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U.S. Securities and Exchange Commission
Washington, D.C. 20549
FORM SB-2
REGISTRATION STATEMENT UNDER THE SECURITIES AT OF 1933
(Amendment No. _____)
TELESERVICES INTERNATIONAL GROUP, INC.
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(Name of small business issuer in its charter)
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Florida 59-2773602
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(State or jurisdiction of (Primary Standard Industrial I.R.S. Employer Identification No.
incorporation or organization Classification Code Number)
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100 Second Avenue South, Suite 1000, St. Petersburg, Florida 33701
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(Address and telephone number of principal executive offices)
100 Second Avenue South, Suite 1000, St. Petersburg, Florida 33701
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(Address of principal place of business or intended principal place of business)
Robert P. Gordon, 100 Second Avenue South, Suite 1000,
St. Petersburg, Florida 33701. (727) 895-4410
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(Name, address and telephone number of agent for service)
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Copies to:
Troy A. Young, Esq.
Futro & Trauernicht, LLC
1401 Seventeenth Street, 11th Floor
Denver, Colorado 80202
(303) 295-3360
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Approximate date of proposed sale to the public: From time to time after the
effective date of this Registration Statement.
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [ ]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [ ]
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CALCULATION OF REGISTRATION FEE
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Proposed Maximum Proposed Maximum Amount of
Title of each Class of Securities Amount to be Offering Price Aggregate Offering Registration
to be Registered Registered(1) Per Security(1) Price(1) Fee(2)
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Common Stock, $.0001 par value 48,822,640(2) $ .315(3) $15,379,131 $ 4,275.40
Common Stock, $.0001 par value 1,274,250(4) $ .315(3) $ 401,389 $ 111.59
Common Stock, $.0001 par value 250,000(5) $ .315(3) $ 78,750 $ 21.89
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Total Registration Fee $ 4,408.88
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(1) Estimated solely for the purpose of calculating the registration fee
pursuant to Rule 457 promulgated under the Securities Act of 1933.
(2) Represents shares that have been or may be acquired by the selling
securityholders upon conversion of convertible debentures, assuming a
conversion price of $.10 per share for debentures which have not yet
been converted. Includes an indeterminate number of shares which may
become issuable in the event of a stock split, stock dividend or
similar transaction involving the common stock to pursuant to
antidilution provisions of the convertible debentures.
(3) Calculated solely for the purpose of determining the registration fee
pursuant to Rule 457(g)(3) based on the average of the bid and asked
price of the common stock on the over the counter electronic bulletin
board maintained by the National Association of Securities Dealers on
April 30, 1999.
(4) Represents shares which may be issuable upon exercise of warrants
issued to two selling securityholders in connection with the issuance
and sale of common stock. Includes an indeterminate number of shares
which may become issuable in the event of a stock split, stock
dividend or similar transaction involving the common stock pursuant to
antidilution provisions of the warrants.
(5) Represents shares which may be issuable upon exercise of warrants
issued to a registered broker-dealer in connection with the issuance
and sale of the convertible debentures and the warrants.
The company hereby amends this registration statement on such date or dates as
may be necessary to delay its effective date until the company shall file a
further amendment which specifically states that this registration statement
shall thereafter become effective in accordance with section 8(a) of the
Securities Act or until the registration statement shall become effective on
such date as the Securities and Exchange Commission, acting pursuant to said
section 8(a), may determine.
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SUBJECT TO COMPLETION, DATED __________, 1999
PRELIMINARY PROSPECTUS
TELESERVICES INTERNATIONAL GROUP INC.
50,346,890 SHARES
COMMON STOCK
The selling securityholders named below are selling up to 50,346,890 shares of
the common stock of TeleServices International Group Inc. under this
prospectus, including up to 48,822,640 shares that they have acquired or may
acquire upon conversion of convertible debentures and 1,524,250 shares that
they may acquire upon exercise of warrants. The selling securityholders
acquired, or will acquire, the convertible debentures and the warrants in the
private financing described below under the caption "Description of Securities
- - Debentures and Warrants."
