<PAGE>
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THE SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-QSB
[X] QUARTERLY REPORT UNDER SECTION 13 OR 15(d)
OF SECURITIES EXCHANGE ACT OF 1934
FOR THE QUARTERLY PERIOD ENDED: March 31, 2000
/ / TRANSITION REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
FOR THE TRANSITION PERIOD FROM _________ TO __________
Commission File No. 0-16472
COMC, INC.
(Exact Name of Registrant as Specified in its Charter)
Illinois 95-4628378
------------------------------- -----------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
2840 Howe Road, Suite D
Martinez, California 94553
----------------------------------------
(Address of principal executive offices)
(925) 335-4000
---------------------------
(Issuer's telephone number)
Check whether the issuer filed all reports required to be filed by Section 13 or
15(d) of the Securities Exchange Act of 1934 during the past 12 months (or for
such shorter Period that the registrant was required to file such reports), and
has been subject to such filing requirements for the past 90 days.
Yes /X/ No / /
As of May 15, 2000, a total of 20,947,741 shares of our common stock was issued
and outstanding. Of this number, 3,564,987 shares are held in Treasury.
Transitional Small Business Disclosure Format. Yes / / No /X/
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
COMC, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
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<PAGE>
Table of Contents
10QSB
PART I.......................................................................2
Item 1.......................................................................2
Consolidated Balance Sheets..................................................2
Consolidated Balance Sheets..................................................3
Consolidated Statement of Operations.........................................4
Consolidated Statement of Cash Flows.........................................5
Item 2.......................................................................6
Part II......................................................................9
Item 1.......................................................................9
Item 2.......................................................................9
Item 3.......................................................................9
Item 4.......................................................................9
Item 5.......................................................................9
Item 6.......................................................................9
<PAGE>
COMC, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. BASIS OF PRESENTATION
The interim consolidated financial statements presented have been prepared
by COMC, Inc. (the "Company") without audit and, in the opinion of the
management, reflect all adjustments of a normal recurring nature necessary for a
fair statement of (a) the results of operations for the three months ended March
31, 2000 and 1999, (b) the financial position at March 31, 2000 and (c) the cash
flows for the three months ended March 31, 2000 and 1999. Interim results are
not necessarily indicative of results for a full year.
The consolidated balance sheet presented as of December 31, 1999 has been
derived from the consolidated financial statements that have been audited by the
Company's independent public accountants. The consolidated financial statements
and notes are condensed as permitted by Form 10-QSB and do not contain certain
information included in the annual financial statements and notes of the
Company. The consolidated financial statements and notes included herein should
be read in conjunction with the financial statements and notes included in the
Company's 1999 Annual Report on Form 10-KSB, the Company's NT 10-K, and Form
8-K's filed on April 27, 2000, March 30, 2000, February 25, 2000, March 29, 2000
and April 14, 2000, respectively.
Item 2. Management Discussion and Analysis of Financial Condition and Results of
Operations
This report contains certain statements of a forward-looking nature relating to
future performance of the Company. Prospective investors are cautioned that such
statements are only predictions, and actual events or results may differ
materially.
Overview
COMC, Inc. ("COMC", the "Company", "we", or "us") is a technology
service company in the telecommunications industry with a rapidly expanding
national geographic service coverage area. We design, implement, support and
manage LAN/WAN computer network systems, voice communication network systems,
and premise wiring for both data and voice. In addition, we distribute and
maintain equipment on behalf of major telecommunication equipment manufacturers.
Service-related revenues, maintenance and client outsourcing services, through
our wholly owned subsidiary, ICF, which now represents 100% of our total
revenues. Our gross margin varies significantly depending on the percentage of
service revenues versus revenues from the sale and installation of products
(with respect to which we obtain a lower margin). For our major customers, we
typically provide these services under contracts with a duration of one or more
years.
In addition to the services described above, our Recruitment Services
division is providing our customers with permanent and temporary technical
professional recruitment and placement services to fill their internal staffing
needs.
Our assets are our employees. Our investments are in our employees.
While we do not design or take the research and development risk borne by the
manufacturers of the equipment we service, we continue to invest in the latest
training and certification for the networks we support for data products
designed by Cisco Systems, Inc., Lucent Technologies, Inc., Bay Networks (a
division of NorTel Networks) and 3Com, as well as voice products by Lucent
Technologies, Inc. and NorTel Networks, Inc.
Under an acquisition and consolidation strategy, we intend to build our
operations and to expand our presence primarily in high growth markets of the
United States.
<PAGE>
Results of Operations, Quarter ended March 31:
Dollars in Thousands 2000 1999
-------------------- ---- ----
Net Revenues
Data & Voice Services $5,155 $3,846
Recruitment Services $798 $1,268
------ ------
Total Revenues $5,953 $5,114
====== ======
Our revenues were $5,952,700 and $5,114,300 for the three months ended
March 31, 2000 and 1999, respectively, representing an increase of 16%. This
increase was due primarily to a 34% increase in Data and Voice Services revenue
for the period, offset by a 37% decline in Recruitment Services revenue. Data
and Voice Services benefited from a number of new client project billings, as
well as significant period conversion project work relating to one of our larger
existing clients. Recruitment Services revenue declined due to the unanticipated
loss of a number of key recruitment professionals, which have since been
replaced, as well as from a tightening of the labor market's effect on our
ability to identify qualified professionals for our clients in the period.
QUARTER ENDED MARCH 31:
Gross Gross
Profit Profit
Dollars in Thousands 2000 Margin 1999 Margin
-------------------- ---- ------ ---- ------
Gross Profit
Data & Voice Services $2,550 49% $1,141 29%
Recruitment Services $269 34% $323 25%
------ ------
Total Gross Profit $2,818 47% $1,464 28%
====== ======
Cost of revenues was $3,133,800 and $3,649,900 for the three months
ended March 31, 2000 and 1999, respectively, representing a decrease of 14%.
Conversely, our Gross Profit for the comparable periods were $2,818,900 and
$1,464,400, respectively, representing an increase of 92%. Gross profit and
margin for Data and Voice Services were $2,549,500 and 49%, respectively, for
the three months ended March 31, 2000 as compared with $1,141,400 and 29%,
respectively for the three months ended March 31, 1999. The increase in margin
was due to more favorable pricing on services, more efficient management of
technical labor and lower comparable product sales, which typically carry a much
lower gross profit margin. Gross profit and margin for Recruitment Services were
$269,400 and 34%, respectively for the three months ended March 31, 2000 as
compared with $323,000 and 25%, respectively for the three months ended March
31, 1999. The increase in margin was due to a higher percentage of permanent
placement revenue as compared to the prior period, which has significantly
higher margin.
Selling, general and administrative expenses increased only 3% from
$1,334,900 for the three months ended March 31, 1999 to $1,387,700 for the three
months ended March 31, 2000 in light of revenue growth of 16%. This was due to
the focused management of our fixed operating costs period over period. Our
holding company expenses increased by $21,200 from $173,700 for the three months
ended March 31, 1999 to $194,900 for the three months ended March 31, 2000. SG&A
expenses for ICF's operations increased from $1,161,200 for the three months
ended March 31, 1999 to $1,192,800 for the three months ended March 31, 2000.
Depreciation expenses were $56,000 and $51,400 for the three months
ended March 31, 2000 and 1999, respectively. This slight increase was due to the
purchase additional field service and new office equipment. We expect that
depreciation will continue to increase in dollar terms as a result of additional
investments in capital equipment required to support the anticipated growth in
our business.
Amortization expense relating to goodwill was $0 and $139,100 for the
three months ended March 31, 2000 and 1999, respectively. The elimination of
goodwill amortization in 2000 was due to the write-off of goodwill in the fiscal
year ended
<PAGE>
December 31, 1999. In December 1999, under the guidelines of Statement of
Financial Accounting Standards No. 121, we assessed the recoverability of
certain of our long-lived assets, namely goodwill. We estimated the fair value
of our goodwill based on comparable assets within the industry, our economic
outlook and discounted future cashflows. These procedures resulted in the
determination that the aforementioned asset had been permanently impaired, and a
charge to earnings of $10,382,300 resulted in 1999 with the write-off of all of
our amortizable goodwill.
March 31, March 31,
Dollars in Thousands 2000 1999
-------------------- ---- ----
Earnings Before Interest, Tax,
Depreciation and Amortization $1,431 $130
Earnings before interest expense, income tax, depreciation and
amortization expenses ("EBITDA") increased by over 10 times to $1,431,200 for
the three months ended March 31, 2000 from $129,500 for the three months ended
March 31, 1999.
Interest Income increased slightly from $1,600 for the three months
ended March 31, 1999 to $2,200 for the three months ended March 31, 2000 due to
slightly higher average daily cash balances with interests rates earned
remaining relatively constant throughout the comparable periods.
Interest Expense increased for the three months ended March 31, 2000 to
$41,100 from $11,700 for the three months ended March 31, 1999, due to increased
borrowing of our working capital line of credit which was utilized to accelerate
the repayment of ICF's income tax liabilities relating to years prior to 1998,
as well as to fund the growth in our working capital.
Interest Expense - Related Party increased slightly for the comparable
period to $118,600 due to a slightly higher interest rate versus the prior year
on the same principal balance, and the inclusion of a non-cash charge relating
to the amortization of deferred finance charges of $30,000 in the Quarter.
Other Income (Expense) is comprised mostly of bank fees and charges
associated with our line of credit, offset by miscellaneous income for the
period, which resulted in income of $300 for the three months ended March 31,
2000, versus $2,900 for the three months ended March 31, 1999.
An Income Tax provision of $480,000 was taken for the three months
ended March 31, 2000 due to our increase in taxable income versus a year ago.
Net Income increased to $738,000, or $.04 per share, fully-diluted
for the three months ended March 31, 2000 versus a Net Loss of $151,700 for the
three months ended March 31, 1999.
Liquidity and Capital Resources
Cash and cash equivalents decreased to $311,600 at March 31, 2000
compared to $385,100 at December 31, 1999.
Cash Flows From Operating Activities: For the three months ended March
31, 2000, cash used in operating activities was $32,500 which resulted primarily
from our net income of $738,000, increased by noncash charges of $266,000,
decreased by our growth in operating assets of $1,782,700 and increased by our
growth in liabilities of $746,200.
Accounts receivables increased $1,592,200 due to greater activity in
the first quarter of 2000 as well as overall growth in our business. Payables
and accruals increased due to greater purchases and accrued payroll.
Cash Flows From Investing Activities: For the three months ended March
31, 2000, net cash used for investing activities was $60,900, as a result of
$55,000 in new equipment purchases, offset by asset sales and deposit increases
of $5,900.
Cash Flows From Financing Activities: For the three months ended March
31, 2000, net cash generated from our financing activities was $19,900, due
primarily from our line of credit usage.
