ $ 0 [ ]
Total Payments Listed (column totals
added) ............................... $ 14,500.00 [X]
- - --------------------------------------------------------------------------------
D. FEDERAL SIGNATURE
- - --------------------------------------------------------------------------------
The issuer has duly caused this notice to be signed by the undersigned duly
authorized person. If this notice is filed under Rule 505, the following
signature constitutes an undertaking by the issuer to furnish to the U.S.
Securities and Exchange Commission, upon written request of its staff, the
information furnished by the issuer to any non-accredited investor pursuant to
paragraph (b)(2) of Rule 502.
Ascot Industries, Inc. /s/ Dale B. Finfrock, Jr. March 2, 1998
Issuer (Print or Type) Signature Date
Dale B. Finfrock, Jr. President
Name of Signer (Print or Type) Title of Signer (Print or Type)
- - --------------------------------------------------------------------------------
ATTENTION
- - --------------------------------------------------------------------------------
Intentional misstatements or omissions of fact constitute federal criminal
violations. (See 18 U.S.C. 1001.)
- - --------------------------------------------------------------------------------
EXHIBIT 4.9(a)5 of the Reorganization Agreement
The Target Companies Exchange Agreement
(See Exhibit 2.6 of the 8-KSB)
170
<PAGE>
EXHIBIT 4.9(c) of the Reorganization Agreement
Target Company's Limited Power of Attorney
Limited Power of Attorney
Coupled with an Interest
State of Florida }
County of Palm Beach } ss.:
American Internet Technical Centers, Inc., a Nevada corporation (the
"Grantor"), by J. Bruce Gleason, an individual residing at 44 Havenwood Drive;
Pompano Beach, Florida 33064, serving as its president, pursuant to a resolution
of its Board of Directors dated June 25th, 1999, and in conjunction with its
obligations under Section 4.9 of that certain reorganization agreement entered
into with Equity Growth Systems, inc., a publicly held Delaware corporation
("Equity Growth"), and certain other parties, including the holders of
approximately 90% of the Grantor's capital stock. and, its wholly owned
subsidiary (the "Reorganization Agreement"), hereby irrevocably appoints the
Board of Directors of Equity Growth, acting by majority vote, with full power of
substitution and delegation, as its attorney-in-fact (the person or persons
designated to so act being hereinafter generically referred to as the
"Grantee"), for all purposes set forth in Section 4.9 of the Reorganization
Agreement and all matters incidental thereto, or convenient to accomplish the
goals thereof, including, without limiting the generality of the foregoing, to
negotiate and execute all indentures, certificates, stock powers, confessions of
judgment, documents, agreements, instruments and corrective instruments on its
behalf and in its name, as if it, itself had undertaken such functions directly
after having received complete and irrevocable directives to so act from the
Grantor's Board of Directors at a properly convened and directed meeting
thereof, with full recourse against it, in conjunction with all matters
concerning the Reorganization Agreement and Equity Growth, and all instruments
and agreements called for in the Reorganization Agreement.
IN WITNESS WHEREOF, I have executed this Indenture, on this 25th day of
June, 1999.
Signed, Sealed & Delivered
In Our Presence
American Internet Technical Centers,
Inc.
- - -------------------------------
_______________________________ By: _______________________________
J. Bruce Gleason, President
SWORN TO BEFORE ME, an official duly authorized by the State of Florida
to administer oaths, on the date first above written by the above referenced
Grantor, who provided me with personal identification, as follows:
and, after being duly sworn, did certify that he is the duly elected and serving
president of the Grantor, that his execution of this irrevocable power of
attorney coupled with an interest was duly authorized, empowered and directed by
the Grantor's Board of Directors at a duly convened meeting thereof, for the
purpose of inducing Equity Growth and the other parties to the Reorganization
Agreement to Close thereon, and to provide the Grantor with a substantial
infusion of capital and other material benefits, and that such act is duly
enforceable against the Grantor, in accordance with the terms of the
Reorganization Agreement and this Indenture.
My Commission expires:
[SEAL]
----------------------
Vanessa H. Mitchem
Notary Public
-118-
171
EXHIBIT 3.30 AMENDMENTS TO REGISTRANT's CERTIFICATE OF INCORPORATION
Certificate of Amendment to Certificate of Incorporation
of
Equity Growth Systems, inc.
Pursuant to the provisions of Sections 222 and 242 of the General
Corporation Law of the State of Delaware, this Delaware profit corporation does
hereby adopt the following certificate of amendment to its Certificate of
Incorporation:
Witnesseth:
First: Amendments adopted:
(d) Articles First, Second, Third, Fifth and Tenth, are hereby repealed.
(e) The following new Article First is hereby adopted, changing the name of
this Corporation from "Equity Growth Systems, inc." to "AmeriNet
Group.com, Inc." As amended, Article First will henceforth read as
follows:
FIRST: Name:
(A) The name of the Corporation is "AmeriNet Group.com, Inc."
(B) The Corporation's Board of Directors is hereby authorized,
without stockholder approval, to amend this Certificate from
time to time, in order to change the name of the Corporation.
(f) The following Articles are hereby adopted, replacing repealed Articles
Second, Third, Fifth and Tenth:
SECOND: Registered Agent
172
<PAGE>
(a) The street address of the registered office of this Corporation
in the state of Delaware is 25 Greystone Manor, Lewes Delaware
19958, situate in Sussex County, and the name of the initial
registered agent of this Corporation at such address is Harvard
Business Services, Inc.
(b) The registered agent's telephone number is 1-800-345-2677 and
its E-Mail address is [email protected].
THIRD: Purposes:
This Corporation is organized for the purpose of transacting any and
all lawful business; provided, however, that it shall not:
(A) Engage in any activities that would subject it to regulation
as an investment company under the Federal Investment Company
Act of 1940 (the "Investment Company Act"), as amended, unless
it shall have first qualified and elected to be regulated as a
small business development company pursuant to Sections 54 et.
seq., thereof, and limits its investment company activities to
those permitted thereby; or
(B) Engage in any activities which would subject the Corporation
to regulation as a broker dealer in securities subject to
regulation under the Securities Exchange Act of 1934, as
amended (the "Exchange Act") or as an investment advisor
subject to regulation under the Investment Advisors Act of
1940, as amended (the "Investment Advisor's Act"); or
(C) Engage in any other activities requiring the Corporation to
comply with governmental registration and supervision, unless
it has completed such registration and conducts itself in full
compliance with such supervisory requirements.
FIFTH: Amendments of Certificate by Board of Directors:
The Corporation's Board of Directors is hereby authorized, without
stockholder approval, to amend this Certificate from time to time, in
order to:
(a) Effect splits or reverse splits of the Corporation's common or
preferred stock;
(b) Increase the Corporation's authorized capital; and
(c) Decrease the Corporation's authorized capital; provided that
such decrease may not affect any issued and outstanding
shares.
173
<PAGE>
TENTH: Quorum:
Unless otherwise provided for in the Corporation's Bylaws, a majority
of the shares entitled to vote, represented in person or by proxy,
shall be required to constitute a quorum at a meeting of stockholders.
(c) The following new Articles are hereby adopted:
ELEVENTH: Indemnification
(a) The Corporation shall indemnify its Officers, Directors and
authorized agents for all liabilities incurred directly,
indirectly or incidentally to services performed for the
Corporation, to the fullest extent permitted under Delaware
law existing now or hereinafter enacted.
(b) Funds required to pay expenses reasonably necessary to defend
allegations that would raise the foregoing right of
indemnifications shall be advanced by this Corporation at any
time that the person claiming such expenses appears reasonably
likely to become entitled to indemnification and enters into a
binding agreement with this Corporation to repay advances for
such expenditures in the event that he, she or it is
eventually found not to be entitled to indemnification.
TWELFTH: Limitation on Stockholder Actions
(b) Stockholders shall not have a cause of action against the
Corporation's Officers, Directors or agents as a result of any
action taken, or as a result of their failure to take any
action, unless deprivation of such right is deemed a nullity
because, in the specific case, deprivation of a right of
action would be impermissibly in conflict with the public
policy of the State of Delaware.
(c) No stockholder may assert a derivative cause of action on
behalf of the Corporation, rather, any claims that would
give rise to derivative causes of action shall be submitted
in writing, specifying the nature of the cause of action and
providing all evidence associated with such claim, to a
special committee of the Board of Directors comprised of
members who do not also serve as officers of the Corporation
and are not reasonably involved with the subject cause of
action, or if no such directors are serving, to legal
counsel designated by the Corporation in which no attorney
holds shares of the Corporation's securities, holds any
office or position with the Corporation or is related by
marriage or through siblings, parents or children to any
officer or director of the Corporation, and the decision to
litigate, or not to litigate by such special committee or
special counsel shall be binding on the Corporation and the
submitting stockholder or stockholders; unless the foregoing
procedure has not been followed within 90 days after
completion of the submission by the subject stockholder.
174
<PAGE>
(d) The fact that this Article shall be inapplicable in certain
circumstances shall not render it inapplicable in any other
circumstances and the Courts of the State of Delaware are
hereby granted the specific authority to restructure this
Article, on a case by case basis or generally, as required to
most fully give legal effect to its intent.
THIRTEENTH: Take Over Defenses:
(1) The Board of Directors of this Corporation shall have the
broadest possible authority and discretion in adopting and
maintaining resistance to, and defenses against, takeover bids
that it deems not to be in the best interests of the
Corporation, including (without limitation) adopting and
maintaining any form of shareholder rights plan or "poison
pill" comprised of such terms and features as the Board of
Directors deems to be in the best interests of the
Corporation.
(2) Without limitation on the foregoing, the Board of Directors
shall have the authority and discretion to adopt and maintain
a shareholder rights plan or other defensive mechanism that
may be deactivated or redeemed only:
(a) By vote of continuing directors (i.e., the directors
who put such shareholder rights plan or other
defensive mechanism in place or the designated
successors of such directors) to the exclusion of
newly elected directors nominated or supported by a
takeover bidder or bidders;
(b) After a prescribed delay period following election of
directors making up a majority of the Board of
Directors if such new directors are nominated or
supported by a takeover bidder or bidders; or
(c) Before election of directors making up a majority of
the Board of Directors if such new directors are
nominated or supported by a takeover bidder or
bidders.
(3) No bylaw shall limit in any way the authority of the Board of
Directors of this Corporation to adopt or maintain any
shareholder rights plan or otherwise to resist or defend
against any takeover bid that the Board of Directors finds not
to be in the best interests of the Corporation.
175
<PAGE>
FOURTEENTH: Affiliated Transactions:
This Corporation shall not be subject to the restrictions or
requirements for affiliated transactions imposed by Section 203 of the
Delaware General Corporation Law, as permitted by the waiver provisions
of Section (b)(1) thereof.
FIFTEENTH: Compromise & Arrangement
(A) Whenever a compromise or arrangement is proposed between
this Corporation and its creditors or any class of them or
between this Corporation and its stockholders or any class
of them, any court of equitable jurisdiction within the
State of Delaware may, on the ap plication in a summary way
of this Corporation or of any creditor or stockholder
thereof or on the application of any receiver or receivers
appointed for this Corporation under Section 291 of Title 8
of the Delaware Code or on the application of trustees in
dissolution or of any receiver or receivers appointed for
this Corporation under Section 279 of Title 8 of the
Delaware Code order a meeting of the creditors or class of
creditors or of the stockholders or class of stockholders of
this Corporation, as the case may be, to be summoned in such
manner as the said court directs.
(b) If a majority in number representing three fourths in value
of the creditors or class of creditors or of the
stockholders or class of stockholders of this Corporation,
as the case may be, agree to compromise or arrangement and
to any reorganization of this Corporation as consequence of
such the said compromise or arrangement and the said
reorganization compromise or arrangement, the said
compromise or arrangement and the said reorganization shall,
if sanctioned by the court to which the said application has
been made, be binding on all the creditors or class of
creditors, and or on all the stockholders or class of
stockholders, of this Corporation, as the case may be, and
also on this Corporation.
Second: The date of each amendment adopted is: July 7, 1999.
Third: The capital of the Corporation was not reduced by virtue of the
foregoing amendment.
Fourth: Adoption of Amendments:
The amendments were adopted by the shareholders after recommendation by
the Board of Directors. The number of votes cast for the amendments
were sufficient for approval, to wit, 6,246,947 in favor, 2,222,177 not
voting.
176
<PAGE>
In Witness Whereof, we have subscribed our names this 7th day
of July, 1999.
Signed, Sealed & Delivered
In Our Presence
Equity Growth Systems, inc.
- - ----------------------------
_____________________________ By: ________________________
Charles J. Scimeca, President
{SEAL}
Attest: ________________________
G. Richard Chamberlin, Esquire
Secretary
177
EXHIBIT 3.31 ARTICLES OF INCORPORATION, AS AMENDED
ARTICLES OF INCORPORATION
OF
AMERICAN INTERNET TECHNICAL CENTER, INC.
The undersigned subscriber to these Articles of Incorporation is a
natural person competent to contract and hereby form a Corporation for profit
under Chapter 607 of the Florida Statutes.
ARTICLE 1 - NAME
The name of the Corporation is AMERICAN INTERNET TECHNICAL CENTER,
INC., (hereinafter, "Corporation").
ARTICLE 2 - PURPOSE OF CORPORATION
The Corporation shall engage in any activity or business permitted
under the laws of the United States and of the State of Florida.
ARTICLE 3 - PRINCIPAL OFFICE
The address of the principal office of this Corporation is 1500 East
Atlantic Boulevard, Pompano Beach, Florida 33060 and the mailing address is the
same.
178
<PAGE>
ARTICLE 4 - INCORPORATOR
The name and street address of the incorporator of this Corporation is:
Elsie Sanchez
343 Almeria Avenue
Coral Gables, Florida 33134
ARTICLE 5 - OFFICERS
The officers of the Corporation shall be:
President: J. Bruce Gleason
Vice-President: Michael D. Umile
Secretary: Michael D. Umile
Treasurer: J. Bruce Gleason
whose addresses shall be the same as the principal office of the Corporation.
ARTICLE 6 - DIRECTOR(S)
The Director(s) of the Corporation shall be:
J. Bruce Gleason
Michael D. Umile
whose addresses shall be the same as the principal office of the Corporation.
ARTICLE 7 - CORPORATE CAPITALIZATION
7.1 The maximum number of shares that this Corporation is authorized to
have outstanding at any time is SEVEN THOUSAND FIVE HUNDRED (7,500) shares of
common stock, each share having the par value of ONE DOLLAR ($1.00).
7.2 No holder of shares of stock of any class shall have any preemptive
right to subscribe to or purchase any additional shares of any class, or any
bonds or convertible securities of any nature; provided, however, that the Board
of Director(s) may, in authorizing the issuance of shares of stock of any class,
179
<PAGE>
confer any preemptive right that the Board of Director(s) may deem advisable in
connection with such issuance.
7.3 The Board of Director(s) of the Corporation may authorize the
issuance from time to time of shares of its stock of any class, whether now or
hereafter authorized, or securities convertible into shares of its stock of any
class, whether now or hereafter authorized, for such consideration as the Board
of Director(s) may deem advisable, subject to such restrictions or limitations,
if any, as may be set forth in the bylaws of the Corporation.
7.4 The Board of Director(s) of the Corporation may, by Restated
Articles of Incorporation, classify or reclassify any unissued stock from time
to time by setting or changing the preferences, conversions or other rights,
voting powers, restrictions, limitations as to dividends, qualifications, or
term or conditions of redemption of the stock.
ARTICLE 8 - SUB-CHAPTER S CORPORATION
The Corporation may elect to be an S Corporation, as provided in
Sub-Chapter S of the Internal Revenue Code of 1986, as amended.
8.1 The shareholders of this Corporation may elect and, if elected,
shall continue such election to be an S Corporation as provided in Sub-Chapter S
of the Internal Revenue Code of 1986, as amended, unless the shareholders of the
Corporation unanimously agree otherwise in writing.
8.2 After this Corporation has elected to be an S Corporation, none of
the shareholders of this Corporation, without the written consent of all the
shareholders of this Corporation shall take any action, or make any transfer or
other disposition of the shareholders' shares of stock in the Corporation, which
will result in the termination or revocation of such election to be an S
Corporation, as provided in Sub chapter S of the Internal Revenue Code of 1986,
as amended.
8.3 Once the Corporation has elected to be an S Corporation, each share
of stock issued by this Corporation shall contain the following legend:
"The shares of stock represented by this certificate cannot be transferred if
such transfer would void the election of the Corporation to be taxed under
Sub-Chapter S of the Internal Revenue Code of 1 986, as amended. "
ARTICLE 9 - SHAREHOLDERS' RESTRICTIVE AGREEMENT
All of the shares of stock of this Corporation may be subject to a
Shareholders' Restrictive Agreement containing numerous restrictions on the
rights of shareholders of the Corporation and transferability of the shares of
stock of the Corporation. A copy of the Shareholders' Restrictive Agreement, if
any, is on file at the principal office of the Corporation.
180
<PAGE>
ARTICLE 10 - POWERS OF CORPORATION
The Corporation shall have the same powers as an individual to do all
things necessary or convenient to carry out its business and affairs, subject to
any limitations or restrictions imposed by applicable law or these Articles of
Incorporation.
ARTICLE 11 - TERM OF EXISTENCE
This Corporation shall have perpetual existence.
ARTICLE 12- REGISTERED OWNER(S)
The Corporation, to the extent permitted by law, shall be entitled to
treat the person in whose name any share or right is registered on the books of
the Corporation as the owner thereto, for all purposes, and except as may be
agreed in writing by the Corporation, the Corporation shall not be bound to
recognize any equitable or other claim to, or interest in, such share or right
on the part of any other person, whether or not the Corporation shall have
notice thereof.
ARTICLE 13 - REGISTERED OFFICE AND REGISTERED AGENT
The initial address of registered office of this Corporation is
AmeriLawyer, located at 343 Almeria Avenue, Coral Gables, Florida 33134. The
name and address of the registered agent of this Corporation is AmeriLawyer, 343
Almeria Avenue, Coral Gables, Florida 33134.
ARTICLE 14- BYLAWS
The Board of Director(s) of the Corporation shall have power, without
the assent or vote of the shareholders, to make, alter, amend or repeal the
Bylaws of the Corporation, but the affirmative vote of a number of Directors
equal to a majority of the number who would constitute a full Board of
Director(s) at the time of such action shall be necessary to take any action for
the making, alteration, amendment or repeal of the Bylaws.
ARTICLE 15 - EFFECTIVE DATE
These Articles of Incorporation shall be effective immediately upon
approval of the Secretary of State, State of Florida.
ARTICLE 16 - AMENDMENT
The Corporation reserves the right to amend, alter, change or repeal
any provision contained in these Articles of Incorporation, or in any amendment
hereto, or to add any provision to these Articles of Incorporation or to any
amendment hereto, in any manner now or hereafter prescribed or permitted by the
181
<PAGE>
provisions of any applicable statute of the State of Florida, and all rights
conferred upon shareholders in these Articles of Incorporation or any amendment
hereto are granted subject to this reservation.
IN WITNESS WHEREOF, I have hereunto set my hand and seal, acknowledged
and filed the foregoing Articles of Incorporation under the laws of the State of
Florida, this APR 14,1998
/s/ Elsie Sanchez, Incorporator /s/
ACCEPTANCE OF REGISTERED AGENT DESIGNATED
IN ARTICLES OF INCORPORATION
AmeriLawyer, having a business office identical with the registered
office of the Corporation name above, and having been designated as the
Registered Agent in the above and foregoing Articles of Incorporation, is
familiar with and accepts the obligations of the position of Registered Agent
under the applicable provisions of the Florida Statutes.
AmeriLawyer
By: /s/ Natalia Utrera, Vice President /s/
Articles of Amendment to Articles of Incorporation
of
American Internet Technical Center, Inc.
Pursuant to the provisions of Section 607.1006, Florida Statutes, this
Florida profit corporation does hereby adopt the following articles of amendment
to its Articles of Incorporation:
Witnesseth:
First: Amendments adopted:
(3) Section 7.1 is hereby repealed and replaced by the following new Section
7.1:
"7.1 The maximum number of shares that this Corporation is
authorized to have outstanding at any time is 20,000,000
shares of common stock, each share having a par value of
$0.001."
(4) The current provisions of Article 6 will be re-designated as Section
6.1 and the following new Section 6.2 is hereby adopted and added to
the Corporation's Articles of Incorporation:
182
<PAGE>
"6.2 The Corporation's Board of Directors is hereby authorized,
without prior stockholder approval, to amend these Articles of
Incorporation, from time to time, in order to:
(1) Effect splits or reverse splits of the Corporation's
common or preferred stock; increase the amount of
authorized capital stock and determine the attributes
thereof, provided that such amendment may not
detrimentally affect the rights of holders of
outstanding capital stock, other than as a result of
pro rata dilution;
(2) Create a class of preferred stock and designate the
attributes of such preferred stock;
(3) Change the name of the Corporation; and,
(4) Such other matters as may be otherwise permitted
under then applicable laws of the State of Florida."
(5) Articles 5, 8, 14, are hereby repealed and replaced by the following new
Articles 5, 8 and 14, adopted and added to the Corporation's Articles of
Incorporation:
ARTICLE 5
INDEMNIFICATION
The Corporation shall indemnify its Officers, Directors and
authorized agents for all liabilities incurred directly, indirectly or
incidentally to services performed for or at the request of the
Corporation, and shall advance funds required for such purposes to the
person indemnified, to the fullest extent permitted under Florida law
existing now or hereinafter enacted, subject to such contractual
conditions or limitations as the Corporation and the indemnified person
may have agreed to in a written and subscribed instrument.
ARTICLE 8
LIMITATION ON STOCKHOLDER ACTIONS
In the event that this Corporation at any time has more than three
stockholders, none of which owns more than 95% of the Corporation's outstanding
common stock of all classes and series, then the following provisions shall be
applicable as to all stockholders who own less than 50% of the Corporation's
outstanding common stock of all classes and series ("Minority Stockholders"):
(1) Minority Stockholders shall not have a cause of action against
the Corporation's Of ficers, Directors or agents as a result
of any action taken, or as a result of their failure
183
<PAGE>
to take any action, unless deprivation of such right is deemed
a nullity because, in the specific case, deprivation of a
right of action would be impermissibly in conflict with the
public policy of the State of Florida.
(2) No Minority Stockholder may assert a derivative cause of
action on behalf of the Corporation, rather, any claims that
would give rise to derivative causes of action shall be
submitted in writing, specifying the nature of the cause of
action and providing all evidence associated with such claim,
to a special committee of the Board of Directors comprised of
members who do not also serve as officers of the Corporation
and are not reasonably involved with the subject cause of
action, or if no such directors are serving, to legal counsel
designated by the Corporation in which no attorney holds
shares of the Corporation's securities, holds any office or
position with the Corporation or is related by marriage or
through siblings, parents or children to any officer or
director of the Corporation, and the decision to litigate, or
not to litigate by such special committee or special counsel
shall be binding on the Corporation and the submitting
Minority Stockholder or Minority Stockholders; unless the
foregoing procedure has not been followed within 90 days after
completion of the submission by the subject Minority
Stockholder.
(3) The fact that this Article shall be inapplicable in certain
circumstances shall not render it inapplicable in any other
circumstances and the Courts of the State of Florida are
hereby granted the specific authority to restructure this
Article, on a case by case basis or generally, as required to
most fully give legal effect to its intent.
ARTICLE 14
AFFILIATED TRANSACTIONS
This Corporation shall not be subject to the restrictions or
requirements for affiliated transactions imposed by Sections 607.0901,
Florida Statutes, as permitted by the waiver provisions of Section
607.0901(5)(b) thereof."
Second: The date of each amendment adopted is: February 10, 1999.
Third: Adoption of Amendments:
The amendments were unanimously adopted by the shareholders. The number
of votes cast for the amendments were sufficient for approval.
184
<PAGE>
IN WITNESS WHEREOF, I have subscribed my name this 8th day of July,
1999.
Signed, Sealed & Delivered
In Our Presence
- - -----------------------------
- - ----------------------------- -----------------------------
J. Bruce Gleason, President
185
EXHIBIT 3.41 BYLAWS OF AMERICAN INTERNET, AS AMENDED
Bylaws
of
American Internet Technical Center, Inc.
ARTICLE I
STOCKHOLDERS
SECTION 1. Annual Meetings
(a) (1) The annual meeting of the stockholders of the Corporation,
shall be held at the principal office of the Corporation in
the State of Florida or at such other place within or without
the State of Florida as may be determined by the Board of
Directors and as may be designated in the notice of such
meeting.
(2) The meeting shall be held on the 15th day of October of each
year or on such other day as the Board of Directors may
specify.
(3) If said day is a legal holiday, the meeting shall be held on
the next succeeding business day not a legal holiday.
(b) Business to be transacted at such meeting shall be the election of
Directors to succeed those whose terms are expiring and such other
business as may be properly brought before the meeting.
(c) In the event that the annual meeting, by mistake or otherwise, shall
not be called and held as herein provided, a special meeting may be
called as provided for in Section 2 of this Article I in lieu of and
for the purposes of and with the same effect as the annual meeting.
186
<PAGE>
SECTION 2. Special Meetings
(a) A special meeting of the stockholders of the Corporation may be called
for any purpose or pur poses at any time by the Chairman or President
of the Corporation, by the Board of Directors or by the holders of not
less than 10% of the outstanding capital stock of the Corporation
entitled to vote at such meeting.
(b) At any time, upon the written direction of any person or persons
entitled to call a special meet ing of the stockholders, it shall be
the duty of the Secretary to send notice of such meeting pursuant to
Section 4 of this Article I. It shall be the responsibility of the
person or persons directing the Secretary to send notice of any special
meeting of stockholders to deliver such direction and a proposed form
of notice to the Secretary not less than 15 days prior to the proposed
date of said meeting.
(c) Special meetings of the stockholders of the Corporation shall be held
at such place, within or without the State of Florida, on such dates,
and at such time as shall be specified in the notice of such special
meeting.
SECTION 3. Adjournment
(a) When the annual meeting is convened, or when any special meeting is
convened, the presiding officer may adjourn it for such period of time
as may be reasonably necessary to reconvene the meeting at another
place and time.
(b) The presiding officer shall have the power to adjourn any meeting of
the stockholders for any proper purpose, including, but not limited to,
lack of a quorum, securing a more adequate meeting place, electing
officials to count and tabulate votes, reviewing any stockholder
proposals or passing upon any challenge which may properly come before
the meetings.
(c) When a meeting is adjourned to another time or place, it shall not be
necessary to give any notice of the adjourned meeting if the time and
place to which the meeting is adjourned are announced at the meeting
at which the adjournment is taken, and any business may be transacted
at the adjourned meeting that might have been transacted on the
original date of the meeting. If, however, after the adjournment the
Board fixes a new record date for the adjourned meeting, a notice of
the adjourned meeting shall be given in compliance with Section 4(a)
of this Article I to each stockholder of record on the new record date
entitled to vote at such meeting.
SECTION 4. Notice of Meetings; Purpose of Meeting; Waiver
(a) (1) Each stockholder of record entitled to vote at any meeting
shall be given in person, or by first class mail, postage
prepaid, written notice of such meeting which, in the case of
187
<PAGE>
a special meeting, shall set forth the purpose(s) for which
the meeting is called, not less than 10 or more than 60 days
before the date of such meeting.
(2) If mailed, such notice is to be sent to the stockholder's
address as it appears on the stock transfer records of the
Corporation, unless the stockholder shall be requested of the
Secretary in writing at least 15 days prior to the
distribution of any required notice that any notice intended
for him or her be sent to some other address, in which case
the notice may be sent to the address so designated.
(3) Notwithstanding any such request by a stockholder, notice sent
to a stockholder's address as it appears on the stock transfer
records of this Corporation as of the record date shall be
deemed properly given.
(4) Any notice of a meeting sent by United States mail shall be
deemed delivered when deposited with proper postage thereon
with the United States Postal Service or in any mail
receptacle under its control.
(b) (1) A stockholder waives notice of any meeting by attendance,
either in person or by proxy, at such meeting or by waiving
notice in writing either before, during or after such meeting.
(2) Attendance at a meeting for the express purpose of objecting
that the meeting was not lawfully called or convened, however,
will not constitute a waiver of notice by a stockholder who
states at the beginning of the meeting, his or her objection
that the meeting is not lawfully called or convened.
(c) A waiver of notice signed by all stockholders entitled to vote at a
meeting of stockholders may also be used for any other proper purpose
including, but not limited to, designating any place within or without
the State of Florida as the place for holding such a meeting.
(d) Neither the business to be transacted at, nor the purpose of, any
regular or special meeting of stockholders need be specified in any
written waiver of notice.
SECTION 5. Closing of Transfer Records; Record Date; Stockholders' List
(a) In order to determine the holders of record of the capital stock of the
Corporation who are en titled to notice of meetings, to vote a meeting
or adjournment thereof, or to receive payment of any dividend, or for
any other purpose, the Board of Directors may fix a date not more than
60 days prior to the date set for any of the above-mentioned activities
for such determination of stockholders.
(b) If the stock transfer records shall be closed for the purpose of
determining stockholders entitled to notice of or to vote at a meeting
of stockholders, such records shall be closed for at least 10 days
immediately preceding such meeting.
188
<PAGE>
(c) In lieu of closing the stock transfer records, the Board of Directors
may fix in advance a date as the date for any such determination of
stockholders, such date in any case to be not more than 60 days prior
to the date on which the particular action, requiring such
determination of stockholders, is to be taken.
(d) If the stock transfer records are not closed and no record date is
fixed for the determination of stockholders entitled to notice or to
vote at a meeting of stockholders, or to receive payment of a dividend,
the date on which notice of the meeting is mailed or the date on which
the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such
determination of stockholders.
(e) When a determination of stockholders entitled to vote at any meeting of
stockholders has been made as provided in this Section, such
determination shall apply to any adjournment thereof, unless the Board
of Directors fixes a new record date under this Section for the
adjourned meeting.
(f) (1) The officer or agent having charge of the stock transfer
records of the Corporation shall make, as of a date at least
10 days before each meeting of stockholders, a complete list
of the stockholders entitled to vote at such meeting or any
adjournment thereof, with the address of each stockholder and
the number and class and series, if any, of shares held by
each stockholder.
(2) Such list shall be kept on file at the registered office of
the Corporation, at the principal place of business of the
Corporation or at the office of the transfer agent or
registrar of the Corporation for a period of 10 days prior to
such meeting and shall be available for inspection by any
stockholder at any time during usual business hours.
(3) Such list shall also be produced and kept open at the time and
place of any meeting of stockholders and shall be subject to
inspection by any stockholder at any time during the meeting.
(g) The original stock transfer records shall be prima facie evidence as to
the stockholders entitled to examine such list or stock transfer
records or to vote any meeting of stockholders.
(h) If the requirements of Section 5(f) of this Article I have not been
substantially complied with, then, on the demand of any stockholder in
person or by proxy, the meeting shall be adjourned until such
requirements are complied with.
(i) If no demand pursuant to Section 5(h) of this Article I is made,
failure to comply with the re quirements of this Section shall not
affect the validity of any action taken at such meeting.
(j) Section 5(g) of this Article I shall be operative only at such time(s)
as the Corporation shall have 6 or more stockholders.
189
<PAGE>
SECTION 6. Quorum
(a) At any meeting of the stockholders of the Corporation, the presence, in
person or by proxy, of stockholders holding a majority of the issued
and outstanding shares of the capital stock of the Corporation entitled
to vote thereat shall be necessary to constitute a quorum for the
transaction of any business.
(b) If a quorum is present, the vote of a majority of the shares
represented at such meeting and entitled to vote on the subject matter
shall be the act of the stockholders.
(c) If there shall not be a quorum at any meeting of the stockholders of
the Corporation, then the Chairman of the meeting or the holders of a
majority of the shares of the capital stock of the Corporation who
shall be present at such meeting, in person or by proxy, may adjourn
such meeting from time to time until holders of all of the shares of
the capital stock shall attend.
(d) At any such adjourned meeting at which a quorum shall be present, any
business may be transacted which might have been transacted at the
meeting as originally scheduled.
SECTION 7. Presiding Officer; Order of Business
(a) (1) Meetings of the stockholders shall be presided over by the
Chairman of the Board, or, if he or she is not present or
there is no Chairman of the Board, by the President or, if he
or she is not present, by the senior Vice President present
or, if neither the Chairman of the Board, the President, nor a
Vice President is present, the meeting shall be presided over
by a chairman to be chosen by a plurality of the stockholders
entitled to vote at the meeting who are present, in person or
by proxy.
(2) The presiding officer of any meeting of the stockholders may
delegate his or her duties and obligations as the presiding
officer as he or she sees fit.
(b) The Secretary of the Corporation, or, in his or her absence, an
Assistant Secretary shall act as Secretary of every meeting of
stockholders, but if neither the Secretary nor an Assistant Secretary
is present, the presiding officer of the meeting shall choose any
person present to act as secretary of the meeting.
190
<PAGE>
(c) The order of business shall be as follows:
Call of meeting to order.
Proof of notice of meeting.
Reading minutes of last previous stockholders' meeting or a waiver thereof.
Reports of Officers.
Reports of committees.
Election of Directors.
Regular and miscellaneous business.
Special matters.
Adjournment.
(d) (1) Notwithstanding the provisions of Section 7(c) of this
Article I, the order and topics of business to be transacted
at any meeting shall be determined by the presiding officer of
the meeting in his or her sole discretion.
(2) In no event shall any variation in the order of business or
additions and deletions from the order of business as
specified in Section 7(c) of this Article I invalidate any
actions properly taken at any meeting.