TeleServices International Group Inc. has not made any underwriting
arrangements with respect to the common stock. The common stock is traded on
the over the counter electronic bulletin board maintained by the National
Association of Securities Dealers under the symbol "TSIG". The selling
securityholders may offer their shares of common stock in the manner described
below under the caption "Plan of Distribution" in public or private
transactions on or off the over the counter electronic bulletin board, or any
other national securities exchange or automated quotation system on which the
common stock may be listed or traded, at prevailing market prices or privately
negotiated prices. Sales may be made through brokers, dealers or other agents
who may receive compensation in the form of commissions, discounts or
concessions. The selling securityholders and participating brokers or dealers
may be deemed to be "underwriters" within the meaning of the Securities Act and
any commission, discount or concession they receive may be deemed to be
underwriting compensation.
TeleServices International Group Inc. will not receive any proceeds from the
sale of the common stock, but will receive proceeds from the sale of
convertible debentures and may receive proceeds from the exercise price of the
warrants.
THE COMMON STOCK IS A SPECULATIVE INVESTMENT AND INVOLVES A HIGH DEGREE OF
RISK. YOU SHOULD READ THE DESCRIPTION OF CERTAIN RISKS UNDER THE CAPTION "RISK
FACTORS" COMMENCING ON PAGE 3 BEFORE PURCHASING THE COMMON STOCK.
THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES OR DETERMINED IF THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time the registration statement becomes
effective. This prospectus shall not constitute an offer to sell or the
solicitation of an offer to buy nor shall there be any sale of these securities
in any state in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such state.
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TABLE OF CONTENTS
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SECTION PAGE
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1. Summary .......................................................... 1
2. Cautionary Statement Concerning Forward Looking Statements ....... 3
3. Risk Factors ..................................................... 3
4. Description of TeleServices ...................................... 6
5. Legal Proceedings ................................................ 9
6. Description of Property .......................................... 10
7. Market for Common Stock and Related Shareholder Matters .......... 10
8. Management Discussion and Analysis of Financial Condition ........ 11
9. Directors and Executive Officers ................................. 12
10. Ownership of Securities by Beneficial Owners and Management ...... 14
11. Executive Compensation ........................................... 16
12. Certain Relationships and Related Transactions ................... 20
13. Selling Securityholders .......................................... 20
14. Plan of Distribution ............................................. 22
15. Description of Securities ........................................ 23
16. Legal Matters .................................................... 24
17. Indemnification Disclosure ....................................... 24
18. Changes In and Disagreements With Accountants .................... 24
19. Where You Can Find More Information .............................. 25
20. Financial Statements ............................................. 25
21. Exhibits Index.................................................... 30
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Dealer Prospectus Delivery Obligation
All dealers that effect transactions in these securities, whether or not
participating in this offering, may be required to deliver a prospectus. This
is in addition to the dealers' obligation to deliver a prospectus when acting
as underwriters and with respect to their unsold allotments or subscriptions.
This prospectus is part of a registration we filed with the Commission. You
should rely only on the information or representations provided in this
prospectus. We have authorized no one to provide you with different
information. No offer of the common stock will be made in any state where the
offer is not permitted. You should not assume that the information in this
prospectus is accurate as of any date other than the date on the cover of this
prospectus.
CAUTIONARY STATEMENT FOR PURPOSES
OF THE "SAFE HARBOR" PROVISIONS OF THE
PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
This prospectus and the documents incorporated herein by reference contain
forward-looking statements within the meaning of Section 27A of the Securities
Act of 1933 and Section 21E of the Securities Exchange Act of 1934, concerning
our future operations. Forward-looking statements are statements that estimate
the happening of future events, are not based on historical fact and are
"forward-looking statements" within the meaning of the Private Securities
Litigation Reform Act of 1995. Forward-looking statements may be identified by
the use of forward-looking terminology such as "believes", "intends",
"projects", "forecasts", "predicts", "may", "will", "expects", "estimates",
"anticipates", "probable", "continue" or similar terms, variations of those
terms or the negative of those terms. The "risk factors" included in this
prospectus under the caption "risk factors" constitute cautionary statements
identifying important factors that could cause actual results to differ
materially from those in the forward-looking statements. The forward-looking
statements contained in this prospectus and the documents incorporated herein
by reference have been compiled by our management based upon assumptions they
consider reasonable. These assumptions are subject to significant business,
economic and competitive uncertainties and contingencies, many of which are
beyond our control. Actual results could differ materially from those currently
anticipated due to a number of factors, including those identified under "risk
factors" and elsewhere in this prospectus. Accordingly, there can be no
assurance that such statements, estimates and projections will be realized. The
forecasts and actual results will likely vary and those variations may be
material. We make no representation or warranty as to the accuracy or
completeness of such statements, estimates or projections contained in this
prospectus or that any forecast contained in this prospectus will be achieved.