<PAGE>
In September of 1999, ICF secured a $3 million Line of Credit facility
("Line of Credit Facility") with Coast Business Credit, a division of Southern
Pacific Bank. This credit facility has a two-year term and all amounts borrowed
will accrue interest at 2% over the prime rate. The Line of Credit Facility is
secured by substantially all of ICF's assets and contains customary covenants
and restrictions. The Line of Credit Facility is being used to support working
capital and may be used to finance smaller acquisitions. Specific uses of the
Line of Credit Facility included: (i) the payment of the balance of income taxes
due to the IRS and California Franchise Tax Board; (ii) the consolidation of
various notes payable; and (iii) various working capital purposes including
additional acquisition financing.
Our long-term liabilities also include $3,500,000 in Related Party
Notes Payable. In consideration for the sale of ICF to us, the two principal
owners of ICF, Messrs. Burns and Lincoln, received an aggregate of $14,000,000,
payable as follows: $1,500,000 in cash at the closing of the transaction;
$1,500,000 in promissory notes due and payable January 5, 1999, secured by all
of our accounts receivable; $1,000,000 in promissory notes due and payable
January 4, 1999; $1,000,000 in promissory notes due and payable August 17, 1999;
and 6,493,506 shares of our common stock valued at $9,000,000 or $1.386 per
share. We were unable to pay off the January 4, 1999, and January 5, 1999,
promissory notes as of their maturity dates. On August 10, 1999, we entered into
an agreement with the Messrs. Burns and Lincoln, to refinance these notes with
new notes under different terms and conditions. Specifically, we agreed with
Messrs. Burns and Lincoln to extend the term of each note to three years,
payable in full on the third anniversary (i.e., August 10, 2002). Interest is
accruing at 10% per annum and paid monthly.
Our net working capital at March 31, 2000 was a positive $3,858,100, an
increase of $939,600. We believe that our current cash flow from operations plus
our present sources of liquidity from current assets, and funds from the Line of
Credit Facility, will be sufficient to finance operations for the foreseeable
future and meet our short-term obligations.
We intend to continue our search for additional merger and acquisition
candidates that will expand our existing markets in related products and
services. These potential acquisitions are anticipated being funded with a
combination of additional bank debt, debt provided by the sellers of the
companies we purchase, and from the private or public sale of additional equity
securities.
We have depended on a few large customers for the majority of our
revenue to date. A loss of any one could have a material effect on our
liquidity. Due to the quality of our major customers, the collectability of
accounts receivable has not been a problem.
Year 2000 Compliance
Throughout 1999, we reviewed our computer systems to identify those
areas that could be adversely affected by Year 2000 software failures. We used a
number of computer software programs and operating systems in our operations,
including financial business systems, marketing and various other administrative
functions. To the extent that these software applications contained source code
that was unable to appropriately interpret the upcoming year 2000, some level of
modification and replacement of such applications was necessary.
We converted all of our information systems to be Year 2000 compliant.
During 1999, we incurred approximately $140,000 to complete the information
system conversions. To date, we have not incurred any complications or adverse
effects on our business from Year 2000 software failures.
<PAGE>
Part II. OTHER INFORMATION
Item 1. Legal proceedings
Not Applicable
Item 2. Changes in Securities
Not Applicable
Item 3. Defaults Upon Senior Securities
Not Applicable
Item 4. Submission of Matters to a Vote of Security Holders
Not Applicable
Item 5. Other Information
Effective February 2, 2000, our Board of Directors decided to dismiss
Hollander, Lumer & Co. LLP ("Hollander") as our independent public accountants.
We believe and have been advised by Hollander that it concurs, that for the two
fiscal years ended December 31, 1998, and the subsequent interim period through
February 2, 2000, we did not have any disagreement with Hollander on any matter
of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure, which disagreement, if not resolved to the
satisfaction of Hollander, would have caused Hollander to make reference in
connection with its report on our financial statements to the subject matter of
the disagreement.
The report of Hollander on our financial statements for the years
ending December 31, 1997 and December 31, 1998 did not contain an adverse
opinion or disclaimer of opinion, and was not qualified or modified as to
uncertainty, audit scope or accounting principles. During that period, there
were no "reportable events" within the meaning of Item 304(a)(1)(v) of
Regulation S-K promulgated under the Securities Act of 1933.
Hollander furnished a letter addressed to the Securities and Exchange
Commission stating that Hollander agreed with the above statements, which was
attached as Exhibit 1 to our Form 8-K describing the above referenced changes,
filed on February 25, 2000.
On February 2, 2000, we engaged Deloitte & Touche LLP ("Deloitte") to
replace Hollander as our independent public accountants. On February 15, 2000,
Deloitte resigned as our independent auditors because Deloitte determined that,
prior to its engagement as auditors, it had performed certain valuation services
that could impact its independence. During the period of Deloitte's engagement,
we did not have any disagreement on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope of procedure with
Deloitte, which disagreement, if not resolved to the satisfaction of Deloitte,
would have caused it to make reference in connection with its report on our
financial statements to the subject matter of the disagreement. Deloitte did not
issue any reports on our financial statements.
Deloitte furnished a letter addressed to the Securities and Exchange
Commission stating that Deloitte agreed with the above statements, which was
attached as Exhibit 2 to our Form 8-K describing the above referenced changes,
filed on February 25, 2000.
Between February 25, 2000, and March 27, 2000, we received and reviewed
engagement proposals from other nationally recognized independent accounting
firms.
<PAGE>
On March 27, 2000, our Board of Directors decided to retain BDO
Seidman, LLP as our new independent public accountants to replace Deloitte. We
formally retained BDO Seidman, LLP as our independent public accountants on
March 28, 2000. No other independent accounting firms were consulted by us on
any accounting and/or reporting matters between February 15, 2000, and March 28,
2000.
Additional details concerning these changes in our independent public
accountants may be found in Form 8K Current Reports that we filed with the SEC
on February 25, 2000 and March 29, 2000.
During our Board meeting that took place on March 27, 2000, our Board
of Directors approved resolutions that, among other things, authorized and
directed our Chairman and Chief Financial officer to do the following on the
Company's behalf:
(i) sell a sufficient number of shares of our common stock, in combination
with the issuance of warrants or stock options to acquire shares of our
common stock, in order to raise a total of approximately Two Million Six
Hundred Twenty-five Thousand Dollars and no/100ths;
(ii) negotiate and enter into on behalf of the Company a Stock Purchase
Agreement or Stock Purchase Agreements providing for the Company's sale of
a sufficient number of shares of the Company's common stock, which, in
combination with the issuance of warrants or stock options as provided
below, will raise up to a total of approximately Two Million Six Hundred
Twenty-five Thousand Dollars and no/100ths ($2,625,000.00);
(iii) negotiate and deliver on behalf of the Company a Warrant Agreement,
Warrant Agreements, Stock Option Agreement or Stock Option Agreements
which, upon exercise, and in combination with the sale of shares of the
Company's common stock as provided above, will raise up to a total of
approximately Two Million Six Hundred Twenty-five Thousand Dollars and
no/100ths ($2,625,000.00); and
(iv) negotiate and enter into a settlement and mutual release agreement by
and between the Company, ICF and Charles E. Lincoln ("Lincoln"), providing
for, among other things, (a) the Corporation's payment of all amounts owing
under a promissory note made by the Company in favor of Lincoln in the
original principal amount of $1,750,000.00; (b) the Company's payment of
all amounts owing under an Employment Agreement by and between the Company,
Lincoln and ICF (the "Employment Agreement"); and (c) the settlement and
mutual release of any and all claims that the Company, ICF and Lincoln may
have against one another and the termination of the Employment Agreement.
From April 17, 2000 through May 15, 2000, we raised approximately
$1,310,000 through a private placement of 1,310,000 shares of our common stock
and options to purchase 655,000 shares of our common stock for $1.00 per share
with various accredited investors (the "Investors"). The options are exercisable
at any time within the next five years. On April 26, 2000, some of the Investors
exercised options and purchased 472,500 shares of common stock under their
option agreements. In connection therewith, 236,250 shares of our common stock
were surrendered to us at the April 26, 2000 OTCBB closing price of $2.00 per
share in a "cashless" transaction and in full payment of $472,500 due from
exercise. Consequently, only 236,250 shares of common stock were issued as a
result of this exercise of options. As of May 10, 2000, and based upon the above
referenced transactions we have a total of 20,947,741 shares of common stock
issued and outstanding, of which 3,564,987 are held in Treasury. A copy of the
form of the Stock Purchase Agreement, Option Agreement and Registration Rights
Agreement we entered into with the Investors is attached hereto as Exhibit 1, 2,
and 3, respectively.
<PAGE>
On May 10, 2000, the Company, ICF and Charles Lincoln entered into a
Settlement and Release Agreement, which provided for, among other things: a) the
termination of Lincoln's Employment as our President and Chief Executive Officer
and the termination of the Employment Agreement; b) the repayment of the
outstanding principal balance and all interest owing under the Subordinated Note
due to Charles E. Lincoln, in the amount of $1,759,722.22, which was paid on
April 19, 2000; c) our agreement to pay a lump sum of $185,291.73 as an
aggregate severance payment under the Employment Agreement, on or before July
29, 2000; d) our agreement to pay for Lincoln's continued participation, at the
Company's expense, in the Company's portion of health insurance and disability
insurance programs, to the extent permitted under such programs, until August
10, 2001; and, e) various confidentiality, non-solicitation and non-disclosure
clauses. Under the Older Worker's Protection Act, Lincoln may rescind this
Settlement and Release Agreement at any time on or prior to May 18, 2000. A copy
of the Settlement and Release Agreement is attached hereto as Exhibit 4.
On May 11, 2000, Charles E. Lincoln tendered his resignation as a
member of our Board of Directors, effective immediately.
Not applicable
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
(1) Form of Stock Purchase Agreement
(2) Form of Option Agreement
(3) Form of Registration Rights Agreement
(4) Settlement and Release Agreement
(6) Reports on Form 8-K
On February 25, 2000, we filed a Form 8-K reporting the change of our
accountants and other items detailed above.
On March 29, 2000, we filed a Form 8-K reporting the change of our
accountants and other items detailed above.
On April 14, 2000, we filed a Form 8-K reporting the delay in the
filing of our annual report (Form 10-KSB) due to the above referenced changes of
our accountants.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, Registrant has duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized.
COMC, INC.
By: /s/ Christopher Smith
------------------------
Christopher Smith, Chief Financial Officer
Dated: May 15, 2000
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below as of May 15, 2000 by the following persons on
behalf of Registrant and in the capacities indicated.