SECTION 8. Voting
(a) Unless otherwise provided for in the Articles of Incorporation, each
stockholder shall be en titled, at each meeting and upon each proposal
to be voted upon, to one vote for each share of voting stock recorded
in his name on the stock transfer records of the Corporation on the
record date fixed as provided for in Section 5 of this Article I.
(b) (1) The presiding officer at any meeting of the stockholders
shall have the power to determine the method and means of
voting when any matter is to be voted upon.
(2) The method and means of voting may include, but shall not be
limited to, vote by ballot, vote by hand, vote by voice or
vote by written consent in lieu of meeting.
(3) No method of voting may be adopted, however, which fails to
take account of any stockholder`s right to vote by proxy as
provided for in Section 10 of this Article I.
(4) In no event may any method of voting be adopted which would
prejudice the outcome of the vote.
SECTION 9. Action Without Meeting
191
<PAGE>
(a) (1) Any action required to be taken at any annual or special
meeting of stockholders of the Corporation, or any action
which may be taken at any annual or special meeting of such
stockholders, may be taken without a meeting, without prior
notice and without a vote, if a consent in writing, setting
forth the action so taken, shall be signed by the holders of a
majority of the Corporation's outstanding voting stock.
(2) Such instrument may be executed in counterparts or as a unitary
document.
(b) In the event that the action to which the stockholders consent is such
as would have required the filing of a certificate under the Florida
Business Corporation Act General Corporation Act, the effect of such
consent shall be as if such action had been voted on by stockholders at
a meeting thereof, however, the certificate filed under such other
section shall state that written consent has been given in accordance
with the provisions of Section 9 of this Article I.
(c) If stockholder action is taken by written consent in lieu of meeting
signed by less than all of the Corporation's stockholders, then all non
participating stockholders shall be provided with written notice of the
action taken within 10 days after the effective date of the written
instrument taking such action.
(d) No action by written consent in lieu of meeting shall be valid if it is
in contravention of ap plicable proxy or informational rules adopted
pursuant to the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), including, without limitation, the requirements of
Section 14 thereof.
SECTION 10. Proxies
(a) Every stockholder entitled to vote at a meeting of stockholders or to
express consent or dissent without a meeting, or his or her duly
authorized attorney-in-fact, may authorize another person or persons to
act for him or her by proxy.
(b) (1) Every proxy must be signed by the stockholder or his or her
attorney-in-fact.
(2) No proxy shall be valid after the expiration of 11 months from
the date thereof unless otherwise provided in the proxy.
(3) Every proxy shall be revocable at the pleasure of the
stockholder executing it, except as otherwise provided in this
Section 10.
(c) The authority of the holder of a proxy to act shall not be revoked by
the incompetence or death of the stockholder who executed the proxy
unless, before the authority is exercised, written
192
<PAGE>
notice of any adjudication of such incompetence or of such death is
received by the corporate officer responsible for maintaining the list
of stockholders.
(d) Except when other provisions shall have been made by written agreement
between the parties, the record holder of shares held as pledges or
otherwise as security or which belong to another, shall issue to the
pledger or to such owner of such shares, upon demand therefor and
payment of necessary expenses thereof, a proxy to vote or take other
action thereon.
(e) A proxy which states that it is irrevocable is irrevocable when it is
held by any of the following or a nominee of any of the following: (i)
a pledgee; (ii) a person who has purchased or agreed to purchase the
shares: (iii) a creditor or creditors of the Corporation who extend or
continue to extend credit to the Corporation in consideration of the
proxy, if the proxy states that it was given in consideration of such
extension or continuation of credit, the amount thereof, and the name
of the person extending or continuing credit; (iv) a person who has
contracted to perform services as an officer of the Corporation, if a
proxy is required by the contract of employment, if the proxy states
that it was given in consideration of such contract of employment and
states the name of the employee and the period of employment
contracted for; and (v) a person designated by or under an agreement
as provided in Article XI hereof.
(f) (1) Notwithstanding a provision in a proxy stating that it is
irrevocable, the proxy becomes revocable after the pledge is redeemed,
the debt of the Corporation is paid, the period of employment provided
for in the contract of employment has terminated, or the agreement
under Article XI hereof has terminated and, in a case provided for in
Section 10(e) (iii) or Section 10(e) (iv) of this Article I, becomes
revocable three years after the date of the proxy or at the end of the
period, if any, specified therein, whichever period is less, unless
the period of irrevocability of the proxy as provided in this Section
10.
(2) This Section 10(f) does not affect the duration of a proxy under
Section 10(b) of this Article I.
(g) A proxy may be revoked, notwithstanding a provision making it
irrevocable, by a purchaser of shares without knowledge of the
existence of the provisions unless the existence of the proxy and its
irrevocability is noted conspicuously on the face or back of the
certificate representing such shares.
(h) If a proxy for the same shares confers authority upon two or more
persons and does not otherwise provide, a majority of such persons
present at the meeting, or if only one is present then that one, may
exercise all the powers conferred by the proxy. if the proxy holders
present at the meeting are equally divided as to the right and manner
of voting in any particular case, the voting of such shares shall be
prorated.
193
<PAGE>
(i) If a proxy expressly so provides, any proxy holder may appoint in
writing a substitute to act in his or her place.
(j) Notwithstanding anything in the Bylaws to the contrary, no proxy shall
be valid if it was ob tained in violation of any applicable laws,
including, without limitation, the requirements of the Exchange Act or
the Rules and Regulations promulgated thereunder.
SECTION 11. Voting of Shares by Stockholders
(a) (1) Shares standing in the name of another corporation,
domestic or foreign, may be voted by the officer, agent, or
proxy designated by the bylaws of the corporate stockholder;
or, in the absence of any applicable bylaw, by such person as
the Board of Directors of the corporate stockholder may
designate.
(2) Proof of such designation may be made by presentation of a
certified copy of the bylaws or other instrument of the
corporate stockholder.
(3) In the absence of any such designation, or in case of
conflicting designation by the corporate stockholder, the
chairman of the board, president, any vice president,
secretary and treasurer of the corporate stockholder, in that
order, shall be presumed to possess authority to vote such
shares.
(b) Shares held by an administrator, executor, guardian or conservator may
be voted by him or her, either in person or by proxy, without a
transfer of such shares into his or her name. Shares standing in the
name of a trustee may be voted as shares held by him or her without a
transfer of such shares into his name.
(c) (1) Shares standing in the name of a receiver may be voted by such
receiver.
(2) Shares held by or under the control of a receiver but not
standing in the name of such receiver, may be voted by such
receiver without the transfer thereof into his name if
authority to do so is contained in an appropriate order of the
court by which such receiver was appointed.
(d) A stockholder whose shares are pledged shall be entitled to vote such
shares until the shares have been transferred into the name of the
pledgee.
(e) Shares of the capital stock of the Corporation belonging to the
Corporation or held by it in a fiduciary capacity shall not be voted,
directly or indirectly, at any meeting, and shall not be counted in
determining the total number of outstanding shares.
194
<PAGE>
ARTICLE II
DIRECTORS
SECTION 1. Board of Directors; Exercise of Corporate Powers
(a) (1) All corporate powers shall be exercised by or under the
authority of, and the business and affairs of the Corporation
shall be managed under the direction of, the Board of
Directors except as may be otherwise provided in the Articles
of Incorporation or in a stockholders' agreement.
(2) If any such provision is made in the Articles of Incorporation
or in a stockholders' agreement, the powers and duties
conferred or imposed upon the Board of Directors shall be
exercised or performed to such extent and by such person or
persons as shall be provided in the Articles of Incorporation
or stockholders' agreement.
(3) In the event that the Corporation, pursuant to due and valid
authorization by the Board of Directors, enters into an
agreement relied on by a third party which requires specific
actions by the Board of Directors in the future (e.g., the
granting of proxies to vote shares in a subsidiary or the
election of a person, or the designee of a person to a
corporate office), then the Corporation's future Boards of
Directors shall be bound to honor such agreement, unless such
agreement is inconsistent with applicable laws.
(b) Directors need not be residents of this state or stockholders of the
Corporation unless the Ar ticles of Incorporation so require.
(c) The Board of Directors shall have authority to fix the compensation of
Directors based on recommendations of its compensation committee unless
otherwise provided in the Articles of Incorporation.
(d) A Director shall perform his or her duties as a Director, including his
or her duties as a member of any committee of the Board upon which he
may serve, in good faith, in a manner he or she reasonably believes to
be in the best interests of the Corporation, and with such care as an
ordinarily prudent person in a like position would use under similar
circumstances.
(e) In performing his or her duties, a Director shall be entitled to rely
on information, opinions, reports or statements, including financial
statements and other financial data, in each case prepared or
presented by: (i) one or more officers or employees of the Corporation
whom the Director reasonably believes to be reliable and competent in
the matters presented; (ii) legal counsel, public accountants or other
persons as to matters which the Director reasonably believes to be
within such persons' professional or expert competence; or (iii) a
committee of the Board upon which he or she does not serve, duly
designated in accordance with a provision of the Articles of
Incorporation or these Bylaws, as to matters within its designated
authority, which committee the Director reasonably believes to merit
confidence.
195
<PAGE>
(f) A Director shall not be considered to be acting in good faith if he or
she has knowledge con cerning the matter in question that would cause
such reliance described in Section 1(e) of this Article II to be
unwarranted.
(g) A person who performs his or her duties in compliance with Section 1 of
this Article II shall have no liability by reason of being or having
been a Director of the Corporation.
(h) A Director of the Corporation who is present at a meeting of the Board
of Directors at which action on any corporate matter is taken shall be
presumed to have assented to the action taken unless he or she votes
against such action or abstains from voting in respect thereto because
of an asserted conflict of interest.
SECTION 2. Number; Election; Classification of Directors; Vacancies
(a) (1) The Board of Directors of this Corporation shall consist of
not less than one Director.
(2) The Board shall have authority, from time to time, to increase
the number of Directors or to decrease it to not less than one
member, provided that no decrease in the number of Directors
shall deprive a serving Director of the right to serve
throughout the term of his or her election.
(3) Whenever the Board of Directors is comprised of three or more
members, at least on such member shall be a person other than
a holder of ten percent or more of any class of the
Corporation's capital stock, an officer or employee of the
Corporation, or a person related to any such person (such
director or directors being hereinafter referred to as
"Independent Director(s)".
(b) Each person named in the Articles of Incorporation as a member of the
initial Board of Direc tors shall serve until his or her successor
shall have been elected and qualified or until his or her earlier
resignation, removal from office, or death.
(c) (1) At the first annual meeting of stockholders and at each
annual meeting thereafter, the stockholders shall elect
Directors to hold office until the next succeeding annual
meeting, except in case of the classification of Director as
permitted by the Florida Business Corporation Act.
(2) Each Director shall hold office for the term for which he or
she is elected and until his or her successor shall have been
elected and qualified or until his or her earlier resignation,
removal from office, or death.
196
<PAGE>
(d) (1) The stockholders, by amendment to these Bylaws, may
provide that the Directors be divided into not more than four
classes, as nearly equal in number as possible, whose terms of
office shall respectively expire at different times, but no
such term shall continue longer than four years, and at least
one fourth of the Directors shall be elected annually.
(2) If Directors are classified and the number of Directors is
thereafter changed, any increase or decrease in Directorship
shall be so apportioned among the classes as to make all
classes as nearly equal in number as possible.
(e) (1) Any vacancy occurring in the Board of Directors, including
any vacancy created by reason of an increase in the number of
Directors, may be filled only by the Board of Directors.
(2) A Director elected to fill a vacancy shall hold office only
until the next election of Directors by the stockholders.
SECTION 3. Removal of Directors
(a) At a meeting of stockholders called expressly for that purpose, any
Director or the entire Board of Directors may be removed, with or
without cause, by the vote of the holders of 50% plus one of the shares
entitled to attend and vote at the election of Directors; provided that
at least one Director remains in office or one Director is elected as a
replacement Director concurrently with such removal.
(b) In the event that the number of Directors is reduced below the number
mandated in the Articles of Incorporation as a result of the removal of
one or more Directors by the stockholders, then the remaining Directors
or the contemporaneously elected replacement Director will promptly
elect replacement Directors, to serve until the next meeting of the
Corporation's stockholders, and until their replacements have been
elected, qualified and assume their office.
SECTION 4. Director Quorum and Voting
(a) A majority of the Directors fixed in the manner provided in these
Bylaws shall constitute a quorum for the transaction of business.
(b) A majority of the members of an executive committee or other committee
shall constitute a quorum for the transaction of business at any
meeting of such executive committee or other committee.
(c) The act of a majority of the Directors present at a Board meeting at
which a quorum is present shall be the act of the Board of Directors.
197
<PAGE>
(d) The act of a majority of the members of an executive committee present
at an executive committee meeting at which a quorum is present shall be
the act of the executive committee.
(e) The act of a majority of the members of any other committee present at
a committee meeting at which a quorum is present shall be the act of
the committee, unless the committee is required to maintain a
membership comprised of a majority of Independent Directors, in which
case an act of the committee will require the affirmative vote of a
majority of all Independent Directors who are eligible to attend and
vote as well as a majority of those present and voting.
(f) Directors may, if not contrary to applicable law, vote either in person
or by proxy, provided that the proxy holder must be either another
Director, an officer or a stockholder of the Corporation; however, any
Director who elects to vote by proxy more than three times during any
single fiscal year shall, unless otherwise determined by the Board of
Directors, be automatically removed as a Director.
SECTION 5. Director Conflicts of Interest
(a) No contract or other transaction between this Corporation and one or
more of its Directors or any other corporation, firm, association or
entity in which one or more of its Directors are Directors or officers
or are financially interested shall be either void or voidable because
of such relationship or interest or because such Director or Directors
are present at the meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or
transaction or because their votes are counted for such purpose, if:
(1) The fact of such relationship or interest is disclosed or
known to the Board of Directors or committee which authorizes,
approves or ratifies the contract or transaction by a vote or
consent sufficient for the purpose without counting the votes
or consents of such interested Directors; or
(2) The fact of such relationship or interest is disclosed or
known to the stockholders en titled to vote and they
authorize, approve or ratify such contract or transaction by
vote or written consent; or
(3) The contract or transaction is fair and reasonable as to the
Corporation at the time it is authorized by the Board, a
committee, or the stockholders.
(b) Interested Directors, whether or not voting, may be counted in
determining the presence of a quorum at a meeting of the Board of
Directors or a committee thereof which authorizes, approves or ratifies
such contract or transaction.
SECTION 6. Executive and Other Committees; Designation; Authority
198
<PAGE>
c) The Board of Directors, by resolution adopted by the full Board of
Directors, may designate from among its Directors an executive
committee and one or more other committees each of which, to the
extent provided in such resolution or in the Articles of Incorporation
or these Bylaws, shall have and may exercise all the authority of the
Board of Directors, except that no such committee shall have the
authority to : (i) approve or recommend to stockholders actions or
proposals required by the Florida Business Corporation Act to be
approved by stockholders; (ii) designate candidates for the office of
Director for purposes of proxy solicitation or otherwise; (iii) fill
vacancies on the Board of Directors or any committee thereof; (iv)
amend these Bylaws; (v) authorize or approve the re-acquisition of
shares unless pursuant to a general formula or method specified by the
Board of Directors; or (vi) authorize or approve the issuance or sale
of, or any contract to issue or sell, shares or designate the terms of
a series of a class of shares, unless the Board of Directors, having
acted regarding general authorization for the issuance or sale of
shares, or any contract therefor, and, in the case of a series, the
designation thereof has specified a general formula or method by
resolution or by adoption of a stock option or other plan, authorized
a committee to fix the terms upon which such shares may be issued or
sold, including, without limitation, the price, the rate or manner of
payment of dividends, provisions for redemption, sinking fund,
conversion, and voting or preferential rights, and provisions for
other features of a class of shares, or a series of a class of shares,
with full power in such committee to adopt any final resolution
setting forth all the terms of a series for filing with the Department
of State under the Florida Business Corporation Act.
(d) The Board, by resolution adopted in accordance with Section 6(a) of
this Article II, may desig nate one or more Directors as alternate
members of any such committee, who may act in the place and stead of
any absent member or members at any meeting of such committee.
(e) Neither the designation of any such committee, the delegation thereto
of authority, nor action by such committee pursuant to such authority
shall alone constitute compliance by a member of the Board of
Directors, not a member of the committee in question, with his
responsibility to act in good faith, in manner he reasonably believes
to be in the best interests of the Corporation, and with such care as
an ordinarily prudent person in a like position would use under similar
circumstances.
(f) The Board of Directors shall at every organizational meeting thereof
designate the following committees comprised in each case of a majority
of Independent Directors:
(1) An audit committee;
(7) A derivative litigation committee;
(8) A compensation committee;
199
<PAGE>
(9) A regulatory compliance committee; and
(10) A nominating committee.
(g) The audit committee shall be responsible for selection of the auditor
for the Corporation's financial statements, which must be a certified
public accountant that is a member of the AICPA's Securities Practice
Section and already successfully subjected to peer review, for
supervision of the annual audit and for review of all financial data
submitted by the Corporation to the Commission.
(h) (1) No stockholder may assert a derivative cause of action on
behalf of the Corporation, rather, any claims that would give
rise to derivative causes of action shall be submitted in
writing, specifying the nature of the cause of action and
providing all evidence associated with such claim, to a the
derivative litigation committee of the Board of Directors.
(2) The derivative litigation committee shall be comprised of
members who do not also serve as officers of the Corporation
and who are not reasonably involved with the subject cause of
action.
(3) In the event that, due to the nature of the litigation
involved, no such directors are serving, then its duties shall
be delegated by the Board of Directors to a specially selected
legal counsel who is not otherwise representing the
Corporation, provided that no attorney so designated or his or
her partners hold shares of the Corporation's securities, hold
any office or position with the Corporation or be related by
marriage or through siblings, parents or children to any
officer or director of the Corporation.
(4) The decision to litigate, or not to litigate by such special
committee or special counsel shall be binding on the
Corporation and the submitting stockholder or stockholders
unless the foregoing procedure has not been initiated within
30 days after completion of the submission by the subject
litigant.
(g) (1) The compensation committee shall have exclusive
jurisdiction to develop compensation plans and alternatives
for all executive officers and directors of the Corporation,
and shall be responsible for development, implementation and
awards under any benefit plans covering the Corporation's
directors, officers or employees which, after proposal by the
compensation committee, are adopted by the Board of Directors
or the stockholders of the Corporation.
(2) Plans or proposals developed by the compensation committee
must be submitted for ratification to the Board of Directors,
and, if approved thereby, shall, if required by applicable
laws, be submitted for ratification to the Corporation's
stockholders.
200
<PAGE>
(3) The Corporation's chief financial officer, a designee of the
Corporation's auditors and a designee of the Corporation's
general counsel shall serve as ex officio, non-voting members
of the compensation committee.
(c) The regulatory compliance committee shall be responsible for review and
approval of all filings by the Corporation with the Commission and any
other federal regulatory body with which the Corporation is regularly
required to file information involving matters not under the
jurisdiction of the audit committee, and shall supervise the
preparation by the Corporation's general counsel of summary materials
concerning all such reports as may be required to permit all members of
the Board of Directors to make informed decisions concerning approval
or ratification of any such reports.
(d) The nominating committee shall conduct ongoing searches for candidates
to corporate offices, for candidates to the Corporation's board of
directors and for membership in committees of the Corporation's board
of directors, and, in each instance when it makes recommendations for
any such position, shall submit more qualified candidates, if
reasonably possible, than there are positions to fill so that the Board
of Directors and stockholders will be presented with more than one
alternative.
(e) Any committee, may, if required for purposes of independence, be
comprised of a single voting member.
(f) Notwithstanding the foregoing, in the event that the Corporation is a
controlled subsidiary of another corporation and the parent corporation
is ultimately responsible for the matters delegated to the audit
committee, derivative litigation committee, compensation committee,
regulatory compliance committee, or nominating committee, then the
requirements for such committees as to this Corporation may be
dispensed with.
SECTION 7. Place, Time, Notice and Call of Directors' Meeting.
(a) Meetings of the Board of Directors, regular or special, may be held
either within or without the State of Florida.
(b) (1) A regular meeting of the Board of Directors of the
Corporation shall be held for the election of officers of the
Corporation and for the transaction of such other business as
may come before such meeting as promptly as practicable after
the annual meeting of the stockholders of this Corporation
without the necessity of notice other than this Bylaw.
(b) Other regular meetings of the Board of Directors of the
Corporation may be held at such places as the Board of
Directors of the Corporation may from time to time resolve
201
<PAGE>
without notice other than such resolution.
(c) Special meetings of the Board of Directors may be held at any
time upon call of the Chairman of the Board of Directors or a
majority of the Directors of the Corporation, at such time and
at such place as shall be specified in the call thereof.
(d) (A) Notice of any special meeting of the Board of
Directors must be given at least two days prior
thereto if by written notice delivered personally, by
telegram, by telephone, by e-mail or by facsimile
transmission; or at least five days prior thereto if
mailed.
(B) If such notice is given by mail, such notice shall be
deemed to have been delivered when deposited with the
United States Postal Service addressed to the
business address of such Director with postage
thereon prepaid.
(C) If notice be given by telegram, such notice shall be
deemed delivered when the telegram is delivered to
the telegraph company.
(D) If notice is given by telephone (including facsimile
transmission or e-mail), such notice shall be deemed
delivered when the call is completed.
(E) Notwithstanding the foregoing: if an emergency
meeting of the Board of Directors or any committee
thereof is required and notice as provided above
cannot be reasonably provided within the time periods
required, then:
(a) Notice shall be provided by all of the
foregoing means and to all members, whether
or not at the locations normally established
for receipt of notice, establishing that an
emergency meeting will be held at a
specified time through teleconference in
which each member must be able to
participate, if he or she so elect;
(b) The time set for the emergency meeting must
be the maximum amount of time following the
provision or attempted provision of notice
as is reasonable under the circumstances;
(c) If a quorum is established, then temporary
required actions may be authorized, subject
to ratification at a regularly called
special meeting to be held within two days
after at the emergency meeting, and if not
so ratified, any such actions shall be
immediately discontinued, and to the extent
reasonably possible, undone.
(c) (1) Notice of a meeting of the Board of Directors need not be given
to any Director who
202
<PAGE>
signs a waiver of notice either before or after the meeting.
(2) Attendance of a Director at a meeting shall constitute a
waiver of notice of such meeting and waiver of any and all
objections to the place of the meeting, the time of the
meeting, or the manner in which it has been called or
convened, except when a Director states, at the beginning of
the meeting, any objection to the transaction of business
because the meeting is not lawfully called or convened.
(d) Neither the business to be transacted at, nor the purpose of, any
regular of special meeting of the Board of Directors need be specified
in the notice or waiver of notice of such meeting.
(e) (1) A majority of the Directors present, whether or not a
quorum exists, may adjourn any meeting of the Board of
Directors to another time and place.
(2) Notice of any such adjourned meeting shall be given to the
Directors who were not present at the time of the adjournment
and, unless the time and place of the adjourned meeting are
announced at the time of the adjournment, to the other
Directors.
(f) (1) Members of the Board of Directors may participate in a
meeting of such Board by means of a conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other at the same
time.
(2) Participation by such means shall constitute presence in person at
a meeting.
SECTION 8. Action by Directors Without a Meeting
(a) (1) Any action required by the Florida Business Corporation Act to be
taken at a meeting of the Directors of the Corporation, or any action
which may be taken at a meeting of the Directors or a committee
thereof, may be taken without a meeting if a consent in writing,
setting forth the action so to be taken, signed by all of the
Directors, or all of the members of the committee, as the case may be,
and is filed in the minutes of the proceedings of the Board or of the
committee.
(2) Such consent shall have the same effect as a unanimous vote.
(b) If not contrary to applicable law, Directors may take action as the
Board of Directors or com mittees thereof through a written consent to
action signed by a number of Directors sufficient to have carried a
vote of the Board of Directors or committee thereof with all members
present and voting; provided, that all Directors not joining in such
written instrument shall be deemed for all purposes to have cast
dissenting votes, and that all Directors not parties to such instrument
shall receive written notice of all action taken through such
instrument within three days after such instrument shall have been
subscribed by the requisite number of Directors required for such
action.
203
<PAGE>
SECTION 9. Compensation
(a) The Directors and members of the executive and any other committee of
the Board of Directors shall be entitled to such reasonable
compensation for their services and on such basis as shall be fixed
from time to time by resolution of the Board of Directors, based on
proposals submitted by the compensation committee of the Board of
Directors.
(b) The Board of Directors and members of any committee of that Board of
Directors shall be entitled to reimbursement for any reasonable
expenses incurred in attending any Board or committee meeting.
(c) Any Director receiving compensation under this Section shall not be
prevented from serving the Corporation in any other capacity and shall
not be prohibited from receiving reasonable compensation for such other
services.
SECTION 10. Resignation
(a) Unless he or she is the sole serving Director, any Director of the
Corporation may resign at any time by providing the Board of Directors
with written notice indicating the Director's intention to resign and
the effective date thereof.
(b) A sole serving Director of the Corporation must, at least concurrently
with his or her resignation, elect one or more successor Director(s) at
least one of whom must assume his or her office concurrently with the
subject resignation, and the resignation shall be effected by providing
the successor Director(s) with written notice indicating the Director's
intention to resign and the effective date thereof.
ARTICLE III
OFFICERS
SECTION 1. Election; Number; Terms of Office
(a) (1) The officers of the Corporation shall consist of a
Chairman of the Board of Directors, provided that there are
three or more directors then serving, whose title may be
designated as "Chairman," a Chief Executive officer, a
President, a Chief Operating Officer, a Chief Financial
Officer, one or more Vice-Presidents, a Secretary and a
Treasurer, each of whom shall be elected by the Board of
Directors at such time and in such manner as may be prescribed
by these Bylaws.
204
<PAGE>
(2) Such other officers and assistance officers and agents as may
be deemed necessary may be elected or appointed by the Board
of Directors.
(3) The officers of the Corporation shall be hereinafter
collectively referred to as the "Officers."
(b) All Officers and agents, as between themselves and the Corporation,
shall have such authority and perform such duties in the management of
the Corporation as are provided in these Bylaws, or as may be
determined by resolution of the Board of Directors not inconsistent
with these Bylaws.
(c) Any two or more offices may be held by the same person, except for the
offices of President and Secretary.
(d) A failure to elect a Chairman of the Board, Chief Executive Officer,
President, Chief Operating Officer, Chief Financial Officer, a Vice
President, a Secretary or a Treasurer shall not affect the existence of
the Corporation.
SECTION 2. Removal
(a) An Officer of the Corporation shall hold office until the election and
qualification of his suc cessor; however, any Officer of the
Corporation may be removed from office by the Board of Directors or, if
appointed by another Officer pursuant to authority delegated by the
Board of Directors, by such appointing Officer, whenever in its, his or
her judgment the best interests of the Corporation will be served
thereby.
(b) Such removal shall be without prejudice to the contract rights, if any,
of the person so removed.
(c) Election or appointment of an officer shall not of itself create any
contract right to employment or compensation or create an
employer-employee relationship.
SECTION 3. Vacancies
Any vacancy in any office from any cause may be filled for the
unexpired portion of the term of such office by the Board of Directors.
SECTION 4. Powers and duties
(a) Chairman:
The Chairman of the Board of Directors (hereinafter referred to as the
"Chairman"):
205
<PAGE>
(1) Shall preside over meetings of the Board of Directors and the
stockholders.
(2) Unless a separate Chief Executive Officer is elected, shall
exercise the powers hereafter granted to that office.
(3) Unless a Chairman of the Board is specifically elected, shall
be the President.
(b) Chief Executive Officer:
(1) The Chief Executive Officer shall be the principal Officer of
the Corporation to whom all other Officers shall be
subordinate.
(2) In the event no Chief Executive Officer is separately elected,
such office shall be assumed by the Chairman of the Board, and
if no such office has been filled, by the President.
(3) Except where by law the signature of the President is required
or unless the Board of Directors shall rule otherwise, the
Chief Executive Officer shall possess the same power as the
President to sign all certificates, contracts and other
instruments of the Corporation which may be authorized by the
Board of Directors.
(c) Chief Operating Officer
(1) The Chief Operating Officer of the Corporation shall be
responsible for management of the day to day affairs of the
Corporation, subject to compliance with the directions of the
Board of Directors and of the Chief Executive Officer.
(2) The Chief Operating Officer shall be responsible for the
general day-to-day supervision of the business and affairs of
the Corporation.
(3) The Chief Operating Officer shall sign or countersign all
certificates, contracts or other instruments of the
Corporation, as authorized by the Board of Directors or as
assigned by the Chief Executive Officer.
(4) Unless otherwise provided by specific resolution of the Board
of Directors, the President shall be the Chief Operating
Officer of the Corporation.
(d) President
(1) In the absence of a separately elected or available Chief
Executive Officer or Chairman of the Board, the President
shall be the Chief Executive Officer of the Corporation and
shall preside at all meetings of the stockholders and the
Board of Directors.
206
<PAGE>
(2) The Board of Directors will at all times retain the power to
expressly delegate the duties of the President to any other
Officer of the Corporation.
(e) Chief Financial Officer
(1) The Chief Financial Officer shall be responsible for
coordinating all financial aspects of the Corporation's
operations, including strategic financial planning,
supervision of the Corporation's Treasurer, Comptroller and,
subject to the supervision of the audit committee, for
coordination with the Corporation's outside auditors.
(2) The Chief Financial Officer shall be responsible for keeping
the audit committee fully and timely informed of all matters
under its jurisdiction.
(3) The Chief Financial Officer shall, unless otherwise
specifically provided by the Board of Directors, serve as the
Corporation's principal compliance officer and shall be
responsible for overseeing preparation and filing of all
reports of the Corporation's activities required to be filed,
either periodically or on a special basis with the United
States Internal Revenue Service, the Commission and with other
federal, state or local governmental agencies.
(4) The Chief Financial Officer shall be responsible for keeping
the regulatory committee fully and timely informed of all
matters under its jurisdiction.
(f) Vice President(s)
(1) The Vice President(s), if any, in the order designated by the
Board of Directors, shall exercise the functions of the
President in the event of the absence, disability, death, or
refusal to act of the President.
(2) During the time that any Vice President is properly exercising
the functions of the President, such Vice President shall have
all the powers of and be subject to all restrictions upon the
President.
(3) Each Vice President shall have such other duties as are
assigned to him from time to time by the Board of Directors or
by the President of the Corporation and shall be subject to
such specializing designations (e.g., "senior," executive,"
etc.) as the Board of Directors may select.
(g) Secretary
(1) The Secretary of the Corporation shall keep the minutes of the
meetings of the stockholders of the Corporation, and, unless
provided otherwise by the Chairman at any meeting of the Board of
Directors, the Secretary shall keep the minutes of the meetings
of the Board of Directors of the Corporation.
\
207
<PAGE>
(2) The Secretary shall, unless a chief legal officer is elected,
be the custodian of the minute books of the Corporation and
such other books and records of the Corporation as the Board
of Directors of the Corporation may direct.
(3) The Secretary of the Corporation shall have the general
responsibility for maintaining the stock transfer records of
the Corporation, or of supervising the maintenance of the
stock transfer records of the Corporation by the transfer
agent, if any, of the Corporation.
(3) The Secretary shall be the custodian of the corporate seal of
the Corporation and shall affix the corporate seal of the
Corporation on contracts and other instruments as the Board of
Directors may direct.
(4) The Secretary shall perform such other duties as are assigned
from time by the Board of Directors, the Chief Executive
Officer, the Chairman, the Chief Operating Officer or the
President of the Corporation.
(h) Treasurer
(1) The Treasurer of the Corporation shall be directly subordinate
to the Chief Financial Officer.
(2) In the absence of a Chief Financial Officer, such office shall
be filled by the Treasurer.
(3) Unless otherwise specified by the Board of Directors, the
Treasurer shall have custody of all funds and securities owned
by the Corporation.
(4) The Treasurer shall cause to be entered regularly in the
proper books of account of the Corporation full and accurate
accounts of the receipts and disbursements of the Corporation.
(5) The Treasurer of the Corporation shall render a statement of
the cash, financial and other accounts of the Corporation
whenever he is directed to render such a statement by the
Board of Directors or by the President of the Corporation.
(6) The Treasurer shall at all reasonable times make available the
Corporation's books and financial accounts to any Director of
the Corporation during normal business hours.
208
<PAGE>
(7) The Treasurer shall perform all other acts incident to the
Office of Treasurer of the Corporation, and he shall have such
other duties as are assigned to him from time to time by the
Board of Directors, the Chief Executive Officer, the Chairman,
the Chief Operating Officer or the President of the
Corporation.
(i) General Counsel & Chief Legal Officer:
(1) The Board of Directors shall designate a person licensed to
practice law in one of the states comprising the United States
as the Corporation's General Counsel and Chief Legal Officer;
(2) The Corporation's General Counsel and Chief Legal Officer
shall coordinate the Corporation's legal affairs under the
directions of the Board of Directors and in coordination with
the Chief Executive Officer, to whom he or she shall report;
(3) The Board of Directors may appoint such subordinate legal
officers and assign them such functions as it may deem
appropriate.
(j) Other Subordinate or Assistant Officers.
(1) Other subordinate, deputy or assistant officers may be
appointed by the Board of Directors or by the Chief Executive
Officer, the Chairman, the Chief Operating Officer or the
President, if such authority is delegated to them by the Board
of Directors.