These forward-looking statements have been compiled as of the date of this
prospectus or the date of the documents incorporated herein by reference, as
the case may be, and you should evaluate them with consideration of any changes
occurring after the date of this prospectus or the documents incorporated
herein by reference in which such forward-looking statements appear. We do not
intend to update these forward-looking statements. We cannot give you any
assurance that any of the assumptions relating to the forward-looking
statements specified in this prospectus or the documents incorporated herein by
reference will prove to be accurate. We urge you and your advisors to review
these forward-looking statements, to consider the assumptions upon which they
are based and to ascertain their reasonableness.
RISK FACTORS
An investment in TeleServices' common stock involves major risks.
Prospective investors should carefully consider the following risk factors, in
addition to all of the other information in this prospectus, in determining
whether to purchase shares of TeleServices' stock.
WE ARE A HIGHLY SPECULATIVE INVESTMENT. The telecommunications and internet
industries are subject to intense competition. TeleServices has been operating
at a loss since inception, and you cannot assume that TeleServices' plans will
either materialize or prove successful. There is no assurance that
TeleServices' operations will become profitable. In the event TeleServices'
plans are unsuccessful, you may lose all or a substantial part of your
investment. For these and other reasons, the purchase of TeleServices' stock
must be considered a highly speculative investment.
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WE HAVE A HISTORY OF OPERATING LOSSES, DEPLETION OF WORKING CAPITAL AND
FINANCIAL INSTABILITY. For the fiscal year ended December 31, 1998,
TeleServices had a net loss of approximately $11,822,251. These losses are
expected to continue for an undetermined time. As of December 31, 1998,
TeleServices had negative stockholders' equity of $8,004,726, an accumulated
deficit of $37,888,635 and a working capital deficit of $8,892,289.
TeleServices has earned limited operating revenues. The financial success of
TeleServices will depend largely upon facts related to TeleServices'
operations. There is substantial doubt as to whether TeleServices will be able
to continue operations. There can be no assurance as to whether TeleServices
will be able to achieve profitable operations or sustained revenues.
WE CANNOT BE SURE THAT FUTURE CAPITAL WILL BE AVAILABLE. TeleServices' business
will continue to require substantial funds for capital expenditures and related
expenses in pursuit of our business plans. The timing and amount of such
spending is difficult to predict accurately and will depend upon many factors.
To the extent required, TeleServices may seek additional funds through
additional private placements which will be exempt from registration. Any such
additional private placements will not require prior shareholder approval and
may include offerings of equity securities such as common stock or preferred
stock which is convertible into common stock, or debt securities such as notes
or debentures convertible into common stock. If additional funds are raised by
issuing equity or debt securities, further dilution to shareholders could
occur. Additionally, investors purchasing future equity or debt securities
could be granted registration rights by TeleServices. There can be no assurance
that additional financing will be available when needed or on terms acceptable
to TeleServices.
WE ARE INVOLVED IN SEVERAL PENDING LAWSUITS. TeleServices and its subsidiaries
are currently involved in several pending lawsuits. There can be no assurance
that the outcome of any litigation will not result in substantial cost and
uncertainty to TeleServices or its subsidiaries.
ONE OF OUR SUBSIDIARIES FILED FOR BANKRUPTCY. VSI, a subsidiary which had
accounted for a significant portion of TeleServices' information services
business in prior years, filed for Chapter 7 bankruptcy in March of 1999. There
can be no assurance that TeleServices' business, financial condition and
results of operations will not be materially adversely affected by the
bankruptcy of VSI.