/s/ Christopher Smith
-----------------------
(Principal Financial and Accounting Officer)
<PAGE>
COMC, Inc. and Subsidiaries
Consolidated Financial Statements
Quarters Ended March 31, 2000 and 1999
(Unaudited)
<PAGE>
COMC, Inc. and Subsidiaries
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
- --------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Assets
Current:
Cash and cash equivalents $ 311,600 $ 385,100
Accounts receivable, less allowance for doubtful
accounts of $273,100 and $273,100, respectively 6,113,600 4,521,400
Inventories 225,900 194,000
Loans receivable from employee 15,600 -
Prepaid expenses and other current assets 161,200 34,900
Refundable income taxes 15,700 -
Deferred income taxes 213,500 213,500
- --------------------------------------------------------------------------------------------------------
Total Current Assets 7,057,100 5,348,900
Property and Equipment, net 562,200 561,200
Other Assets 343,800 368,900
- --------------------------------------------------------------------------------------------------------
$ 7,963,100 $ 6,279,000
========================================================================================================
</TABLE>
2
<PAGE>
COMC, Inc. and Subsidiaries
Consolidated Balance Sheets
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
March 31, 2000 December 31, 1999
- -------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Liabilities and Shareholders' Equity
Current Liabilities:
Bank borrowings $ 901,600 $ 879,200
Accounts payable 802,300 648,000
Accrued expenses 768,000 572,800
Current portion of long-term debt 10,500 10,500
Customer deposits 123,800 -
Accrued interest due related party 30,100 30,100
Income taxes payable 562,700 270,000
Other current liabilities - 19,800
- -----------------------------------------------------------------------------------------------------------
Total Current Liabilities 3,199,000 2,430,400
Long-term Debt, less current portion 17,900 20,400
Related Party Notes Payable 3,500,000 3,500,000
Deferred Income Taxes 269,500 89,500
- -----------------------------------------------------------------------------------------------------------
Total Liabilities 6,986,400 6,040,300
- -----------------------------------------------------------------------------------------------------------
Commitments
Shareholders' Equity:
Common stock, $.01 par value; 40,000,000 shares authorized;
19,401,491 and 20,054,946 shares issued and outstanding,
respectively 194,000 194,000
Additional paid-in capital 12,918,100 12,918,100
Accumulated deficit (10,355,600) (11,093,600)
Treasury stock at cost; 3,564,987 and no shares, respectively (1,779,800) (1,779,800)
- -----------------------------------------------------------------------------------------------------------
Total Shareholder's Equity 976,700 238,700
- -----------------------------------------------------------------------------------------------------------
$ 7,963,100 $ 6,279,000
===========================================================================================================
</TABLE>
3
<PAGE>
COMC, Inc. and Subsidiaries
Consolidated Statements of Operations
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarters Ended March 31, 2000 1999
- ----------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Revenues :
Data and voice services $ 5,154,800 $ 3,846,300
Recruitment services 797,900 1,268,000
- ----------------------------------------------------------------------------------------------------------
5,952,700 5,114,300
Cost of Revenues:
Data and voice services 2,605,300 2,704,900
Recruitment services 528,500 945,000
- ---------------------------------------------------------------------------------------------------------
3,133,800 3,649,900
- ---------------------------------------------------------------------------------------------------------
Gross Profit 2,818,900 1,464,400
- ---------------------------------------------------------------------------------------------------------
Operating Expenses:
Selling, general, and administrative 1,387,700 1,334,900
Noncash expenses:
Amortization of goodwill - 139,100
Depreciation and amortization 56,000 51,400
- ---------------------------------------------------------------------------------------------------------
1,443,700 1,525,400
- ---------------------------------------------------------------------------------------------------------
Income (Loss) From Operations 1,375,200 (61,000)
- ---------------------------------------------------------------------------------------------------------
Other Income (Expense):
Interest income 2,200 1,600
Interest expense (129,600) (11,700)
Interest expense, related party (30,100) (83,500)
Other 300 2,900
- ---------------------------------------------------------------------------------------------------------
(157,200) (90,700)
- ---------------------------------------------------------------------------------------------------------
Income (Loss) Before Provision for Income Taxes 1,218,000 (151,700)
Provision for Income Taxes 480,000 -
- ---------------------------------------------------------------------------------------------------------
Net Income (Loss) $ 738,000 $ (151,700)
==========================================================================================================
Basic and Diluted Income (Loss) per Common Share $ 0.038 $ (0.007)
==========================================================================================================
Basic and Diluted Weighted-Average Common Shares Outstanding 19,401,491 20,054,946
==========================================================================================================
</TABLE>
4
<PAGE>
COMC, Inc. and Subsidiaries
Consolidated Statements of Cash Flows
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Quarters Ended March 31, 2000 1999
- -------------------------------------------------------------------------------------------------------------
(Unaudited) (Unaudited)
<S> <C> <C>
Cash Flows From Operating Activities:
Net Income (Loss) $ 738,000 $ (151,700)
Adjustments to reconcile net loss to net cash provided
by (used in) operating activities:
Depreciation and amortization 86,000 190,400
Deferred income taxes 180,000
Gain loss on disposition of capital equipment (1,000) -
Changes in operating assets and liabilities:
Accounts receivable (1,592,200) (589,400)
Inventories (31,900) (67,900)
Refundable income taxes (15,700) -
Prepaid expenses and other current assets (141,900) (86,600)
Accounts payable and accrued expenses 349,500 858,500
Income taxes payable 292,700 (300,400)
Customer's deposits 123,800 -
Other current liabilities (19,800) -
- ----------------------------------------------------------------------------------------------------------
Net Cash Used in Operating Activities (32,500) (147,100)
- ----------------------------------------------------------------------------------------------------------
Cash Flows From Investing Activities:
Sales of property and equipment 1,000 -
Deposits (6,900) (20,900)
Loans receivable from officer - -
Purchase of property and equipment (55,000) (32,600)
- ----------------------------------------------------------------------------------------------------------
Net Cash Used In Investing Activities (60,900) (53,500)
- ----------------------------------------------------------------------------------------------------------
Cash Flows From Financing Activities
Bank overdraft - (69,400)
Advances from bank loans and other credit institutions 22,400 -
Payment for long-term debt and short term debts (2,500) (13,800)
- ----------------------------------------------------------------------------------------------------------
Net Cash Provided By (Used in) Financing Activities 19,900 (83,200)
- ----------------------------------------------------------------------------------------------------------
Net Decrease in Cash and Cash Equivalents (73,500) (283,800)
Cash and Cash Equivalents, beginning of period 385,100 1,018,500
- ----------------------------------------------------------------------------------------------------------
Cash and Cash Equivalents, end of period 311,600 734,700
- ----------------------------------------------------------------------------------------------------------
Cash Paid For:
Interest $ 129,600 $ 95,200
==========================================================================================================
</TABLE>
5
<PAGE>
STOCK PURCHASE AGREEMENT
THIS STOCK PURCHASE AGREEMENT (this "Agreement"), dated as of ________,
2000 (the "Effective Date"), is entered into by and between COMC, Inc., an
Illinois corporation (the "Company") and ______________ (the "Purchaser").
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, Purchaser wishes to purchase from the Company, and the Company
wishes to sell to Purchaser, an aggregate of _________ shares (the "Shares") of
the Company's common stock ("Common Stock") according to the terms and
conditions set forth herein.
NOW, THEREFORE, for good and valuable consideration, and intending to
be legally bound, the parties hereto agree as follows:
1. Purchase of Shares. On the basis of the representations, warranties,
agreements and covenants herein contained, and subject to the terms and
conditions herein set forth, Purchaser will purchase the Shares from the Company
at a price equal to $1.00 per share, for an aggregate purchase price of
$__________ (the "Purchase Price"). The Purchase Price shall be payable in full
to the Company at the Closing (as defined below).
2. Closing. The closing of the sale and purchase of the Shares
hereunder (the "Closing") shall take place upon execution of this Agreement and
satisfaction of the terms and conditions set forth herein at the offices of
McCutchen Doyle Brown Enersen LLP, Three Embarcadero Center San Francisco,
California 94111 (the "Closing Date").
3. Representations and Warranties of the Company. The Company hereby
represents and warrants to Purchaser as follows:
(a) The Company is a corporation duly organized and validly
existing and in good standing under the laws of the State of Illinois. The
Company has the requisite corporate power to own its properties and to conduct
its business as now being conducted and as proposed to be conducted by it (as
disclosed to Purchaser), and possesses all governmental and other permits,
licenses and other authorizations to own its properties as now owned and to
conduct its businesses as now conducted and as presently contemplated to be
conducted, except where the failure to hold such permit or license would not
have a material adverse effect.
(b) The Company has all requisite corporate power to enter
into this Agreement. The Company has the corporate power to carry out and
perform its obligations under the terms of (i) this Agreement; (ii) the Option
Agreement by and between the Company and the Purchaser, a copy of which is
attached hereto as Exhibit A; and (iii) the Registration Rights Agreement by and
between the Company and the Purchaser, a copy of which is attached hereto as
Exhibit B. The Option Agreement and the Registration Rights Agreement are
referred to collectively herein as the "Related Agreements."
(c) The authorized capital stock of the Company immediately
prior to the Closing shall consist of 40,000,000 shares of Common Stock, of
which (A) 15,836,504 shares
<PAGE>
shall have been validly issued and shall be outstanding, fully paid and
nonassessable, with no personal liability attaching to the ownership thereof,
(B) 3,564,987 shares shall have been duly reserved initially for issuance upon
exercise of currently outstanding options of the Company, (C) 306,666 shares
shall have been duly reserved initially for issuance upon exercise of currently
outstanding warrants of the Company issued in connection with its July 1998
private placement; (D) 7,000,000 shares shall have been duly reserved initially
for issuance upon conversion in the event of a payment default of outstanding
indebtedness of the Company and (E) 240,000 shall have been dully reserved
initially for issuance upon exercise of options pursuant to the 1999 COMC, INC.,
Stock Option Plan .
(d) All corporate action on the part of the Company and its
directors and stockholders necessary to be taken on or prior to the Closing for
the authorization, execution, delivery and performance by the Company of this
Agreement and the Related Agreements and the consummation of the transactions
contemplated herein and therein has been of will be taken on or prior to the
Closing. There is no action which the Company has failed to take that would
inhibit the transactions contemplated hereby from being consummated.
(e) This Agreement and the Related Agreements are valid and
binding obligations of the Company, enforceable in accordance with their
respective terms, subject to applicable bankruptcy, insolvency, reorganization
and moratorium laws and other laws of general application affecting enforcement
of creditors' rights generally and to general equitable principles. The
execution, delivery and performance by the Company of this Agreement and the
Related Agreements, and its compliance herewith and therewith and the sale and
delivery by Company of the Shares will not result in any violation of and will
not conflict with, or result in a breach of any of the terms of, or constitute a
default under, the Charter or By-Laws, and will not result in any violation of
and will not conflict with, or result in a material breach of any of the terms
of, or constitute a material default under, any mortgage, indenture, agreement,
instrument, judgment, decree, order, rule or regulation or other restriction to
which the Company is a party or by which it is bound or any provision of state
or Federal law to which the Company is subject, or result in the creation of any
mortgage, pledge, lien, encumbrance or charge of any kind whatsoever upon any of
the properties or assets of the Company pursuant to any such term or result in
the suspension, revocation, impairment, forfeiture or non-renewal of any permit,
license, authorization or approval applicable and material to the Company's
operations or any of its assets or properties.