(2) Persons so appointed shall exercise such powers and perform
such duties as may be delegated to them by the Board of
Directors, the Chief Executive Officer, the Chief Operating
Officer or by the President, that appointed them, as the case
may be.
(k) In case of the absence or disability of any Officer of the Corporation
and of any person authorized to act in his place during such period of
absence or disability, the Board of Directors may from time to time
delegate the powers and duties of such Officer or any Director or any
other person whom it may select.
SECTION 5. Salaries
(a) The salaries of all Officers of the Corporation shall be fixed by the
Board of Directors based on recommendations by the compensation
committee of the Board of Directors.
(b) No Officer shall be ineligible to receive such salary by reason of the
fact that he is also a Director of the Corporation and receiving
compensation therefor.
209
<PAGE>
ARTICLE IV
LOANS TO EMPLOYEES AND OFFICERS;
GUARANTEE OF OBLIGATIONS OF EMPLOYEES AND OFFICERS
(a) This Corporation may lend money to, guarantee any obligation of, or
otherwise assist any Of ficer or other employee of the Corporation or
of a subsidiary, including any Officer or employee who is a Director of
the Corporation or of a subsidiary, whenever, in the judgment of the
Directors, such loan, guarantee or assistance may reasonably be
expected to benefit the Corporation.
(b) The loan, guarantee or other assistance may be with or without
interest, and may be unsecured, or secured in such manner as the Board
of Directors shall approve including, without limitation, a pledge of
shares of stock of the Corporation.
(c) Nothing in this Article shall be deemed to deny, limit or restrict the
powers of guarantee or warranty of this Corporation at common law or
under any statute.
ARTICLE V
STOCK CERTIFICATES; VOTING TRUSTS; TRANSFERS
SECTION 1. Certificates Representing Shares
To the extent legally permitted by the laws of the United States and
the State of Florida, in the event that the Corporation has 100 or more
stockholders, records of the holders of the Corporation's capital stock shall be
maintained through stock transfer record entry with a transfer agent registered
and in good standing with the Commission and certificates evincing ownership of
capital stock shall not be issued, except at the request of a stockholder in
which case they shall be issued as provided below, at the stockholders' expense:
(a) (1) Subject to the foregoing, every holder of shares of this
Corporation shall be entitled to one or more certificates
representing all shares to which he, she or it is entitled and
such certificates shall be signed by the Chairman, Chief
Executive Officer, Chief Operating Officer, the President or a
Vice President and the Secretary or an Assistant Secretary of
the Corporation and may be sealed with the seal of the
Corporation or a facsimile thereof.
(2) The signatures of the Chairman, the Chief Executive Officer,
the Chief Operating Officer, the President or Vice President
and the Secretary or Assistant Secretary may be facsimiles if
the certificate is manually signed on behalf of a transfer
agent or a registrar other than the Corporation itself or an
employee of the Corporation.
210
<PAGE>
(3) In case any Officer who signed or whose facsimile signature
has been placed upon such certificate shall have ceased to be
such Officer before such certificate is issued, it may be
issued by the Corporation with the same effect as if it were
executed by the appropriate Officer at the date of its
issuance.
(b) Every certificate representing shares issued by this Corporation
shall, if shares are divided into one or more classes or series with
differing rights, state that the Corporation will furnish to any
stockholder upon request and without charge a full statement of: (i)
the designations, preferences, limitations, and relative rights of the
shares of each class or series authorized to be issued, and (ii) the
variations in the relative rights and preferences between the shares
of each such series, if the Corporation is authorized to issue any
preferred or special class in series and so far as the same have been
fixed and determined, and the authority of the Board of Directors to
fix and determine, the relative rights and preferences of subsequent
series.
(c) Every certificate representing shares which are restricted as to sale,
disposition or other transfer (including restrictions based on federal
or state securities and other laws) shall state that such shares are
restricted as to transfer and shall set forth or fairly summarize upon
the certificate, or shall state that the Corporation will furnish to
any stockholder upon request and without charge a full statement of,
such restrictions.
(d) Each certificate representing shares shall state upon the face thereof:
(1) The name of the Corporation;
(2) That the Corporation is organized under the laws of the State
of Florida;
(3) The name of the person or persons to whom issued;
(4) The number and class of shares, and the designation of the
series, if any, which such certificate represents;
(5) The date of issuance; and
(6) The par value of each share represented by such certificate,
or a statement that the shares are without par value.
(e) No certificate shall be issued for any shares until they are fully
paid for and in the event that a certificate is erroneously issued or
compensation paid is subsequently discovered to be other than as
represented (e.g., dishonored checks, securities of a corporation
acquired in a reorganization where the representations and warranties
provided prove to be materially false, services provided where other
than as represented, etc.), then the Board of Directors shall
promulgate a certified resolution detailing the nature of the
misrepresented consideration, and shall submit such certified
resolution to the person responsible for recording and effecting
transactions in the Corporation's securities; whereupon such
securities will be restricted from transfer and treated as no longer
outstanding for all purposes unless the Corporation becomes subject to
a judgment of a couRt of competent jurisdiction providing otherwise.
211
<PAGE>
(6) For purposes of Commission Rule 144, the holding period for the
company's securities shall be the initial date recorded in the
Corporation's stock transfer record entry system for the issuance or
transfer thereto to the subject holder, subject to the tacking
provisions of such rule, unless a failure of consideration is
determined to exist pursuant to the preceding paragraph, in which case
the holding period will be deemed to have tolled until a legally
binding determination is obtained concerning when the subject
securities were, in fact, fully paid for.
SECTION 2. Transfer records
(a) The Corporation shall keep at its registered office or principal place
of business or in the office of its transfer agent or registrar, a
stock transfer record (or stock transfer records where more than one
kind, class, or series of stock is outstanding) to be known as the
Official Stock Transfer Registry, containing the names, alphabetically
arranged, addresses and Social Security numbers of every stockholder
and the number of shares each kind, class or series of stock held of
record.
(b) Where the Stock Transfer Registry is kept in the office of the transfer
agent, the Corporation shall keep at its chief administrative offices
copies of the stock lists prepared from said Stock Transfer Registry
and sent to it from time to time (but not less frequently than every
month) by the transfer agent.
(c) The Stock Transfer Registry or stock lists shall show the current
status of the ownership of shares of the Corporation provided that, if
the transfer agent of the Corporation be located elsewhere, a
reasonable time shall be allowed for transit or mail, not to exceed
three days.
SECTION 3. Transfer of Shares
(a) The name(s) and address(es) of the person(s) to whom shares of stock of
this Corporation are issued, shall be entered on the Stock Transfer
records of the Corporation, with the number of shares and date of
issue.
(b) (1) Transfer of shares of the Corporation shall be made on the
Stock Transfer records of the Corporation by the Secretary or
the transfer agent, subject to compliance with any
restrictions specified on such certificate, only when the
holder of record thereof or the legal representative of such
holder of record or the attorney-in-fact of such holder of
record, authorized by power of attorney duly executed and
filed with the Secretary or
212
<PAGE>
transfer agent of the Corporation, shall direct that such
transfer be effected in a written instrument complying with
the securities industry requirements for stock and bond
powers, bearing a medallion guarantee or such other
requirements as may from time to time be promulgated by the
Commission, and, if a certificate therefor has been issued,
shall require surrender the Certificate representing such
shares for cancellation concurrently with the request for
transfer.
(2) Lost, destroyed or stolen Stock Certificates shall be replaced
pursuant to Section 5 of this Article V.
(c) The person or persons in whose names shares stand on the stock transfer
records of the Corporation shall be deemed by the Corporation to be the
owner of such shares for all purposes, except as otherwise provided
pursuant to Sections 10 and 11 of Article I, or Section 4 of Article V.
(d) Shares of the Corporation's capital stock shall be freely transferable
without required Board of Directors' consent unless:
(1) Such shares are subject to transfer restrictions under
applicable Commission rules;
(2) Transfer of the shares has been restricted due to lack of
consideration, fraud in the inducement or other legally
cognizable reasons heretofore described; or
(3) A consent requirement has been imposed pursuant to a binding
written contract subscribed to by the holder or his or her
predecessor in interest.
(e) (1) All transactions in securities subject to any restrictions
imposed under Commission Rule 144 ("restricted securities" and
"Rule 144," respectively) shall, as a condition to transfer,
require the following documentation, to be reviewed and
approved by legal counsel to the Corporation:
(A) An affidavit from the holder (the "Holder") providing
details concerning acquisition of the subject shares;
providing evidence of the date when consideration for the
shares was paid in full; detailing all transactions in the
Corporation's securities during the immediately preceding 90
days; affirming a present intent to dispose of the subject
securities; affirming that a Form 144 has been filed with
the Commission covering the proposed transaction (and
providing a copy thereof); affirming compliance with any
reporting obligations under Sections 13(d), 13(g) or 16(b)
of the Exchange Act, and providing such other facts or
representations as legal counsel to the Corporation may
reasonably require;
213
<PAGE>
(B) A written confirmation by the Corporation's transfer
agent based on records available thereto of all
transactions in the Corporation's securities by the
Holder and anyone with whom the holder is required to
aggregate sales or securities holdings for purposes
of Rule 144, as well as confirmation of the
percentage of outstanding securities of the
Corporation held of record by the Holder and anyone
with whom the holder is required to aggregate sales
or securities holdings for purposes of Rule 144;
(C) Except as provided below, a written confirmation from
the broker through whom the Holder is effecting the
proposed transaction verifying that the transaction
will be effected in full compliance with Rule 144;
and
(D) A legal opinion from counsel to the Holder (who may
not also be the counsel to the Corporation)
specifically addressing all aspects of Rule 144 and
detailing the manner in which they are being complied
with or the reasons that they are not applicable.
(2) Transactions in restricted securities that are not being
effected in reliance on Rule 144 shall require, as a condition
to transfer, the following documentation, to be reviewed and
approved by legal counsel to the Corporation:
(A) An affidavit from the holder (the "Holder") providing
details concerning acquisition of the subject shares;
providing evidence of the date when consideration for
the shares was paid in full; the identity and
qualifications of the person to whom the securities are
being transferred; the manner in which such person has
been provided with required information concerning the
Corporation; affirming compliance with any reporting
obligations under Sections 13(d), 13(g) or 16(b) of the
Exchange Act and providing such other facts or
representations as legal counsel to the Corporation may
reasonably require;
(B) If the Corporation has a class of securities registered
under Section 12 of the Exchange Act, an affidavit from
the Holder affirming that all reports required to be
filed by the Holder with the Commission pursuant to
Sections, 13, 14 and 16 of the Exchange Act (e.g.,
Forms 3, 4 and 5, and Schedules 13D or 13G), have been
filed; and
(C) A legal opinion from counsel to the Holder (who may not
also be the counsel to the Corporation) addressed to
the Corporation in a manner creating enforceable
privity between such legal counsel and the Corporation,
specifically addressing all aspects of the exemptions
relied on to effect the proposed transaction
214
<PAGE>
without registration under applicable federal and
state securities laws and regulations, detailing the
manner in which they are being complied with or the
reasons that they are not applicable and, if the
Corporation has a class of securities registered
under Section 12 of the Exchange Act, asserting that
after diligent inquiry, such counsel confirms that
all reports required to be filed by the Holder with
the Commission pursuant to Sections, 13, 14 and 16 of
the Exchange Act (e.g., Forms 3, 4 and 5, and
Schedules 13D or 13G), have been filed.
(3) No transactions in the Corporation's restricted securities
failing to materially comply with the foregoing requirements
will be honored, nor will any holding period required under
Rule 144 be deemed to commence until all such requirements are
materially complied with (material compliance to be determined
in the sole discretion of the Board of Directors or a court of
competent jurisdiction located in the county where the
Corporation's Chief Legal Officer maintains its principal
offices).
SECTION 4. Voting Trusts
(a) (1) Any number of stockholders of the Corporation may create a
voting trust for the purpose of conferring upon a trustee or
trustees the right to vote or otherwise represent their
shares, for a period not to exceed ten years, by: (i) entering
into a written voting trust agreement specifying the terms and
conditions of the voting trust; (ii) depositing a counterpart
of the agreement with the Corporation at its registered
office; and (iii) transferring their shares to such trustee or
trustees for the purposes of this Agreement.
(2) Prior to the recording of the agreement, the stockholder
concerned shall, if certificates have been issued, tender the
stock certificate(s) described therein to the Corporate
Secretary who shall note on each certificate:
"This Certificate is subject to the provisions of a voting
trust agreement dated ..........., recorded in Minute Book
............, of the Corporation."
(b) (1) Upon the transfer of such shares, voting trust
certificates shall be issued by the trustee or trustees to the
stockholders who transfer their shares in trust.
(2) Such trustee or trustees shall keep a record of the holders of
voting trust certificates evidencing a beneficial interest in
the voting trust, giving the names and addresses of all such
holders and the number and class or the shares in respect of
which the voting trust certificates held by each are issued,
and shall deposit a copy of such record with the Corporation
at its registered office.
215
<PAGE>
(3) The Corporation shall have no liability to any stockholder
participating in a voting trust as a result of any actions or
failures to act by the trustee.
(c) The counterpart of the voting trust agreement and the copy of such
record so deposited with the Corporation shall be subject to the same
right of examination by a stockholder of the Corporation, in person or
by agent or attorney, as are the books and records of the Corporation,
and such counterpart and such copy of such record shall be subject to
examination by any holder of record of voting trust certificates either
in person or by agent or attorney, at any reasonable time for any
proper purpose.
(d) (1) At any time before the expiration of a voting trust
agreement as originally fixed or as extended one or more times
under this Section 4(d), one or more holders of voting trust
certificates may, by agreement in writing, extend the duration
of such voting trust agreement, nominating the same or
substitute trustees, for an additional period not exceeding 10
years.
(2) Such extension agreement shall not affect the rights or
obligations or persons not parties to the agreement, and such
persons shall be entitled to remove their shares from the
trust and promptly to have their stock certificates reissued
upon the expiration of the original term of the voting trust
agreement.
(3) The extension agreement shall in every respect comply with and
be subject to all the provisions of this Section 4, applicable
to the original voting trust agreement except that the 10 year
maximum period of duration shall commence on the date of
adoption of the extension agreement.
(e) The trustees under the terms of the agreements entered into under the
provisions of this Section 4, shall not acquire the legal title to the
shares but shall be vested only with the legal right and title to the
voting power which is incident to the ownership of the shares.
(f) Notwithstanding generally applicable prohibitions against a
corporation's voting of treasury stock or any other provisions in these
Bylaws, if the Corporation is the trustee under a voting trust, it
shall have full authority to vote such shares in accordance with the
terms of the voting trust agreement, even if such agreement vests
absolute and unfettered voting discretion in the trustee and
notwithstanding that the voting trust was created at the prompting or
direction of the Corporation, its Officers or Directors.
SECTION 5. Lost, Destroyed, or Stolen Certificates
No Certificate representing shares of stock in the Corporation shall be
issued in place of any Certificate alleged to have been lost, destroyed, or
stolen except on production of evidence, satisfactory to the Board of Directors,
of such loss, destruction or theft, and, if the Board of Directors so requires,
216
<PAGE>
upon the furnishing of an indemnity bond in such amount (but not to exceed twice
the fair market value of the shares represented by the Certificate) and with
such terms and with such surety as the Board of Directors may, in its
discretion, require.
ARTICLE VI
BOOKS AND RECORDS
(a) The Corporation shall keep correct and complete books and records of
account and shall keep minutes of the proceedings of its stockholders,
Board of Directors and committees of Directors.
(b) Any books, records and minutes may be in written form or in any other
form capable of being converted into written form within a reasonable
time.
(1) Any person who shall have been a holder of record of
shares, or the holder of record of voting trust
certificates for, at least five percent of the
outstanding shares of any class or series of the
Corporation, upon at least five business days prior
written demand stating the purpose thereof, shall;
subject to the qualifications contained in subsection
(2) hereof, have the right to examine, in person or by
agent or attorney, at any reasonable business time or
times, for any purpose, its relevant books and records
of account, minutes and records of stockholders and to
make extracts therefrom, provided that, to the extent
legally permitted, such person shall be required to
reimburse the Corporation for the actual costs of any
reasonable expenses occasioned thereby.
(d) (1) No stockholder who within two years has sold or offered for
sale any list of stockholders or of holders of voting trust
certificates for shares of this Corporation or any other
corporation; has aided or abetted any person in procuring any
list of stockholders or of holders of voting trust certificates
for any such purpose; or has improperly used any information
secured through any prior examination of the books and records of
account, minutes, or record of stockholders or of holders of
voting trust certificates for shares of the Corporation of any
other corporation; shall be entitled to examine the documents and
records of the Corporation as provided in Section (c) of this
Article VI.
(2) No stockholder who does not act in good faith or for a proper
purpose in making his demand shall be entitled to examine the
documents and records of the Corporation as provided in
Section (c) of this Article VI.
(e) Unless modified by resolution of the stockholders, this Corporation
shall prepare not later than 70 days after the close of each fiscal
year, audited financial statements, including all required schedules,
prepared in accordance with Generally Accepted Accounting Principals
("GAAP") consistently applied; and shall prepare not later than 40 days
after the close of each fiscal
217
<PAGE>
quarter (other than the fourth quarter), quarterly unaudited financial
statements, including all required schedules, prepared in accordance
with Generally Accepted Accounting Principals ("GAAP").
(f) Upon the written request of any stockholder or holder of voting trust
certificates for shares of the Corporation, the Corporation shall mail
to such stockholder or holder of voting trust certificates a copy of
its most recent balance sheet and profit and loss statement.
(g) Such financial statements shall be filed and kept for at least five
years in the chief administrative office of the Corporation and shall
be subject to inspection during business hours by any stockholder or
holder of voting trust certificates, in person or by agent, provided
that, to the extent legally permitted, such person shall be required to
reimburse the Corporation for the actual costs of any reasonable
expenses occasioned thereby.
(8) Notwithstanding the foregoing, in the event that this Corporation is
part of a group of corporation's which, pursuant to GAAP, is eligible
to have financial statements prepared on a consolidated basis, then the
inclusion of the Corporation's financial data, prepared in accordance
with GAAP, shall satisfy the requirements of this Article, unless
otherwise required under applicable provisions of federal securities
laws.
ARTICLE VII
DIVIDENDS & OTHER STOCKHOLDER BENEFITS
SECTION 1. Dividends
The Board of Directors of the Corporation may, from time to time,
declare, and the Corpora tion may pay dividends on its own shares, except when
the Corporation is insolvent or when the pay ment thereof would render the
Corporation insolvent, subject to the following provisions:
(a) Dividends in cash or property may be declared and paid, except as
otherwise provided in this Article VII, only out of the unreserved and
unrestricted earned surplus of the Corporation or out of capital
surplus, however arising, but each dividend paid out of capital surplus
shall be identified as a distribution of capital surplus, and the
amount per share paid from such capital surplus shall be disclosed to
the stockholders receiving the same concurrently with the distribution.
(b) If the Corporation shall engage in the business of exploiting natural
resources or other wasting assets and if the Articles of Incorporation
so provide, dividends may be declared and paid in cash out of depletion
or similar reserves, but each such dividend shall be identified as
distribution of such reserves and the amount per share paid from such
reserves shall be disclosed to the stockholders receiving the same
concurrently with the distribution thereof.
218
<PAGE>
(c) Dividends may be declared and paid in the Corporation's treasury
shares, in shares of the capital stock or other securities of the
Corporation's subsidiaries, in the shares of capital stock or other
securities of other issuers held by the Corporation or in any other
assets owned by the Corporation which are capable of equitable
distribution to the Corporation's stockholders, in proportion to their
ownership of equity interests in the Corporation, or in classes or
series thereof, inter se.
(d) Dividends may be declared and paid in the Corporation's authorized but
unissued shares, out of any unreserved and unrestricted surplus of the
Corporation, upon the following conditions:
(1) If a dividend is payable in the Corporations' own shares
having a par value, such shares shall be issued at not less
than the par value thereof and there shall be transferred to
stated capital at the time such dividend is paid an amount of
surplus equal to the aggregate par value of the shares to be
issued as a dividend.
(2) If a dividend is payable in the Corporations' own shares
without par value, such shares shall be issued at a stated
value fixed by the Board of Directors by resolution adopted at
the time such dividend is declared, and there shall be
transferred to stated capital at the time such dividend is
paid an amount of surplus equal to the aggregate stated value
so fixed and the amount per share so transferred to stated
capital shall be disclosed to the stockholders receiving such
dividend concurrently with the payment thereof.
(e) No dividend payable in shares of any class shall be paid to the holders
of shares of any other class unless the Articles of Incorporation so
provide or such payment is authorized by the affirmative vote or the
written consent of the holders of at least a majority of the
outstanding shares of the class in which the payment is to be made.
(f) A split or division of the issued shares of any class into a greater
number of shares of the same class without increasing the stated
capital of the Corporation shall not be construed to be a stock
dividend within the meaning of this Article VII.
SECTION 2. Other Stockholder Benefits
The Board of Directors may, subject to the restrictions involving
impairment of the Corporation's capital applicable to declaration of dividends,
enter into arrangements with any other person or entity, including affiliates of
the Corporation or its officers, directors or stockholders, designed to provide
a benefit or benefits directly to the Corporation's stockholders, including,
without limitation, the payment for services provided by the Corporation by
making distributions of assets, rights or benefits directly to the Corporation's
stockholders.
219
<PAGE>
ARTICLE VIII
SEAL
The Board of Directors shall adopt a Corporate Seal which shall be
circular in form and shall have inscribed thereon the name of the Corporation,
the state of incorporation and the year of incor poration.
ARTICLE IX
INDEMNIFICATION
(a) This Corporation shall indemnify its officers, Directors and authorized
agents for all liabilities incurred directly, indirectly or
incidentally to services performed for the Corporation, or for other
entities at the request of the Corporation, to the fullest extent
permitted under Florida law now existing or hereinafter enacted.
(b) Funds required to pay expenses reasonably necessary to defend
allegations that would raise the foregoing right of indemnifications
shall be advanced by this Corporation at any time that the person
claiming such expenses appears reasonably likely to become entitled to
indemnification and enters into a binding agreement with this
Corporation to repay advances for such expenditures in the event that
he, she or it is eventually found not to be entitled thereto.
(c) In the event that there are any questions raised concerning the
legality of indemnification, they will be referred by the Board of
Directors to the derivative litigation committee for resolution, or if
such committee is disqualified, to an independent legal counsel in the
manner established in these Bylaws for making decisions involving
derivative litigation.
ARTICLE X
AMENDMENT OF BYLAWS
The Board of Directors shall have the power to amend, alter, or repeal
these Bylaws, and to adopt new bylaws unless the bylaw involved was passed by
the stockholders' in a resolution reserving the right to its amendment or repeal
to the stockholders.
ARTICLE XI
FISCAL YEAR
The fiscal year of this Corporation shall be determined by the Board of
Directors and, subject to compliance with applicable laws, may be modified from
time to time by the Board of Directors.
220
<PAGE>
ARTICLE XII
MEDICAL REIMBURSEMENT
SECTION 1. Benefits
(a) The Corporation may, subject to approval by the Board of Directors of a
plan proposed by its compensation committee, reimburse all employees
for expenses incurred by themselves and their dependents, as defined in
Section 152 (or any successor provision thereto) of the Internal
Revenue Code of 1986, as amended (the "IRC"), for medical care, as
defined in IRC Section 213(e) or any successor section thereto, subject
to the conditions and limitations hereinafter set forth.
(b) It is the intention of the Corporation that the benefits payable to
employees hereunder will be excluded from their gross income pursuant
IRC Section 105 or any successor section thereto.
SECTION 2. Employees Defined
The term "employees" as used in this medical expense plan is hereby
defined to include all in dividuals employed by the corporation except the
following:
(a) Employees who have not completed three months of service as is provided
in IRC Section 105(h)(3) (b)(i), or any successor section thereto;
(b) Employees who have not attained the age of 25 years;
(c) Employees who are part-time or seasonal as is defined in IRC Section
105(h)(3)(B)(iii) or any successor section thereto;
(d) Employees who are included in a unit of employees covered by an
agreement between employee representatives and one or more employers
found to be a collective bargaining agreement where accident and health
benefits were the subject of good faith bargaining between such
employee representatives and such employer(s) as is defined in IRC
Section 105(h)(3)(B)(iv) or any successor section thereto;
(e) Employees who are nonresident aliens and who receive no earned income
from the employer which constitutes income from sources within the
United States as is further defined in IRC Section 105(h)(5)(B)(v) or
any successor section thereto.
221
<PAGE>
SECTION 3. Limitations
(a) The Corporation will reimburse any employee no more than $5,000.00 in
any fiscal year for medical care expenses;
(b) Reimbursement or payment provided under this plan will be made by the
Corporation only in the event and to the extent that such reimbursement
or payment is not provided under any insurance policy(ies), whether
owned by the Corporation or the employee, or under any other health and
accident or wage continuation plan;
(c) In the event that there is such an insurance policy or plan in effect
providing for reimbursement in whole or in part, then to the extent of
the coverage under such policy or plan, the Corporation will be
relieved of any and all liability hereunder.
SECTION 4. Submission of Proof
(a) Any employee applying for reimbursement under this plan will submit to
the Corporation, at least quarterly, all bills for medical care,
including premium notices for accident or health insurance, for
verification by the Corporation prior to payment.
(b) Failure to comply herewith, may at the discretion of the Board of
Directors, terminate such employee's right to said reimbursement.
SECTION 5. Discontinuation
This plan will be subject to termination at any time by vote of the
Board of Directors; provided, however, that medical care expenses incurred prior
to such termination will be reimbursed or paid in accordance with the terms of
this plan.
SECTION 6. Determination
The Chief Executive Officer will determine all questions arising from
the administration and interpretation of the Plan except where reimbursement is
claimed by the Chief Executive Officer, in which such case determination will be
made by the compensation committee of the Board of Directors.
The Undersigned, being the duly elected and acting Secretary of the
Corporation, hereby cer tifies that the foregoing constitute the validly adopted
and true Bylaws of the Corporation, as of the date set forth below.
Dated: June 25, 1999 ------------------------
Michael D. Umile
Secretary
(Corporate Seal)
222
EXHIBIT 4.11 Class A, Series A, Convertible, Subordinated Debenture
Equity Growth Systems, inc.
(a Delaware corporation)
Debenture Number 00000_
Class A, Series A, Convertible, Subordinated Debenture
$________ June __, 1999
FOR VALUE RECEIVED, Equity Growth Systems, inc., a Delaware corporation
with a class of securities registered under Section 12(g) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act") and with offices at 8001
DeSoto Woods Drive; Sarasota, Florida 34243 (the "Registrant"), promises to pay
to the order of:
-----------------------------------
Type Name
-------------------------------------------------
Type Address
-------------------------------
Type Social Security or Federal Employer Identification Number
(the "Debenture Holder;" hereinafter collectively referred to with its
successors in interest and the Registrant as the "Parties"), the principal sum
of $________, together with interest thereon at the annual rate of 8%, at the
Registrant's offices, or such other address as the Debenture Holder may provide
for such purpose, subject to the following terms:
TERMS
1. Basic Terms:
(4) This Debenture is one of that series of debentures in the aggregate
principal amount of $110,000, identical in all material terms to this
one, privately placed by the Registrant solely to accredited
223
<PAGE>
investors pursuant to the provisions of Section 4(6) of the Securities
Act, and designated as the Class A, Series A, Convertible, Subordinated
Debentures.
(5) This Debenture shall be payable as follows:
(1) Interest shall be payable in one aggregate payment on the
maturity date of the Debenture, subject to tender of the
Debenture for cancellation and payment in the manner
hereinafter provided therefore. Except in the event of a
default on payment after presentation therefor, interest shall
cease on the maturity date.
(2) Principal on this Debenture shall be payable on the 366th day
following the later of its execution by the Registrant, as
evinced by the date hereon, or the tender of the total
subscription price for this Debenture, to the Registrant, in
cleared and immediately available funds.
(b) The Debenture Holder may elect to subdivide this Debenture into two or
more separate obligations, at its option, provided, however, that each
separate resulting instrument must be in an amount of at least $10,000
in principal and must be divisible by 1,000 without resulting fraction,
except as to one single certificate which will be in such amount as is
required to accurately reflect the principal balance then due.
(c) Transfers or divisions of Debentures will be affected by the
Registrant, at the written request of the Debenture Holder, including
appropriate signature guarantees (but payment of bond transfer fees
and taxes shall be the responsibility of the Debenture Holder);
provided, however, that unless the Debentures are properly registered
pursuant to Section 5 of the Securities Act of 1933, as amended (the
"Securities Act"), and comparable state blue sky laws in the state of
the transferee's domicile, no transfers will be effected unless
accompanied by an opinion of legal counsel acceptable to the
Registrant is providing attesting to the fact that the transfer will
not violate applicable laws and detailing the factual and legal basis
for such opinion.
(d) The Registrant shall immediately instruct its transfer agent to reserve
the quantity of common stock required to be issued in the event of
conversion of the Debentures and shall require its transfer agent to
maintain such reserved stock until the Debentures are either paid in
full or converted.
(e) Security and Subordination
This Debenture is an unsecured, general obligation of the Registrant.
2.01: Debentures Subordinate to Senior Indebtedness.
(a) The Registrant covenants and agrees, and each Holder of a Debenture, by
his acceptance thereof, likewise covenants and agrees, that, to the
extent and in the manner hereinafter set forth in this
224
<PAGE>
Section 2, the indebtedness represented by the Debentures and the
payment of the principal of and interest on each and all of the
Debentures are hereby expressly made subordinate and subject in right
of payment to the prior payment in full of all Senior Indebtedness.
(b) "Senior Indebtedness" means all liabilities, contingent or otherwise,
of the Registrant (1) for borrowed money (but only if the recourse of
the lender is secured by any assets of the Registrant) and (2) with
respect to letters of credit, bankers acceptances, or similar
instruments issued or accepted by banks ("Indebtedness") incurred by
the Registrant prior to or after the date of this Debenture and any
replacement, renewal, refinancing, and extension (whether direct or
indirect) thereof; provided, however, that notwithstanding anything to
the contrary in this Debenture, Senior Indebtedness does not include
(i) any Indebtedness of the Registrant that by its terms or the terms
of the instrument creating or evidencing it expressly provides that
such Indebtedness is subordinate in right of payment to, or pari passu
in right of payment with, this Debenture and (ii) any Indebtedness
that ranks subordinate in right of payment to any other Indebtedness
of the Registrant; provided, that the limitation set forth in this
clause (ii) shall not apply to distinctions between categories of
Senior Indebtedness that exist by reason of any liens arising or
created in respect of some but not all Senior Indebtedness.
2.02: Payment Over of Proceeds Upon Dissolution, Etc.
(a) In the event of (1) any insolvency or bankruptcy case or proceeding,
or any receivership, liquidation, reorganization or other similar case
or proceeding in connection therewith, relative to the Registrant or
to its creditors, as such, or to its assets, or (2) any liquidation,
dissolution or other winding up of the Registrant, whether voluntary
or involuntary and whether or not involving insolvency or bankruptcy,
or (3) any assignment for the benefit of creditors or any other
marshaling of assets and liabilities of the Registrant, then and in
any such event the holders of Senior Indebtedness shall be entitled to
receive payment in full of all amounts due or to become due on or in
respect of all Senior Indebtedness, or provision shall be made for
such payment in money or money's worth, before the Holders of the
Debentures are entitled to receive any payment on account of principal
of (or premium, if any) or interest on the Debentures, and to that end
the holders of Senior Indebtedness shall be entitled to receive, for
application to the payment thereof, any payment or distribution of any
kind or character, whether in cash, property or securities, which may
be payable or deliverable in respect of the Debentures in any such
case, proceeding, dissolution, liquidation or other winding up or
event.
(b) In the event that, notwithstanding the foregoing provisions of this
Section 2, the Holder of any Debenture shall have received any payment
or distribution of assets of the Registrant of any kind or character,
whether in case, property or securities, before all Senior Indebtedness
is paid in full or payment thereof provided for, and if such fact
shall, at or prior to the time of such payment or distribution, have
been made known to such Holder, then and in such event such payment or
distribution shall be paid over or delivered forthwith to the trustee
in bankruptcy, receiver, liquidating trustee, custodian, assignee,
agent or other Person making payment or distribution of
225
<PAGE>
assets of the Registrant for application to the payment of all Senior
Indebtedness remaining unpaid, to the extent necessary to pay all
Senior Indebtedness in full, after giving effect to any concurrent
payment or distribution to or for the holders of Senior Indebtedness.
(c) The consolidation of the Registrant with, or the merger of the
Registrant into, another Person or the liquidation or dissolution of
the Registrant following the conveyance or transfer of its properties
and assets substantially as an entirety to another Person shall not be
deemed a dissolution, winding up, liquidation, reorganization,
assignment for the benefit of creditors or marshaling of assets and
liabilities of the Registrant for the purposes of this Section 2 if
the Person formed by such consolidation or into which the Registrant
is merged or the Person which acquires by conveyance or transfer such
properties and assets substantially as an entirety, as the case may
be, shall, as a part of such consolidation, merger, conveyance or
transfer, agree to comply with the Registrant's obligations under the
Senior Indebtedness.
2.03: Prior Payment to Senior Indebtedness Upon Acceleration of Debentures.
(a) In the event that any Debentures are declared due and payable before
their Stated Maturity, then and in such event the Holders of Senior
Indebtedness shall, if required pursuant to the terms of any Senior
Indebtedness, be entitled to receive payment in full of all amounts due
or to become due on or in respect of all Senior Indebtedness, or
provision shall be made for such payment in money or money's worth,
before the Holders of the Debentures are entitled to receive any
payment by the Registrant on account of the principal of (or premium,
if any) or interest on the Debentures or on account of the purchase or
other acquisition of Debentures.