WE DEPEND ON EXISTING MANAGEMENT; NO ADDITIONAL LIFE INSURANCE ON KEY PERSONNEL
IS CARRIED. TeleServices' future success depends in significant part upon the
continued service of certain key management personnel. Competition for such
personnel is intense, and there can be no assurance that TeleServices can
retain its key managerial personnel or that it can attract, assimilate or
retain other highly qualified managerial personnel in the future. The loss of
key personnel, especially if without advance notice, or the inability to hire
or retain qualified personnel could have a material adverse effect upon
TeleServices business, financial condition and result of operations.
TeleServices does not currently maintain additional life insurance on the life
of any of its key officers, directors, employees or consultants.
INDEMNIFICATION OF DIRECTORS AND OFFICERS. TeleServices' by-laws provide that
TeleServices will indemnify a current or past director or officer, or person
who has acted in such capacity for another corporation at the request of
TeleServices, (and such person's heirs and legal representatives) against all
reasonably incurred costs and amounts paid to settle an action, in a proceeding
where he has been named as a party because of his role. TeleServices has also
entered into indemnification agreements with several of the officers and
directors of TeleServices and its subsidiaries, and may enter into similar
agreements in the future.
The company currently has directors' and officers' liability insurance policies
with a total limit of liability of $10,000,000 (including costs of defense).
The current policies expire May 27, 1999.
Florida law provides that directors will not be personally liable to
TeleServices or its shareholders for monetary damages for breach of fiduciary
duty as a director if:
o he acted honestly and in good faith with a view to the best
interests of TeleServices;
o in the case of a criminal or administrative action or
proceeding that is enforced by a monetary penalty, he had
reasonable grounds for believing that his conduct was lawful;
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o he did not receive an improper personal benefit from a
transaction; and
o he did not authorize a distribution that is unlawful under
Florida law.
TeleServices has been advised that while indemnification may be invoked to
disclaim liability for damages by directors, officers or persons controlling
TeleServices under these circumstances, in the opinion of the Securities and
Exchange Commission, such indemnification is against public policy and is
therefore unenforceable.
PREFERRED STOCK. The Articles of Incorporation of TeleServices authorize the
issuance of 10,000,000 shares of preferred stock. None have been issued. The
preferred stock may be divided into one or more series. The board of directors
is authorized to determine the rights, provisions, privileges and restrictions
and number of authorized shares of any series of preferred stock. Additionally,
the preferred stock can have other rights, including voting and economic rights
which are senior to the common stock. The issuance of preferred stock could
adversely affect the market value of the common stock.
WE HAVE NEVER PAID DIVIDENDS. The board of directors of TeleServices has the
sole authority to determine whether cash dividends will be paid. This decision
will depend on many factors including TeleServices' earnings, capital
requirements and financial condition. TeleServices has not paid cash dividends
in the past and does not anticipate paying cash dividends in the near future.
HOW FUTURE ISSUANCES OF COMMON STOCK WILL AFFECT YOUR RIGHTS AS A SHAREHOLDER.
TeleServices has three separate non-qualified stock option plans. These three
plans, combined, initially reserved for issuance up to 47,500,000 shares of
TeleServices' common stock to officers, directors, employees and consultants of
TeleServices and its subsidiaries. Roughly 43.3 million of these shares have
been issued under these plans. When additional shares are issued under these
plans, your stock ownership will be diluted. TeleServices currently has
outstanding additional non-plan options and other contingent commitments to
issue shares of common stock. Additional stock or options to acquire stock of
TeleServices can be granted at any time by the board of directors, usually
without shareholder approval.
HOW FUTURE SALES OF COMMON STOCK MAY AFFECT YOU. Future sales of common stock
by management personnel and others may be made under Rule 144 of the 1933 Act.