(f) The Shares, when sold by Company in compliance with the
provisions of this Agreement, shall be validly issued, fully paid and
nonassessable, and shall be free of any mortgage, pledge, lien, encumbrance or
charge of any kind whatsoever.
4. Representations and Warranties of Purchaser. Purchaser represents
and warrants to the Company that:
(a) Purchaser understands that Shares have not been registered
under the Act or any applicable state securities law, and may not be sold except
pursuant to an effective registration statement under the Act, or pursuant to a
duly available exemption from such registration requirements;
2
<PAGE>
(b) Purchaser is purchasing the Shares for his own account and
not with a view to or for sale which would be in violation of the Act;
(c) In effecting the purchase of the Shares, Purchaser has not
engaged in any activities which would necessitate registration of the Shares
under the Act or any applicable state Securities laws;
(d) Purchaser is a sophisticated investor, and qualifies as an
accredited investor under the Act, with such experience in financial and
business matters that he is capable of evaluating the merits and risks of the
purchase of the Shares and Purchaser has had access to, and has been furnished
with all such information as he has considered necessary, including the
Company's Annual Report on Form 10-K for the year ended December 31, 1998, and
Purchaser has concluded that he is able to bear these risks;
(e) the Shares were not offered or sold to Purchaser by any
form of general solicitation or general advertising,
(f) Purchaser acknowledges that if any transfer of the Shares
is to be made in reliance on an exemption under the Act, the Company, as issuer
of the Shares, may require an opinion of counsel satisfactory to it that Such
transfer may be made pursuant to an exemption under the Act;
(g) in making any Subsequent offer or sale of the Shares,
Purchaser will be acting for himself and not as part of a sale or planned
distribution which would be in violation of the Act or any applicable state
securities laws; and
(h) Purchaser acknowledges that for so long as appropriate,
the legend concerning transfer of the Shares currently set forth on the Shares
will remain on the Shares.
5. Conditions to Closing
(a) Conditions to the Obligations of Company. The obligations
of Company under this Agreement to consummate the sale of the Shares are subject
to the fulfillment at or prior to the Closing, Date of the following conditions:
(i) The representations and warranties of Purchaser set
forth herein shall be true and correct as of the Closing Date.
(ii) Purchaser shall have duly performed and complied with
all covenants, agreements and conditions required by this Agreement to be
performed by or complied with by Purchaser, respectively, prior to or at the
Closing Date.
(iii) All corporate proceedings of the Company to be taken
or required to be taken in connection with the transactions contemplated hereby
have been taken on or prior to the Closing, Date and all documents incident
thereto shall be reasonably satisfactory in form and substance to Company.
3
<PAGE>
(b) Conditions to the obligations of Purchaser. The
obligations of Purchaser Under this Agreement to effect the transactions
contemplated hereby are subject to the fulfillment at or prior to the Closing
Date of the following conditions:
(i) The representations and warranties of the Company set
forth herein shall be true and correct as of the Closing Date.
(ii) The Company shall have duly performed and complied
with the covenants, agreements and conditions required by this Agreement to be
performed by or complied with by it or him, respectively, prior to or on the
Closing Date.
(iii) All corporate proceedings of the Company to be taken
or required to be taken in connection with the transactions contemplated hereby
have been taken on or prior to the Closing Date.
(iv) The Company shall have delivered, or cause to be
delivered, to Purchaser a certificate or certificates representing the Shares to
be sold by Company hereunder in negotiable form.
6. Further Assurances. To the extent that applicable laws require the
execution and delivery of additional agreements, documents or instruments or the
taking of any other action in order to effectively transfer beneficial ownership
of the Shares to Purchaser, each of the parties hereto agrees to execute and
deliver all such agreements, documents or instruments and to take such action as
soon as reasonably possible and to effectuate the intentions and purposes of
this Agreement.
7. Notices. Any notice or other communication under this Agreement
shall be in writing and shall be considered given when received and shall be
delivered personally, mailed by registered or certified mail, return receipt
requested, or, to the extent available, sent by facsimile transmission to the
parties at the addresses set forth below (or at such other address as a party
may specify by notice to the other):
If to the Company: COMC, Inc.
2840 Howe Road, Suite D
Martinez, CA 94553-4000
Attention: Chief Financial Officer
Fax No.: (925) 335-4007
with a copy to: Scott C. Smith, Esq.
McCutchen Doyle Brown Enersen LLP
Three Embarcadero Center
San Francisco, California 94111
Fax No. (415) 393-2106
4
<PAGE>
If to Purchaser:
with a copy to:
8. Assignment, Transferees. Purchaser may not assign his rights or
obligations under this Agreement without the prior written consent of Company.
Subject to the foregoing, this Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
9. Applicable Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of California, without giving effect to
any provisions relating to conflicts of laws.
10. Entire Agreement. This Agreement and the Related Agreements
referred to herein, states the entire agreement between the parties with respect
to the subject matter hereof and no provision hereof may be modified, waived or
terminated orally, but only by a writing signed by the parties.
11. Headings. The headings in this Agreement are inserted for
convenience and reference only and are not to be used in construing or
interpreting any of the provisions of this Agreement.
12. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date and year first above mentioned.
COMC. INC.
By:
--------------------
Name: John J. Ackerman
Title: Chairman
PURCHASER:
By:
--------------------
Name:
5
<PAGE>
STOCK OPTION AGREEMENT
THIS OPTION AGREEMENT, dated as of _________, 2000, between COMC, INC.,
an Illinois corporation (the "Company") and ____________ (the "Optionee") is
made and entered into with reference to the following facts.
WHEREAS, the Company, in consideration of the Optionee's agreement to
purchase shares of the Company's common stock pursuant to that certain Stock
Purchase Agreement by and between the Company and Optionee of even date herewith
(the "Stock Purchase Agreement"), desires to grant to the Optionee an option to
increase his proprietary interest in the Company and its subsidiaries.
NOW, THEREFORE, in consideration of the premises and of the mutual
agreements hereinafter set forth, the parties hereto mutually agree as follows:
1. Grant of Option. Subject to the terms and conditions hereinafter set
forth, the Company hereby grants to Optionee, the option (the "Option") to
purchase, during the period specified in Paragraph 2 and at the purchase price
specified in Paragraph 3, all or any part of ___________ shares (the "Shares")
of the Common Stock of the Company, $.01 par value (the "Common Stock"), which,
when issued upon the exercise of the Option, and paid for in accordance with the
terms hereof, shall be fully paid and nonassessable.
2. Period and Exercise.
A. Subject to the provisions of Paragraphs 3 and 8, the Option
shall be immediately exercisable, in whole or in part, at any time during the
term of the Option. The Option and all rights thereunder shall terminate on a
date five (5) years from the date of this Agreement (the "Termination Date").
B. The Option may be exercised pursuant to its terms by the
Optionee's giving written notice thereof to the Secretary or Chief Financial
Officer of the Company at its then principal office. Such notice shall state the
number of Shares with respect to which the Option is being exercised and shall
be accompanied by payment in full of the exercise price for such Shares in cash,
by check payable in good funds to the order of the Company, by the delivery of
shares of Common Stock of the Company valued at their fair market value on the
date of exercise, or by the surrender of options with respect to such number of
other shares which, when multiplied by the excess of the fair market value of a
share of Common Stock on the date of exercise over the exercise price of such
surrendered option, equals the exercise price, or the portion thereof, to be
satisfied on such surrender.
C. The Company may in its discretion require, whether or not a
registration statement under the Securities Act of 1933 (the "Act") is then in
effect with respect to the Shares issuable upon such exercise, that as a
condition precedent to the exercise of the Option, the person exercising the
Option give to the Company a written representation and undertaking satisfactory
in form and substance to the Company that he is acquiring the Shares for his or
her own account for investment and not with a view to the distribution or resale
thereof and otherwise establish to the Company's satisfaction that the offer or
sale of the Shares issuable
1
<PAGE>
upon the exercise of the Option will not constitute or result in any breach or
violation of the Act, or any similar act or statute or any rulings or
regulations thereunder.
3. Option Price. Subject to the provisions of Paragraph 5, the option
price per share shall be $1.00 per share (the "Option Price").
4. Listing, Registration and other Legal Requirements.
A. The granting and exercise of this Option and the Company's
obligation to deliver Shares pursuant to an exercise of the Option shall be
subject to all applicable federal and state laws, rules and regulations, and to
obtaining such approvals by registration or qualification with a regulatory or
governmental agency as may be required. Pending the satisfaction of the
foregoing, such exercise shall be deemed suspended and there shall be returned
to the person exercising the Option the proceeds representing the exercise
price. In such event, the Company shall provide notice to the Optionee or his
representative of the satisfaction of the foregoing condition, whereupon the
right to exercise the Option shall be reinstated.
B. In accordance with the terms and conditions of that certain
Registration Rights Agreement by and between the Company, Optionee and certain
other investors that is of even date herewith and attached hereto as Exhibit A,
the Company shall file a registration statement with the Securities and Exchange
Commission, and use its best efforts to effect such registration, including,
without limitation, the execution of an undertaking to file post-effective
amendments, and shall take all actions to comply with applicable regulations
issued under the Act, as may required under such Registration Rights Agreement.
5. Adjustments for Reorganization, Liquidation, Stock Dividends or
Stock Splits.
A. If the Company is reorganized, or merged or consolidated
with another corporation while the Option, or any portion thereof, remains
outstanding, there shall be substituted for the shares subject to the
unexercised portion of the Option an appropriate number of shares of each class
of stock or other securities of the reorganized, or merged or consolidated
corporation which were distributed to the shareholders of the Company in respect
of such shares; provided, however, that this Option may be exercised in full by
the Optionee as of the effective date of any such reorganization, merger or
consolidation by the Optionee's giving notice in writing to the Company of his
intention to so exercise.
B. If the Company is liquidated or dissolved while the Option,
or any portion thereof, remains unexercised, then such unexercised portion of
the Option may be exercised in full by the Optionee as of the effective date of
any such liquidation or dissolution of the Company by the Optionee's giving
notice in writing to the Company of his intention to so exercise.
C. If the outstanding shares of common stock of the Company
shall at any time be changed or exchanged by declaration of a stock dividend,
stock split, combination or exchange of shares, or recapitalization not
involving cash or consideration other than shares, and as often as the same
shall occur, then the number, class and kind of shares subject to this Option,
and the Option Price, shall be appropriately and equitably adjusted, as
determined by the Board of Directors of the Company so as to maintain the
proportionate number of shares without
2
<PAGE>
changing the Option Price; provided, however, that no adjustment shall be made
by reason of the distribution of subscription rights on outstanding stock.