(b) In the event that, notwithstanding the foregoing, the Registrant shall
make any payment to the Holder of any Debenture prohibited by the
foregoing provisions of this Section 2, such Holder, then and in such
event such payment shall be paid over and delivered forthwith to the
Registrant.
(c) The provisions of this Section 2 shall not apply to any payment with
respect to which Section 2.02 would be applicable.
2.04: No Payment when Senior Indebtedness in Default.
(a) In the event and during the continuation of (1) any default in the
payment of principal of (or premium, if any) or interest on any Senior
Indebtedness beyond any applicable grace period with respect thereto,
or in the event that any event of default with respect to any Senior
Indebtedness shall have occurred and be continuing permitting the
Holders of such Senior Indebtedness (or a trustee on behalf of the
holders thereof to declare such Senior Indebtedness due and payable
prior to the date on which it would otherwise have become due and
payable, unless and until such event of default shall have been cured
or waived or shall have ceased to exist, or (2) in the event any
226
<PAGE>
judicial proceeding shall be pending with respect to any such default,
then no payment shall be made by the Registrant on account of principal
of (or premium, if any) or interest on the
(b) Debentures or on account of the purchase or other acquisition of
Debentures.
(c) In the event that, notwithstanding the foregoing, the Registrant shall
make any payment to the Holder of any Debenture prohibited by the
foregoing provisions of this Section 2, and if such fact shall, at or
prior to the time of such payment, have been made known to such Holder,
then and in such event such payment shall be paid over and delivered
forthwith to the Registrant.
(d) The provisions of this Section 2 shall not apply to any payment with
respect to which Section 2.02 would be applicable.
2.05: Payment Permitted if No Default.
Nothing contained in this Section 2 or elsewhere in the Debentures
shall prevent (a) the Registrant, at any time except during the pendency of any
case, proceeding dissolution, liquidation or other winding up, assignment for
the benefit of creditors or other marshaling of assets and liabilities of the
Registrant referred to in Section 2.02 or under the conditions described in
Section 2.03 or 2.04, from making payments at any time of principal of (and
premiums, if any) or interest on the Debentures, or (b) the retention of such
payment by the Holders, if, at the time it did not have knowledge that such
payment would have been prohibited by the provisions of this Section 2.
2.06: Subrogation to Rights of Holders of Senior Indebtedness.
(a) Subject to the payment in full of all Senior Indebtedness, the Holders
of the Debentures shall be subrogated to the extent of the payments or
distributions made to the holders of such Senior Indebtedness pursuant
to the provisions of this Section 2 (equally and ratably with the
holders of all indebtedness of the Registrant which by its express
terms is subordinated to indebtedness of the Registrant to
substantially the same extent as the Debentures are subordinated and
is entitled to like rights of subrogation) to the rights of the
holders of such Senior Indebtedness to receive payments and
distributions of cash, property and securities applicable to the
Senior Indebtedness until the principal of (and premium, if any) and
interest on the Debentures shall be paid in full.
(b) For purposes of such subrogation, no payments or distributions to the
holders of the Senior Indebtedness of any cash, property or securities
to which the Holders of the Debentures would be entitled except for the
provisions of this Section 2, and no payments over pursuant to the
provisions of this Section 2 to the Holders of Senior Indebtedness by
Holders of the Debentures shall, as among the Registrant, its creditors
other than holders of Senior Indebtedness and the Holders of the
Debentures, be deemed to be a payment or distribution by the Registrant
to or on account of the Senior Indebtedness.
227
<PAGE>
2.07: Provisions Solely to Define Relative Rights.
(a) The provisions of this Section 2 are and are intended solely for the
purpose of defining the relative rights of the Holders of the
Debentures on the one hand and the holders of Senior Indebtedness on
the other hand.
(b) Nothing contained in this Section 2 or elsewhere in the Debentures is
intended to or shall (1) impair, as among the Registrant, its
creditors other than holders of Senior Indebtedness and the Holders of
the Debentures, the obligation of the Registrant, which is absolute
and unconditional (and which, subject to the rights under this Section
2 of the holders of Senior Indebtedness, is intended to rank equally
with all other general obligations of the Registrant), to pay to the
Holders of the Debentures the principal of (and premium, if any) and
interest on the Debentures as and when the same shall become due and
payable in accordance with their terms; or (2) affect the relative
rights against the Registrant of the Holders of the Debentures and
creditors of the Registrant other than the holders of Senior
Indebtedness; or (3) prevent the Holder of any Debenture from
exercising all remedies otherwise permitted by applicable law upon
default under this Indenture, subject to the rights, if any, under
this Section 2 of the holders of Senior Indebtedness to receive cash,
property and securities otherwise payable or deliverable to such
Holder.
2.08: The Registrant to Effectuate Subordination.
Each Holder of a Debenture by his acceptance thereof authorizes and
directs the Registrant on his behalf to take such action as may be necessary or
appropriate to effectuate the subordination provided in this Section 2 and
appoints any designee of the Registrant his attorney-in-fact for any and all
such purposes.
2.09: No Waiver of Subordination Provisions.
(1) No right of any present or future holder of any Senior Indebtedness to
enforce subordination as herein provided shall at any time in any way
be prejudiced or impaired by any act or failure to act on the part of
the Registrant or by any act or failure to act, in good faith, by any
such holder, or by any non-compliance by the Registrant with the terms,
provisions and covenants of this Debenture, regardless of any knowledge
thereof any such holder may have or be otherwise charged with.
(2) Without in any way limiting the generality of the foregoing paragraph,
the holders of Senior Indebtedness may, at any time and from time to
time, without the consent of or notice to the Holders of the
Debentures, without incurring responsibility to the Holders of the
Debentures and without impairing or releasing the subordination
provided in this Section 2 or the obligation hereunder of the Holders
of the Debentures to the holders of Senior Indebtedness, do any one or
more of the following: (1) change the manner, place or terms of payment
or extend the time of payment of, or renew or alter, Senior
Indebtedness, or otherwise amend or supplement in any
228
<PAGE>
manner Senior Indebtedness or any instrument evidencing the same or any
agreement under which Senior Indebtedness is outstanding; (2) sell,
exchange, release or otherwise deal with any property pledged,
mortgaged or otherwise securing Senior Indebtedness; (3) release any
Person liable in any manner for the collection of Senior Indebtedness;
and (4) exercise or refrain from exercising any rights against the
Registrant and any other Person.
2.10: Notice to Holder.
(1) The Registrant shall give prompt written notice to the Holder of any
fact known to the Registrant which would prohibit the making of any
payment to or by the Holder in respect of the Debentures.
(2) Notwithstanding the provisions of this Section 2 or any other provision
of this Debenture, the Holder shall not be charged with knowledge of
the existence of any facts which would prohibit the making of any
payment to or by the Holder in respect of the Debentures, unless and
until the Holder shall have received written notice thereof from the
Registrant or a holder of Senior Indebtedness or from any trustee
therefor; and, prior to the receipt of any such written notice, the
Holder shall be entitled in all respects to assume that no such facts
exist; provided, however, that if the Holder shall not have received
the notice provided for in this Section 2 at least ten business days
prior to the date upon which by the terms hereof any money may become
payable for any purpose (including, without limitation, the payment of
the principal of (and premium, if any) or interest on any Debenture),
then, anything herein contained to the contrary notwithstanding, the
Holder shall have full power and authority to receive such money and to
apply the same to the purpose for which such money was received and
shall not be affected by any notice to the contrary which may be
received by it within ten business days prior to such date.
(3) The Registrant shall be entitled to rely on the delivery to it of a
written notice by a Person representing himself to be a holder of
Senior Indebtedness (or a trustee therefor) to establish that such
notice has been given by a holder of Senior Indebtedness (or a trustee
therefor).
(4) In the event that the Registrant determines in good faith that further
evidence is required with respect to the right of any Person as a
holder of Senior Indebtedness to participate in any payment or
distribution pursuant to this Section 2, the Registrant may request
such Person to furnish evidence to the reasonable satisfaction of the
Registrant as to the amount of Senior Indebtedness held by such Person,
the extent to which such Person is entitled to participate in such
Payment or distribution and any other facts pertinent to the rights of
such Person under this Section 2, and if such evidence is not
furnished, the Registrant may defer any payment to such Person pending
judicial determination as to the right of such Person to receive such
payment.
229
<PAGE>
2.11: Reliance on Judicial Order or Certificate of Liquidating Agent.
Upon any payment or distribution of assets of the Registrant referred
to in this Section 2, the Holders of the Debentures shall be entitled to rely
upon any order or decree entered by any court of competent jurisdiction in which
such insolvency, bankruptcy, receivership, liquidation, reorganization,
dissolution, winding up or similar case or proceeding is pending, or a
certificate of the trustee in bankruptcy, receiver, liquidating trustee,
custodian, assignee for the benefit of creditors, agent or other Person making
such payment or distribution, delivered to the Holders of Debentures, for the
purpose of ascertaining the Persons entitled to participate in such payment or
distribution, the holders of the Senior Indebtedness and other indebtedness of
the Registrant, the amount thereof or payable thereon, the amount or amounts
paid or distributed thereon and all other facts pertinent thereto or to this
Section 2.
2.12: The Registrant Not Fiduciary for Holders of Senior Indebtedness.
(1) No implied covenants or obligations with respect to holders of Senior
Indebtedness shall be read into this Indenture against the Registrant.
(2) The Registrant shall not be deemed to owe any fiduciary duty to the
holders of Senior Indebtedness and shall not be liable to any such
holders if it shall in good faith mistakenly pay over or distribute to
Holders of Debentures or to the Registrant or to any other Person cash,
property or securities to which any holders of Senior Indebtedness
shall be entitled by virtue of this Section 2 or otherwise.
2.13: Certain Conversions Deemed Payment.
(1) For the purposes of this Section 2 only, (1) the issuance and delivery
of common stock upon conversion of Debentures as provided for in this
Debenture shall not be deemed to constitute a payment or distribution
on account of the principal of or premium or interest on Debentures or
on account of the purchase or other acquisition of Debentures, and (2)
the payment, issuance or delivery of cash, property or securities
(other than common stock) upon conversion of a Debenture shall be
deemed to constitute payment on account of the principal of such
Debenture.
(2) For the purposes of this Section 2, the term junior securities means
(1) shares of any stock of any class of the Registrant and (2)
securities of the Registrant which are subordinated in right of payment
to all Senior Indebtedness which may be outstanding at the time of
issuance or delivery of such securities to substantially the same
extent as, or to a greater extent than, the Debentures are so
subordinated as provided in this Section 2.
(3) Nothing contained in this Section 2 or elsewhere in the Debentures is
intended to or shall impair, as among the Registrant, its creditors
other than holders of Senior Indebtedness and the Holders of the
Debentures, the right, which is absolute and unconditional, of the
Holder of any Debenture to convert such Debenture in accordance with
the provisions of this Debenture.
230
<PAGE>
3. Conversion, Trading, Exemptions from Securities Laws & Registration:
(a) (1) This Debenture shall, at the Debenture Holder's option, be
convertible into shares of the Registrant's common stock, $0.01 par
value per share, at a conversion price of $.50 per share, unless the
Registrant shall have split or reverse split its common stock
subsequent to the date of this Debenture, in which case, the exercise
price shall be adjusted in inverse ratio to such reverse or forward
split (e.g., in the event of a three for one split, the Debenture
Holder shall be entitled to three shares of common stock for each
$0.50 in principal and accrued interest, whereas in the event of a one
share for three reverse split, the Debenture Holder shall be entitled
to one third of a share of common stock for each $0.50 in principal
and accrued interest.
(2) Conversion may not be in part but rather must involve all of the
Debentures held by a Debenture Holder; provided that the decision of
any Debenture Holder not to convert will not preclude any other
Debenture Holder from exercising conversion rights, unless he, she or
it is merely the nominee or an alter ego of the non-exercising
Debenture Holder.
(b) This Debenture has not been registered under any federal or state
securities requirements in reliance on the exemption provided by
Section 4(6) of the Securities Act, the Debenture Holder having
heretofore confirmed to the Registrant that he, she or it is meets the
following definition of an "accredited investor" contained in Rule
501(a) of Securities and Exchange Commission (the "Commission")
Regulation D, and by acceptance of this Debenture, the Debenture Holder
hereby confirms such assertion under penalty of perjury:
"Reg. ss.230.501. As used in Regulation D (ss.ss.230.501-230.508),
the following terms shall have the meaning indicated:
(3) Accredited investor. "Accredited investor" shall mean
any person who comes within any of the following
categories, or who the issuer reasonably believes
comes within any of the following categories, at the
time of the sale of the securities to that person:
(1) Any bank as defined in section 3(a)(2) of
the Act, or any savings and loan association
or other institution as defined in section
3(a)(5)(A) of the Act whether acting in its
individual or fiduciary capacity; any broker
or dealer registered pursuant to section 15
of the Securities Exchange Act of 1934; any
insurance company as defined in section
2(13) of the Act; any investment company
registered under the Investment Company Act
of 1940 or a business development company as
defined in section 2(a)(48) of that Act;
Small Business Investment Company licensed
by the U.S. Small Business Administration
under section 301(c) or (d) of the Small
231
<PAGE>
Business Investment Act of 1958; any plan
established and maintained by a state, its
political subdivisions, or any agency or
instrumentality of a state or its political
subdivisions for the benefit of its
employees, if such plan has total assets in
excess of $5,000,000; employee benefit plan
within the meaning of the Employee
Retirement Income Security Act of 1974 if
the investment decision is made by a plan
fiduciary, as defined in section 3(21) of
such Act, which is either a bank, savings
and loan association, insurance company, or
registered investment adviser, or if the
employee benefit plan has total assets in
excess of $5,000,000 or, if a self-directed
plan, with investment decisions made solely
by persons that are accredited investors;
[Amended in Release No. 33-6758 (P. 84,211),
effective April 11, 1988, 53 F.R. 7866; and
Release No. 33-6825 (P. 84,404), effective
April 19, 1989, 54 F.R. 11369.]
(2) Any private business development company as
defined in section 202(a)(22) of the
Investment Advisers Act of 1940;
(3) Any organization described in Section
501(c)(3) of the Internal Revenue Code,
corporation, Massachusetts or similar
business trust, or partnership, not formed
for the specific purpose of acquiring the
securities offered, with total assets in
excess of $5,000,000; [Amended in Release
No. 33- 6758 (P. 84,211), effective April
11, 1988, 53 F.R. 7866.]
(4) Any director, executive officer, or general
partner of the issuer of the securities
being offered or sold, or any director,
executive officer, or general partner of a
general partner of that issuer;
(5) Any natural person whose individual net
worth, or joint net worth with that person's
spouse, at the time of his purchase exceeds
$1,000,000;
(6) Any natural person who had an individual
income in excess of $200,000 in each of the
two most recent years or joint income with
that person's spouse in excess of $300,000
in each of those years and has a reasonable
expectation of reaching the same income
level in the current year; [Amended in
Release No. 33-6758 (P. 84,221), effective
April 11, 1988, 53 F.R. 7866.]
(7) Any trust, with total assets in excess of
$5,000,000, not formed for the specific
purpose of acquiring the securities offered,
whose purchase is directed by a
sophisticated person as described in
ss.230.506(b)(2)(ii); and [Added in Release
No. 33-6758 (P. 84,221), effective April 11,
1988, 53 F.R. 7866.]
232
<PAGE>
(8) Any entity in which all of the equity owners
are accredited investors.[Amended in Release
No. 33-6758 (P. 84,221), effective April
11, 1988, 53 F.R. 7866.]"
(c) The Class A, Series A, Convertible, Subordinated Debentures will not
be subject to the protective features of the Trust Indenture Act of
1939, as amended (the "Indenture Act") pertaining to required use of
an approved form of trust indenture and the employment of an
independent trustee to protect the interests of the Debenture Holders,
pursuant to exemptive provisions of Sections 304(a)(8) and 304 (b) of
the Indenture Act and Rule 4a-1 adopted thereunder (Reg.
Section260.4a- 1). Consequently, all of the terms of the Class A,
Series A, Convertible, Subordinated Debentures are contained in this
instrument and each Debenture Holder will be required to monitor
compliance by the Registrant with its obligations hereunder directly
and to take enforcement actions individually.
(d) The Debenture Holder, by acceptance of this Debenture, hereby confirms
that
(a) He, she or it has reviewed all of the Registrant's filings
under the Exchange Act currently posted on the Commission's
Internet web site during the past 12 months, has had the
opportunity to question officers and directors of the
Registrant concerning its business, history, personnel and the
terms of the private placement pursuant to which this
Debenture was issued;
(b) Because neither this Debenture nor the shares of common stock
issuable in the event of its conversion have been registered
with the Commission or any state securities regulatory
authorities, the Debenture Holders hereby acknowledge that:
(1) This Debenture and the shares of common stock issuable upon
conversion will bear legends restricting their transfer,
sale, conveyance or hypothecation unless they are either
registered under the provisions of Section 5 of the
Securities Act and the securities laws of the Debenture
Holders state of domicile, or an opinion of legal counsel,
in form and substance satisfactory to legal counsel to the
Registrant is provided by the Debenture Holder to the effect
that such registration is not required as a result of
applicable exemptions therefrom; provided that the Parties
agree that it is their understanding that because the
exchange of the Debenture on conversion is solely in
consideration for shares of the Registrant's common stock,
the holding period applicable prior to resale under
Commission Rule 144(d) will commence on the date of the
Debenture, pursuant to the exchange of securities provisions
of Rule 144(d)(3)(ii).
(b) The Registrant's transfer agent shall be instructed not to
transfer this Debenture or any of the common stock issued on
conversion thereof unless the Registrant advises it that
such transfer is in compliance with all applicable laws; and
233
<PAGE>
(c) The Debenture Holder is acquiring this Debenture for its own
account, for investment purposes only, and not with a view
to further sale or distribution.
(e) In the event the Registrant files a registration statement during the
term of this Agreement, it shall notify all of the original Debenture
Holders of the series of debentures which includes this Debenture (the
Class A, Series A, Convertible, Subordinated Debentures") in writing,
and their successors in interest either in writing or by publication in
a newspaper of national circulation (e.g., USA Today or the Wall Street
Journal) of such intent and shall, at the request of any of them,
register their Debenture(s) and the shares of common stock underlying
the conversion rights described herein, in such registration statement.
4. Prepayment:
(a) The Debenture is pre-payable, in whole or in part, at the sole election
of the Registrant, at any time, without prepayment penalties, subject
to the following requirements:
(a) The Registrant may not selectively prepay the Debentures but
rather, unless it has elected to prepay all of the Class A,
Series A, Convertible, Subordinated Debentures, it must
notify all Class A, Series A, Convertible, Subordinated
Debenture Holders (the "Prepayment Notice"), either as
hereinafter provided by United States 1st Class Mail,
postage prepaid, addressed to the address set forth on the
face hereof or such other address as the Debenture Holder
has provided to the Registrant and the Registrant has listed
in its securities registry records; or, at the Registrant's
option, in the manner hereinbefore set forth for notice of
intent to file a registration statement with the Commission,
of its intention to partially prepay the Debentures,
specifying the terms of prepayment, and advising all
Debenture Holders who desire to voluntarily accept
prepayment to notify the Registrant on or before a specified
date no earlier than the tenth business day following the
date of the Prepayment Notice, in writing in the manner
hereinafter set forth for providing notice to the
Registrant, of such fact (the "Prepayment Request Notice").
(b) The Registrant shall first prepay the Debentures held by
persons who have provided timely Prepayment Request Notices
and if such Debenture Holders held Debentures with an
aggregate balance due exceeding the amount specified for
prepayment, the Registrant may, in its sole discretion,
either elect to increase the amount due which it is prepared
to prepay in order to prepay all of them; elect to prepay
the Debentures based on first paying Debenture Holders of
Debentures with the largest aggregate amount due; or, elect
to prepay the Debentures by random selection of Debenture
serial numbers.
(c) In the event that the aggregate amount due to the holder of
Debentures that have provided Prepayment request Notices is
less than the amount that the amount specified for
prepayment, the Registrant may, in its sole discretion,
either elect to decrease the amount due which it is prepared
to prepay in order to limit prepayment to the Debentures
held by those Debenture Holders that provided the Prepayment
Request Notice; elect to prepay the balance of the
Debentures to be prepaid based on first paying holders of
Debentures with the smallest aggregate amount due; or, elect
to prepay the Debentures by random selection of Debenture
serial numbers.
234
<PAGE>
(d) In all cases, the holders of Debentures will be provided
until not earlier than the 30th day following the date of
the Prepayment Notice, with the option of converting all
(but not less than all) of the Debentures held by them,
directly or indirectly, into shares of the Registrant's
common stock, in the manner hereinbefore provided.
5. Notices:
(a) Any demand or notice made or given by the Debenture Holder
pursuant hereto or in connection herewith shall be made upon
or given to the Registrant by registered mail, return
receipt requested, postage prepaid, directed to the
Registrant at its address as et forth on the latest Exchange
Act report filed by the Registrant with the Commission, as
reflected on the Commission's Internet we site
(www.sec.gov), unless the Registrant has ceased filing such
reports, in which case it shall be provided to the address
maintained for the Registrant by the Office of the Secretary
of State of the state in which it is then incorporated, but
making or giving or attempting to make or give any demand or
notice shall not waive any right granted hereunder or
otherwise to act without demand or notice.
(b) Any demand or notice made or given by the Registrant to any
Debenture Holder pursuant hereto or in connection herewith
shall be made upon or given to the by United States 1st
Class Mail, postage prepaid, addressed to the address set
forth on the face hereof or such other address as the
Debenture Holder has provided to the Registrant and the
Registrant has listed in its securities registry records;
or, at the Registrant's option, by publication in a
newspaper of national circulation (e.g., USA Today or the
Wall Street Journal).
6. Litigation
The Parties hereby covenant and agree that in the event that either is
required to retain an attorney to assist it in enforcing the provisions of this
Debenture, the victor in such proceeding shall, by application to the subject
tribunal, be entitled to recover from the other Party such costs, expenses and
damages associated with the actions or failures to act which led to such
decision, as such tribunal deems appropriate under the circumstances, including,
without limitation, attorneys fees actually paid throughout the course of any
negotiations, trials or appeals, but shall exclude consequential or incidental
damages.
235
<PAGE>
7. Governing Law, Venue, Process, Reformation & Enforcement
(a) This note shall be governed by and construed in accordance with the
laws of the State of Delaware but any proceedings arising hereunder
shall be adjudicated before a forum located within the county in which
the Registrant maintains its principal legal offices, or in the absence
of any such offices, its principal administrative offices.
(b) In the event any provision of this Agreement shall be deemed
unenforceable under the laws binding on a tribunal adjudicating its
validity, then the Parties hereby request that such tribunal reform
this Debenture in such manner as will most closely accomplish its
purpose without violating applicable laws or public policies.
(c) By execution and delivery of this Debenture, the Parties hereby
irrevocably accept and submit to, for themselves and in respect of
their, generally and unconditionally, to the in personam jurisdiction
of any tribunal meeting the requirements for venue set forth above.
(d) (1) The Parties hereby irrevocably consent to service of any
summons and/or legal process by registered or certified United
States air mail, postage prepaid, to the Party served at the
address determined in the manner hereinbefore set forth in
this Debenture for the provision of notice, such method of
service to constitute, in every respect, sufficient and
effective service of process in any such legal action or
proceeding.
(2) Nothing in this Agreement shall affect the right to service of
process in any other manner permitted by law.
(3) The Parties further agree that final judgment against either
of them in any legal action, suit or proceeding complying with
the foregoing provisions shall be conclusive and may be
enforced in any other jurisdiction, within or outside the
United States of America, by suit on the judgment, a certified
or exemplified copy of which shall be conclusive evidence of
the fact and the amount of the subject Party's liability.
236
<PAGE>
8. Acceptance of Terms of this Agreement by the Debenture Holders
By accepting any of the rights granted under this Debenture, the
Debenture Holder and all of the Debenture Holder's successors in interest to any
rights under this Debenture shall be conclusively presumed to have accepted all
obligations set forth herein as applying to Debenture Holders, such acceptance
constituting a condition precedent to any obligations of the Registrant to the
Debenture Holder or its successor in interest arising from the transaction
reflected in this Debenture.
9. License
This instrument is the property of The Yankee Companies, Inc., a
Florida corporation ("Yankees"), and has been licensed for use only in
conjunction with this transaction. No one may utilize this form or any
derivations thereof without the prior written consent of Yankees.
In Witness Whereof, the Registrant has executed this instrument on this
25th day of June, 1999.
Equity Growth Systems, inc.
By: ___________________________________
Charles J. Scimeca, President
[Corporate Seal]
Attest: ___________________________________
G. Richard Chamberlin, Esquire
Secretary & General Counsel
237
<PAGE>
Conversion Form
The Undersigned hereby irrevocably elects to convert all amounts due
under this Debenture and all other Class A, Series A Convertible, Subordinated
Debentures held by or on behalf of the undersigned, into shares of the
Registrant's common stock, as provided for in this Debenture.
Instructions For Registration and Delivery of Stock
Please type or print in block letters
---------------------
(Name)
--------------------------------
(Social Security or Federal Employer Identification Number)
--------------------------------
--------------------------------
(Address)
Dated: ___________
-------------------------------------
Debenture Holder's Signature
NOTICE: The signatures to this
notice of conversion must correspond
with the name as written upon the
face of the Debenture in every
particular, without alteration or
enlargement or any change whatever.
Signature Guaranteed:
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER
OF A REGISTERED NATIONAL EXCHANGE OR BY A COMMERCIAL BANK OR A TRUST
COMPANY!
238
<PAGE>
Assignment Form
(Please type or print in block letters)
FOR VALUE RECEIVED, ___________________ hereby sells, assigns and transfers unto
-----------------------------------------------------------
Name
-----------------------------------------------------------
Address
$_______________ of the principal amount and accrued interest of this
Debenture to which this Debenture relates, and does hereby irrevocably
constitute and appoint _______________________ attorney, to transfer the same on
the books of the Registrant with full power of substitution in the premises.
Dated: ___________
-------------------------------------
Debenture Holder's Signature
NOTICE: The signatures to this
assignment must correspond with the
name as written upon the face of the
Certificate in every particular,
without alteration or enlargement or
any change whatever.
Signature Guaranteed:
IMPORTANT: SIGNATURE MUST BE GUARANTEED BY A FIRM WHICH IS A MEMBER
OF A REGISTERED NATIONAL EXCHANGE OR BY A COMMERCIAL BANK OR A TRUST
COMPANY!
239
EXHIBIT 4.12 FORM OF SUBSCRIPTION AGREEMENT FOR DEBENTURE
Equity Growth Systems, inc.
Accredited Investor Subscription Agreement
THE SECURITIES REFERRED TO IN THIS OFFERING MEMORANDUM WILL BE SOLD TO,
AND ACQUIRED BY, THE HOLDER IN A TRANSACTION EXEMPT UNDER SECTION 517.061(11) OF
THE FLORIDA SECURITIES ACT. THE SECURITIES HAVE NOT BEEN REGIS TERED UNDER SAID
ACT IN THE STATE OF FLORIDA, IN ADDITION, ALL FLORIDA RESI DENTS SHALL HAVE THE
PRIVILEGE OF VOIDING THE PURCHASE WITHIN THREE (3) DAYS AFTER THE FIRST TENDER
OF CONSIDERATION IS MADE BY SUCH PURCHASER TO THE IS SUER, AN AGENT OF THE
ISSUER, OR AN ESCROW AGENT OR WITHIN 3 DAYS AFTER THE AVAILABILITY OF THAT
PRIVILEGE IS COMMUNICATED TO SUCH PURCHASER, WHICHEVER OCCURS LATER.
THE CLASS A, SERIES A, CONVERTIBLE, SUBORDINATED DEBENTURES WILL NOT BE
SUBJECT TO THE PROTECTIVE FEATURES OF THE TRUST INDENTURE ACT OF 1939, AS
AMENDED (THE "INDENTURE ACT") PERTAINING TO REQUIRED USE OF AN APPROVED FORM OF
TRUST INDENTURE AND THE EMPLOYMENT OF AN INDEPENDENT TRUSTEE TO PROTECT THE
INTERESTS OF THE DEBENTURE HOLDERS, PURSUANT TO EXEMPTIVE PROVISIONS OF SECTIONS
304(A)(8) AND 304(B) OF THE INDENTURE ACT AND RULE 4a-1 ADOPTED THEREUNDER (REG.
SECTION 260.4a-1). CONSEQUENTLY, ALL OF THE TERMS OF THE CLASS A, SERIES A,
CONVERTIBLE, SUBORDINATED DEBENTURES ARE CONTAINED IN THE DEBENTURE CERTIFICATE
AND EACH DEBENTURE HOLDER WILL BE REQUIRED TO MONITOR COMPLIANCE BY THE
REGISTRANT WITH ITS OBLIGATIONS THEREUNDER DIRECTLY AND TO TAKE ENFORCEMENT
ACTIONS INDIVIDUALLY.
THESE SECURITIES ARE OFFERED IN RELIANCE ON THE EXEMPTION FROM
REGISTRATION REQUIREMENTS IMPOSED BY THE SECURITIES ACT OF 1933, AS AMENDED,
PROVIDED BY SECTION 4(6) THEREOF.
TERMS:
1. General.
(a) (1) This Subscription is part of a limited subscription by accredited
investors, as that term is defined in Rule 501 of Securities and Exchange
Commission (the "Commission") Regulation D promulgated under authority of
the Securities Act of 1933, as amended ("Rule 501", "Regulation D" and the
"Act", respectively) for the acquisition of an aggregate of up to $110,000
in principal of Class A, Series A, convertible, subordinated debentures of
Equity Growth Systems, inc., a publicly held Delaware corporation with a
class of securities currently registered under Section 12 of the Securities
Exchange Act of 1934, as amended, in the form annexed hereto and made a
part hereof as exhibit 1(a)(1) (the "Registrant" and the "Debentures").
(2) The hereinafter described subscriber is an "accredited investor" as
that term is defined in Rule 501 of Regulation D.
240
<PAGE>
(3) The issuance of the Debentures is to be effected pursuant to
the exemptive provisions of Section 4(6) of the Act, providing
for the issuance of securities solely to accredited investors
and Sections 304(a)(8) and 304(b) of the Trust Indenture Act
of 1939, as amended (the "Indenture Act").
(4) The Registrant will, immediately following closing on the
first subscription accepted in this limited offering, file a
Form D with the Securities and Exchange Commission, as
required to permit the contemplated subscription.
(b) (1) Current information concerning the Registrant is contained
on the SEC's EDGAR web site on the Internet, including
certified financial statements for the period ended December
31, 1998, and unaudited quarterly updates thereto for the
period ended March 31, 1999, all of which is hereby
incorporated by reference herein (the "34 Act Reports").
2. Annexed hereto and made a part hereof as exhibit 1(b)(2) is a
draft of a current report on Form 8-KSB (the "American
Internet 8-KSB")that the Registrant intends to file with the
Commission within fifteen days after it acquires the American
Internet Subsidiaries (as defined therein), the American
Internet 8-KSB being, for purposes of this Agreement, being
deemed one of the 34 Act Reports.
(c) (1) The proceeds of this limited offering are to be used to
comply with obligations of the Registrant to provide $100,000
in working and expansion capital in conjunction with closing
on the acquisition of American Internet Technical Center, Inc.
("American Internet"), as described in the Registrant's report
on Form 10-KSB for the year ended December 31, 1998, and for
working capital for the Registrant.
(2) The Registrant may elect to borrow funds required for the
purposes identified in Section 1(a)(1) and to repay such loans
using proceeds of this limited offering.
(3) (A) The Registrant's management is of the opinion
that the net proceeds from the offering ($110,000)
would be sufficient to permit the Registrant to close
on the acquisition of American Internet, but that it
will require substantial additional capital in order
to effect other acquisitions and to properly
capitalize American Internet, which it intends to
obtain through a private placement of up to
$2,000,000 in its securities following closing on the
American Internet transaction.
(2) No assurances can be provided that required capital will
be available in the future.
(4) (1) The Registrant may temporarily invest any unexpended
balances on hand in government securities,
certificates of deposit, money market funds.
241
<PAGE>
(2) The Registrant intends to make such investments only
temporarily in order to avoid any requirement to
register the Registrant under the Investment Company
Act of 1940.
(3) Any income realized from investment of the net
proceeds of this limited offering will be general
revenues of the Registrant.
(5) The Registrant will provide reports on the actual use of
proceeds on a quarterly basis until all proceeds have been
expended, in its quarterly reports to the Commission on Form
10- QSB.
(d) Certain risks associated with this limited offering are disclosed in
exhibit 1(d) annexed hereto and made a part hereof (the "Material Risk
Factors") and prospective investors must carefully review such exhibit
prior to making an investment decision.
(5) The Registrant will not pay any commissions or grant of any discounts
in conjunction with this limited offering.
2. Subscription Consideration.
(a) The undersigned Accredited Subscriber hereby subscribes $_____________
in principal amount of the Debentures and will tender payment in full
therefor immediately following receipt of an executed copy of this
Agreement evincing acceptance of this subscription by the Registrant.
(b) Within 72 hours after receipt of payment for the Debentures, the
Registrant's transfer agent will issue and deliver to the Accredited
Subscriber, at the Registrant's expense, a certificate for the
Debentures.