In general, under Rule 144, a person who has held their stock for one year may,
under certain circumstances, sell within any three-month period a number of
shares which is not greater than one percent of the then outstanding shares of
common stock or (if qualified) the average weekly trading volume in shares
during the four calendar weeks immediately prior to such sale. Under certain
circumstances, the sale of shares which have been held for two years by a
person who is not affiliated with TeleServices is also permitted. Management
personnel and others have or may acquire shares of common stock registered on
Form S-8 which may be sold in compliance with state securities laws without
restriction by non-affiliates in, and by those affiliated with TeleServices
either (i) under Rule 144 but without the one-year holding period or (ii)
pursuant to an effective reoffer prospectus filed for the Form S-8. Future
sales of common stock may have an adverse effect on the current market price of
the common stock and adversely affect TeleServices' ability to obtain future
funding as well as create a potential market overhang.
WE MAY HAVE TO HOLD A SPECIAL SHAREHOLDERS' MEETING TO INCREASE THE NUMBER OF
SHARES OF COMMON STOCK AUTHORIZED TO BE ISSUED. To date, 100,000,000 shares of
common stock are authorized and 80,064,798 shares are outstanding. Because the
number of shares we may have to issue when debentures are converted by selling
shareholders depends on the market price of our common stock, we may be
required to issue more shares than we have authorized. Increasing the number of
authorized shares requires stockholder approval. We are considering calling a
special shareholders' meeting to do this before we have issued all authorized
shares. There can be no assurance that the shareholders will approve an
increase in the authorized shares, which could have a serious impact on our
ability to meet our contractual obligations to the selling securityholders.
WE MAY BE ADVERSELY AFFECTED BY YEAR 2000 COMPLIANCE ISSUES. The Year 2000
computer problem refers to the potential for system and processing failures of
date-related data as a result of computer-controlled systems using two digits
rather than four to define the applicable year. For example, computer programs
that have time-sensitive software may recognize a date represented as "00" as
the year 1900 rather than the year 2000. This could result in a
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system failure or miscalculation causing disruptions of operations, including
among other things, a temporary inability to process transactions, send
invoices, or engage in similar normal business activities.
TeleServices is continually evaluating its Year 2000 state of readiness. We
have determined that our systems which are affected are very limited,
specifically:
o an old reservation system that has not been used since May
1998; and
o an employee time-clock system, which will be phased out of
use before December 1999.
We have completed 90% of our evaluation on TeleServices' computer systems. To
date, all computer hardware is Year 2000 compliant. All software has been
inventoried and each software manufacturer has been contacted to verify that
the software is Year 2000 compliant. So far, it has been determined that no
software will need to be replaced, but some will require software patches. Once
the inventory is complete and all patches are installed, TeleServices will
perform tests to make sure all computer systems are Year 2000 compliant. If
third parties with which TeleServices conducts business do not successfully
address the Year 2000 issue, the business and financial condition of
TeleServices could be adversely effected.
OUR STOCK HAS BEEN LIMITED IN ITS PUBLIC TRADING; POSSIBLE VOLATILITY OF STOCK.
There has been a limited public trading market for the common stock of
TeleServices, and there can be no assurance that an active trading market will
be sustained upon the completion of the offering. The issuance of common stock
on conversion of the debentures or exercise of the warrants and the subsequent
sale of the common stock pursuant to this prospectus can dilute the common
stock and adversely affect the market price of the common stock. There can be
no assurance that the market price of the stock will not decline below its
current price. The market price for securities of telecommunications and
internet companies have historically been highly volatile. TeleServices
believes that fluctuations in its operating results and even mild expressions
of interest on a particular day (being traded on the OTC Bulletin Board) can
cause the market price of its shares to fluctuate, perhaps substantially. The
stock can expect to experience substantial price changes in short periods of
time, owing to the unpredictability of the Bulletin Board. Stock markets in the
United States have, from time to time, experienced significant price and volume
fluctuations which are not necessarily related to TeleServices net worth or any
other established criteria of value. It can be expected that substantial price
swings will occur in the stock for the foreseeable future, and percentage
changes in stock indices (such as the Dow Jones Industrial Average) could be
magnified, particularly in downward movements of the markets. These
fluctuations may adversely affect the price of the common stock.