6. Corporate Reorganization; Liquidation. In the event of a
reorganization by means of merger or consolidation of the Company with, or sale
or substantially all the assets of the Company to another corporation or the
dissolution or liquidation of the Company while all or part of the Option
remains outstanding under this Agreement, there shall be substituted for the
shares subject to the unexercised portion of the Option an appropriate number of
shares (as determined by the Board of Directors of the Company) of each class of
stock, other securities or other assets of the reorganized corporation or, if
liquidated, the Company, which would have been distributed in respect of such
Shares if the Option had been exercised immediately prior to the record date of
the applicable foregoing transaction; provided, however, that the Optionee may
exercise in full the Option granted hereunder as of the effective date of any
such reorganization or dissolution or liquidation of the Company by giving
notice to the Company of his intention to so exercise.
7. No Rights in Shares Prior to Exercise. The Optionee shall not be
considered a record holder of any of the Shares subject to an unexercised
portion of the Option until the date on which he or she shall exercise the
Option as to such Shares in accordance with Paragraph 2 hereof; provided,
however, in the event the exercise is effected within 10 days prior to the
record date for the determination of holders entitled to vote at a meeting of
shareholders, the holder of the Shares received upon exercise of the Option
shall not have any right to vote the Shares received at such meeting.
8. Stock Reserved. The Company shall at all times during the term of
this Agreement reserve and keep available such number of shares of Common Stock
as will be sufficient to satisfy the requirements of this Agreement and shall
pay all original issue taxes, if any, on the exercise of the Option, and all
other fees and expenses necessarily incurred by the Company in connection
therewith.
9. Assignment, Transferees. Optionee may not assign his rights or
obligations under this Agreement without the prior written consent of Company.
Subject to the foregoing, this Agreement will be binding upon and inure to the
benefit of the parties hereto and their respective successors and permitted
assigns.
10. Amendment. This agreement may not be amended or modified at any
time without the prior written consent of the parties hereto.
11. Notices. Any notice or other communication under this Agreement
shall be in writing and shall be considered given when received and shall be
delivered personally, mailed by registered or certified mail, return receipt
requested, or, to the extent available, sent by facsimile transmission to the
parties at the addresses set forth below (or at such other address as a party
may specify, by notice to the other):
3
<PAGE>
If to the Company: COMC, Inc.
2840 Howe Road, Suite D
Martinez, CA 94553-4000
Attention: Chief Financial Officer
Fax No.: (925) 335-4022
with a copy to: Scott Smith, Esq.
McCutchen Doyle Brown Enersen LLP
Three Embarcadero Center
San Francisco, California 94111
Fax No. (415) 393-2106
If to Optionee:
with a copy to:
12. Governing Law. This Agreement shall be governed by and construed in
accordance with the substantive laws of the State of California.
13. Fractional Share. The Company shall not be required to issue any
fractional share upon exercise of the Option, but it shall pay to the Optionee
or to his or her personal representative or beneficiary who acquires the right
to exercise the Option by bequest or inheritance on the death of the Optionee,
the cash equivalent of any fractional share interests, as determined in the sole
discretion of the Board or the Committee.
4
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
COMC, INC.
By:
-----------------------
Name: John J. Ackerman
Title: Chairman
---------------------------
Optionee
5
<PAGE>
REGISTRATION RIGHTS AGREEMENT
This Agreement is made and entered into as of this ___th day of
________, 2000, by and among COMC, Inc., an Illinois corporation (the
"Company"), _______________, ___________ and ______________ being collectively
referred to herein as the "Investors").
1. CERTAIN DEFINITIONS.
Section 1.1 As used in this Agreement, the following terms shall have
the following meanings:
1.1 Commission means the Securities and Exchange Commission, or
any other federal agency at the time administering the Securities Act and the
Exchange Act.
1.2 Common Stock means the Company's Common Stock, $.01 par
value.
1.3 Exchange Act means the Securities Exchange Act of 1934, as
amended, or any similar federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
1.4 Person means an individual, corporation, partnership, joint
venture, trust, or unincorporated organization, or a government or any agency or
political subdivision thereof.
1.5 Registrable Securities means any shares of Common Stock owned
as of the date hereof or acquired hereafter by Investors or by their permitted
successors and assigns, including but not limited to shares of Common Stock
issued to Investors pursuant to the Stock Purchase Agreements, dated
____________, 2000, between the Company and each of the Investors and shares of
Common Stock acquired by the Investors pursuant to the exercise of options
granted by the Company in favor of the investors, but excluding any such shares
of Common Stock that have been (a) sold by such parties other than to a
permitted transferee of Investors, as defined in Section 5 hereof, (b)
registered under the Securities Act pursuant to an effective registration
statement filed thereunder and disposed of in accordance with the registration
statement covering such shares of Common Stock or (c) publicly sold pursuant to
Rule 144 of the Securities Act.
1.6 Securities Act means the Securities Act of 1933, as amended,
or any similar federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
2. REGISTRATION RIGHTS.
Section 2.1 Requested Registrations.
(a) Request for Registration. If at any time after the date
hereof, the Company shall receive from the Investors, holding at least 80% of
the Registrable Securities, a written request that the Company effect any
registration with respect to all or a part of the Registrable Securities, the
Company shall do the following:
<PAGE>
(i) within ten (10) days of receipt of such request from such
Investor(s), give written notice of the proposed registration to any other
Investors; and
(ii) as soon as practicable, but in any event no later than
ninety (90) days after receipt of such request from the Investor(s), file a
registration statement with the Commission, and use its best efforts to effect
such registration, including, without limitation, the execution of an
undertaking to file post-effective amendments, appropriate qualification under
applicable blue sky or other state securities laws (except that the Company
shall not be required to qualify the offering under the blue sky laws of any
jurisdiction in which the Company would be required to execute a general consent
to service of process unless the Company is already subject to service in such
jurisdiction), and appropriate compliance with applicable regulations issued
under the Securities Act, as may be so requested and as would permit or
facilitate the sale and distribution of all Registrable Securities as are
specified in such request, together with all Registrable Securities of any other
Investor joining in such request as are specified in a written request by the
other Investors within twenty (20) days after receipt of such written notice
from the Company.
(b) Underwriting.
(i) If the registration of which the Investors give notice is
for a registered public offering involving an underwriting, the Investors shall
so advise the Company as a part of their request made pursuant to Section 2.1
(a) above. The Company shall include such information in the written notice of
the Company referred to in Section 2.1(a)(i) above, including the name of the
underwriter or representative thereof selected for such underwriting. In such
event, the right of any Investor to registration pursuant to this Section 2.1
shall be conditioned upon such Investor participating in such underwriting and
the inclusion of such Investor's Registrable Securities in such underwriting to
the extent provided herein. Any underwriter requested by the Investors shall be
subject to the Company's approval.
(ii) The Company shall (together with all Investors proposing
to distribute their Registrable Securities through such underwriting) enter into
an underwriting agreement in customary form with the Underwriter or
representative thereof selected for such underwriting. Notwithstanding any other
provision of this Section 2.1, if the underwriter or representative thereof
advises the Investors in writing that, in its opinion, marketing factors require
a limitation on the number of shares to be underwritten, the number of shares of
Registrable Securities that are entitled to be included in the registration and
underwriting shall be allocated in the following manner: the securities of the
Company held by officers or directors (other than Registrable Securities) of the
Company and other stockholders, and the securities to be sold by the Company for
its own account shall be excluded from such registration to the extent so
required by such limitation, and if a limitation of the number of shares is
still required, the number of shares of Registrable Securities that may be
included in the registration and underwriting shall be allocated among all
Investors in proportion, as nearly as practicable, to the respective amounts of
Registrable Securities which they had requested to be included in such
registration at the time of filing, the registration statement. No Registrable
<PAGE>
Securities or any other securities excluded from the underwriting by reason of
the underwriter's marketing limitation shall be included in such registration.
If the Company or any holder of Registrable Securities, officer, director or
other stockholder who has requested inclusion in such registration as provided
above disapproves of the terms of any such underwriting, such person may elect
to withdraw therefrom by written notice to the Company, the underwriter and the
other Investors. The securities so withdrawn shall also be withdrawn from
registration. Any Registrable Securities or other securities excluded shall also
be withdrawn from such registration.
Section 2.2 Piggyback Registrations. If at any time or times the
Company shall determine to register any of its Common Stock or securities
convertible into or exchangeable for Common Stock Under the Securities Act,
whether in connection with a public offering of securities by the Company (a
"primary offering"), a public offering thereof by stockholders (a "secondary
offering"), or both (but not in connection with a registration effected solely
to implement an employee benefit plan or a transaction to which Rule 145 or any
other similar rule of the Commission under the Securities Act is applicable),
the Company will promptly give written notice thereof to the Investors, and will
use its best efforts to effect the registration under the Securities Act of all
Registrable Securities in satisfaction of the Company's obligations under
Section 2.1; provided, however, that in the event that any registration pursuant
to this Section 2.1 shall be, in whole or in part, all underwritten public
offering of Common Stock, the number of shares of Registrable Securities to be
included in such an underwriting may be reduced (pro rata among Investors and
any other holder of Registrable Securities based upon the number of shares of
Registrable Securities owned by Investors and such holders) if and to the extent
that the managing underwriter shall be of the opinion that such inclusion would
adversely affect the marketing of the securities to be sold by the Company
therein; provided, however, that, prior to any such reduction, the Company shall
first exclude from such registration, in the following order, all shares of
Common Stock sought to be Included therein by (i) any holder thereof not having
any such contractual, incidental registration rights, and (ii) any holder
thereof having contractual, incidental registration rights subordinate or junior
to the rights of Investors. To the extent that the Company proposes to include
the Registrable Securities of any Investors in any primary or secondary offering
in accordance with this Section 2.2, and an Investor or Investors give notice
that they do not wish to be so included, the Company shall have no further
obligations hereunder with respect to such Investor or Investors.
Section 2.3 Registration Expenses. In the event of a registration
described in Section 2.1, all reasonable expenses of registration and offering
of Investors including, without limitation, printing expenses, fees and
disbursements of counsel (limited to fees and expenses of a single attorney
jointly retained by Investors to represent Investors as a group), and
independent public accountants, shall be borne by the Company, except that each
of the Investors shall bear underwriting commissions and discounts attributable
to his Registrable Securities being registered.