3. Accredited Subscriber's Representations, Warranties and Covenants.
As a material inducement to the Registrant's consideration of the
Accredited Subscriber's offer to acquire Debenture(s), the Accredited Subscriber
represents, warrants and covenants to the Registrant, as follows:
(a) The Accredited Subscriber is familiar with the requirements for
treatment as an "accredited investor" under Regulation D and Section
4(6) of the Securities Act of 1933, as amended (the "Act") and meets
one or more of the definitions of an "accredited investor" contained in
Rule 501 promulgated under authority of the Act and has, alone or
together with his Offeree's Representative, if any, (as hereinafter
defined) such knowledge and experience in financial matters that the
Accredited Subscriber is capable of evaluating the relative risks and
merits of this subscription (the text of Rule 501 being set forth, in
full, in the Debentures);
242
<PAGE>
(b) The Accredited Subscriber acknowledges that he, she or it has, based on
his, her or its own substantial experience, the ability to evaluate the
transactions contemplated hereby and the merits and risks thereof in
general and the suitability of the transaction for the Accredited
Subscriber in particular;
(c) (1) The Accredited Subscriber understands that the offer and
issuance of the Debentures is being made in reliance on the
Accredited Investor's representation that he, she or it has
reviewed all of the Registrant's reports filed with the
Commission during the past 12 months and posted on the
Commission's Internet web site (www.sec.gov) and has become
familiar with the information disclosed therein, including
that contained in exhibits filed with such reports concerning
the proposed acquisition of American Internet.
(2) The Accredited Subscriber is fully aware of the material risks
associated with becoming an investor in the Registrant and
confirms that he, she or it was previously informed that all
documents, records and books pertaining to this investment
have been available from the Registrant and that all
documents, records and books pertaining to this transaction
requested by the Accredited Subscriber have been made
available to the Accredited Subscriber;
(d) The Accredited Subscriber has had an opportunity to ask questions of
and receive answers from the officers of the Registrant concerning:
(1) the terms and conditions of this Subscription Agreement and
the transactions contemplated hereby, as well as the affairs
of the Registrant and related matters; and
(2) any arrangements or proposed arrangements of the Registrant
relating to any of its Debentures Holders that are not
identical to those relating to all of its Debentures Holders;
(e) The Accredited Subscriber has had an opportunity to obtain additional
information necessary to verify the accuracy of the information
referred to in subparagraphs (a), (b), (c) and (d) hereof, as well as
to supplement the information in the 34 Act Reports, as called for by
Florida Rule 3E-500.005.
(f) The Accredited Subscriber has provided the Registrant with the personal
and business financial information concerning himself which he, she or
it agrees demonstrates the Accredited Subscriber's general ability to
bear the risks of the subject transaction and suitability as a
subscriber in a private offering and the Accredited Subscriber hereby
affirms the correctness of such information;
(g) The Accredited Subscriber acknowledges and is aware that:
243
<PAGE>
(1) The Debentures are a speculative investment with no assurance
that the Registrant will be successful, or if successful, that
such success will result in payments to the Accredited
Subscriber or to realization of capital gains by the
Accredited Subscriber on disposition of the Debentures or the
shares of common stock issuable upon conversion thereof; and
(2) The Debentures being subscribed for and the shares of common
stock into which they are convertible have not been registered
under the Securities Act or under any state securities laws,
accordingly the Accredited Subscriber may have to hold such
Debentures or common stock and may not be able to liquidate,
pledge, hypothecate, assign or transfer them;
(h) The Accredited Subscriber has obtained its own oral opinion from his,
her or its legal counsel to the effect that after an examination of the
transactions associated herewith and the applicable law, no action
needs to be taken by either the Accredited Subscriber or the Registrant
in conjunction with this Subscription and the issuance of the
Debentures in conjunction therewith, other than such actions that have
already been taken in order to comply with the securities law
requirements of the Accredited Subscriber's state of domicile; and
(i) (1) The Debentures and the shares of common stock into which they
may be converted will bear restrictive legends and the
Registrant's transfer agent will be instructed not to transfer
the subject securities unless they have been registered
pursuant to Section 5 of the Securities Act of 1933, as
amended, or an opinion of counsel satisfactory to legal
counsel to the Registrant and the Registrant's president has
been provided, to the effect that the proposed transaction is
exempt from registration requirements imposed by the
Securities Act of 1933, as amended, the Securities Exchange
Act of 1934, as amended, and any applicable state or foreign
laws.
(2) The legend shall read as follows: "The securities represented
by this certificate were issued without registration under the
Securities Act of 1933, as amended, or comparable state laws
in reliance on the provisions of Section 4(6) of such act, and
comparable state law provisions. These securities may not be
transferred pledged or hypothecated unless they are first
registered under applicable federal, state or foreign laws, or
the transaction is demonstrated to be exempt from such
requirements to the Registrant's satisfaction."
4. Responsibility.
(a) The officers of the Registrant will endeavor to exercise their best
judgment in the conduct of all matters arising under this Subscription
Agreement; provided, however, that this provision shall not enlarge,
limit or otherwise affect the liability of the Registrant or its
officers.
(b) The Accredited Subscriber shall indemnify and hold harmless the
Registrant; any corporation or entity affiliated with the Registrant;
the officers, directors and employees of any of the foregoing;
244
<PAGE>
or any professional adviser thereto, from and against any and all loss,
damage, liability or expense, including costs and reasonable attorney's
fees at trial or on appeal, to which said entities and persons may be
subject or which said entities and persons incur by reason of or in
connection with any misrepresentation made by the Accredited
Subscriber, any breach of any of the Accredited Subscriber's warranties
or the Accredited Subscriber's failure to fulfill any of the covenants
or agreements under this Subscription Agreement.
5. Survival of Representations, Warranties and Agreements.
The representations, warranties, covenants and agreements contained
herein shall survive the delivery of and the payment for the Debentures being
subscribed for.
6. Notices.
Any and all notices, designations, consents, offers, acceptances or any
other communication provided for herein shall be given in writing by registered
or certified mail which shall be addressed in the case of the Registrant to
Equity Growth Systems, inc.; 8001 DeSoto Woods Drive; Sarasota, Florida 34243;
and, in the case of the Accredited Subscriber, to the address set forth at the
end of this Agreement, or to the address appearing on the books of the
Registrant or to such other address as may be designated by the Accredited
Subscriber or the Registrant in writing.
Accredited Subscriber Information
Please Print the following Information
Accredited Subscriber's Name: _____________________________________
Accredited Subscriber's Authorized Signatory: * _______________________________
Accredited Subscriber's Address: _____________________________________
Accredited Subscriber's Telephone Number: _____________________________________
Accredited Subscriber's Tax ** Number: _____________________________________
- - ------
* If applicable (e.g., if the Subscriber is a corporation, partnership,
joint venture, etc.)
** FEIN or Social Security number
7. Miscellaneous.
(a) This Agreement shall be governed by, construed and enforced in
accordance within the laws of the State of Delaware, both substantive,
procedural (except for choice of law provisions) and remedial.
(b) The section headings contained herein are for reference purposes only
and shall not in any way affect the meaning or interpretation of this
Agreement.
245
<PAGE>
(c) This Agreement shall be binding on and shall inure to the benefit of
the Parties and their respective successors, assigns, executors and
administrators, but this Agreement and the respective rights and
obligations of the Parties hereunder shall not be assumable by any
Party hereto without the prior written consent of the other.
(d) This Agreement represents the entire understanding and agreement
between the Parties hereto with respect to the subject matter hereof;
and cannot be amended, supplemented or modified except by an instrument
in writing signed by the Party against whom enforcement of any such
amendment, supplement or modification is sought.
(e) The failure of any provision of this Agreement shall in no manner
affect the right to enforce the other provisions of same, and the
waiver of any Party of any breach of any provision of this Agreement
shall not be construed to be a waiver by such Party of any succeeding
breach of such provision or waiver by such Party of any breach of any
provision.
IN WITNESS WHEREOF, I have executed this Agreement on behalf of the
Accredited Subscriber this ___ day of June, 1999.
Accredited Subscriber
------------------------------------------.
(Print or Type Name)
By: _________________________________
(Signature)
Subscription Accepted:
Equity Growth Systems, inc. Dated: June ___, 1999.
By: _______________________
Charles J. Scimeca
President
Attest: _______________________
G. Richard Chamberlin, Esquire
Secretary & General Counsel
246
<PAGE>
Exhibit Index
Exhibit Description
1(a)(1) Form of the Debentures
1(b)(2) The American Internet 8-KSB
1(d) Material Risk Factors
3(f) Investment Letter
Exhibit 1(a)(1)
Form of the Debentures
Provided in independent form separate from this Agreement, but the
receipt thereof is hereby acknowledged by the Accredited Subscriber:
Dated: June ___, 1999
---------------------------
Accredited Subscriber's Signature
Exhibit 1(b)(2)
The American Internet 8-KSB
Provided in independent form separate from this Agreement, but the
receipt thereof is hereby acknowledged by the Accredited Subscriber:
Dated: June ___, 1999
---------------------------
Accredited Subscriber's Signature
Exhibit 1(d)
RISK FACTORS
General Warning
The securities offered hereby are speculative and prospective investors
should be aware that they will be subject to a number of material risks,
including the risk factors described below. Accordingly, only persons who
qualify as accredited investors and can afford to lose their entire investment
without a materially adverse impact on their standard of living and financial
security participate in this limited offering. Prospective investors should
carefully consider the following risk factors relating to the Registrant, the
industries in which it operates, general economic factors and the offering
together with the other information and financial data available concerning the
Registrant, its history and its activities which is available through the
Securities and Exchange Commission's (the "Commission") EDGAR system, available
at the Commission's Internet web site (www.sec.gov).
247
<PAGE>
Risks Associated with the Registrant
Development Stage Company
The Registrant recently divested itself of all assets and operations in
order to posture itself to make a complete change in its business strategies, as
a result of which it was reclassified, for accounting purposes, as a development
stage company. The Registrant has entered into an agreement (the "Reorganization
Agreement") to acquire 90% of the capital stock of American Internet Technical
Centers, Inc., a Nevada corporation ("AI Nevada"), which owns 100% of the
capital stock of American Internet Technical Center, Inc., a Florida corporation
("AI Florida;" AI Nevada and AI Florida being collectively hereinafter referred
to as the "Subsidiary") and $100,000 from the proceeds of this limited offering
will be invested by the Registrant in the Subsidiary immediately following
closing on such acquisition. However, it is possible that due to unforseen
circumstances, closing on the Reorganization Agreement will not take place and
the Registrant will remain a publicly held corporation without material business
operations.
Dependence on Future Financing
The Registrant's anticipates that it will raise all or a substantial
portion of the financing required for the Subsidiary and other unrelated
acquisitions through a private placement which the Registrant expects to
undertake during 1999. However, there are no assurances that the Registrant will
succeed in effecting such private placement on favorable terms, if at all, or
that the Registrant will be able to raise sufficient capital from such
undertaking. Even if the Registrant successfully concludes the proposed private
placement, there are no assurances that the Registrant will be able to use those
proceeds to generate new favorable acquisitions or to materially improve the
business and business prospects of any businesses acquired, including the
Subsidiary.
Risks Associated with the Debentures
Arbitrary Conversion Price
The Registrant's management determined the conversion price of the
Debentures unilaterally, based upon management's good faith belief as to the
reasonable minimum value of the Registrant's restricted securities after the
acquisition of the American Internet subsidiaries; however, the conversion price
is not based on the Registrant's assets, book value, or earnings or any other
tangible or objectively verifiable criteria. Accordingly, the conversion price
should not be considered an indication of the actual fair market value of the
Registrant's common stock as if appraised by a disinterested party.
248
<PAGE>
Subordination
The Debentures are not secured and instead, are specifically made
subordinate to any other obligations that the Registrant identifies as "Senior
Indebtedness." Consequently, in the event of liquidation of the Registrant, the
Debentures could possibly rank behind all of the Registrant's creditors and
ahead of only the Registrant's common stock. Subordination is essential to the
Registrant and the American Internet subsidiaries because they hope that its
will permit them to obtain debt or line of credit financing to expand their
operations and fund new acquisitions. If successful, such activities would make
it more likely that the terms of the Debentures would be fully complied with.
However, if not successful, subordination will greatly reduce the assets
available for liquidation in the event of a default.
Lack of Protection under Trust Indenture Act of 1939
The Trust Indenture Act of 1939, as amended (the "Indenture Act")
protects holders of public debt by requiring the use of an approved form of
indenture governing the rights and obligations of the parties, and the use of a
trustee to act for the creditors. Because of the small amount of debt involved
and the restricted nature of the Debenture offering, it is subject to exemptions
from the indenture and trustee requirements of the Indenture Act.
No Assurances of a Public Market for Debentures
There is no public market for the Registrant's Debentures nor is one
expected to develop because they have not been registered with the Commission or
the securities regulatory authorities of any state; rather, they are being
issued in reliance on the exemption from registration under the Securities Act
provided by Section 4(6) thereof pertaining to sales solely to "accredited
investors," as that term is defined in Commission Rule 501 of regulation D.
Consequently, it may be difficult or impossible for the holders of the
Debentures to sell pledge, hypothecate or sell them should they desire to do so.
In addition, there are substantial restrictions on the sale or transfer of the
Debentures imposed by federal and state securities laws.
Risks Associated with the Registrant's Common Stock
In the event that the Debentures are converted into common stock, the
holder will be subject to all the risks inherent in investments in common stock
and those that pertain to investments in equity securities of less mature public
companies, including legal impediments to liquidity resulting from "penny stock"
rules as described in Item __, of the Registrant's report on Form 10-KSB for the
year ended December 31, 1998). Such risks include:
(6) Dividends will be paid only when declared by the Registrant's board of
directors out of funds legally available therefore. The Registrant's
Board of Directors will determine future dividend policy based upon the
Registrant's results of operations, financial condition, capital
requirements, and other circumstances. The Registrant currently does
not contemplate paying dividends on the
249
<PAGE>
common stock in the foreseeable future since it intends to use all its
earnings, if any, to finance expansion, acquisition, and marketing
campaigns.
(7) Currently, the Registrant's officers and directors beneficially own
approximately __% of the Registrant's outstanding common stock and, if
all of the Debentures are converted into common stock, will continue to
beneficially own approximately ___% of the Registrant's outstanding
common stock. When added to the outstanding shares beneficially owned
by the Registrant's control group (its consultants, officers and
directors, the officers and directors of its subsidiaries (including
the shares to be issued for the American Internet Subsidiaries), and
their affiliates, collectively hereinafter referred to as the "Control
Group"), the Registrant's Control Group beneficially will own _____% of
the Registrant's outstanding common stock. Based on such ownership, the
Control Group will be in a position to totally control all aspects of
the Registrant's operations, including election of directors, selection
of auditors, approval of charter amendments and benefit plans, etc.
Risks Associated with the American Internet Subsidiaries
The information called for hereby is incorporated by reference from
"Item 2, Risk factors" as contained in the draft of the report on Form 8-KSB
prepared by the Registrant for filing with the Securities and Exchange
Commission within 15 days after closing on the acquisition of the American
Internet Subsidiaries, a copy of which is included as exhibit 1(b)(2) to the
Accredited Investor Subscription Agreement.
Exhibit 3(f)
FORM OF INVESTMENT LETTER
Date:
Charles J. Scimeca
President
Equity Growth Systems, inc.
8001 DeSoto Woods Drive
Sarasota, Florida 34243
Re.: Debentures Subscription
Dear Sir:
I hereby certify and warrant that I am acquiring $_______________ in
principal amount of Class A, Series A, Convertible, Subordinated, Debentures of
Equity Growth Systems, inc. (the "Registrant" and the "Debentures,"
respectively). I hereby certify under penalty of perjury that upon receipt of
the Debentures, I will be acquiring them for my own account for investment
purposes without any intention of selling or distributing all or any part
thereof. I represent and warrant that I qualify as an accredited investor (as
that term is defined in rule 501 of Regulation D promulgated under authority of
the Securities Act of 1933, as amended) and that I am sophisticated in financial
affairs, or have relied on the advice of someone sophisticated in financial
affairs, and I able to bear the economic risks of this investment and I do not
have any reason to anticipate any change in my circumstances, financial or
otherwise, nor any other particular occasion or event which should cause me to
sell or distribute, or necessitate or require my sale or distribution of the
Debentures. No one other than me has any beneficial interest in the Debentures.
250
<PAGE>
I further certify that I have consulted with my own legal counsel who,
after having been apprized by me of all the material facts surrounding this
transaction, opined to me, for the benefit of the Registrant, that this
transaction was being effected in full compliance with the applicable securities
laws of my state of domicile.
I agree that I will in no event sell or distribute any of the
Debentures or the shares of common stock into which they are convertible unless
in the opinion of your counsel (based on an opinion of my legal counsel) the
Debentures or common stock may be legally sold without registration under the
Securities Act of 1933, as amended, and/or registration and/or other
qualification under then-applicable State and/or Federal statutes, or the
Debentures or common stock shall have been so registered and/or qualified and an
appropriate prospectus, shall then be in effect.
I am fully aware that the Debentures are being offered and sold by the
Registrant to me in reliance on the exemption provided by Section 4(6) or the
Securities Act of 1933, as amended, which exempts the sale of securities by an
issuer solely to accredited investors and on my certifications and warranties.
In connection with the foregoing, I consent to your legending my
certificates representing the Debentures to indicate my investment intent and
the restriction on transfer contemplated hereby and to your placing a "stop
transfer" order against the Debentures in the Registrant's securities transfer
books until the conditions set forth herein shall have been met.
I acknowledge by my execution hereof that I have had access to your
books, records and properties, and have inspected the same to my full and
complete satisfaction prior to my acquisition of the Debentures. I represent and
warrant that because of my experience in business and investments, I am
competent to make an informed investment decision with respect thereto on the
basis of my inspection of your records and my questioning of your officers.
I further certify that my domicile is located at the following address:
Accredited Subscriber's Name: _____________________________________
Accredited Subscriber's Address: _______________________________________
------------------------------------
Very truly yours,
Accredited Subscriber
251
EXHIBIT 10.33 LOCK-UP & VOTING AGREEMENT
This Lock-Up & Voting Agreement (the "Agreement") is made and entered into by
and among Equity Growth Systems, inc., a Delaware corporation with a class of
securities registered under Section 12 of the Securities Exchange Act of 1934,
as amended (the "Holding Company" and the "Exchange Act," respectively) and the
officers directors and principal stockholders of the Holding Company made
signatories to this Agreement (the "Holding Company's Principals"), the Holding
Company and the Holding Company's Principals being sometimes hereinafter
collectively referred to as the "Parties" and each being sometimes hereinafter
generically referred to as a "Party").
Preamble:
WHEREAS, the Holding Company and the Holding Company's Principals
desire to induce American Internet Technical Centers, Inc., a Nevada corporation
originally organized as Ascot Industries, Inc. (the "Target Company") and the
individuals and entities which are listed in exhibit 0.1 to the proposed
reorganization agreement between the Holding Company, the Target Company (the
"Reorganization Agreement" and the "Subscribers." respectively), to enter into
and close on the Reorganization Agreement, as a result of which the target
Company will become a 90% owned subsidiary of the Holding Company in a
transaction intended to meet the requirements of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended; and
WHEREAS, the Subscribers desire to engage in such transaction provided
that they receive additional assurances from the Holding Company that certain
covenants in the Reorganization Agreement which require ongoing action by the
directors and stockholders of the Holding Company are confirmed by the Holding
Company's Principals, as set forth below; and
WHEREAS, the Holding Company's Principals are agreeable to such
confirmation through entry into this Agreement:
NOW, THEREFORE, in consideration of the premises, as well as the mutual
covenants hereinafter set forth, the Parties, intending to be legally bound,
hereby agree as follows:
252
<PAGE>
Witnesseth:
First Voting Agreements
The Holding Company's Principals, jointly and severally, hereby agree
that during the five year period following the Closing (as defined in the
Reorganization Agreement, all capitalized terms not otherwise defined in this
Agreement having the meanings defined in the Reorganization Agreement), they
will, in their roles as members of the Holding Company's Board of Directors and
as stockholders in the Holding Company, at all meetings of the Holding Company's
stockholders or of Board of Directors, vote in such a manner as to secure
approval of the following covenants made by the Holding Company to the
Subscribers in Section 4.6 of the Reorganization Agreement, to wit:
"During the five years following the Closing, the Holding Company shall
use its best efforts to assure that:
(1) At least one designee of the Subscribers is nominated for
membership on the Holding Company's Board of Directors at each
meeting of the Holding Company's stockholders or directors at
which the membership of its Board of Directors is up for
election, and to use their best efforts consistent with
applicable law to secure such nominee's election, so that the
membership of the Holding Company's Board of Directors
includes at least one designee of the Subscribers;
(2) Designees of the Subscribers are elected to at least two
thirds of the seats on the Target Company's Board of Directors
and
(3) On one occasion only, [the Holding Company] provide "piggy
back" registration rights covering up to an aggregate of
35,000 shares of the Holding Company's Stock obtained pursuant
to this Agreement to Messrs. Bruce Drezner and Gary Walk;
Theodore Gill and Susan Gill, his wife, as tenants by the
entireties; and, Lyn Poppiti."
Second: Stock Lock-Up Agreements
During the following periods, the Holding Company's Principals will
refrain from any sales of the Holding Company's securities, except as
specified below:
(a) During the 90 day period following closing on this Agreement,
the Holding Company's Principals will not engage in any sales
of the Holding Company's common stock; and
(b) (1) From the 91st through the 270th day following closing
on this Agreement, the Holding Company's Principals
will not engage in any sales of the Holding Company's
common stock in excess of 10,000 shares per month;
253
<PAGE>
(2) For purposes of this Section 2-b only, the persons or
entities included within each separately numbered
subsection shall be deemed to be acting in concert as
part of a related group for purposes of determining
such 10,000 shares per month limitation:
1. Charles J. Scimeca, on his own behalf and on
behalf of his affiliates.
2. Anthony Q. Joffe, on his own behalf and on
behalf of his affiliates.
3. Penny Adams Field, on her own behalf and on
behalf of his affiliates.
4. G. Richard Chamberlin Esquire, on his own
behalf and on behalf of his affiliates.
5. Jerry C. Spellman, and on behalf of his
affiliates.
6. The Yankee Companies, Inc., on its own behalf
and on behalf of its affiliates.
7. The Granville-Smith Group: Mark Granville-
Smith, on his own behalf and on behalf of his
affiliates; and, Edward Granville-Smith, and
on behalf of his affiliates.
8. The Calvo Group: Cyndi N. Calvo, on her own
behalf, on behalf of her affiliates and as a
trustee for the Calvo Family Spendthrift
Trust; and, William A. Calvo, III, on his
own behalf, on behalf of his affiliates and
as a trustee for his children, William,
Alexander & Edward.
9. The Tucker Group: Leonard Miles Tucker, on
his own behalf, on behalf of his affiliates
and on behalf of Carrington Capital Corp.
(exclusive of the 50,000 shares as to which
Equitrade Securities Corporation has
purchase rights under two covered
option/leap agreements, each dated December
18, 1998); and, Michelle Tucker, on her own
behalf, on behalf of her affiliates, on
behalf of Blue Lake Capital Corp., and as a
trustee for her children Shayna and Montana.
10. The Radcliffe Group: Joseph D. Radcliffe, on
his own behalf and on behalf of his
affiliates; Dennis V. Radcliffe, on his own
behalf and on behalf of his affiliates;
Michael J. Radcliffe, on his own behalf and
on behalf of his affiliates; and, Vanessa
Radcliffe, on her own behalf and on behalf
of her affiliates.
254
<PAGE>
(2) Notwithstanding anything in this Agreement to the contrary,
nothing in this Agreement shall be interpreted as an agreement
by the Holding Company's Principals to engage in any concerted
or group activities involving the Holding Company's common
stock, as determined for purposes of Commission Rule 144, or
Sections 13, 14 or 16 of the Exchange Act.
Third: Miscellaneous
3.1 Amendment.
No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is evinced by a written instrument,
subscribed by the Party against which such modification, waiver, amendment,
discharge or change is sought.
3.2 Notice.
(a) All notices, demands or other communications given hereunder shall be
in writing and shall be deemed to have been duly given on the first
business day after mailing by United States registered or unaudited
mail, return receipt requested, postage prepaid, addressed as follows:
To the Holding Company's Principals (other than The Yankee Companies,
Inc. ["Yankees"]):
At such addresses as they provide the Holding Company's transfer agent
for such purpose, with a copy to G. Richard Chamberlin, Esquire (at the
address set forth below), who is hereby appointed by each of the
Holding Company's Principals, as his, her or its authorized agent for
purposes of initialing each page of this Agreement, and as a
supplemental recipient of notices.
To the Holding Company:
Equity Growth Systems, inc.
8001 DeSoto Woods Drive; Sarasota, Florida 34243;
Telephone (941) 358-8182; Fax (941) 358-8423
Attention: Charles J. Scimeca, President; with a copy to
G. Richard Chamberlin, Esquire; General Counsel
Equity Growth Systems, inc.
14950 South Highway 441; Summerfield, Florida
34491 Telephone (352) 694-6714, Fax (352) 694-9178; and,
e-mail, [email protected].
To Yankees:
The Yankee Companies, Inc.
902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487
Telephone (561) 998-2025, Fax (561) 998-3425; and, e-mail
[email protected]; Attention: Leonard Miles
Tucker, President; with a copy to
255
<PAGE>
The Yankee Companies, Inc.
1941 Southeast 51st Terrace; Ocala, Florida 34471
Telephone (352) 694-9179, Fax (352) 694-9178; and, e-mail [email protected]
Attention: William A. Calvo, III, Vice President
or such other address or to such other person as any Party shall
designate to the other for such purpose in the manner hereinafter set
forth.
(b) (1) The Parties acknowledge that Yankees serves as a strategic
consultant to the Holding Company and has acted as scrivener
for the Parties in this transaction but that Yankees is
neither a law firm nor an agency subject to any professional
regulation or oversight.
(2) Because of the inherent conflict of interests involved,
Yankees has advised all of the Parties to retain independent
legal and accounting counsel to review this Agreement and its
exhibits and incorporated materials on their behalf.
3.3 Merger.
This instrument, together with the instruments referred to herein,
contains all of the understandings and agreements of the Parties with respect to
the subject matter discussed herein. All prior agreements whether written or
oral are merged herein and shall be of no force or effect.
3.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and the Closing hereon and
shall be effective regardless of any investigation that may have been made or
may be made by or on behalf of any Party.
3.5 Severability.
If any provision or any portion of any provision of this Agreement,
other than one of the conditions precedent or subsequent, or the application of
such provision or any portion thereof to any person or circumstance shall be
held invalid or unenforceable, the remaining portions of such provision and the
remaining provisions of this Agreement or the application of such provision or
portion of such provision as is held invalid or unenforceable to persons or
circumstances other than those to which it is held invalid or unenforceable,
shall not be affected thereby.
256
<PAGE>
3.6 Governing Law.
This Agreement shall be construed in accordance with the substantive
and procedural laws of the State of Delaware (other than those regulating
taxation and choice of law) but any proceedings pertaining directly or
indirectly to the rights or obligations of the Parties hereunder shall, to the
extent legally permitted, be held in Broward County, Florida.
3.7 Indemnification.
Each Party hereby irrevocably agrees to indemnify and hold the other
Parties harmless from any and all liabilities and damages (including legal or
other expenses incidental thereto), contingent, current, or inchoate to which
they or any one of them may become subject as a direct, indirect or incidental
consequence of any action by the indemnifying Party or as a consequence of the
failure of the indemnifying Party to act, whether pursuant to requirements of
this Agreement or otherwise. In the event it becomes necessary to enforce this
indemnity through an attorney, with or without litigation, the successful Party
shall be entitled to recover from the indemnifying Party, all costs incurred
including reasonable attorneys' fees throughout any negotiations, trials or
appeals, whether or not any suit is instituted.
3.8 Litigation.
(a) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the
prevailing Party shall be entitled to recover its costs and expenses,
including reasonable attorneys' fees up to and including all
negotiations, trials and appeals, whether or not litigation is
initiated.
(b) In the event of any dispute arising under this Agreement, or the
negotiation thereof or inducements to enter into the Agreement, the
dispute shall, at the request of any Party, be exclusively resolved
through the following procedures:
(1) (A) First, the issue shall be submitted to mediation
before a mediation service in Broward County, Florida
to be selected by lot from six alternatives to be
provided, two by Yankees as agent for the Holding
Company's Principals, one by the Holding Company and
three by the Subscribers acting by majority vote
(based on their relative stock ownership in the
Holding Company).
(B) The mediation efforts shall be concluded within ten
business days after their in itiation unless the
Parties unanimously agree to an extended mediation
period;
(2) In the event that mediation does not lead to a resolution of
the dispute then at the request of any Party, the Parties
shall submit the dispute to binding arbitration before an
arbitration service located in Broward County, Florida to be
selected by lot, from six alternatives to be provided, two by
Yankees as agent for the Holding Company's Principals, one by
the Holding Company and three by the Subscribers acting by
majority vote (based on their relative stock ownership in the
Holding Company).
257
<PAGE>
(3) (A) Expenses of mediation shall be borne by the
Holding Company, if successful. Expenses of
mediation, if unsuccessful and of arbitration shall
be borne by the Party or Parties against whom the
arbitration decision is rendered.
(B) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration shall be borne equally by
the Parties.
3.9 Benefit of Agreement.
The terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the Parties, their successors, assigns, personal
representatives, estate, heirs and legatees.
3.10 Captions.
The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
3.11 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
3.12 Further Assurances.
The Parties agree to do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged or delivered and to perform all such acts and
deliver all such deeds, assignments, transfers, conveyances, powers of attorney,
assurances, stock certificates and other documents, as may, from time to time,
be required herein to effect the intent and purpose of this Agreement.
3.13 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, employer-employee relationship, lessor-lessee
relationship, or principal-agent relationship.
258
<PAGE>
3.14 Counterparts.
(a) This Agreement may be executed in any number of counterparts. All
executed counterparts shall constitute one Agreement notwithstanding
that all signatories are not signatories to the original or the same
counterpart.
(b) Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for
aesthetic purposes, prepare a fully executed original version of this
Agreement, which shall be the document filed with the Commission.
3.15 License.
(a) This Agreement is the property of Yankees and the use hereof by the
Parties is authorized hereby solely for purposes of this transaction.
(b) The use of this form of agreement or of any derivation thereof without
Yankees' prior written permission is prohibited.
In Witness Whereof, the Parties have caused this Agreement to be
executed effective as of the date last set forth below.
Signed, sealed and delivered
In Our Presence:
Equity Growth Systems, inc.
- - ---------------------------------
_________________________________ By:_____________________________
Charles J. Scimeca
Personally and as President
(Corporate Seal)
Attest:_______________________________
G. Richard Chamberlin, Secretary
Dated: June __, 1999
The Holding Company's Principals:
- - ---------------------------------
- - --------------------------------- --------------------------
Charles J. Scimeca
Officer, Director and Stockholder
Dated: June __, 1999
259
<PAGE>
- - ---------------------------------
- - --------------------------------- --------------------------
Anthony Q. Joffe
Director and Stockholder
Dated: June __, 1999
- - ---------------------------------
- - --------------------------------- --------------------------
Penny Adams Field
Director and Stockholder
Dated: June __, 1999
- - ---------------------------------
- - --------------------------------- --------------------------
G. Richard Chamberlin Esquire
Officer, Director and Stockholder
Dated: June __, 1999
- - ---------------------------------
- - --------------------------------- --------------------------
Mark Granville-Smith, Director
and Stockholder, on his own behalf
and as attorney-in-fact for his father,
Edward Granville-Smith
Dated: June __, 1999
- - ---------------------------------
- - --------------------------------- --------------------------
Edward Granville-Smith, Stockholder
on his own behalf and on behalf of
his affiliates
Dated: June __, 1999
- - ---------------------------------
- - --------------------------------- --------------------------
Jerry C. Spellman, Stockholder
on his own behalf and on behalf of
his affiliates
Dated: June __, 1999
260
<PAGE>
- - ---------------------------------
- - --------------------------------- --------------------------
Cyndi N. Calvo, on her own behalf
and as a trustee for the Calvo
Family Spendthrift Trust, Stockholders
Dated: June __, 1999
- - ---------------------------------
- - --------------------------------- --------------------------
William A. Calvo, III, on his own behalf
and as a trustee for his children, William,
Alexander & Edward, Stockholders
Dated: June __, 1999
- - ---------------------------------
- - --------------------------------- --------------------------
Leonard Miles Tucker, on his
own behalf and on behalf of
Carrington Capital Corp., Stockholders
Dated: June __, 1999
- - ---------------------------------
- - --------------------------------- --------------------------
Michelle Tucker, on her own behalf,
on behalf of Blue Lake Capital Corp.,
and as a trustee for her children
Shayna and Montana, Stockholders
Dated: June __, 1999
- - ---------------------------------
- - --------------------------------- --------------------------
Joseph D. Radcliffe, on his own behalf
and on behalf of his affiliates,
Stockholder
Dated: June __, 1999
261
<PAGE>
- - ---------------------------------
- - --------------------------------- --------------------------
Dennis V. Radcliffe, on his own behalf
and on behalf of his affiliates,
Stockholder
Dated: June __, 1999
- - ---------------------------------
- - --------------------------------- --------------------------
Michael J. Radcliffe, on his own behalf
and on behalf of his affiliates,
Stockholder
Dated: June __, 1999
- - ---------------------------------
- - --------------------------------- --------------------------
Vanessa Radcliffe, on her own behalf
and on behalf of her affiliates,
Stockholder
Dated: June __, 1999
The Yankee Companies, Inc.