RESTRICTIONS ON SECONDARY TRADING. While it is posted on the OTC Bulletin Board
and trades below $5.00 per share, TeleServices' common stock will be subject to
restrictions imposed by law that limit the ability of broker-dealers which sell
such securities to anyone other than established customers and investors which
meet certain sophisticated investor tests. These restrictions can affect the
ability of broker-dealers to sell TeleServices' stock and can also affect your
ability to resell your stock in any trading market that may develop.
Cautionary Statement Concerning Forward-Looking Statements Included In This
Prospectus. With the exception of historical matters, the matters discussed or
incorporated by reference in this prospectus are forward looking statements
that involve risks and uncertainties that could cause actual results to differ
materially from targeted or projected results. These forward-looking statements
include statements regarding the intent, belief or current expectations of
TeleServices and members of its senior management team, including, without
limitation, future economic, competitive and market conditions and future
business decisions, all of which are difficult or impossible to predict
accurately. Many of these factors are beyond the ability of TeleServices to
control. Readers are cautioned not to put undue reliance on forward looking
statements.
DESCRIPTION OF TELESERVICES
BUSINESS DEVELOPMENT
TeleServices International Group Inc. (the "Registrant", the "company"
or "TSIG") is in the business of providing teleservices and internet solutions
to both domestic and international companies through state-of-the-art
facilities, telecommunications and products.
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History of the Company
TeleServices International Group Inc. (formerly Visitors Services
International Corp. and Dynasty Capital Corporation) was a development stage
enterprise formed under the laws of the State of Florida to evaluate, structure
and complete a business combination in the form of a merger with, or
acquisition of, prospects consisting of private companies, partnerships or sole
proprietorships. The company sold 2,500,000 units of $.0001 par value common
stock ("common stock") at $.02 per unit, for total proceeds of $50,000 in a
public offering which closed on June 8, 1987. The company was formed for the
purpose of seeking potential business opportunities in the form of a business
combination with of an existing business.
Acquisition of Visitors Services International Corp.
Visitors Services International Corp., formerly Visitors Services,
Inc. ("VSI") was in the business of providing reservations and information
services to Convention and Visitors Bureaus and convention/event organizers.
VSI originally became a subsidiary of the company as a result of an Agreement
and Plan of Reorganization ("Agreement") among the company, VSI and certain
Stockholders of VSI, dated September 26, 1996, pursuant to which a minimum of
80% of the issued and outstanding shares of VSI were to be exchanged on a one
share for one share basis for shares of restricted stock of the company, after
the company effected a 14.4 to 1 reverse stock split of the shares outstanding
before the date of the Agreement from 10,801,000 shares down to 750,093 shares
(in lieu of any fractional shares created as a result of the reverse stock
split, each holder of a fractional share was issued one additional whole
share). The closing date of the Agreement was September 27, 1996, when the
company's reverse stock split was effected and certain Stockholders of VSI
holding at least 80% of the outstanding shares of VSI executed the Agreement.
The "Exchange Offer" was extended to and accepted by all of the remaining
shareholders of VSI. By virtue of the reorganization, VSI became a wholly-owned
subsidiary of the company.
After becoming a subsidiary of the company, VSI entered into the
following business acquisitions:
1. On December 23, 1996, VSI entered into an Asset Purchase Agreement
with Global Reservation Systems, Inc. ("GRS"), a Colorado corporation, to
acquire all of GRS's interests in, to and under any asset, used in connection
with GRS's business of answering toll-free telephone numbers advertised by
contracted marketing organizations, providing information to callers of such
toll-free telephone numbers, making reservations with lodging properties and
attractions and providing advertising effectiveness statistics to such
contracted marketing organizations of every kind, nature and description.
2. On January 21, 1997, VSI acquired and took possession of all the
assets of International Reservation Services, Limited ("IRSL"), to utilize all
such assets to operate the former business of IRSL as the business of VSI. VSI
acquired these assets from IRSL as a result of a bankruptcy proceeding of IRSL.
The assets of IRSL consisted primarily of equipment, account receivables,
customer contracts and the rights to approximately one hundred "800" telephone
numbers. IRSL was a destination database marketing service company,
specializing in the provision of a centralized nationwide lodging reservation
service and other travel related services.