Section 2.4 Further Obligations of the Company. Whenever, under the
preceding sections of this Agreement, the Company is required hereunder to
register
<PAGE>
Registrable Securities, it agrees that it shall also do the following:
(a) Use its best efforts to diligently prepare for filing with
the Commission a registration statement and such amendments and supplements to
said registration statement and the prospectus used in connection therewith as
may be necessary to keep said registration statement effective for a period of
at least 270 days and to comply with the provisions of the Securities Act with
respect to the sale of securities covered by said registration statement for the
period necessary to complete the proposed public offering;
(b) Furnish to Investors such copies of each preliminary and
final prospectus and such other documents as such holder may reasonably request
to facilitate the public offering of his Registrable Securities;
(c) Enter into any underwriting agreement with provisions
reasonably required by the proposed underwriter for Investor, if any, and
reasonably acceptable to the Company; and
(d) Use best efforts to register or qualify the Registrable
Securities covered by said registration statement under the securities or
"blue-sky" laws of such jurisdictions as Investor may reasonably request.
3. INDEMNIFICATION. Incident to any registration referred to in this agreement,
and subject to applicable law, the Company will indemnify each underwriter, each
Investor, and each person controlling any of them against all claims, losses,
damages and liabilities, including legal and other expenses reasonably incurred
in investigating or defending against the same, arising out of any untrue
statement of a material fact contained in any prospectus or other document
(including any related registration statement) or any omission to state therein
a material fact required to be stated therein or necessary to make the
statements therein not misleading, or arising out of any violation by the
Company of the Securities Act, any state securities or "blue-sky" laws or any
rule or regulation thereunder in connection with such registration; provided,
however, that the Company will not be liable in any case to the extent that any
such claim, loss, damage or liability (i) may have been caused by an untrue
statement or omission which is based upon information furnished in writing to
the Company by Investors expressly for use therein, or (ii) may have been
suffered or incurred by the Company and resulted from an action, claim or suit
by a Person who purchased Registrable Securities or other securities of the
Company from any of the Investors in reliance upon any untrue statement or
omission which was contained or made in any preliminary prospectus furnished by
Investor to such Person in connection with such registration and which was
corrected in a final prospectus which such Investor possessed, but which such
Investor failed to deliver or provide a copy of such final prospectus to such
Person at or prior to the confirmation of the sale of any such Registrable
Securities in any case where such delivery is required by the Securities Act. In
the event of any registration of any of the Registrable Securities under the
Securities Act pursuant to this Agreement, each Investor will indemnify and hold
harmless the Company, each of its directors and officers and each underwriter
(if any) and each if any, who controls the Company or any such underwriter
within the
<PAGE>
meaning of the Securities Act or the Exchange Act against any claim,
losses, damages and liabilities, including legal and other expenses reasonably
incurred in investigating or defending it against the same, (i) arising out of
any untrue statement of a material fact contained in any prospectus or other
document (including any related registration statement) or any omission to state
therein a material fact required to be stated therein or necessary to make the
statement therein not misleading, if the statement or omission was made in
reliance upon and in conformity with information furnished in writing to the
Company by or on behalf of such Investor, specifically for use in connection
with the preparation of such registration statement, prospectus, amendment or
supplement, or (ii) which may have been suffered or incurred by the Company and
which resulted from an action, claim or suit by a Person who purchased
Registrable Securities or other securities of the Company from Investor in
reliance upon any untrue statement or omission which was contained or made in
any preliminary prospectus furnished by such investor to such Person and which
was corrected in a final prospectus which Investor possessed, but which such
Investor failed to deliver or provide a copy of such final prospectus to such
Person at or prior to the confirmation of the sale of any such Registrable
Securities in any case where such delivery is required by the Securities Act.
4. RULE 144 REQUIREMENTS. If the Company remains subject to the reporting
requirements of either Section 13 or Section 15(d) of the Exchange Act, the
Company will use its best efforts to file with the Commission such information
as the Commission may require under either of said sections; and in such event,
the Company shall use its best efforts to take all action as may be required as
a condition to the availability of Rule 144 of the Securities Act (or any
Successor exemptive rule hereinafter ill effect). The Company shall furnish to
such Investor upon request, a written statement executed by the Company as to
the steps it has taken to comply with the current public information
requirements of Rule 144.
5. TRANSFER OF REGISTRATION RIGHTS. The registration rights of Investors under
this Agreement may be transferred to any transferee of any Registrable
Securities, who (i) is a holder of Registrable Securities as of the date of this
Agreement, (ii) is an affiliate of an entity that holds Registrable Securities,
as "affiliate" is defined in the Investment Company Act of 1940, as of the date
of this Agreement (including a partner of such holder), or (iii) acquires at
least 10,000 shares of Registrable Securities (as adjusted for stock splits,
stock dividends, reclassification, recapitalizations or other similar events).
Each such transferee shall be deemed to be an "Investor" for purposes of this
Agreement; provided, however, that no transfer of registration rights by
Investor pursuant to this Section 5 shall create any additional rights in the
transferee beyond those rights granted to Investors Pursuant to this Agreement.
6. MISCELLANEOUS.
Section 6.1 Damages. The Company recognizes and agrees that Investors
will not have all adequate remedy if the Company falls to comply with this
Agreement and that damages may not be readily ascertainable, and the Company
expressly agrees that, in the event of such failure, it shall not oppose all
application by any Investor requiring specific performance of any and all
provisions hereof or enjoining the Company from continuing to commit any such
breach of this Agreement.
<PAGE>
Section 6.2 No Waiver, Cumulative Remedies. No failure or delay on the
part of any party to this Agreement in exercising any right, power or remedy
hereunder shall operate as a waiver thereof, nor shall any single or partial
exercise of any such right, power or remedy preclude any other or further
exercise thereof or the exercise of any other right, power or remedy hereunder.
The remedies herein provided are cumulative and not exclusive of any remedies
provided by law.
Section 6.3 Amendments and Waivers. Except as hereinafter provided,
amendments to this Agreement shall require and shall be effective upon receipt
of the written consent of both the Company and Investors. Except as hereinafter
provided, compliance with any covenant or provision set forth herein may be
waived upon written consent by the party or parties whose rights are being
waived. Any waiver or amendments may be given subject to satisfaction of
conditions stated therein and any waiver or amendments shall be effective only
in the specific instance and for the specific purpose for which given.
Section 6.4 Notices.
As the terms "notice" or "notices" are used herein as between the
parties, such term shall mean a written document, explaining the reason for the
notice, and the same shall be mailed by United States Postal Service Via
Certified Mail, Return Receipt Requested, addressed as follows:
If to the Company: COMC, Inc.
2840 Howe Road, Suite D
Martinez, CA 94553-4000
Attention: Chief Financial Officer
Fax No.: (925) 335-4007
with a copy to: Scott Smith, Esq.
McCutchen Doyle Brown Enersen LLP
Three Embarcadero Center
San Francisco, California 94111
Fax No. (415) 393-2106
If to Investors: to the respective address set forth on Schedule I
attached hereto.
Such notice shall be deemed to have been given on the date placed in the U.S.
Mails, and sent by fax to counsel, whether actually received by the addressee or
not. The parties shall, as a matter of convenience and courtesy, send each party
receiving notice a copy of said notice by facsimile or other electronic means,
or by courier, Federal Express, or similar service, but such notifications shall
not be deemed lawful "notice" as required hereby. The parties may, from time to
time, amend the above addresses and names by written notice to the other party.
Section 6.5 Binding Effect; Assignment. This Agreement shall be binding
upon and inure to the benefit of the parties hereto and their respective heirs,
successors and assigns, except that the Company shall not have the right to
delegate its obligations hereunder or to assign its rights hereunder or any
interest herein without the prior written consent of all of the Investors.
<PAGE>
Section 6.6 Prior Agreements. This Agreement constitutes the entire
agreement between the parties and Supersedes any prior understandings or
agreements concerning the subject matter hereof.
Section 6.7 Severability. The provisions of this Agreement are
severable and, in the event that any court of competent Jurisdiction shall
determine that any one or more of the provisions or part of a provision
contained in this Agreement, shall, for any reason, be held to be invalid,
illegal or unenforceable such invalidity, illegality or unenforceability shall
not affect any other provision or part of a provision of this Agreement, but
instead this Agreement shall be reformed and construed as if such invalid or
illegal or unenforceable provision, or part of a provision, had never been
contained herein, and such provisions or part reformed so that it would be
valid, legal and enforceable to the maximum extent possible.
Section 6.8 Governing Law. This Agreement shall be governed by and
construed in accordance with the substantive laws of the State of California.
Section 6.9 Headings. Article, section and subsection headings in this
Agreement are included herein for convenience of reference only and shall not
constitute a part of this Agreement for any other purpose.
Section 6.10 Counterparts. This Agreement maybe executed in any number
of counterparts, all of which taken together shall constitute one and the same
instrument, and any of the parties hereto may execute this Agreement by signing
any such counterpart.
Section 6.11 Further Assurances. From and after the date of this
Agreement, upon the request of any party hereto, the other parties shall execute
and deliver such instruments, documents and other writings as may be reasonably
necessary or desirable to confirm and carry out and to effectuate fully the
intent and purposes of this Agreement.
[the remainder of this page has been intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed on the day and year first above written.
COMC, Inc.
By: --------------------------------
Name: John J. Ackerman
Title: Chairman
INVESTORS:
- ------------------------------------
<PAGE>
SETTLEMENT AND RELEASE AGREEMENT
THIS SETTLEMENT AND RELEASE AGREEMENT ("Release Agreement") is made
this 1st day of May, 2000 by and between Charles E. Lincoln ("Lincoln"), ICF
Communication Solutions, Inc., a California corporation ("ICF"), and COMC, Inc.,
an Illinois corporation ("COMC").
WHEREAS a Loan Agreement, dated as of August 10, 1999, was entered into
by and between COMC, Inc., an Illinois corporation, and Charles E. Lincoln, an
individual residing in Alamo, California (hereinafter "The Loan Agreement").
WHEREAS an Employment Agreement, dated as of August 10, 1999, was
entered into between ICF Communication Solutions, Inc., a California corporation
("ICF"), COMC, Inc. an Illinois corporation and the sole shareholder of ICF
(together, the "Company"), and Charles E. Lincoln, as well as a First Amendment
To Employment Agreement ("Amendment"), deemed effective October 11, 1999,
between COMC, Inc., ICF Communication Solutions, Inc., and Charles E. Lincoln,
the term being through August 10, 2001, without regarding to any extensions of
the Employment Agreement.
WHEREAS the Board of Directors of COMC has terminated Lincoln's
employment without "cause," as such term is defined under the Employment
Agreement and used in Section 3(h) of the Agreement and Plan of Merger dated
July 24, 1998.