- - ---------------------------------
_________________________________ By:
-------------------------------
Leonard Miles Tucker, President
(Corporate Seal)
Attest:______________________________
William A. Calvo, III, Secretary
Dated: June __, 1999
262
DASZKAL, BOLTON & MANELA
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
240 W. PALMETTO PARK ROAD, SUITE 300 o BOCA RATON, FLORIDA 33432
TELEPHONE (561) 367-1040 FAX (561) 750-3236
JEFFREY A. BOLTON, CPA, P.A. MEMBER OF THE AMERICAN
INSTITUTE
MICHAEL I. DASZKAL, CPA, P.A. OF CERTIFIED PUBLIC
ACCOUNTANTS
ROBERT A. MANELA, CPA, P.A.
TIMOTHY R. DEVLIN, CPA, P.A.
July 9, 1999
To the Board of Directors
Equity Growth Systems, Inc.
8001 Desoto Woods Drive
Sarasota, FL 34243
We are pleased to confirm our understanding of the services we are to provide
for Equity Growth Systems, Inc. for the six months ended June 30, 1999.
We will audit the balance sheet of Equity Growth Systems, Inc. as of June 30,
1999 and the related statements of income, retained earnings, and cash flows for
the period then ended.
The objective of our audit is the expression of an opinion about whether your
financial statements are fairly presented, in all material respects, in
conformity with generally accepted accounting principals. Our audit will be
conducted in accordance with generally accepted auditing standards and will
include tests of your accounting records and other procedures we consider
necessary to enable us to express such an opinion If our opinion is other than
unqualified, we will discuss the reasons with you in advance. If, for any
reason, we are unable to complete the audit or are unable to form or have not
formed an opinion, we may decline to express an opinion or issue a report as a
result of this engagement.
Our procedures will include tests of documentary evidence supporting the
transactions recorded in the accounts, direct confirmation of receivables and
certain other assets and liabilities by correspondence with selected customers,
creditors, and banks. We will request written representations from your
attorneys as part of the engagement, and they may bill you for responding to
this inquiry. At the conclusion of our audit, we will also request certain
written representations from you about the financial statements and related
matters.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements; therefore, our audit will involve
judgement about the number of transactions to be examined and the areas to be
tested. Also, we will plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement.
Because of the concept of reasonable assurance and because we will not perform a
detailed examination of all transactions, there is a risk that material errors,
fraud, or other illegal acts, may exist and not be detected by us. In addition,
an audit is not designed to detect errors, fraud, or other
263
<PAGE>
Equity Growth Systems, Inc.
Page 2
illegal acts that are immaterial to the financial statements. Our responsibility
as auditors is limited to the period covered by our audit and does not extend to
any later periods for which we are not engaged as auditors.
Our audit will include obtaining an understanding of internal control sufficient
to plan the audit and to determine the nature, timing, and extent of audit
procedures to be performed. An audit is not designed to provide assurance on
internal control or to identify reportable conditions, that is, significant
deficiencies in the design or operation of internal control. However, during the
audit, if we become aware of such reportable conditions, we will communicate
them to you.
We understand that you are responsible for making all financial records and
related information available to us and that you are responsible for the
accuracy and completeness of that information. We will advise you about
appropriate accounting principles and their application and will assist in the
preparation of your financial statements, but the responsibility for the
financial statements remains with you. This responsibility includes
establishment and maintenance of adequate records and effective internal
controls over financial reporting, the selection and application of accounting
principles, and the safeguarding of assets. Management is also responsible for
identifying and ensuring that the entity complies with applicable laws and
regulations.
Because many computer systems use only two digits to record the year in date
fields, such systems may not be able to accurately process dates including the
year 2000 and after. The effects of this problem will vary from system to system
and may adversely affect your operations as well as the ability to prepare
financial statements. An audit of financial statements conducted in accordance
with generally accepted auditing standards is not designed to detect whether
your systems are year 2000 compliant. Further, we have no responsibility with
regard to your efforts to make your systems year 2000 compliant or to provide
assurance on whether you have addressed, or will be able to address, all of the
affected systems on a timely basis. These are your responsibilities. However, we
may choose to communicate matters that come to our attention relating to the
potential effects of the year 2000 on your computer systems.
We understand that your employees will prepare all cash, accounts receivable,
and other confirmations we request and will locate any documents selected by us
for testing.
Our fees for these services will be based on firm hourly rates which range from
$50 to $140 per hour. We expect our fees for the audit of the June 30, 1999
financial statements in accordance with, generally accepted accounting
principles to be approximately $6,500 to $7,000. You will also be responsible
for travel and other out-of-pocket costs. Our invoices will be rendered as work
progresses and are payable on presentation. In accordance with our firm's
policies, work may be suspended if your account becomes overdue and will not be
resumed until your account is paid in full. We require a retainer of $4,000
prior to the commencement of the engagement.
264
<PAGE>
Equity Growth Systems, Inc.
Page 3
We appreciate the opportunity to be of service to you and believe this letter
accurately summarizes the significant terms of our engagement. If you have any
questions, please let us know. If you agree with the terms of our engagement as
described in this letter, please sign below and return the letter to us with a
retainer check for $4,000.
Very truly yours,
DASZKAL, BOLTON & MANELA
/s/ Michael I Daszkal /s/
Michael I. Daszkal, CPA
Partner
RESPONSE:
This letter correctly sets forth the understanding of Equity Growth Systems,
Inc.
Officer Signature: Charles J. Scimeca
Title: President
Date: 7/9/99
265
EXHIBIT 10.35 EMPLOYMENT AGREEMENT WITH J. BRUCE GLEASON
Executive's Employment Agreement
This Executive's Employment Agreement (the "Agreement") is entered into by
and among J. Bruce Gleason, an individual residing in the State of Florida (the
"President"); American Internet Technical Centers, Inc., a Nevada corporation
(the "Parent Company"); and, American Internet Technical Center, Inc., a Florida
corporation (the " Company"), the Parent Company and the Company being
collectively hereinafter referred to as the "Consolidated Corporation," and the
Consolidated Corporation and the President being sometimes hereinafter
collectively to as the "Parties" or generically as a "Party".
Preamble:
WHEREAS, The Consolidated Corporation, and the Consolidated
Corporation's boards of directors are of the opinion that in conjunction with
effectuation of the Consolidated Corporation's future plans, the Consolidated
Corporation must continue the services of the Company's co-founder, who
currently serves as the president, director and chief executive officer of the
Consolidated Corporation, on a long term basis; and
WHEREAS, the President is thoroughly knowledgeable with all aspects of the
Consolidated Corporation's operations and plans; and
WHEREAS, the President is agreeable to serving as the Consolidated
Corporation's president and chief executive officer, on the terms and conditions
hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
Witnesseth:
Article One
Term, Renewals, Earlier Termination
1.1 Term.
Subject to the provisions set forth herein, the term of the President's
employment hereunder shall be deemed to commence on June 15, 1999 and continue
until June 14, 2004.
1.2 Renewals.
This Agreement shall be renewed automatically, after expiration of the
original term, on a continuing annual basis, unless the Party wishing not to
renew this Agreement provides the other Party with written notice of its
election not to renew ("Termination Election Notice") on or before the 30th day
prior to termination of the then current term.
266
<PAGE>
1.3 Earlier Termination.
The Parent Company and the Company shall each have the right to
terminate this Agreement prior to the expiration of its Term, as it applies to
them (without affecting the Agreement as it applies to the other, except in
conjunction with the compensation aspects thereof), or of any renewals thereof,
subject to the provisions of Section 1.4, for the following reasons:
(a) For Cause:
(1) The Parent Company and the Company may each terminate the
President's employment under this Agreement at any time for
cause.
(2) Such termination shall be evidenced by written notice thereof
to the President, which notice shall specify the cause for
termination.
(3) For purposes hereof, the term "cause" shall mean:
(3) The inability of the President, through sickness or
other incapacity, to discharge his duties under this
Agreement for ninety or more consecutive days or for
a total of 120 or more days in a period of twelve
consecutive months;
(4) The refusal of the President to follow the directions
of the Consolidated Corporation's boards of
directors;
(5) Dishonesty; theft; or conviction of a crime involvin
moral turpitude;
(6) Material default in the performance by the President
of his obligations, services or duties required under
this Agreement (other than for illness or incapacity)
or materially breach of any provision of this
Agreement, which default or breach has continued for
twenty days after written notice of such default or
breach and such material default or breach has
resulted in material damage to the Consolidated
Corporation.
(2) In the event of a dispute concerning termination due to breach
or default, the President's compensation shall be continued
until resolution of such dispute by a tribunal of competent
jurisdiction, it being understood that the President must
repay any amounts so paid upon final determination that he was
not entitled to such compensation.
(b) Discontinuance of Business:
In the event that the Parent Company or the Company discontinues
operating its business, this Agreement shall terminate as to that
entity as of the last day of the month on which it ceases
267
<PAGE>
operation with the same force and effect as if such last day of the
month were originally set as the termination date hereof; provided,
however, that a reorganization of the Parent Company, the Company or
the Consolidated Corporation shall not be deemed a termination of their
respective business.
(c) Death:
This Agreement shall terminate immediately on the death of the
President; however, all accrued compensation at such time shall be promptly paid
to the President's estate.
1.4 Final Settlement.
Upon termination of this Agreement and payment to the President of all
amounts due him hereunder, the President or his representative shall execute and
deliver to the terminating entity on a form prepared by the terminating entity,
a receipt for such sums and a release of all claims, except such claims as may
have been submitted pursuant to the terms of this Agreement and which remain
unpaid, and, shall forthwith tender to the terminating entity all records,
manuals and written procedures, as may be desired by it for the continued
conduct of its business.
Article Two
Scope of Employment
2.1 Retention.
The Parent Company and the Company each hereby hires the President and
the President hereby accepts such employment, in accordance with the terms,
provisions and conditions of this Agreement.
2.2 General Description of Duties.
(a) The President shall be employed as the president of the Company and the
Parent Company and perform the duties generally associated with the
position of president and chief executive officer of thereof.
(b) Without limiting the generality of the foregoing, the President shall
have exclusive control of all aspects of the Consolidated Corporation's
day to day operations, subject only to compliance with the directions
of the Consolidated Corporation's boards of directors, applicable laws
and fiduciary obligations.
(c) The President covenants to perform in good faith his employment duties,
devoting substantially all of his business time, energies and abilities
to the proper and efficient management of the business of the
Consolidated Corporation, and for its benefit.
268
<PAGE>
2.3 Status.
(a) Throughout the term of this Agreement, the President shall serve as a
member of the boards of directors of the Consolidated Corporation and
as their president and chief executive officer.
(b) In the event that he is not elected to such positions, then, at the
option of the President, this Agreement may be deemed terminated as to
the non-complying entity and, at the President's election, the other
entity constituting the Consolidated Corporation, effective as of the
earliest time that it can be reasonably determined that such election
will not take place, provided that written notice of such election is
provided to the entity involved within 30 days after the date that the
subject entity failed to elect the President.
2.4 Exclusivity.
The President shall, unless specifically otherwise authorized by
Consolidated Corporation's board of directors, on a case by case basis, devote
his business time exclusively to the affairs of the Consolidated Corporation.
Article Three
Compensation
3.1 Compensation.
1. As consideration for the President's services to the Consolidated
Corporation the President shall be entitled to a salary in an aggregate
gross sum equal to $75,000.00 per annum payable in bi-monthly
installments (the "Base Salary").
2. The Base Salary shall be increased by $5,000.00 per year starting on
the third anniversary date of this Agreement.
3.2 Benefits.
During the term of this Agreement, the President shall also be entitled
to the following benefits:
(a) Three weeks paid vacation per year during the first three years of this
Agreement and four weeks per year thereafter.
(b) During the period of his employment, the President shall be reimbursed
for reasonable traveling and other expenses reasonably required in
connection with the performance of his duties hereunder, subject to
verification required by the Consolidated Corporation for audit
purposes, for tax deduction purposes and in order to assure compliance
with applicable laws and regulations.
269
<PAGE>
(c) The President shall be entitled to receive health and life insurance
(provided that in the aggregate, they cost not more than $500 per month
to the Consolidated Corporation, any excess being deducted from the
Base salary) and all other benefits of employment generally available
to management of the Consolidated Corporation or its subsidiaries.
3.3 Indemnification.
The Consolidated Corporation will defend, indemnify and hold the
President harmless from all liabilities, suits, judgments, fines, penalties or
disabilities, including expenses associated directly, therewith (e.g. legal
fees, court costs, investigative costs, witness fees, etc.) resulting from any
reasonable actions taken by him in good faith on behalf of the Consolidated
Corporation, their affiliates or for other persons or entities at the request of
the board of director of the Parent Company or the Company, to the fullest
extent legally permitted, and in conjunction therewith, shall assure that all
required expenditures are made in a manner making it unnecessary for the
President to incur any out of pocket expenses; provided, however, that the
President permits the majority stockholders of the Parent Company to select and
supervise all personnel involved in such defense and that the President waive
any conflicts of interest that such personnel may have as a result of also
representing the Consolidated Corporation, their stockholders or other personnel
and agrees to hold them harmless from any matters involving such representation,
ex cept such as involve fraud or bad faith.
Article Four
Special Covenants
4.1 Confidentiality.
(a) The President acknowledges that, in and as a result of his employment
hereunder, he will be developing for the Consolidated Corporation, making
use of, acquiring and/or adding to, confidential information of special and
unique nature and value relating to such matters as the Consolidated
Corporation's trade secrets, systems, procedures, manuals, confidential
reports, personnel resources, strategic and tactical plans, advisors,
clients, investors and funders; consequently, as material inducement to the
entry into this Agreement by the Consolidated Corporation, the President
hereby covenants and agrees that he shall not, at anytime during or
following the terms of his employment hereunder, directly or indirectly,
personally use, divulge or disclose, for any purpose whatsoever, any of
such confidential information which has been obtained by or disclosed to
him as a result of his employment by the Consolidated Corporation, or the
Consolidated Corporation's affiliates.
(b) In the event of a breach or threatened breach by the President of any of
the provisions of this Section 4.1, the Consolidated Corporation, in
addition to and not in limitation of any other rights, remedies or damages
available to the Consolidated Corporation, whether at law or in equity,
shall be entitled to a permanent injunction in order to prevent or to
restrain any such breach by the President, or by the President's partners,
agents, representatives, servants, employers, employees, affiliates and/or
any and all persons directly or indirectly acting for or with him.
270
<PAGE>
4.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly
occur to the Consolidated Corporation as a result of a breach by the President
of the covenants or agreements contained in this Article Four, and in view of
the lack of an adequate remedy at law to protect the Consolidated Corporation's
interests, the President hereby covenants and agrees that the Consolidated
Corporation shall have the following additional rights and remedies in the event
of a breach hereof:
(a) The President hereby consents to the issuance of a permanent injunction
enjoining him from any violations of the covenants set forth in Section
4.1 hereof; and
(b) Because it is impossible to ascertain or estimate the entire or exact
cost, damage or injury which the Consolidated Corporation may sustain
prior to the effective enforcement of such injunction, the President
hereby covenants and agrees to pay over to the Consolidated
Corporation, in the event he violates the covenants and agreements
contained in Section 4.2 hereof, the greater of:
(i) Any payment or compensation of any kind received by him because of
such violation before the issuance of such injunction, or
(ii) The sum of One Thousand ($1,000.00) Dollars per violation, which sum
shall be liquidated damages, and not a penalty, for the injuries
suffered by the Consolidated Corporation as a result of such
violation, the Parties hereto agreeing that such liquidated damages
are not intended as the exclusive remedy available to the Consolidated
Corporation for any breach of the covenants and agreements contained
in this Article Four, prior to the issuance of such injunction, the
Parties recognizing that the only adequate remedy to protect the
Consolidated Corporation from the injury caused by such breaches would
be injunctive relief.
4.3 Cumulative Remedies.
The President hereby irrevocably agrees that the remedies described in
Section 4.3 hereof shall be in addition to, and not in limitation of, any of the
rights or remedies to which the Consolidated Corporation is or may be entitled
to, whether at law or in equity, under or pursuant to this Agreement.
271
<PAGE>
4.4 Acknowledgment of Reasonableness.
The President hereby represents, warrants and acknowledges that he has
carefully read and considered the provisions of this Article Four and, having
done so, agrees that the restrictions set forth herein are fair and reasonable
and are reasonably required for the protection of the interests of the
Consolidated Corporation, its officers, directors and other employees;
consequently, in the event that any of the above-described restrictions shall be
held unenforceable by any court of competent jurisdiction, the President hereby
covenants, agrees and directs such court to substitute a reasonable judicially
enforceable limitation in place of any limitation deemed unenforceable and, the
President hereby covenants and agrees that if so modified, the covenants
contained in this Article Four shall be as fully enforceable as if they had been
set forth herein directly by the Parties. In determining the nature of this
limitation, the President hereby acknowledges, covenants and agrees that it is
the intent of the Parties that a court adjudicating a dispute arising hereunder
recognize that the Parties desire that this covenant not to compete be imposed
and maintained to the greatest extent possible.
4.5 Unauthorized Acts.
The President hereby covenants and agrees that he will not do any act
or incur any obligation on behalf of the Parent Company or the Company of any
kind whatsoever, except as authorized by the board of directors of the subject
entity or by its stockholders pursuant to duly adopted stockholder action.
Article Five
Miscellaneous
5.1 Notices.
(a) All notices, demands or other communications hereunder shall be in
writing, and unless otherwise provided, shall be deemed to have been
duly given on the first business day after mailing by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
To the President: J. Bruce Gleason: 46 Havenwood Drive;
Pompano Beach, Florida 33064;
To the Parent Company: American Internet Technical Centers, Inc.
440 East Sample Road, Suite 204; Pompano Beach, Florida 33064
Attention: Michael D. Umile, Senior Vice President;
To the Company: American Internet Technical Center, Inc.
440 East Sample Road, Suite 204; Pompano Beach, Florida 33064
Attention: Michael D. Umile, Senior Vice President.
or to such other address or to such other person as any party shall
designate to the other for such purpose in the manner hereinafter set
forth.
(b) (1) The Parties acknowledge that The Yankee Companies, Inc., a Florida
corporation ("Yankees") has acted as scrivener for the Parties in this
transaction and that Yankees is neither a law firm nor an agency
subject to any professional regulation or oversight.
272
<PAGE>
(2) Because of the inherent conflict of interests involved, Yankees
has advised all of the Parties to retain independent legal and
accounting counsel to review this Agreement and its exhibits and
incorporated materials on their behalf.
5.2 Amendment.
(1) No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is in writing and signed by
the Party against which the enforcement of said modification, waiver,
amendment, discharge or change is sought.
(2) This Agreement may not be modified without the consent of a majority in
interest of the Parent Company's stockholders.
5.3 Merger.
(a) This instrument contains all of the understandings and agreements of
the Parties with respect to the subject matter discussed herein.
(b) All prior agreements whether written or oral, are merged herein and shall be
of no force or effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and shall be effective
regardless of any investigation that may have been made or may be made by or on
behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Agreement, or
the application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining portions of
such provision and the remaining provisions of this Agreement or the application
of such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be effected thereby.
5.6 Governing Law and Venue.
273
<PAGE>
This Agreement shall be construed in accordance with the laws of the
State of Florida but any proceeding arising between the Parties in any matter
pertaining or related to this Agreement shall, to the extent permitted by law,
be held in Broward County, Florida.
5.7 Litigation.
(a) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the
prevailing Party shall be entitled to recover its costs and expenses,
including reasonable attorneys' fees up to and including all
negotiations, trials and appeals, whether or not litigation is
initiated.
(b) In the event of any dispute arising under this Agreement, or the
negotiation thereof or inducements to enter into the Agreement, the
dispute shall, at the request of any Party, be exclusively resolved
through the following procedures:
(1) (A) First, the issue shall be submitted to mediation
before a mediation service in Broward County,
Florida, to be selected by lot from six alternatives
to be provided, one by the majority stockholder of
the Parent Company, one by the Parent Company, one by
the Company and three by the President.
(B) The mediation efforts shall be concluded within ten
business days after their in itiation unless the
Parties unanimously agree to an extended mediation
period;
(2) In the event that mediation does not lead to a resolution of
the dispute then at the request of any Party, the Parties
shall submit the dispute to binding arbitration before an
arbitration service located in Broward County, Florida to be
selected by lot, from six alternatives to be provided, one by
the majority stockholder of the Parent Company, one by the
Parent Company, one by the Company and three by the President.
(3) (1) Expenses of mediation shall be borne by the Company,
if successful.
(2) Expenses of mediation, if unsuccessful and of
arbitration shall be borne by the Party or Parties
against whom the arbitration decision is rendered.
(3) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration shall be borne equally by
the Parties.
5.8 Benefit of Agreement.
(1) This Agreement may not be assigned by the President without the prior
written consent of the Consolidated Corporation.
274
<PAGE>
(2) Subject to the restrictions on transferability and assignment contained
herein, the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties, their successors,
assigns, personal representative, estate, heirs and legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or
cause to be done, executed or acknowledged or delivered and to perform all such
acts and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but, rather,
the relationship established hereby is that of employer-employee in the
Consolidated Corporation.
5.13 Counterparts.
(a) This Agreement may be executed in any number of counterparts.
(b) Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for
aesthetic purposes, prepare a fully executed original version of this
Agreement, which shall be the document filed with the Securities and
Exchange Commission.
275
<PAGE>
5.14 License.
(a) This Agreement is the property of Yankees and the use hereof by the
Parties is authorized hereby solely for purposes of this transaction.
(b) The use of this form of agreement or of any derivation thereof without
Yankees' prior written permission is prohibited.
In Witness Whereof, the Parties have executed this Agreement, effective
as of the last date set forth below.
Signed, Sealed & Delivered
In Our Presence
President
- - --------------------------
- - -------------------------- ------------------------
J. Bruce Gleason
Dated: June ___, 1999
American Internet Technical Centers, Inc.
a Nevada corporation.
- - --------------------------
__________________________ By: ___________________________
J. Bruce Gleason, President
(CORPORATE SEAL)
Attest: __________________________
Michael D. Umile
Senior Vice President & Secretary
Dated: June ___, 1999
American Internet Technical Center, Inc.
a Florida corporation.
- - --------------------------
__________________________ By: ___________________________
J. Bruce Gleason, President
(CORPORATE SEAL)
Attest: _________________________
Michael D. Umile
Senior Vice President & Secretary
Dated: June ___, 1999
276
<PAGE>
EXHIBIT 10.35 EMPLOYMENT AGREEMENT WITH MICHAEL D. UMILE
Executive's Employment Agreement
This Executive's Employment Agreement (the "Agreement") is entered into
by and among Michael D. Umile, an individual residing in the State of Florida
(the "Senior Vice President"); American Internet Technical Centers, Inc., a
Nevada corporation (the "Parent Company"); and, American Internet Technical
Center, Inc., a Florida corporation (the " Company"), the Parent Company and the
Company being collec tively hereinafter referred to as the "Consolidated
Corporation," and the Consolidated Corporation and the Senior Vice President
being sometimes hereinafter collectively to as the "Parties" or generically as a
"Party".
Preamble:
WHEREAS, The Consolidated Corporation, and the Consolidated
Corporation's boards of directors are of the opinion that in conjunction with
effectuation of the Consolidated Corporation's future plans, the Consolidated
Corporation must continue the services of the Company's co-founder, who
currently serves as the senior vice president, director and chief operating
officer of the Consolidated Corporation, on a long term basis; and
WHEREAS, the Senior Vice President is thoroughly knowledgeable with all
aspects of the Consolidated Corporation's operations and plans; and
WHEREAS, the Senior Vice President is agreeable to serving as the
Consolidated Corporation's senior vice president and chief operating officer, on
the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
Witnesseth:
Article One
Term, Renewals, Earlier Termination
1.1 Term.
Subject to the provisions set forth herein, the term of the Senior Vice
President's employment hereunder shall be deemed to commence on June 15, 1999
and continue until June 14, 2004.
277
<PAGE>
1.2 Renewals.
This Agreement shall be renewed automatically, after expiration of the
original term, on a continuing annual basis, unless the Party wishing not to
renew this Agreement provides the other Party with written notice of its
election not to renew ("Termination Election Notice") on or before the 30th day
prior to termination of the then current term.
1.3 Earlier Termination.
The Parent Company and the Company shall each have the right to
terminate this Agreement prior to the expiration of its Term, as it applies to
them (without affecting the Agreement as it applies to the other, except in
conjunction with the compensation aspects thereof), or of any renewals thereof,
subject to the provisions of Section 1.4, for the following reasons:
(a) For Cause:
(1) The Parent Company and the Company may each terminate the
Senior Vice President's employment under this Agreement at any
time for cause.
(2) Such termination shall be evidenced by written notice thereof
to the Senior Vice President, which notice shall specify the
cause for termination.
(3) For purposes hereof, the term "cause" shall mean:
(A) The inability of the Senior Vice President, through
sickness or other incapacity, to discharge his duties
under this Agreement for ninety or more consecutive
days or for a total of 120 or more days in a period
of twelve consecutive months;
(B) The refusal of the Senior Vice President to follow
the directions of the Consolidated Corporation's
boards of directors;
(C) Dishonesty; theft; or conviction of a crime involving
moral turpitude;
(D) Material default in the performance by the Senior
Vice President of his obligations, services or duties
required under this Agreement (other than for illness
or incapacity) or materially breach of any provision
of this Agreement, which default or breach has
continued for twenty days after written notice of
such default or breach and such material default or
breach has resulted in material damage to the
Consolidated Corporation.
(4) In the event of a dispute concerning termination due to breach
or default, the Senior Vice President's compensation shall be
continued until resolution of such dispute by a tribunal
278
<PAGE>
of competent jurisdiction, it being understood that the Senior
Vice President must repay any amounts so paid upon final
determination that he was not entitled to such compensation.
(b) Discontinuance of Business:
In the event that the Parent Company or the Company discontinues
operating its business, this Agreement shall terminate as to that
entity as of the last day of the month on which it ceases operation
with the same force and effect as if such last day of the month were
originally set as the termination date hereof; provided, however, that
a reorganization of the Parent Company, the Company or the Consolidated
Corporation shall not be deemed a termination of their respective
business.
(c) Death:
This Agreement shall terminate immediately on the death of the Senior
Vice President; however, all accrued compensation at such time shall be promptly
paid to the Senior Vice President's estate.
1.4 Final Settlement.
Upon termination of this Agreement and payment to the Senior Vice
President of all amounts due him hereunder, the Senior Vice President or his
representative shall execute and deliver to the terminating entity on a form
prepared by the terminating entity, a receipt for such sums and a release of all
claims, except such claims as may have been submitted pursuant to the terms of
this Agreement and which remain unpaid, and, shall forthwith tender to the
terminating entity all records, manuals and written procedures, as may be
desired by it for the continued conduct of its business.
Article Two
Scope of Employment
2.1 Retention.
The Parent Company and the Company each hereby hires the Senior Vice
President and the Senior Vice President hereby accepts such employment, in
accordance with the terms, provisions and conditions of this Agreement.
2.2 General Description of Duties.
(a) The Senior Vice President shall be employed as the senior vice
president of the Company and the Parent Company and perform the duties
generally associated with the position of senior vice president and
chief operating officer of thereof.
279
<PAGE>
(b) Without limiting the generality of the foregoing, the Senior Vice
President shall serve as the president's principal deputy and shall
perform such duties as are assigned to him by the Consolidated
Corporation's president and boards of directors, subject to compliance
with all applicable laws and fiduciary obligations.
(c) The Senior Vice President covenants to perform in good faith his
employment duties, devoting substantially all of his business time,
energies and abilities to the proper and efficient management of the
business of the Consolidated Corporation, and for its benefit.
2.3 Status.
(a) Throughout the term of this Agreement, the Senior Vice President shall
serve as a member of the boards of directors of the Consolidated
Corporation and as their senior vice president and chief operating
officer.
(b) In the event that he is not elected to such positions, then, at the
option of the Senior Vice President, this Agreement may be deemed
terminated as to the non-complying entity and, at the Senior Vice
President's election, the other entity constituting the Consolidated
Corporation, effective as of the earliest time that it can be
reasonably determined that such election will not take place, provided
that written notice of such election is provided to the entity involved
within 30 days after the date that the subject entity failed to elect
the Senior Vice President.
2.4 Exclusivity.
The Senior Vice President shall, unless specifically otherwise
authorized by Consolidated Corporation's board of directors, on a case by case
basis, devote his business time exclusively to the affairs of the Consolidated
Corporation.
Article Three
Compensation
3.1 Compensation.
1. As consideration for the Senior Vice President's services to the
Consolidated Corporation the Senior Vice President shall be entitled to
a salary in an aggregate gross sum equal to $75,000.00 per annum
payable in bi-monthly installments (the "Base Salary").
2. The Base Salary shall be increased by $5,000.00 per year starting on
the third anniversary date of this Agreement.
280
<PAGE>
3.2 Benefits.
During the term of this Agreement, the Senior Vice President shall also
be entitled to the following benefits:
(a) Three weeks paid vacation per year during the first three years of this
Agreement and four weeks per year thereafter.
(b) During the period of his employment, the Senior Vice President shall be
reimbursed for reasonable traveling and other expenses reasonably
required in connection with the performance of his duties hereunder,
subject to verification required by the Consolidated Corporation for
audit purposes, for tax deduction purposes and in order to assure
compliance with applicable laws and regulations.
(c) The Senior Vice President shall be entitled to receive health and life
insurance (provided that in the aggregate, they cost not more than $500
per month to the Consolidated Corporation, any excess being deducted
from the Base salary) and all other benefits of employment generally
available to management of the Consolidated Corporation or its
subsidiaries.
3.3 Indemnification.
The Consolidated Corporation will defend, indemnify and hold the Senior
Vice President harmless from all liabilities, suits, judgments, fines, penalties
or disabilities, including expenses associated directly, therewith (e.g. legal
fees, court costs, investigative costs, witness fees, etc.) resulting from any
reasonable actions taken by him in good faith on behalf of the Consolidated
Corporation, their affiliates or for other persons or entities at the request of
the board of director of the Parent Company or the Company, to the fullest
extent legally permitted, and in conjunction therewith, shall assure that all
required expenditures are made in a manner making it unnecessary for the Senior
Vice President to incur any out of pocket expenses; provided, however, that the
Senior Vice President permits the majority stockholders of the Parent Company to
select and supervise all personnel involved in such defense and that the Senior
Vice President waive any conflicts of interest that such personnel may have as a
result of also representing the Consolidated Corporation, their stockholders or
other personnel and agrees to hold them harmless from any matters involving such
representation, except such as involve fraud or bad faith.
281
<PAGE>
Article Four
Special Covenants
4.1 Confidentiality.
(a) The Senior Vice President acknowledges that, in and as a result
of his employment hereunder, he will be developing for the
Consolidated Corporation, making use of, acquiring and/or adding
to, confidential information of special and unique nature and
value relating to such matters as the Consolidated Corporation's
trade secrets, systems, procedures, manuals, confidential
reports, personnel resources, strategic and tactical plans,
advisors, clients, investors and funders; consequently, as
material inducement to the entry into this Agreement by the
Consolidated Corporation, the Senior Vice President hereby
covenants and agrees that he shall not, at anytime during or
following the terms of his employment hereunder, directly or
indirectly, personally use, divulge or disclose, for any purpose
whatsoever, any of such confidential information which has been
obtained by or disclosed to him as a result of his employment by
the Consolidated Corporation, or the Consolidated Corporation's
affiliates.
(b) In the event of a breach or threatened breach by the Senior Vice
President of any of the provisions of this Section 4.1, the
Consolidated Corporation, in addition to and not in limitation of
any other rights, remedies or damages available to the
Consolidated Corporation, whether at law or in equity, shall be
entitled to a permanent injunction in order to prevent or to
restrain any such breach by the Senior Vice President, or by the
Senior Vice President's partners, agents, representatives,
servants, employers, employees, affiliates and/or any and all
persons directly or indirectly acting for or with him.
4.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly
occur to the Consolidated Corporation as a result of a breach by the Senior Vice
President of the covenants or agreements contained in this Article Four, and in
view of the lack of an adequate remedy at law to protect the Consolidated
Corporation's interests, the Senior Vice President hereby covenants and agrees
that the Consolidated Corporation shall have the following additional rights and
remedies in the event of a breach hereof:
(a) The Senior Vice President hereby consents to the issuance of a
permanent injunction enjoining him from any violations of the covenants
set forth in Section 4.1 hereof; and
(b) Because it is impossible to ascertain or estimate the entire or exact
cost, damage or injury which the Consolidated Corporation may sustain
prior to the effective enforcement of such injunction, the Senior Vice
President hereby covenants and agrees to pay over to the Consolidated
Corporation, in the event he violates the covenants and agreements
contained in Section 4.2 hereof, the greater of:
(i) Any payment or compensation of any kind received by him because
of such violation before the issuance of such injunction, or
282
<PAGE>
(ii) The sum of One Thousand ($1,000.00) Dollars per violation, which
sum shall be liquidated damages, and not a penalty, for the
injuries suffered by the Consolidated Corporation as a result of
such violation, the Parties hereto agreeing that such liquidated
damages are not intended as the exclusive remedy available to the
Consolidated Corporation for any breach of the covenants and
agreements contained in this Article Four, prior to the issuance
of such injunction, the Parties recognizing that the only
adequate remedy to protect the Consolidated Corporation from the
injury caused by such breaches would be injunctive relief.