On March 5, 1999, VSI filed a voluntary petition for relief under
Chapter 7 of the United States Bankruptcy Code for the Middle District of
Florida, Tampa Division.
Acquisition and Disposition of GuaranTEE Time, Inc.
The company acquired all of the outstanding capital stock of GuaranTEE
Time, Inc. ("GTT") on February 24, 1997, in exchange for restricted common
stock of the company. Initially 100,000 shares of the company were issued to
the selling shareholders of GTT in exchange for their 100% interest in GTT. GTT
provided automated tee-time scheduling for daily-fee golf courses and their
customers.
The company disposed of substantially all of the assets of GTT on
October 3, 1997, following a sale by GTT (as seller) to Guarantee Time
Acquisitions, Inc., an unaffiliated third-party (the "Buyer"). The company and
GTT agreed not to compete with the Buyer for a period of three years in the
business of tee-time reservation services.
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Acquisition of American International Travel Agency, Inc.
On December 6, 1996, the company, through VSI, entered into a Stock
Purchase Agreement with Phoenix Information Systems Corp. ("Phoenix") to
acquire all the capital stock of American International Travel Agency, Inc.
("AIT") from Phoenix in exchange for 31,579 shares of common stock of Phoenix
owned by VSI. This transaction was closed on December 6, 1996. The
consideration paid was based upon arms-length negotiations and an independent
fair-market evaluation.
Following a corporate restructuring by the company, AIT became a
wholly-owned subsidiary of the company. AIT enables the company to access to
the major travel agency computerized reservation systems world-wide, and the
ability to issue airline tickets.
PRESENT BUSINESS OF THE COMPANY
The company has recently restructured its business operations and
announced its intent, subject to shareholder approval, to change the name of
the company to "TeleServices Internet Group Inc." doing business as "TSIG.com".
Through its three strategic business divisions (described below), the company
is positioning itself as a pioneer in providing comprehensive outsourced
e-commerce solutions. These services will enable companies to develop, build
and maintain e-commerce websites, create revenue-generating programs with
corporations and non-profit organizations that attract consumer to customers'
sites, and complement these offerings with web-based call center and related
services that provide customer service and support. A brief description of the
three divisions is set forth below.
Online Services Division
The Online Services Division plans to offer a full complement of
online products designed to reduce a client's time to market and cost of
development, by providing an established e-commerce engine with customized
user-interfaces. The company will offer this technology through "packaged
products for rent" instead of the traditional building of websites from
scratch. The company will provide the necessary hardware, maintenance and
technical support necessary for a client's solution at a very competitive
price. The company plans to build up recurring revenue through monthly
maintenance and support programs. This division will be headquartered in the
Silicon Valley area of California.
The Online Services Division also plans to offer "Community Website"
products to support the "My Card" Programs of the Products and Services
Division (described below) and to cross-sell products while providing an
Internet solution to not-for-profit organizations.
TeleServices Division
The TeleServices Division, based in St. Petersburg, Florida, will
offer "Web-Based Customer Care Solutions" as well as traditional service bureau
call-center business including, but not limited to, inbound, outbound and
telemarketing. Through state-of-the-art technology and internet connectivity,
all call center operators have on-line capabilities to provide customer and
technical support and order entry to provide solutions for both in-house
products as well as clients' web-based applications.
Products and Services Division
The Products and Services Division offers consumer products through
its customized "My Card" programs. The first of these products, My MusicCard,
entitles holders to purchase music CDs and cassette tapes at discounted prices.
Consumers receive the discounts by purchasing membership cards either from the
site or authorized distributors, through affinity programs with corporations
and retail stores, or as part of fund-raising drives from non-profit
organizations.
On March 29, 1999, the company launched its proprietary Internet site,
www.myMusicCard.com, which enables consumers to purchase music CDs and
cassettes over the Internet at prices lower than major retail or
8
<PAGE> 11
existing online sources. The site offers more than 250,000 music selections
from a complete range of artists, and the company believes it has the most
robust searching ability of any music-only site, enabling consumers to search
by any combination of artist, title, release date, song name and other
criteria.