FOR AND IN CONSIDERATION of payment of the outstanding principal
balance and any interest due of the Subordinated Note, as defined in Article I,
Section 1.01 of The Loan Agreement, of a lump sum payment by the Company in the
amount of $176,538.59, minus applicable payroll withholdings, (the "Severance
Amount") on or before July 29, 2000 of all payments due Lincoln under the
Employment Agreement in
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the event of a termination without cause, Mr. Lincoln's continued participation,
at the Company's expense, in the Company's portion of health insurance and
disability insurance programs, to the extent permitted under such programs,
until August 10, 2001, a lump sum payment by the Company in the amount of
$8,753.14 of an automobile allowance on or before July 29, 2000, and retention
of the URL Officetelephones.com, Charles E. Lincoln, does hereby, conditioned on
the receipt of the consideration above, generally release and forever discharge
and hold harmless ICF Communication Solutions, Inc., a California corporation
("ICF"), COMC, Inc. an Illinois corporation and the sole shareholder of ICF
(together, the "Company"), and their respective subsidiary and parent
corporation, officers, directors, agents, servants, employees, predecessors,
successors and assigns, and each of them, of all claims, demands, accounts,
actions, causes of action, obligations, proceedings, losses, liabilities, and
sums of money of every kind and character whatsoever, whether now known or
unknown, whether based on contract, tort, statute, or other legal or equitable
theory of recovery, which Lincoln, his successors, or assigns, can, shall or may
have against any of the above-named persons, parties, corporations, or entities,
arising out of or in any way related to his employment with the Company,
including, but not limited to, claims based upon the Loan Agreement and
Employment Agreement defined above, and all claims and demands set forth in the
business relationship between Lincoln and the Company; provided that nothing in
this Release Agreement shall be construed to eliminate or affect the Company's
obligations to defend and indemnify him against claims brought against him as a
result of him being, or having been, an employee, officer or director of the
Company. Lincoln also specifically agrees and acknowledges that he is waiving
any right to recovery based on state or
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federal sex, age, race, color, national origin, marital status, religion,
veteran status, disability, sexual orientation or other anti-discrimination
laws, including, without limitation, Title VII, the Age Discrimination in
Employment Act, the Americans with Disabilities Act and the California Fair
Employment and Housing Act, all as amended, and any state or federal overtime or
wage and hour laws. Lincoln understands and agrees that he has not executed this
Release Agreement without first having had the opportunity to consider it for a
full twenty-one days from receipt of the Release Agreement and that he did not
execute this Release Agreement without first being requested, in writing, to
consult with an attorney.
ICF Communication Solutions, Inc., a California corporation ("ICF"),
COMC, Inc. an Illinois corporation and the sole shareholder of ICF (together,
the "Company"), do hereby generally release and forever discharge and hold
harmless Charles E. Lincoln, of all claims, demands, accounts, actions, causes
of action, obligations, proceedings, losses, liabilities, and sums of money of
every kind and character whatsoever, whether based on contract, tort, statute,
or other legal or equitable theory of recovery, which the Company, the Company's
successors, or assigns, currently have or may have against Lincoln, arising out
of or in any way related to his employment with the Company, including, but not
limited to, claims based upon the Loan Agreement and Employment Agreement
defined above; provided, however, the Company does not release Lincoln from any
undiscovered or unknown conduct in the nature of fraud, embezzlement,
misappropriation of trade secrets, unauthorized disclosure of confidential or
proprietary information, or similar acts by Lincoln resulting from his
employment with the Company
3
<PAGE>
that could result in a claim, cause of action or liability for the Company
against Lincoln ("the "Unreleased Claims")
FOR AND IN CONSIDERATION of the aforesaid payment and grants, and as a
condition of this Release Agreement, Lincoln and the Company (collectively
"Parties") agree, represent and warrant as follows:
1. ICF, COMC and Lincoln each expressly denies any violation of any
federal, state or local statute, ordinance, rule, regulation,
policy, order or other law. The payment herein provided for is
not to be construed as an admission of liability, which is
expressly denied, and that this Release Agreement arises from
compromise.
2. That this is a full and final release by Lincoln applying to all
unknown and unanticipated injuries or damages, including any and
all claims now existing or which may arise in the future, arising
out of the employment of Lincoln, as well as those not known or
disclosed; Lincoln expressly waives any right or claim of right
to assert hereafter that any claim, demand, obligation and/or
cause of action has, through ignorance, oversight or error, been
omitted from the terms of this Release Agreement, and further
expressly waives any right or claim of right that he may have
under the law of any jurisdiction that releases such as those
herein given do not apply to unknown or unstated claims. It is
the express intent of Lincoln to waive any and all claims he has
against the persons and entities herein released, including any
which are presently unknown, unsuspected, unanticipated or
undisclosed. LINCOLN EXPRESSLY WAIVES THE PROVISIONS OF SECTION
1542 OF THE CIVIL CODE OF CALIFORNIA, WHICH PROVIDES:
A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH THE
CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IF
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR;
3. Lincoln and the Company warrant and represent that they have not
heretofore assigned or transferred or purported to assign or
transfer to any person not a party hereto any matter released by
this Release Agreement. Lincoln and the Company will indemnify
and save harmless the parties herein released from any loss,
claim, expense, demand, or cause of action of any kind or
character through the assertion by any stranger hereto of a
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<PAGE>
claim or claims connected with the subject matter of this Release
Agreement.
4. Lincoln and the Company agree that the provisions of Section 10
and Section 11 of the Employment Agreement remain in full force
and effect, and is additionally hereby incorporated into this
Release Agreement as if fully set forth within. Lincoln agrees
that he has received payment of the Loan Agreement and Company
acknowledges receipt of the original Promissory Note.
5(a). Lincoln and the Company agree that this is a private agreement
and covenant and agree not to disclose, (whether orally, in
writing, or otherwise) without prior written consent of the other
party, to any person, corporation, agency, group, or other
organization, either directly or indirectly, any information
relating to the existence of and/or contents of this Release
Agreement, including the nature or amount of the consideration
paid except as required by the Parties' financial or legal
advisors to enable them to provide financial or legal advice to
the Parties or as otherwise required by law (collectively
referred to as "the permitted disclosures"). Lincoln and the
Company agree that, except for the permitted disclosures, they
will only state that the agreements which are the subject matter
of this Release Agreement have been disposed of to the
satisfaction of the Parties.
(b) Lincoln and the Company further agree that, without prior written
consent of the other party, they will not publicly or privately
communicate (whether orally, in writing, or otherwise) any
information about any claims which they believe they have, had or
may have against the other parties, or any of them, or the
substance of any such claims, including but not limited to the
facts arising out of Lincoln's employment or related to his
employment at the Company, including to any past, present or
prospective employee of ICF and COMC, or any of them, with any
member of the media or with any representative of governmental
agency, unless compelled by law, except as to the Unreleased
Claims. Lincoln further agrees not to disparage or make
pejorative comments regarding ICF, COMC, or any officers or
directors of ICF and COMC, and the Company further agrees not to
disparage or make pejorative comments about Lincoln. Nothing in
the covenants contained in paragraphs 5(a) and 5 (b) prevents
Lincoln, ICF or COMC from holding a press conference, issuing any
press release or engaging in any other communication to the
public or the media regarding the separation of Lincoln's
employment, on the condition that the Parties fully comply with
their obligations pursuant to paragraphs 5(a) and 5(b).
(c) The Parties acknowledge and agree that the covenants contained in
paragraph 5 are material terms of this Release Agreement and that
a
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<PAGE>
violation of the covenants contained in this paragraph 5 shall
constitute a material breach of this Release Agreement. The
Parties further acknowledges and agrees that, without limiting
any other remedy that may be available at law or in equity, such
a breach or threatened breach shall be grounds for the Parties to
seek appropriate restraining orders and injunctive relief to
enjoin violation of paragraph 5 as well as to seek any other
appropriate remedies.
6. Lincoln understands and agrees that he:
(a) Has had a full twenty-one days within which to consider this
Release Agreement before executing it.
(b) Has carefully read and fully understands all of the provisions of
this Release Agreement.
(c) Is, through and subject to the terms of this Release Agreement,
releasing the Company from any and all claims he may have against
the Company.
(d) Knowingly and voluntarily agrees to all of the terms set forth in
this Release Agreement.
(e) Knowingly and voluntarily intends to be legally bound by the
same.
(f) Was advised and hereby is advised in writing to consider the
terms of this Release Agreement and consult with an attorney of
his choice prior to executing this Release Agreement.
(g) Has a full seven days following the execution of this Release
Agreement to revoke this Release Agreement and has been and
hereby is advised in writing that this Release Agreement shall
not become effective or enforceable until the revocation period
has expired.
(h) Understands that rights or claims under the Age Discrimination in
Employment Act of 1967 (29 U.S.C.ss.621 et seq.) that may arise
after the date this Release Agreement is executed are not waived.
7. Lincoln knowingly and voluntarily waives all rights he may have
under federal and/or state law to reinstatement to his employment
with the Company.
8. By executing this Agreement, Lincoln acknowledges and certifies
that he has not filed any claim against the Company under
California Labor Code Section 132a.
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9. Lincoln acknowledges that the Company makes no representation or
warranty to Lincoln concerning the effect of this settlement on
the past, present or future state or federal tax liabilities of
Lincoln. Lincoln agrees that any tax that may be payable by
Lincoln on the consideration received by Lincoln pursuant to this
Release Agreement is the sole responsibility of Lincoln. Lincoln
agrees to indemnify, defend and hold ICF and COMC, and each of
them, harmless from and against any liability or claim, including
penalties, for any tax or other governmental contribution that
may be incurred or demanded as a result of the receipt by Lincoln
of the consideration provided for in this Release Agreement
except to the extent any such liability or claim arises out of
the tax obligations of the Company. If, due to Lincoln's failure
to satisfy his obligations, if any, to pay taxes or make other
governmental contributions as a result of his receipt of the
consideration provided for in this Release Agreement, any
governmental authority demands or requests payments by ICF and
COMC, or any of them, of any such tax or other governmental
contribution, Lincoln shall, at the request of ICF and COMC, make
the payment or post appropriate security for such payment.
10. If any provision of this Release Agreement or application thereof
is held invalid, the invalidity shall not affect other provisions
or applications of the Release Agreement which can be given
effect without the invalid provision or application. To this end,
the provisions of this Release Agreement are severable.
11. This Release Agreement and all covenants and provisions set forth
herein shall be binding upon and shall inure to the benefit of
Lincoln, ICF and COMC, their legal successors, heirs, assigns,
partners, representatives, parent companies, subsidiary
companies, agents, attorneys, officers, employees, directors and
shareholders.
12. Lincoln hereto acknowledges he has read this Release Agreement,
that he fully understands his rights, privileges and duties under
the Release Agreement, and that he enters this Release Agreement
freely and voluntarily. Lincoln further acknowledges he has had
the opportunity to consult with an attorney of his choice to
explain the terms of this Release Agreement and the consequences
of signing it.