4.3 Cumulative Remedies.
The Senior Vice President hereby irrevocably agrees that the remedies
described in Section 4.3 hereof shall be in addition to, and not in limitation
of, any of the rights or remedies to which the Consolidated Corporation is or
may be entitled to, whether at law or in equity, under or pursuant to this
Agreement.
4.4 Acknowledgment of Reasonableness.
The Senior Vice President hereby represents, warrants and acknowledges
that he has carefully read and considered the provisions of this Article Four
and, having done so, agrees that the restrictions set forth herein are fair and
reasonable and are reasonably required for the protection of the interests of
the Consolidated Corporation, its officers, directors and other employees;
consequently, in the event that any of the above-described restrictions shall be
held unenforceable by any court of competent jurisdiction, the Senior Vice
President hereby covenants, agrees and directs such court to substitute a
reasonable judicially enforceable limitation in place of any limitation deemed
unenforceable and, the Senior Vice President hereby covenants and agrees that if
so modified, the covenants contained in this Article Four shall be as fully
enforceable as if they had been set forth herein directly by the Parties. In
determining the nature of this limitation, the Senior Vice President hereby
acknowledges, covenants and agrees that it is the intent of the Parties that a
court adjudicating a dispute arising hereunder recognize that the Parties desire
that this covenant not to compete be imposed and maintained to the greatest
extent possible.
4.5 Unauthorized Acts.
The Senior Vice President hereby covenants and agrees that he will not
do any act or incur any obligation on behalf of the Parent Company or the
Company of any kind whatsoever, except as authorized by the board of directors
of the subject entity or by its stockholders pursuant to duly adopted
stockholder action.
283
<PAGE>
Article Five
Miscellaneous
5.1 Notices.
(a) All notices, demands or other communications hereunder shall be in
writing, and unless otherwise provided, shall be deemed to have been
duly given on the first business day after mailing by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
To the Senior Vice President:
Michael D. Umile: 210 Oregon Lane; Boca Raton, Florida 33487;
To the Parent Company: American Internet Technical Centers, Inc.
440 East Sample Road, Suite 204; Pompano Beach, Florida 33064
Attention: J. Bruce Gleason, President;
To the Company: American Internet Technical Center, Inc.
440 East Sample Road, Suite 204; Pompano Beach, Florida 33064
Attention: J. Bruce Gleason, President.
or to such other address or to such other person as any party shall
designate to the other for such purpose in the manner hereinafter set
forth.
(b) (1) The Parties acknowledge that The Yankee Companies, Inc., a
Florida corporation ("Yankees") has acted as scrivener for the
Parties in this transaction and that Yankees is neither a law
firm nor an agency subject to any professional regulation or
oversight.
(2) Because of the inherent conflict of interests involved,
Yankees has advised all of the Parties to retain independent
legal and accounting counsel to review this Agreement and its
exhibits and incorporated materials on their behalf.
5.2 Amendment.
(1) No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is in writing and signed by
the Party against which the enforcement of said modification, waiver,
amendment, discharge or change is sought.
(2) This Agreement may not be modified without the consent of a majority in
interest of the Parent Company's stockholders.
284
<PAGE>
5.3 Merger.
(a) This instrument contains all of the understandings and agreements of
the Parties with respect to the subject matter discussed herein.
(b) All prior agreements whether written or oral, are merged herein and shall be
of no force or effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and shall be effective
regardless of any investigation that may have been made or may be made by or on
behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Agreement, or
the application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining portions of
such provision and the remaining provisions of this Agreement or the application
of such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be effected thereby.
5.6 Governing Law and Venue.
This Agreement shall be construed in accordance with the laws of the
State of Florida but any proceeding arising between the Parties in any matter
pertaining or related to this Agreement shall, to the extent permitted by law,
be held in Broward County, Florida.
5.7 Litigation.
(a) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the
prevailing Party shall be entitled to recover its costs and expenses,
including reasonable attorneys' fees up to and including all
negotiations, trials and appeals, whether or not litigation is
initiated.
(b) In the event of any dispute arising under this Agreement, or the
negotiation thereof or inducements to enter into the Agreement, the
dispute shall, at the request of any Party, be exclusively resolved
through the following procedures:
(1) (A) First, the issue shall be submitted to mediation
before a mediation service in Broward County,
Florida, to be selected by lot from six alternatives
to be
285
<PAGE>
provided, one by the majority stockholder of the
Parent Company, one by the Parent Company, one by the
Company and three by the Senior Vice President.
(B) The mediation efforts shall be concluded within ten
business days after their in itiation unless the
Parties unanimously agree to an extended mediation
period;
(2) In the event that mediation does not lead to a resolution of
the dispute then at the request of any Party, the Parties
shall submit the dispute to binding arbitration before an
arbitration service located in Broward County, Florida to be
selected by lot, from six alternatives to be provided, one by
the majority stockholder of the Parent Company, one by the
Parent Company, one by the Company and three by the Senior
Vice President.
(3) (A) Expenses of mediation shall be borne by the Company,
if successful.
(2) Expenses of mediation, if unsuccessful and of
arbitration shall be borne by the Party or Parties
against whom the arbitration decision is rendered.
(3) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration shall be borne equally by
the Parties.
5.8 Benefit of Agreement.
(1) This Agreement may not be assigned by the Senior Vice President without
the prior written consent of the Consolidated Corporation.
(2) Subject to the restrictions on transferability and assignment contained
herein, the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties, their successors,
assigns, personal representative, estate, heirs and legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
286
<PAGE>
5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or
cause to be done, executed or acknowledged or delivered and to perform all such
acts and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but, rather,
the relationship established hereby is that of employer-employee in the
Consolidated Corporation.
5.13 Counterparts.
(a) This Agreement may be executed in any number of counterparts.
(b) Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for
aesthetic purposes, prepare a fully executed original version of this
Agreement, which shall be the document filed with the Securities and
Exchange Commission.
5.14 License.
(a) This Agreement is the property of Yankees and the use hereof by the
Parties is authorized hereby solely for purposes of this transaction.
(b) The use of this form of agreement or of any derivation thereof without
Yankees' prior written permission is prohibited.
287
<PAGE>
In Witness Whereof, the Parties have executed this Agreement, effective
as of the last date set forth below.
Signed, Sealed & Delivered
In Our Presence
Senior Vice President
- - --------------------------
- - -------------------------- -------------------
Michael D. Umile
Dated: June ___, 1999
American Internet Technical Centers, Inc.
a Nevada corporation.
- - --------------------------
__________________________ By:
---------------------------
J. Bruce Gleason, President
(CORPORATE SEAL)
Attest:________________________
Michael D. Umile
Senior Vice President & Secretary
Dated: June ___, 1999
American Internet Technical Center, Inc.
a Florida corporation.
- - --------------------------
__________________________ By:
---------------------------
J. Bruce Gleason, President
(CORPORATE SEAL)
Attest:_________________________
Michael D. Umile
Senior Vice President & Secretary
Dated: June ___, 1999
288
EXHIBIT 10.36 EMPLOYMENT AGREEMENT WITH CARMEN PICCOLO
Employment Agreement
This Employment Agreement (the "Agreement") is entered into by and
among Carmen Piccolo, an individual residing in the State of Florida (the
"Corporate Information Spokesperson"); Equity Growth Systems, inc., a Delaware
publicly held corporation with a class of securities registered under Section
12(g) of the Securities Exchange Act of 1934, as amended ("Equity Growth" and
the "Exchange Act," respectively); and, American Internet Technical Center,
Inc., a Florida corporation ("American Internet"), Equity Growth, American
Internet and all other subsidiaries of Equity Growth, whether current or
subsequently formed or acquired, being collectively hereinafter referred to as
the "Consolidated Corporation," and the Consolidated Corporation and the
Corporate Information Spokesperson being sometimes hereinafter collectively to
as the "Parties" or generically as a "Party".
Preamble:
WHEREAS, The Consolidated Corporation, and the Consolidated
Corporation's boards of directors are of the opinion that in light of their
public status and the importance of dissemination of accurate and complete
information concerning their business affairs, it is critical to appoint one
person with responsibility for gathering, verifying, securing required approvals
and then disseminating information in full compliance with all applicable laws;
and
WHEREAS, the Corporate Information Spokesperson is experienced and well
known in the financial community and is thoroughly knowledgeable with the
communications related obligations and restriction imposed on public companies
by the Exchange Act, as well as by the Securities Act of 1933, as amended (the
"Securities Act"); and
WHEREAS, the Corporate Information Spokesperson is agreeable to serving
as the Consolidated Corporation's corporate information spokesperson on the
terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
Witnesseth:
Article One
Term, Renewals, Earlier Termination
1.1 Term.
Subject to the provisions set forth herein, the term of the Corporate
Information Spokesperson's employment hereunder shall be deemed to commence on
first business day of the first week following the
289
<PAGE>
last date appearing on the signature page of this Agreement and continue until
June 30, 2000, unless extended or earlier terminated by Equity Growth as
hereinafter set forth.
1.2 Renewals.
This Agreement shall be renewed automatically, after expiration of the
original term, on a continuing annual basis, unless the Party wishing not to
renew this Agreement provides the other Party with written notice of its
election not to renew ("Termination Election Notice") on or before the 30th day
prior to termination of the then current term.
1.3 Earlier Termination.
Equity Growth and American Internet shall each have the right to
terminate this Agreement prior to the expiration of its Term, as it applies to
them (without affecting the Agreement as it applies to the other, except in
conjunction with the compensation aspects thereof), or of any renewals thereof,
subject to the provisions of Section 1.4, for the following reasons:
(a) For Cause:
(1) Equity Growth and American Internet may each terminate the
Corporate Information Spokesperson's employment under this
Agreement at any time for cause.
(2) Such termination shall be evidenced by written notice thereof
to the Corporate Information Spokesperson, which notice shall
specify the cause for termination.
(3) For purposes hereof, the term "cause" shall mean:
(a) The inability of the Corporate Information
Spokesperson, through sickness or other incapacity,
to discharge her duties under this Agreement for 15
or more consecutive days or for a total of 30 or more
days in a period of twelve consecutive months;
(b) The refusal of the Corporate Information Spokesperson
to follow the directions of the Consolidated
Corporation's boards of directors, or their
presidents or other superior officers;
(c) Dishonesty; theft; or conviction of a crime involving
moral turpitude;
(d) Material default in the performance by the Corporate
Information Spokesperson of her obligations, services
or duties required under this Agreement (other than
for illness or incapacity) or materially breach of
any provision of this Agreement, which default or
breach has continued for five days after written
notice of such default or breach.
290
<PAGE>
(b) Discontinuance of Business:
In the event that Equity Growth or American Internet discontinues
operating its business, this Agreement shall terminate as to that
entity as of the last day of the month on which it ceases operation
with the same force and effect as if such last day of the month were
originally set as the termination date hereof; provided, however, that
a reorganization of Equity Growth, American Internet or the
Consolidated Corporation shall not be deemed a termination of their
respective business.
(c) Death:
This Agreement shall terminate immediately on the death of the
Corporate Information Spokesperson; however, all accrued compensation at such
time shall be promptly paid to the Corporate Information Spokesperson's estate.
1.4 Final Settlement.
Upon termination of this Agreement and payment to the Corporate
Information Spokesperson of all amounts due her hereunder, the Corporate
Information Spokesperson or her representative shall execute and deliver to the
terminating entity on a form prepared by the terminating entity, a receipt for
such sums and a release of all claims, except such claims as may have been
submitted pursuant to the terms of this Agreement and which remain unpaid, and,
shall forthwith tender to the terminating entity all records, manuals and
written procedures, as may be desired by it for the continued conduct of its
business.
Article Two
Scope of Employment
2.1 Retention.
Equity Growth hereby hires the Corporate Information Spokesperson and
the Corporate Information Spokesperson hereby accepts such employment, in
accordance with the terms, provisions and conditions of this Agreement.
2.2 General Description of Duties.
(a) The Corporate Information Spokesperson shall be employed as the
corporate information spokesperson for Equity Growth and its
subsidiaries, including American Internet, and shall
291
<PAGE>
perform the duties generally associated with the position of corporate
information spokesperson thereof.
(b) Without limiting the generality of the foregoing, the Corporate
Information Spokesperson shall:
(1) Serve as the principal point of contact between the Consolidated
Corporation and:
(a) The media (print, electronic, voice and picture);
(b) The investment community;
(c) Their security holders;
(2) Be responsible for the collection and maintenance of all
information concerning the Consolidated Corporation and for
verification of the accuracy and completeness thereof;
(3) Assist in the prepare and distribution of regular reports of
the activities of the Consolidated Corporation to the
investment community, the press, their securities holders and
the general public;
(4) Assist in development and implement all public relations
programs required by the Consolidated Corporation;
(5) Be responsible for securing prior written approval for the
release of any information concerning the Consolidated
Corporation from any regulatory authorities (e.g., the
Securities and Exchange Commission [the "Commission") or self
regulatory organizations (e.g., the National Association of
Securities Dealers, Inc. [the "NASD"]) having jurisdiction
over dissemination of such information; the boards of
directors and chief executive officers of the Consolidated
Corporation, and from Equity Growth's General Counsel;
(6) Maintain orderly and easy to find records of all corporate
information released by her.
(7) Perform such other duties as are assigned to her by the
Consolidated Corporation's president and boards of directors,
subject to compliance with all applicable laws and fiduciary
obligations.
(c) The Corporate Information Spokesperson covenants to perform in good
faith her employment duties, devoting substantially all of her business
time, energies and abilities to the proper and efficient management
and execution thereof and for its benefit.
292
<PAGE>
2.3 Status.
(1) The Corporate Information Spokesperson shall serve as an employee of
Equity Growth but shall have no authority to act as an agent thereof,
or to bind Equity Growth or its subsidiaries as a principal or agent
thereof, all such functions being reserved to their officers as
specified by their boards of directors and in compliance with the
requirements of their constituent documents.
(2) The Corporate Information Spokesperson hereby covenants and agrees that
she shall not hold herself out as an authorized agent of the
Consolidated Corporation unless such authority is specifically assigned
to her, on a case by case basis, by the boards of directors of the
Constituent Corporation, pursuant to a duly adopted resolution which
remains in effect.
(3) The Corporate Information Spokesperson hereby represents and warrants
to Equity Growth and American Internet that she is subject to no legal,
self regulatory organization (e.g., National Association of Securities
Dealers, Inc.'s bylaws) or regulatory impediments to the provision of
the services called for by this Agreement, or to receipt of the
compensation called for under this Agreement or any supplements
thereto; and, the Corporate Information Spokesperson hereby irrevocably
covenants and agrees to immediately bring to the attention of Equity
Growth any facts required to make the foregoing representation and
warranty continuingly accurate throughout the term of this Agreement,
or any supplements or extensions thereof.
2.4 Exclusivity.
The Corporate Information Spokesperson shall, unless specifically
otherwise authorized by Consolidated Corporation's board of directors, on a case
by case basis, devote her business time ex clusively to the affairs of the
Consolidated Corporation.
2.5 Limitations on Services
(a) The Parties recognize that certain responsibilities and obligations are
imposed by federal and state securities laws and by the applicable
rules and regulations of stock exchanges, the National Association of
Securities Dealers, Inc., in-house "due diligence" or "compliance"
departments of Licensed Securities Firms, etc.; accordingly, the
Corporate Information Spokesperson agrees that she will not:
(1) Release any financial or other material information or data
about the Consolidated Corporation without the prior written
consent and approval of Equity Growth's General Counsel;
293
<PAGE>
(2) Conduct any meetings with financial analysts without informing
Equity Growth's General Counsel and board of directors in
advance of the proposed meeting and the format or agenda of
such meeting;
(3) Release any information or data about the Consolidated
Corporation to any selected or limited person(s), entity, or
group if the Corporate Information Spokesperson is aware that
such information or data has not been generally released or
promulgated.
(b) In any circumstances where the Corporate Information Spokesperson is
describing the securities of Equity Growth to a third party, the
Corporate Information Spokesperson shall disclose to such person any
compensation received from Equity Growth to the extent required under
any applicable laws, including, without limitation, Section 17(b) of
the Securities Act of 1933, as amended.
(c) In rendering her services, the Corporate Information Spokesperson shall
not disclose to any third party any confidential non-public information
furnished by Equity Growth or American Internet or otherwise obtained
by it with respect to the Consolidated Corporation.
(d) The Corporate Information Spokesperson shall restrict or cease, as
directed by Equity Growth, all efforts on behalf of the Consolidated
Corporation, including all dissemination of information regarding the
Consolidated Corporation, immediately upon receipt of instructions (in
writing by fax or letter) to that effect from Equity Growth.
(e) If the Corporate Information Spokesperson learns of any pending public
securities offering to be made or expected to be by made the
Consolidated Corporation, the Corporate Information Spokesperson shall
immediately cease any public relations activities on behalf of the
Consolidated Corporation until receipt of written instructions from
Equity Growth's General Counsel as to how to proceed, and thereafter
shall proceed only in accordance with such written instructions.
(f) The Corporate Information Spokesperson shall not take any action which
would in any way adversely affect the reputation, standing or prospects
of Equity Growth or the Consolidated Corporation or which would cause
Equity Growth or the Consolidated Corporation to be in violation of
applicable laws.
294
<PAGE>
Article Three
Compensation
3.1 Compensation.
1. As consideration for the Corporate Information Spokesperson's services
to the Consolidated Corporation the Corporate Information Spokesperson
shall be entitled to a gross monthly salary of $2,000 payable in
bi-monthly installments of $1,000 less related taxes and withholding
obligations imposed under federal, state or local laws (the "Base
Salary").
2. (1) In addition to the Base Salary, the Corporate Information
Spokesperson shall be entitled to an option to purchase up to
48,000 shares of Equity Growth's common stock at an exercise
price of $_.00 per share, vesting at the rate of 4,000 shares
per month, provided that she remains in the employ of the
Consolidated Corporation at the time of exercise (the
"Options").
2. The Options shall be exercisable for a period of 12 months
from their date of vesting and will be issued in reliance on
the exemption from registration under Section 5 of the
Securities Act and the Florida securities and Investor
Protection Act (the "Florida Act"), pursuant to Section 4(2)
of the Securities Act and Section 517.061(11) of the Florida
Act.
3. The Corporate Information Spokesperson hereby represents,
warrants, covenants and acknowledges that:
(A) The securities being issued as compensation under
Section 3.1(b) of this Agreement (the "Securities")
will be issued without registration under the
provisions of Section 5 of the Securities Act or the
securities regulatory laws and regulations of the
State of Florida (the "Florida Act") pursuant to
exemptions provided pursuant to Section 4(2) of the
Act and comparable provisions of the Florida Act;
2. The Corporate Information Spokesperson shall be
responsible for preparing and filing any reports
concerning this transaction with the Florida Division
of Securities (none being expected), and payment of
any required filing fee (none being expected);
3. All of the Securities will bear legends restricting
their transfer, sale, conveyance or hypothecation
unless such Securities are either registered under
the provisions of Section 5 of the Act and under the
Florida Act, or an opinion of legal counsel, in form
and substance satisfactory to legal counsel to Equity
Growth is provided to Equity Growth's General Counsel
to the effect that such registration is not required
as a result of applicable exemptions therefrom;
295
<PAGE>
4. Equity Growth's transfer agent shall be instructed
not to transfer any of the Securities unless the
General Counsel for Equity Growth advises it that
such transfer is in compliance with all applicable
laws;
5. The Corporate Information Spokesperson is acquiring
the Securities for her own account, for investment
purposes only, and not with a view to further sale or
distribution; and
6. The Corporate Information Spokesperson or her
advisors have examined Equity Growth's books and
records and questioned its officers and directors as
to such matters involving Equity Growth as she deemed
appropriate.
4. In the event that Equity Growth files a registration or
notification statement with the Commission or any state
securities regulatory authorities registering or qualifying
any of its securities for sale or resale to the public as free
trading securities, it will notify the Corporate Information
Spokesperson of such intent at least 15 business days prior to
such filing, and shall, if requested by her, include any
shares theretofore issued upon exercise of the Options in such
registration or notification statement, provided that the
Corporate Information Spokesperson c ooperates in a timely
manner with any requirements for such registration or
qualification by notification, including, without limitation,
the obligation to provide complete and accurate information
therefor.
3.2 Benefits
The Corporate Information Spokesperson shall be entitled to any
benefits generally made available to all other employees (rather than to a
specified employee or group of employees).
3.3 Indemnification.
The Consolidated Corporation will defend, indemnify and hold the
Corporate Information Spokesperson harmless from all liabilities, suits,
judgments, fines, penalties or disabilities, including expenses associated
directly, therewith (e.g. legal fees, court costs, investigative costs, witness
fees, etc.) resulting from any reasonable actions taken by her in good faith on
behalf of the Consolidated Corporation, their affiliates or for other persons or
entities at the request of the board of directors of Equity Growth or American
Internet, to the fullest extent legally permitted, and in conjunction therewith,
shall assure that all required expenditures are made in a manner making it
unnecessary for the Corporate Information Spokesperson to incur any out of
pocket expenses; provided, however, that the Corporate Information Spokesperson
permits Equity Growth to select and supervise all personnel involved in such
defense and that the Corporate Information Spokesperson waive any conflicts of
interest that such personnel may have as a result of also representing the
Consolidated Corporation, their stockholders or other personnel and agrees to
hold them harmless from any matters involving such representation, except such
as involve fraud or bad faith.
296
<PAGE>
Article Four
Special Covenants
4.1 Confidentiality.
(a) The Corporate Information Spokesperson acknowledges that, in and as a
result of her employment hereunder, she will be developing for the
Consolidated Corporation, making use of, acquiring and/or adding to,
confidential information of special and unique nature and value
relating to such matters as the Consolidated Corporation's trade
secrets, systems, procedures, manuals, confidential reports, personnel
resources, strategic and tactical plans, advisors, clients, investors
and funders; consequently, as material inducement to the entry into
this Agreement by the Consolidated Corporation, the Corporate
Information Spokesperson hereby covenants and agrees that she shall
not, at anytime during or following the terms of her employment
hereunder, directly or indirectly, personally use, divulge or disclose,
for any purpose whatsoever, any of such confidential information which
has been obtained by or disclosed to her as a result of her employment
by the Consolidated Corporation, or the Consolidated Corporation's
affiliates.
(b) In the event of a breach or threatened breach by the Corporate
Information Spokesperson of any of the provisions of this Section 4.1,
the Consolidated Corporation, in addition to and not in limitation of
any other rights, remedies or damages available to the Consolidated
Corporation, whether at law or in equity, shall be entitled to a
permanent injunction in order to prevent or to restrain any such breach
by the Corporate Information Spokesperson, or by the Corporate
Information Spokesperson's partners, agents, representatives, servants,
employers, employees, affiliates and/or any and all persons directly or
indirectly acting for or with her.
4.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly
occur to the Consolidated Corporation as a result of a breach by the Corporate
Information Spokesperson of the covenants or agreements contained in this
Article Four, and in view of the lack of an adequate remedy at law to protect
the Consolidated Corporation's interests, the Corporate Information Spokesperson
hereby covenants and agrees that the Consolidated Corporation shall have the
following additional rights and remedies in the event of a breach hereof:
(a) The Corporate Information Spokesperson hereby consents to the issuance
of a permanent injunction enjoining her from any violations of the
covenants set forth in Section 4.1 hereof; and
(b) Because it is impossible to ascertain or estimate the entire or exact
cost, damage or injury which the Consolidated Corporation may sustain
prior to the effective enforcement of such injunction,
297
<PAGE>
the Corporate Information Spokesperson hereby covenants and agrees to
pay over to the Consolidated Corporation, in the event she violates the
covenants and agreements contained in Section 4.2 hereof, the greater
of:
(i) Any payment or compensation of any kind received by her because
of such violation before the issuance of such injunction, or
(ii) The sum of One Thousand ($1,000.00) Dollars per violation, which
sum shall be liquidated damages, and not a penalty, for the
injuries suffered by the Consolidated Corporation as a result of
such violation, the Parties hereto agreeing that such liquidated
damages are not intended as the exclusive remedy available to the
Consolidated Corporation for any breach of the covenants and
agreements contained in this Article Four, prior to the issuance
of such injunction, the Parties recognizing that the only
adequate remedy to protect the Consolidated Corporation from the
injury caused by such breaches would be injunctive relief.
4.3 Cumulative Remedies.
The Corporate Information Spokesperson hereby irrevocably agrees that
the remedies described in Section 4.3 hereof shall be in addition to, and not in
limitation of, any of the rights or remedies to which the Consolidated
Corporation is or may be entitled to, whether at law or in equity, under or
pursuant to this Agreement.
4.4 Acknowledgment of Reasonableness.
The Corporate Information Spokesperson hereby represents, warrants and
acknowledges that she has carefully read and considered the provisions of this
Article Four and, having done so, agrees that the restrictions set forth herein
are fair and reasonable and are reasonably required for the protection of the
interests of the Consolidated Corporation, its officers, directors and other
employees; consequently, in the event that any of the above-described
restrictions shall be held unenforceable by any court of competent jurisdiction,
the Corporate Information Spokesperson hereby covenants, agrees and directs such
court to substitute a reasonable judicially enforceable limitation in place of
any limitation deemed unenforceable and, the Corporate Information Spokesperson
hereby covenants and agrees that if so modified, the covenants contained in this
Article Four shall be as fully enforceable as if they had been set forth herein
directly by the Parties. In determining the nature of this limitation, the
Corporate Information Spokesperson hereby acknowledges, covenants and agrees
that it is the intent of the Parties that a court adjudicating a dispute arising
hereunder recognize that the Parties desire that this covenant not to compete be
imposed and maintained to the greatest extent possible.
298
<PAGE>
4.5 Unauthorized Acts.
The Corporate Information Spokesperson hereby covenants and agrees that
she will not do any act or incur any obligation on behalf of Equity Growth or
American Internet of any kind whatsoever, except as authorized by the board of
directors of the subject entity or by its stockholders pursuant to duly adopted
stockholder action.
4.6 Covenant not to Disparage
The Corporate Information Spokesperson hereby irrevocably covenants and
agrees that during the term of this Agreement and after its termination, she
will refrain from making any remarks that could be construed by anyone, under
any circumstances, as disparaging, directly or indirectly, specifically, through
innuendo or by inference, whether or not true, about the Consolidated Company,
its constituent members, or their officers, directors, stockholders, employees,
agent or affiliates, whether related to the business of the Consolidated
Company, to other business or financial matters or to personal matters.
Article Five
Miscellaneous
5.1 Notices.
(a) All notices, demands or other communications hereunder shall be in
writing, and unless otherwise provided, shall be deemed to have been
duly given on the first business day after mailing by registered or
certified mail, return receipt requested, postage prepaid, addressed as
follows:
To the Corporate Information Spokesperson:
Carmen Piccolo: 246 Northeast 30th Street; Boca Raton, Florida 33431;
telephone (561) 392-0102;
To Equity Growth: Equity Growth Systems, inc.
Equity Growth Systems, inc.
8001 DeSoto Woods Drive; Sarasota, Florida 34243;
Telephone (941) 358-8182; Fax (941) 358-8423
Attention: Charles J. Scimeca, President; with a copy to
G. Richard Chamberlin, Esquire; General Counsel
Equity Growth Systems, inc.
14950 South Highway 441; Summerfield, Florida
34491 Telephone (352) 694-6714, Fax (352) 694-9178; and,
e-mail, [email protected].
299
<PAGE>
To American Internet:
American Internet Technical Center, Inc.
440 East Sample Road; Pompano Beach, Florida 33056
Attention: J. Bruce Gleason, President.
Telephone (954) 943-4748; Fax (954) 943-4046; e-mail [email protected]
To Yankees:
The Yankee Companies, Inc.
902 Clint Moore Road, Suite 136; Boca Raton, Florida 33487
Attention: Leonard Miles Tucker, President
Telephone (561) 998-2025, Fax (561) 998-3425;
and, e-mail [email protected];
or such other address or to such other person as any Party shall
designate to the other for such purpose in the manner hereinafter set
forth.
(b) (1) The Parties acknowledge that Yankees serves as a strategic
consultant to Equity Growth and has acted as scrivener for the
Parties in this transaction but that Yankees is neither a law
firm nor an agency subject to any professional regulation or
oversight.
(2) Because of the inherent conflict of interests involved,
Yankees has advised all of the Parties to retain independent
legal and accounting counsel to review this Agreement and its
exhibits and incorporated materials on their behalf.
(c) The decision by any Party not to use the services of legal
counsel in conjunction with this transaction shall be solely
at their own risk, each Part acknowledging that applicable
rules of the Florida Bar prevent Equity Growth's general
counsel, who has reviewed, approved and caused modifications
on behalf of the Consolidated Corporation, from representing
anyone other than the Consolidated Corporation in this
transaction.
5.2 Amendment.
(1) No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is in writing and signed by
the Party against which the enforcement of said modification, waiver,
amendment, discharge or change is sought.
(2) This Agreement may not be modified without the consent of a majority in
interest of Equity Growth's stockholders.
300
<PAGE>
5.3 Merger.
(a) This instrument contains all of the understandings and agreements of
the Parties with respect to the subject matter discussed herein.
(b) All prior agreements whether written or oral, are merged herein and shall be
of no force or effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and shall be effective
regardless of any investigation that may have been made or may be made by or on
behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Agreement, or
the application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining portions of
such provision and the remaining provisions of this Agreement or the application
of such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be effected thereby.
5.6 Governing Law and Venue.
This Agreement shall be construed in accordance with the laws of the
State of Florida but any proceeding arising between the Parties in any matter
pertaining or related to this Agreement shall, to the extent permitted by law,
be held in Broward County, Florida.
5.7 Litigation.
(a) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the
prevailing Party shall be entitled to recover its costs and expenses,
including reasonable attorneys' fees up to and including all
negotiations, trials and appeals, whether or not litigation is
initiated.
(b) In the event of any dispute arising under this Agreement, or the
negotiation thereof or inducements to enter into the Agreement, the
dispute shall, at the request of any Party, be exclusively resolved
through the following procedures:
(1) (A) First, the issue shall be submitted to mediation
before a mediation service in Broward County,
Florida, to be selected by lot from six alternatives
to be provided, two by Equity Growth, one by American
Internet and three by the Corporate Information
Spokesperson.
301
<PAGE>
(B) The mediation efforts shall be concluded within ten
business days after their in itiation unless the
Parties unanimously agree to an extended mediation
period;
(2) In the event that mediation does not lead to a resolution of
the dispute then at the request of any Party, the Parties
shall submit the dispute to binding arbitration before an
arbitration service located in Broward County, Florida to be
selected by lot, from six alternatives to be provided, two by
Equity Growth, one by American Internet and three by the
Corporate Information Spokesperson.
(3) (A) Expenses of mediation shall be borne by the
Consolidated Corporation, if successful.
(B) Expenses of mediation, if unsuccessful and of
arbitration shall be borne by the Party or Parties
against whom the arbitration decision is rendered.
(c) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration shall be borne equally by
the Parties.
5.8 Benefit of Agreement.
(1) This Agreement may not be assigned by the Corporate Information
Spokesperson without the prior written consent of the Consolidated
Corporation.
(2) Subject to the restrictions on transferability and assignment contained
herein, the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties, their successors,
assigns, personal representative, estate, heirs and legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
302
<PAGE>
5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or
cause to be done, executed or acknowledged or delivered and to perform all such
acts and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but, rather,
the relationship established hereby is that of employer-employee in the
Consolidated Corporation.
5.13 Counterparts.
(a) This Agreement may be executed in any number of counterparts.
(b) Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for
aesthetic purposes, prepare a fully executed original version of this
Agreement, which shall be the document filed with the Securities and
Exchange Commission.
5.14 License.
(a) This Agreement is the property of Yankees and the use hereof by the
Parties is authorized hereby solely for purposes of this transaction.
(b) The use of this form of agreement or of any derivation thereof without
Yankees' prior written permission is prohibited.
(3) This Agreement shall not be more strictly interpreted against any Party
as a result of its authorship.
303
<PAGE>
In Witness Whereof, the Parties have executed this Agreement, effective
as of the last date set forth below.
Signed, Sealed & Delivered
In Our Presence
Corporate Information Spokesperson
- - --------------------------
- - -------------------------- ------------------------
Carmen Piccolo
Dated: July ___, 1999
Equity Growth Systems, inc.
a Delaware corporation
- - --------------------------
__________________________ By: ___________________________
Charles J. Scimeca, President
(CORPORATE SEAL)
Attest: ________________________
G. Richard Chamberlin, Esquire
General Counsel & Secretary
Dated: July ___, 1999
American Internet Technical Center, Inc.
a Florida corporation.
- - --------------------------
__________________________ By: ___________________________
J. Bruce Gleason, President
(CORPORATE SEAL)
Attest: ________________________
Michael D. Umile
Senior Vice President & Secretary
Dated: July ___, 1999
304
EXHIBIT 10.37 DISTRIBUTOR AGREEMENT
EDUCATION TO GO
AGREEMENT TO OFFER ONLINE COURSES
THIS AGREEMENT TO OFFER ONLINE COURSES (Agreement) is made and entered into as
of the 4th day of August, 1998, between Education To Go, P.O. Box 890516,
Temecula, California, 92589 (Contractor), and American Internet Technical
Center, 1500 East Atlantic Blvd., Pompano Beach, FL 33060, (College).
RECITALS:
WHEREAS, Contractor is engaged in the business of producing and providing online
college courses to students via the Internet; and
WHEREAS, College is an academic institution interested in offering the courses
produced by Contractor to its students;
NOW, THEREFORE, College and Contractor agree as follows:
74. Terms and Automatic Renewal- This Agreement shall commence as of the
date first written above and continue until the end of the academic
term (semester or quarter) of the College. At the end of the academic
term, it will be automatically renewed for the following academic term,
unless either party gives written notice to the other party of its
decision to terminate the Agreement thirty (30) days prior to
commencement of the following academic term.
2. Selection of Courses- College will select courses by notifying
Contractor through its website using an order form. Courses will be
delivered to individual students via e-mail and the World Wide Web.
3 Cost and Payment- College shall make payment on a per student basis to
Contractor an NET 30 terms by sending remittance to mailing address
P.O. Box 890516, Temecula, CA 92589. Billing commences after a course
completes 50% of instruction. Course prices are listed in Addendum A as
part of this contract.
The College shall pay Contractor for instructional services upon
submission of the following:
a. an invoice with total amount for each course;
b. a student roster verifying students receiving course instruction;
4. Waiver on Dissatisfaction. Contractor agrees to waive its fee for any
student who expresses, In writing, dissatisfaction with a course
provided by Contractor.
5. No Minimum Enrollment There shall be no minimum enrollment required for
any of the courses offered by Contractor.
305
<PAGE>
6. Advertising- Contractor hereby grants College permission to use
Contractor's name, qualifications, and course description(s) in
advertising or promotion. In addition, College may list the
Contractor's on-line courses in its catalog.
7. Cancellation- In the event the Contractor cancels any course, such
course may, at College's option, be rescheduled to a mutually agreed
later date.
8. Costs- Contractor shall be responsible for the expenses in producing
and delivering the courses via the Internet The student shall be
responsible for the expenses of receiving the courses, including
hardware, software, Internet access, and telephone charges.
9. Course Contents- For each course, Contractor shall provide:
a. A total of twelve (12) sets of written lecture notes delivered
to each student by e-mail at the rate of two (2) per week for
six (6) weeks.
b. Interactive tutorials developed by the instructor and made
available with lesson and assignments.
c. A list of students who have met the requirements for a
completion certificate.
10. Limits of Liability- The liability of Contractor for any breach of this
Agreement or other cause of action arising from the services rendered
or agreed to be rendered under this Agreement, including but not
limited to damages for cancellation of a course, the course content,
the failure to deliver courses, or the interruption of courses, shall
be limited to a refund of any tuition paid by College to Contractor for
said courses. Contractor shall not be liable for the tuition or fees
the College has collected or to the student or College for
consequential damages
11. Status of Contractor- While performing services hereunder, Contractor
is an independent contractor and not an officer, agent, or employee of
College.
12. General Provisions- This Agreement supersedes any and all other
agreements, either oral or written, between the parties with respect
to the subject matter of this Agreement and contains all covenants and
agreements between the parties with respect therein. Each party
acknowledges that no representations, inducements, promises, or
agreements, oral or otherwise, have been made by any panty, or by
anyone acting on the behalf of any parry, which are not embodied
herein. and that no other agreement, statement or promise not
contained herein shall be valid or binding. Any modification shall be
effective only if it is in writing and signed by the party to be
charged, in the form of an amendment to this Agreement.
306
<PAGE>
IN WITNESS WHEREOF, this Agreement is entered into as of the date first
written above by and on behalf of Contractor and College by the authorized agen
thereof.
Contractor: EDUCATION TO GO, a California General Partnership
EIN 33-0769719
By: Jules Ruggles
Institution:
AMERICAN INTERNET TECHNICAL CENTER
By: J. Bruce Gleason
Title: President
307
EXHIBIT 22 AUDITOR'S CONSENT
DASKAL, BOLTON & MANELA
CERTIFIED PUBLIC ACCOUNTANTS
A PARTNERSHIP OF PROFESSIONAL ASSOCIATIONS
240 W. PALMETTO PARK ROAD, SUITE 300 BOCA RATON, FLORIDA 33432
TELEPHONE 561 367-1040 FAX (561) 750-3236
JEFFREY A. BOLTON, C.P.A., P.A. MEMBER OF THE AMERICAN
INSTITUTE
MICHAEL I. DASZKAL, C.P.A., P.A. OF CERTIFIED PUBLIC
ACCOUNTANTS
ROBERT A. MANELA, C.P.A., P.A.
TIMOTHY B. DEVLIN, C.P.A., P.A.
July 9, 1999
To: the Board of Directors
Equity Growth Systems, inc.
(the "Registrant")
8001 Desoto Woods Drive
Sarasota, Florida 34243
Re: Consent for use of Auditor's Name
Dear Sirs;
We hereby consent to the use of our name in Item 4 of the Registrant's
Form 8-KSB dated July 12, 1999, disclosing that we have been appointed as its
auditors.
---------------
Daskal, Bolton & Manela
Certified Public Accountants
Boca Raton, Florida
308
EXHIBIT 99.34 OFFICERS & DIRECTORS QUESTIONNAIRES (GLEASON)
TO: Mr. Bruce Gleason
American Internet Technical Center, Inc.
440 E. Sample Road
Pompano Beach, Florida 33064
From G. Richard Chamberlin, Esq
Re: Due Diligence Disclosures for
Equity Growth Systems, inc.
DIRECTOR/OFFICER/PRINCIPAL QUESTIONNAIRE
(Please Print or Type Responses)
Please provide us with the following information, as soon as possible.
1. Name: J. Bruce Gleason
2. (a) Home Address: 44 Havenwood Drive
Pompano Beach, Florida 33064
309
<PAGE>
(b) Business Address: 440 E. Sample Road #204
Pompano Beach, Florida 33064
. (a) Home Phone: 954-946-6236
(b) Business Phone: 954-943-4748
3.. Age: 56
4.. State positions and offices held or to be held with the juridical entity or
entities disclosed above (each being hereinafter generically referred to as the
"Juridical Entity"), and your term of office for each:
President/Treasurer/CEO
State periods during which you have served in such position(s) and
office(s):
1 year & 3 months
5. Is there any arrangement or understanding between you and any other person
pursuant to which you were or will be selected as an officer, director or
nominee or principal? yes ____ no X (If "yes," briefly describe such arrangement
or understanding, and name such person. Do not include arrangements with
directors and officers acting solely in their capacities as such.)
6. State the nature of any family relationship (by blood, marriage, or adoption,
not more remote than first cousin) between yourself and any director, executive
officer, or person nominated or chosen by the Juridical Entity to become a
director or executive officer.
Not Applicable
7. List all places of employment, their principal business, and your principal
occupation(s) during the last five years, staring with your current positions
and working back in time. Include all positions as an officer, director,
partner, consultant or sole proprietor:
Principal
Dates Location Name of Business Principal Purpose Occupation
3/98 to Present American Internet Technical Center President
2/96 to 2/98 Prepaid Legal Services, Inc. Owner/ Ind. Agent
Lighthouse Point, FL
6/93 to 6/95 Showcase Group Real Estate Development President
Deerfield Beach, FL
310
<PAGE>
8.. State whether any of the businesses listed are parents, subsidiaries, or
affiliates of the Juridical Entity.
Not Applicable
9. State, in detail, the nature of responsibility undertaken by you in the prior
positions listed above. (Answer should include specific principal duties which
relate to the level of your professional competence.)
Owner/operator, Management duties
10.. Have you ever held a directorship in any company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the reporting requirements of Section 15(d) of such Act, or of any
company registered as an investment company under the Investment Company Act of
1940? yes ____ no X (if "yes" list all such companies below):
11. During the past five years, has a petition under the federal bankruptcy laws
or under any state insolvency law been filed by or against you, or any
partnership in which you were a general partner within two years before such
filing, or any corporation or business association of which you were an
executive officer within two years before such filing? yes ______ no X. If yes,
please provide specific details and, under separate cover, please provide copies
of any pleadings, orders or judgments associated therewith:
12. During the past five years, has a receiver, fiscal agent, or similar officer
been appointed by a court for your business or property, or any partnership in
which you were a general partner within two years before such appointment, or
any corporation or business association of which you were an executive officer
within two years before such appointment? yes ____ no X. If yes, please provide
specific details and, under separate cover, please provide copies of any
pleadings, orders or judgments associated therewith:
13. During the past five years, have you been convicted in a criminal proceeding
or named the subject of a pending criminal proceeding (excluding minor traffic
violations)? yes ____ no X. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
14. During the past five years, have you been the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining you from, or
otherwise limiting your involvement in, the following activities:
(1) Acting as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance
company, engaging in or continuing conduct or practice in connection
with such activity? yes ______ no X. If yes, please provide specific
details and, under separate cover, please provide copies of any
pleadings, orders or judgments associated therewith:
311
<PAGE>
(2) Engaging in any type of business practice? yes ______ no ______. If
yes, please provide specific details and, under separate cover, please
provide copies of any pleadings, orders or judgments associated
therewith:
Not Applicable
(3) Engaging in any activity in connection with the purchase or sale of
any security or in connection with any violation of federal or state securities
laws? yes ______ no ______. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
Not Applicable
15. During the past five years, have you been the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, on any federal or
state authority barring, suspending or otherwise limiting for more than 60 days
the right of such person to act as an underwriter, investment adviser, broker or
dealer in securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance company, or
engaging in or continuing any conduct or practice in connection with such
activity? yes ______ no X. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
16. Have you ever been disbarred by any agency of the United States from
contracting with the United States? yes ______ no X. If yes, please provide
specific details and, under separate cover, please provide copies of any
pleadings, orders or judgments associated therewith:
17. Has it ever been the finding of any court of competent jurisdiction, the
Commodity Futures Trading Commission or the Securities and Exchange Commission,
or have you, by agreement or settlement with the foregoing, admitted or
consented to without admitting or denying, to charges that you:
(1) Have violated any provision(s) of the Commodity Exchange Act, the
Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility
Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment
Company Act of 1940, the Investment Advisors Act of 1940, the Securities
Investors Act of 1970, the Foreign Corrupt Practices Act of 1977, or any similar
statute of a state or foreign jurisdiction, or any rule or regulation under such
statutes? yes ______ no X. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
312
<PAGE>
(2) Have aided, abetted, counseled, commanded, induced, or procured the
violation by any other person of such statutes or rules or regulations? yes
______ no X. If yes, please provide specific details and, under separate cover,
please provide copies of any pleadings, orders or judgments associated
therewith:
You should be aware that the Juridical Entity is currently preparing
materials to be filed with the Securities and Exchange Commission in accordance
with rules and regulations of the Securities and Exchange Commission. The
information provided by you on this questionnaire may be used, in whole or in
part, as needed to comply with these rules and regulations. Please also include
with this completed questionnaire a current resume detailing your educational
background (including schools or universities attended, dates of graduation and
degrees received); and listing your work experience during the last five years
(including name of firm, dates of employment, principal positions held and
specific duties involved in those positions, and the nature of business and
location of such firms).
The answers and information which I have given above, including all supplemental
information attached hereto on separate sheets, each of which I have signed, are
true and accurate to the best of my knowledge. I have read and understand the
foregoing and I consent to the use of all or part of the information provided in
this questionnaire in the Registration Statement. I further certify that the
attached resume is a complete and accurate account of my education, and work
experience for the last five years, and that there are no material facts
required to be included therein in order to make the information therein not
misleading, which are not so included therein.
Dated: 5/28/99 /s/ J. Bruce Gleason /s/
----------------------
Signature
Please return this completed form to us at the address listed on the letterhead
of this questionnaire!
Very truly yours,
/s/ G. Richard Chamberlin /s/
-------------
G. Richard Chamberlin, Esq
For Chamberlin Law Office, Inc.
313
<PAGE>
EXHIBIT 99.35 OFFICERS & DIRECTORS QUESTIONNAIRES (UMILE)
TO: Mr. Mike Umile
American Internet Technical Center, Inc.
440 E. Sample Road
Pompano Beach, Florida 33064
From G. Richard Chamberlin, Esq
Re: Due Diligence Disclosures for
Equity Growth Systems, inc.
DIRECTOR/OFFICER/PRINCIPAL QUESTIONNAIRE
(Please Print or Type Responses)
Please provide us with the following information, as soon as possible.
1. Name: Michael Umile
2. (a) Home Address: 210 Oregon Lane
Boca Raton, Florida 33487
(b) Business Address: 440 E. Sample Road #204
Pompano Beach, Florida 33064
. (a) Home Phone: 561-988-2484
(b) Business Phone: 954-943-4748
3. Age: 49
4. State positions and offices held or to be held with the juridical entity or
entities disclosed above (each being hereinafter generically referred to as the
"Juridical Entity"), and your term of office for each:
Vice President and Secretary
State periods during which you have served in such position(s) and
office(s):
314
<PAGE>
1 year and 3 months
5. Is there any arrangement or understanding between you and any other person
pursuant to which you were or will be selected as an officer, director or
nominee or principal? yes ____ no X (If "yes," briefly describe such arrangement
or understanding, and name such person. Do not include arrangements with
directors and officers acting solely in their capacities as such.)
6. State the nature of any family relationship (by blood, marriage, or adoption,
not more remote than first cousin) between yourself and any director, executive
officer, or person nominated or chosen by the Juridical Entity to become a
director or executive officer.
None
7. List all places of employment, their principal business, and your principal
occupation(s) during the last five years, staring with your current positions
and working back in time. Include all positions as an officer, director,
partner, consultant or sole proprietor:
Principal
Dates Location & Name of Business Principal Purpose Occupation
3/98-Present American Internet Technical Centers Internet Vice President
Lighthouse Point, FL
2/96-2/98 Universal Group Sales President
Lighthouse Point, FL
10/94-5/95 Smoking Joe's Vice President
Lighthouse Point, FL Owner
6/93-6/95 Showcase Group Sec Builders
Deerfield Beach, FL
8. State whether any of the businesses listed are parents, subsidiaries, or
affiliates of the Juridical Entity.
Not Applicable
9. State, in detail, the nature of responsibility undertaken by you in the prior
positions listed above. (Answer should include specific principal duties which
relate to the level of your professional competence.)
Management of companies
10. Have you ever held a directorship in any company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the reporting requirements of Section 15(d) of such Act, or of any
company registered as an investment company under the Investment Company Act
of 1940? yes ____ no X (if "yes" list all such companies below):
315
<PAGE>
11. During the past five years, has a petition under the federal bankruptcy laws
or under any state insolvency law been filed by or against you, or any
partnership in which you were a general partner within two years before such
filing, or any corporation or business association of which you were an
executive officer within two years before such filing? yes ______ no X. If yes,
please provide specific details and, under separate cover, please provide copies
of any pleadings, orders or judgments associated therewith:
12. During the past five years, has a receiver, fiscal agent, or similar officer
been appointed by a court for your business or property, or any partnership in
which you were a general partner within two years before such appointment, or
any corporation or business association of which you were an executive officer
within two years before such appointment? yes ____ no X. If yes, please provide
specific details and, under separate cover, please provide copies of any
pleadings, orders or judgments associated therewith:
13. During the past five years, have you been convicted in a criminal proceeding
or named the subject of a pending criminal proceeding (excluding minor traffic
violations)? yes ____ no X. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
14. During the past five years, have you been the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining you from, or
otherwise limiting your involvement in, the following activities:
(1) Acting as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance company, engaging in or
continuing conduct or practice in connection with such activity? yes ______ no
X. If yes, please provide specific details and, under separate cover, please
provide copies of any pleadings, orders or judgments associated therewith:
(2) Engaging in any type of business practice? yes ______ no X. If yes,
please provide specific details and, under separate cover, please provide copies
of any pleadings, orders or judgments associated therewith:
(3) Engaging in any activity in connection with the purchase or sale of
any security or in connection with any violation of federal or state securities
laws? yes ______ no X. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
15. During the past five years, have you been the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, on any federal or
state authority barring, suspending or
316
<PAGE>
otherwise limiting for more than 60 days the right of such person to act as an
underwriter, investment adviser, broker or dealer in securities, or as an
affiliated person, director or employee of any investment company, bank, savings
and loan association or insurance company, or engaging in or continuing any
conduct or practice in connection with such activity? yes ______ no X. If yes,
please provide specific details and, under separate cover, please provide copies
of any pleadings, orders or judgments associated therewith:
16. Have you ever been disbarred by any agency of the United States from
contracting with the United States? yes ______ no X. If yes, please provide
specific details and, under separate cover, please provide copies of any
pleadings, orders or judgments associated therewith:
17. Has it ever been the finding of any court of competent jurisdiction, the
Commodity Futures Trading Commission or the Securities and Exchange Commission,
or have you, by agreement or settlement with the foregoing, admitted or
consented to without admitting or denying, to charges that you:
(1) Have violated any provision(s) of the Commodity Exchange Act, the
Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility
Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment
Company Act of 1940, the Investment Advisors Act of 1940, the Securities
Investors Act of 1970, the Foreign Corrupt Practices Act of 1977, or any similar
statute of a state or foreign jurisdiction, or any rule or regulation under such
statutes? yes ______ no X. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
(2) Have aided, abetted, counseled, commanded, induced, or procured the
violation by any other person of such statutes or rules or regulations? yes
______ no X. If yes, please provide specific details and, under separate cover,
please provide copies of any pleadings, orders or judgments associated
therewith:
You should be aware that the Juridical Entity is currently preparing
materials to be filed with the Securities and Exchange Commission in accordance
with rules and regulations of the Securities and Exchange Commission. The
information provided by you on this questionnaire may be used, in whole or in
part, as needed to comply with these rules and regulations. Please also include
with this completed questionnaire a current resume detailing your educational
background (including schools or universities attended, dates of graduation and
degrees received); and listing your work experience during the last five years
(including name of firm, dates of employment, principal positions held and
specific duties involved in those positions, and the nature of business and
location of such firms).
The answers and information which I have given above, including all supplemental
information attached hereto on separate sheets, each of which I have signed, are
true and accurate to the best of my knowledge. I have read and understand the
foregoing and I consent to the use of all or part of the information provided in
this questionnaire in the Registration Statement. I further certify that the
attached resume is a complete
317
<PAGE>
and accurate account of my education, and work experience for the last five
years, and that there are no material facts required to be included therein in
order to make the information therein not misleading, which are not so included
therein.
Dated: 5/28/99 /s/ Michael Umile/s/
----------------------
Signature
Please return this completed form to us at the address listed on the letterhead
of this questionnaire!
Very truly yours,
/s/ G. Richard Chamberlin /s/
-------------
G. Richard Chamberlin, Esq
For Chamberlin Law Office, Inc.
318
EXHIBIT 99.36 OFFICERS & DIRECTORS QUESTIONNAIRES (M. GRANVILLE-SMITH)
TO: Mark Granville-Smith
From G. Richard Chamberlin, Esq
Re: Due Diligence Disclosures for
Equity Growth Systems, inc.
DIRECTOR/OFFICER/PRINCIPAL QUESTIONNAIRE
(Please Print or Type Responses)
Please provide us with the following information, as soon as possible.
1. Name: R. Mark Granville-Smith
2. (a) Home Address: 9743 Brentsville Road
Manassas, VA 90112
319
<PAGE>
(b) Business Address: 10460 Dumfries Road
Manassas, VA 90110
. (a) Home Phone: 703-365-8662
(b) Business Phone: 703-365-0070
703-791-2885
3. Age: 41
4. State positions and offices held or to be held with the juridical entity or
entities disclosed above (each being hereinafter generically referred to as the
"Juridical Entity"), and your term of office for each:
non voting standing in for Edward Granville-Smith by power of attorney to become
a voting director of Equity Growth at a board meeting of later date.
State periods during which you have served in such position(s) and
office(s):
December 8, 1998 as power of attorney for Edward Granville-Smith
5. Is there any arrangement or understanding between you and any other person
pursuant to which you were or will be selected as an officer, director or
nominee or principal? yes X no ___ (if "yes," briefly describe such arrangement
or understanding, and name such person. Do not include arrangements with
directors and officers acting solely in their capacities as such.)
Equity Growth Systems, inc. and Edward Granville-Smith Settlement Agreement
6. State the nature of any family relationship (by blood, marriage, or adoption,
not more remote than first cousin) between yourself and any director, executive
officer, or person nominated or chosen by the Juridical Entity to become a
director or executive officer.
None other than Edward Granville-Smith
7. List all places of employment, their principal business, and your principal
occupation(s) during the last five years, staring with your current positions
and working back in time. Include all positions as an officer, director,
partner, consultant or sole proprietor:
Principal
Dates Location & Name of Business Principal Purpose Occupation
1992-Present Classic Concept Custom Home Builder Chairman/CEO
Manassas, VA
320
<PAGE>
8. State whether any of the businesses listed are parents, subsidiaries, or
affiliates of the Juridical Entity.
None of above
9. State, in detail, the nature of responsibility undertaken by you in the prior
positions listed above. (Answer should include specific principal duties which
relate to the level of your professional competence.)
Not Applicable
10. Have you ever held a directorship in any company with a class of securities
registered pursuant to Section 12 of the Securities Exchange Act of 1934 or
subject to the reporting requirements of Section 15(d) of such Act, or of any
company registered as an investment company under the Investment Company Act of
1940? yes ____ no X (if "yes" list all such companies below):
11. During the past five years, has a receiver, fiscal agent, or similar officer
been appointed by a court for your business or property, or any partnership in
which you were a general partner within two years before such appointment, or
any corporation or business association of which you were an executive officer
within two years before such appointment? yes ____ no X. If yes, please provide
specific details and, under separate cover, please provide copies of any
pleadings, orders or judgments associated therewith:
No for me personally
No for Edward Granville-Smith other than would the court case in Baltimore
(Albright) be applicable
12. During the past five years, have you been convicted in a criminal proceeding
or named the subject of a pending criminal proceeding (excluding minor traffic
violations)? yes ____ no X. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
No for me personally
No for Edward Granville-Smith
13. During the past five years, have you been the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, of any court of
competent jurisdiction, permanently or temporarily enjoining you from, or
otherwise limiting your involvement in, the following activities:
(1) Acting as an investment adviser, underwriter, broker or dealer in
securities, or as an affiliated person, director or employee of any investment
company, bank, savings and loan association or insurance
321
<PAGE>
company, engaging in or continuing conduct or practice in connection with such
activity? yes ______ no X. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
No for me personally
No for Edward Granville-Smith
(2) Engaging in any type of business practice? yes ______ no X. If yes,
please provide specific details and, under separate cover, please provide copies
of any pleadings, orders or judgments associated therewith:
No for me personally
No for Edward Granville-Smith
(3) Engaging in any activity in connection with the purchase or sale of
any security or in connection with any violation of federal or state securities
laws? yes ______ no X. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
No for me personally
No for Edward Granville-Smith
14. During the past five years, have you been the subject of any order, judgment
or decree, not subsequently reversed, suspended or vacated, on any federal or
state authority barring, suspending or otherwise limiting for more than 60 days
the right of such person to act as an underwriter, investment adviser, broker or
dealer in securities, or as an affiliated person, director or employee of any
investment company, bank, savings and loan association or insurance company, or
engaging in or continuing any conduct or practice in connection with such
activity? yes ______ no X. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
No for me personally
No for Edward Granville-Smith
15. Have you ever been disbarred by any agency of the United States from
contracting with the United States? yes ______ no X. If yes, please provide
specific details and, under separate cover, please provide copies of any
pleadings, orders or judgments associated therewith:
No for me personally
No for Edward Granville-Smith
16. Has it ever been the finding of any court of competent jurisdiction, the
Commodity Futures Trading
322
<PAGE>
Commission or the Securities and Exchange Commission, or have you, by agreement
or settlement with the foregoing, admitted or consented to without admitting or
denying, to charges that you:
(1) Have violated any provision(s) of the Commodity Exchange Act, the
Securities Act of 1933, the Securities Exchange Act of 1934, the Public Utility
Holding Company Act of 1935, the Trust Indenture Act of 1939, the Investment
Company Act of 1940, the Investment Advisors Act of 1940, the Securities
Investors Act of 1970, the Foreign Corrupt Practices Act of 1977, or any similar
statute of a state or foreign jurisdiction, or any rule or regulation under such
statutes? yes ______ no X. If yes, please provide specific details and, under
separate cover, please provide copies of any pleadings, orders or judgments
associated therewith:
No for me personally
(2) Have aided, abetted, counseled, commanded, induced, or procured the
violation by any other person of such statutes or rules or regulations? yes
______ no X. If yes, please provide specific details and, under separate cover,
please provide copies of any pleadings, orders or judgments associated
therewith:
No for me personally
No for Edward Granville-Smith
You should be aware that the Juridical Entity is currently preparing
materials to be filed with the Securities and Exchange Commission in accordance
with rules and regulations of the Securities and Exchange Commission. The
information provided by you on this questionnaire may be used, in whole or in
part, as needed to comply with these rules and regulations. Please also include
with this completed questionnaire a current resume detailing your educational
background (including schools or universities attended, dates of graduation and
degrees received); and listing your work experience during the last five years
(including name of firm, dates of employment, principal positions held and
specific duties involved in those positions, and the nature of business and
location of such firms).
The answers and information which I have given above, including all supplemental
information attached hereto on separate sheets, each of which I have signed, are
true and accurate to the best of my knowledge. I have read and understand the
foregoing and I consent to the use of all or part of the information provided in
this questionnaire in the Registration Statement. I further certify that the
attached resume is a complete and accurate account of my education, and work
experience for the last five years, and that there are no material facts
required to be included therein in order to make the information therein not
misleading, which are not so included therein.
323
<PAGE>
Dated: 3/30/99 Mark Granville-Smith , individually
Mark Granville-Smith, as power of
attorney for Edward Granville-Smith
----------------------
Signature
Please return this completed form to us at the address listed on the letterhead
of this questionnaire!
Very truly yours,
/s/ G. Richard Chamberlin /s/
-------------
G. Richard Chamberlin, Esq
For Chamberlin Law Office, Inc.
324
EXHIBIT 10.37 LAWRENCE S. BENJAMIN SETTLEMENT AGREEMENT
SETTLEMENT AGREEMENT
This Settlement Agreement and Release is entered into this day of 24 day of
June 1999 by and between Lawrence S. Benjamin ("Benjamin'), and American
Internet Technical Center ("American Internet").
WITNESSETH:
WHEREAS, the parties are involved in a dispute which is the subject
maker of certain litigation in the Cuyahoga County Court of Common Pleas styled
Lawrence S. Benjamin v USA Cellular, et al., designated as Case No. 355845 (the
"Lawsuit").
WHEREAS, Benjamin alleges that American Internet sent unauthorized
business solicitations via facsimile to Benjamin.
WHEREAS, Benjamin alleges that the facsimiles violate 47 U.S.C. 227(b)
(1)(C).
WHEREAS, American Internet disputes Benjamin's allegations.
WHEREAS, the Defendant American Internet debuts all liability alleged
in the Plaintiff' s Complaint and the Plaintiff and Defendant American Internet
agree that this Settlement Agreement does not effect the status of the denials
by Defendant American Internet.
WHEREAS, Benjamin and American Internet wish to amicably settle all
claims and disputes between them regarding the lawsuit and anything relating to
the facsimiles delivered to Benjamin by
325
<PAGE>
American Internet.
NOW, THEREFORE:, it is the desire of Benjamin and American Internet to
state in writing the details of their agreements. For money paid and received
and other valuable consideration between the parties, it is mutually agreed as
follows:
1. American Internet agrees to pay Benjamin $7,500.00 ("Settlement Sum")
within seven (7) days of the date of the execution of this Settlement Agreement
and Release, and upon receipt of the Settlement Sum the Plaintiff shall dismiss
with prejudice the action as against Defendant American Internet.
2. The Settlement Sum shall be in full satisfaction of Benjamin's claims arising
out of the lawsuit.
3. In consideration of the terms stated above, Benjamin does hereby for
himself, his heirs, executors, administrators, successors, agents, assigns,
insurers, and attorneys, releases and forever discharges American Internet, its
executors, administrators, successors, subsidiaries and parent companies,
affiliates, and respective past and present officers, directors, agents,
successor assigns, insurers, attorneys, and employees of those corporations and
their predecessors and successor companies, and assigns, all of which are
included collectively or individually in the defined term "American Internet,"
from all debts, claims, demands, damages, actions, causes of action,
controversies, costs, obligations, lawsuits and liabilities whatsoever, past or
present, both known and unknown, in law or equity, from the beginning of time to
the date of the execution of this Settlement Agreement and Release and
particularly, without limiting the generality of the foregoing, all matters
relating to the Lawsuit, and the facsimiles delivered from American Internet to
Benjamin.
4. In consideration of the terns stated above, American Internet does
hereby for itself, its executors, administrators, successors, its subsidiaries
and parent companies,, its affiliates, and their respective past and present
officers, directors, agents, successor assigns, insurers attorneys, and
employees of those corporations and its predecessors and successor companies,
and assigns, releases and forever discharges Benjamin. its executors,
administrators, successors,, agents, insurers and attorneys, and assigns, from
all debts, claims, demands, damages, actions, causes of action, controversies,
costs, obligations, lawsuits and liabilities whatsoever, past or present, both
known and unknown, in law or equity, from the beginning of time to the date of
the execution of this Settlement Agreement and Release and particularly, without
limiting the generality of the foregoing, all matters relating to the Lawsuit
and the facsimiles delivered from American Internet to Benjamin.
5. This Settlement Agreement and Release constitutes the complete and
exclusive agreement of the parties and settlement of claims regarding the
Lawsuit, and anything relating to the delivery of facsimiles to Benjamin from
American Internet.
6. The terms of this Settlement Agreement and Release may not be modified
except in writing and signed by all the parties.
326
<PAGE>
6. The rights and obligations of the parties hereto and the interpretation
of this Settlement Agreement and Release shall be governed by the laws of the
State of Ohio. Cuyahoga County shall be the designated venue for any issue,
dispute, cause of action, or any other matter, uncles or arising out of this
Settlement Agreement and Release.
7. Except where otherwise required by the context, words of any gender used
herein shall be deemed to include any and all genders and the singular and
plural shall be interchangeable.
8. If any term or provision of this Settlement Agreement and Release or any
application thereof shall be invalid or unenforceable, such term or provision
shall be deemed to be severed and the remainder of this Settlement Agreement and
Release and any other application of such term or provision shall not be
affected or invalidated thereby.
9. The individuals who have signed this Settlement Agreement and Release
represent that they have full authority to bind the parties herein and an
understanding of all of the terms of this Settlement Agreement and Release.
10 The parties hereto represent that in reaching this Settlement Agreement
and Release that they have been represented by legal counsel and received legal
advice as to their respective rights.
11. Confidentiality. All information regarding American Internet and
Lawrence Benjamin obtained in the course of this litigation not made a part of
the public record and all the terms and conditions of the settlement and this
Agreement, including all demands and offers and the contents of all discussions
preceding settlement and the signing thereof, are and will be confidential; and
the undersigned agree not to disclose any of that information, terms and
conditions, demands and offers; and neither the undersigned nor the agent nor
representative of any of them may or will disclose any of the confidential
information, unless given permission in writing from all signatories to the
Agreement.
IN WITNESS WHEREOF, the parties have hereunto affixed their signatures
on the date and at the place first written above.
SIGNED AND ACKNOWLEDGED:
LAWRENCE S. BENJAMIN
_______________________________ By: Lawrence S. Benjamin
_______________________________ Date: ________________________
327
<PAGE>
AMERICAN INTERNET TECHNICAL CENTER
_______________________________ By: J. Bruce Gleason
_______________________________ Date:
STATE OF OHIO )
COUNTY OF _______ ) SS:
SWORN to and subscribed in my presence this _ day of _______, 1999 by
Lawrence S. Benjamin, who acknowledges that this was his free and authorized act
and deed.
- - -------------------------
Notary Public
STATE OF FLORIDA )
COUNTY OF __________) SS:
SWORN to and subscribed in my presence this ___ day of _____ , 1999 by
authorized representative of American Internet Technical Center, who
acknowledges that this was his free and authorized act and deed and the free and
authorized act and deed of said company.
- - -------------------------
Notary Public
328
EXHIBIT 99.38 NOTICE OF ELECTION OF RIGHTS
Corporate Offices
Equity Growth Systems, inc.
A Publicly held Delaware Corporation
July 9, 1999
American Internet Technical Centers, Inc.
A Nevada corporation ("American Internet Nevada")
440 East Sample Road, Suite 204
Pompano Beach, Florida 33064
American Internet Technical Center, Inc.
A Florida corporation ("American Internet Florida")
440 East Sample Road
Pompano Beach, Florida 33064
Re.: Exercise of rights under Section 4.9 of Reorganization
Agreement; related rescission of American Internet Nevada
stock exchange with former American Internet Florida
stockholders.
Gentlemen:
Please be advised that Equity Growth Systems, inc., a publicly held
Delaware corporation, hereby exercises its rights under Section 4.9 of the
Reorganization Agreement with certain of the stockholders of American Internet
Nevada, the former stockholders of American Internet Florida, American Internet
Nevada, American Internet Florida, and, as a consequence thereof, American
Internet Florida is now a direct wholly owned subsidiary of Equity Growth,
American Internet Nevada no longer has any right title and interest in American
Internet Florida, and only the former stockholders of American Internet Florida
(J. Bruce Gleason and Michael D. Umile) have any rights to the shares of Equity
Growth common stock being issued in exchange for all of the capital stock of
American Internet Florida, subject to reallocation required to protect the
interest of several innocent subscribers for American Internet Nevada common
stock which we have agreed to honor, at the request of Messrs. J. Bruce Gleason
and Michael D. Umile.
Very truly yours
Equity Growth Systems, inc.
/s/ Charles J. Scimeca /s/ /s/ G. Richard Chamberlin /s/
- - ------------------------- -----------------------------
Charles J. Scimeca G. Richard Chamberlin, Esquire
President General Counsel
GRC/vhl
329