13. Except to the extent that the terms of the Employment Agreement
referred to above and the Agreement and Plan of Merger made July
24, 1998 have been specifically terminated by the provisions of
this Release Agreement, this Release Agreement contains the
entire agreement between the parties hereto and supersedes any
and all prior oral and written agreements and understandings with
respect to the subject matter hereof, and no representation,
warranty, condition, understanding or agreement of any kind with
respect to the subject matter hereof shall be relied upon by the
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<PAGE>
parties unless incorporated herein. This Release Agreement may
not be amended or modified except by an agreement in writing
signed by the party against whom the enforcement of any
modification or amendment is sought. The terms of this Release
Agreement are contractual and not a mere recital. The Company
additionally acknowledges that the terms of that certain Stock
Option Agreement dated as of August 10, 1999 between COMC and
Lincoln, a copy of which is attached hereto, remains in full
force and effect, and that such agreement, and Lincoln's right to
exercise the options granted therein, are unaffected by this
Release Agreement.
14. The undersigned hereby represents and agrees that he:
(a) Will not at any time, without the prior written consent of ICF
and COMC, either directly or indirectly use, divulge or
communicate to any person, firm or corporation, in any manner
whatsoever, any confidential or proprietary information of any
kind concerning any matters affecting or relating to the business
of ICF and COMC. This includes, but is not limited to: trade
secrets; formulas; know-how; specifications; drawings;
distributor and supplier lists; the names, contact persons,
habits or practices of any of ICF or COMC clients or customers;
the business, financial and marketing strategies, forecasts,
methods, procedures, techniques, practices and standards of ICF
or COMC; drawings, models, financial and planning data, studies,
manuals, memoranda, notebooks, files, documents, correspondence,
salary information, computer reports, compilations of business
and financial information and other confidential business or
financial information concerning the business of ICF or COMC, its
manner of operation, or other confidential data of any kind,
nature or description that is not generally available to the
public. This paragraph shall not be construed to apply to any
information that (i) was acquired by Lincoln subsequent to his
employment with the Company and without the use of any resources
belonging to the Company, or (ii) is, at the time of its use or
disclosure, information that is generally available to the
public.
(b) Does not have in his possession, custody or control any items
belonging to ICF or COMC, including, but not limited to,
computers, laptop computers, monitors, peripheral computer
equipment, cellular telephones, pagers, San Francisco Giants
tickets, keys, credit cards, files, records, compilations,
reports, studies, manuals, memoranda, notebooks, documents,
correspondence, software programs, computer reports, drawings,
models, visual or conceptual presentations of any type, and other
confidential information or records and similar confidential
items relating to the business of ICF or COMC, and any copies or
duplicates thereof. The Company acknowledges that Lincoln has
previously returned a credit card, cellular telephone, pager,
laptop computer, peripheral computer equipment, office keys and
San Francisco Giants tickets to the Company.
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15. Lincoln hereby represents and agrees:
(a) That the ICF and COMC have invested substantial time and effort
in assembling its present staff of personnel. Accordingly,
Lincoln agrees that at no time prior to May 1, 2002 will Lincoln,
directly or indirectly, either on Lincoln's own behalf or in
concert with others, solicit or induce, or attempt to solicit or
induce, any person who has been employed as an employee, agent,
independent contractor or otherwise by ICF or COMC, to leave his
or her employment with ICF or COMC, and/or to perform services of
any kind for any other person, firm or corporation.
(b) At no time prior to May 1, 2002 will Lincoln, directly or
indirectly, either on Lincoln's own behalf or on behalf of any
other person, firm or corporation, divert or take away, or
attempt to divert or take away, or call on or solicit, or attempt
to call on or solicit, any customers or clients of ICF or COMC
that were customers or clients while Lincoln was engaged as an
employee of ICF or COMC. Notwithstanding any other provisions of
this paragraph 15(b), Lincoln may notify any or all of the
customers or clients with which Lincoln dealt while employed at
the Company that he is no longer with the Company and may provide
such customers or clients with his new business address,
telephone and facsimile numbers, and electronic mail address, if
any. Nothing in this subparagraph 15(b) shall be construed (i) to
prohibit Lincoln from calling on, soliciting, or otherwise doing
business with any client or customer of the Company on behalf of
himself or any other entity so long as such business activity
does not compete with the business of the Company; or (ii) to
prohibit Lincoln from sending a generalized mailing or
generalized advertisement which happens to result in a subsequent
contact with a client or customer of the Company, so long as
Lincoln does not use any of the Company's confidential
information in preparing the generalized mailing or generalized
advertisement. Nothing in this paragraph 15(b) shall prohibit
Lincoln from using information that is generally available to the
public. Nothing in this paragraph 15(b) shall prohibit Lincoln
from doing business with any client or customer of the Company
that may approach Lincoln unsolicited and request to do business
with Lincoln. Provided, however, that in no event shall Lincoln
use or reveal any confidential information of the Company except
as expressly permitted by paragraph 14(a).
(c) If the Company fails to make payment of the Severance Amount on
or before July 29, 2000, Company shall have a period of ten (10)
days from the date of receipt of a written notice of non-payment
to pay Lincoln the Severance Amount at the address set forth in
paragraph 23. If after the expiration of ten (10) days the
Company has not paid Lincoln the Severance Amount, Lincoln's
obligations under paragraph 15(a) and 15(b) will terminate.
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16. This Release Agreement and the provisions contained herein shall
not be construed or interpreted for or against any individual or
company because that individual or company drafted or caused a
legal representative to draft any of its provisions.
17. The undersigned acknowledges that he may hereafter discover facts
different from, or in addition to, those he now knows or believes
to be true with respect to the claims, demands, liens,
agreements, contracts, covenants, actions, suits, causes of
action, wages, obligations, debts, expenses, damages, judgments,
orders and liabilities herein released, and agrees the release
herein shall be and remain in effect in all respects as a
complete and general release as to all matters released herein,
notwithstanding any such different or additional facts.
18. Regarding claims for breach of this Release Agreement: This
Release Agreement irrevocably and forever extinguishes all of the
claims listed herein and such claims cannot be revived in any
way, including but not limited to, any attempt to characterize a
listed claim herein as an alleged breach of this Release
Agreement. The remedy for any such alleged breach shall be
limited exclusively to breach of this Release Agreement.
Notwithstanding anything else in paragraph 18, if the Company
fails to make payment of the Severance Amount on or before July
29, 2000, the Company shall then have a period of ten (10) days
from the date of receipt of a written notice of non-payment from
Lincoln to pay Lincoln the Severance Amount. If after the
expiration of ten (10) days the Company has not paid Lincoln the
Severance Amount at the address set forth in paragraph 23,
Lincoln's obligations to release the Company of all of the claims
listed herein shall terminate. Provided, however, that in no
event shall Lincoln use or reveal any confidential information of
the Company except as expressly permitted by paragraph 14(a).
19. This Release Agreement shall be construed in accordance with, and
be deemed governed by, the laws of the State of California
without reference to its principles of conflicts of laws.
20. This Release Agreement may be executed in any number of
counterparts, each of which so executed shall be deemed to be an
original and such counterparts shall together constitute one and
the same Release Agreement.
21. As used in this Release Agreement, the masculine, feminine, or
neuter gender, and the singular or plural number shall each be
deemed to include the other whenever the contents so indicate.
10
<PAGE>
22. In the event any dispute arising from this Release Agreement is
pursued to litigation or to arbitration, the prevailing party in
any such dispute shall, in addition to recovering all costs of
suit or arbitration, be entitled to an award of reasonable
attorney's fees. The parties agree that should any subsequent
litigation or arbitration arising from this Release Agreement
allege any violation or disputes of the terms of paragraphs 5(a),
5(b), 5(c), 20, 21 or 23, the prevailing party of such dispute
shall not be entitled to his/its attorney's fees and costs.
The attorney's fees provision applies solely to the paragraphs
not contained in the named exception, and shall not be
interpreted to apply to the excepted paragraphs of this
agreement. Each party to this Release Agreement, Lincoln, ICF and
COMC, was represented by counsel in the negotiation and execution
of this Release Agreement, so that this attorney's fee provision
cannot be construed as applying to the entire contract. Any
action brought by the parties to enforce or interpret any
provision of this Agreement shall be commenced and maintained in
state court in Contra Costa County, California or in the United
States District Court for the Northern District of California.
The parties hereby consent to such jurisdiction and venue and
expressly waive any objection to the same.
23. For the purpose of this Agreement, notices and all other
communications provided for herein shall be in writing and shall
be deemed to have been duly given when delivered, if personally
delivered, or three (3) days after being mailed by United States
registered mail, return receipt requested, postage prepaid,
addressed as follows:
If to Lincoln: 205 Carol Court
Alamo, California 94507
Attn: Charles E. Lincoln
If to the Company: 2840 Howe Road, Suite D
Martinez, California 94553-4000
Attn: President
or to such other address as any party may have furnished to
the other in writing in accordance herewith, except that
notices of change of address shall be effective only upon
receipt.
24. The Severance Amount shall be immediately due and payable in the
event that either ICF or COMC enters into an agreement (a) for
the sale of substantially all of the assets of ICF or COMC or (b)
respecting a transaction in which, whether by merger,
consolidation, sale of stock, reorganization, or otherwise, the
holders of the outstanding voting stock of the Company
immediately prior to such transaction will own, immediately after
such transaction, securities representing less than fifty percent
(50%)
11
<PAGE>
of the voting power of the corporation or other entity surviving
such transaction.
The undersigned, Charles E. Lincoln, does hereby declare that the
meaning of this Release Agreement has been explained to him by his attorney, and
that he fully understands and appreciates the meaning thereof and has executed
the same of him own free will and accord.
PLEASE READ CAREFULLY. THIS AGREEMENT SIGNIFICANTLY AFFECTS YOUR
LEGAL RIGHTS.
DATED: ____________________ ______________________________
Charles E. Lincoln
DATED: ____________________ ICF Communication Solutions, Inc.
By: ____________________________
Title: _________________________
DATED: ____________________ COMC, Inc.
By: ____________________________
Title: ____________________
12
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<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 311,600
<SECURITIES> 0
<RECEIVABLES> 6,386,700
<ALLOWANCES> 273,100
<INVENTORY> 225,900
<CURRENT-ASSETS> 406,000
<PP&E> 562,200
<DEPRECIATION> 0
<TOTAL-ASSETS> 7,963,100
<CURRENT-LIABILITIES> 3,199,000
<BONDS> 3,500,000
0
0
<COMMON> 194,000
<OTHER-SE> 782,700
<TOTAL-LIABILITY-AND-EQUITY> 7,963,100
<SALES> 0
<TOTAL-REVENUES> 5,952,700
<CGS> 3,133,800
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<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 157,200
<INCOME-PRETAX> 1,218,000
<INCOME-TAX> 480,000
<INCOME-CONTINUING> 738,000
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
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<EPS-BASIC> 0,046
<EPS-DILUTED> 0,038
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