The myMusicCard.com site will soon offer video DVDs and other related
products, as well as links to other companies to provide digital downloading as
well as customized compact discs. The My MusicCard program is the first of many
proposed products that will be available to clients through the "My Card"
Program. The next product the company intends to launch is the "My PhotoCard".
The Products and Services Division has begun operations thorough two
wholly-owned subsidiaries: My MusicCard Company and My Card, Inc.
To handle order fulfillment of current and future products, the
company uses third-party fulfillment houses and also plans to develop its own
fulfillment facility in California.
Trademarks
The company's subsidiary, VSI, applied for federal registration of the
trademark "VSI" which application was approved on February 27, 1996.
The company and/or its subsidiaries have applied for federal
registration of several trademarks and service-marks which are currently
pending approval.
Employees
As of the date hereof, the company and its subsidiaries currently
employ 78 individuals, of which 17 are part-time employees.
LEGAL PROCEEDINGS
The company and/or its subsidiaries are parties to the following
material legal proceedings:
1. On February 9, 1998, Robert P. Gordon, individually, filed a lawsuit
against Felcrest Trading Ltd. ("Felcrest") in Circuit Court for Pinellas County,
Florida in connection with a private loan made by Felcrest to Gordon. On
October 23, 1998, Felcrest filed a third party complaint against the company,
VSI, and current and former officers and directors of the company and VSI and
other third parties (collectively the "Third Party Defendants") asserting
claims for unspecified damages against the Third Party Defendants. All parties
have executed a Stipulation of Dismissal based on a settlement agreement that is
subject to court approval.
2. On December 28, 1998, EIS International, Inc., of Herndon, Virginia,
issued a Demand for Arbitration to the company, as the result of a dispute
arising under a contract dated May 7, 1998 with the company. EIS seeks $223,261
for software, licenses and services, which it claims are due and owing under
the parties agreement, plus interest, attorneys' fees and costs. The company
claims that it notified EIS of major defects in the software, demanded that
they be remedied, but EIS refused to do so and instead demanded payment.
Further, the company counter-claimed that it has suffered damages in excess of
$200,000, plus costs and attorneys' fees, because the
9
<PAGE> 12
company was forced to create alternative systems for performing the functions
for which the EIS software was intended and suffered significant loss of
business opportunities as a result of the failure of EIS's software to perform
as promised. A date for an arbitration proceeding has not been set yet.
3. On March 5, 1999, the company's wholly owned subsidiary, Visitors
Services International Corp., filed a voluntary petition for relief under
Chapter 7 of the United States Bankruptcy Code for the Middle District of
Florida, Tampa Division. Visitors Services International Corp. was a party to
several previously reported material litigation proceedings, all of which have
been automatically stayed as a result of the bankruptcy filing.
DESCRIPTION OF PROPERTY
The company owns no property; all of its facilities are leased. Its
corporate headquarters are housed in approximately 16,000 square feet of
commercial space at 100 Second Avenue South, St. Petersburg, Florida. The
company has no real estate related investments.
MARKET FOR COMMON STOCK AND RELATED SHAREHOLDER MATTERS
(a) Market Information
The company's common stock is traded over-the-counter on the
Electronic Bulletin Board maintained by the National Association of Securities
Dealers under the Symbol "TSIG". There is no assurance that the common stock
will continue to be quoted or that any liquidity exists for the company's
shareholders.
The following table sets forth the range of high and low bid
quotations for the company's common stock on the OTC Bulletin Board for each
quarter of 1997 and 1998 and the first quarter of 1999.
<TABLE>
<CAPTION>
Low Bid High Bid
------- --------
<S> <C> <C>
1st Qtr. 1997 $ 2.25 $ 3.25
2nd Qtr. 1997 $ 2.00 $ 3.25
3rd Qtr. 1997 $ 1.9375 $ 2.8125
4th Qtr. 1997 $ .24 $ 2.25
1st Qtr. 1998 $ .15 $ .51
2nd Qtr. 1998 $ .125 $ .48
3rd Qtr. 1998 $ .1875 $ .39
4th Qtr. 1998 $ .18 $ .52
1st Qtr. 1999 $ .31 $ .48
</TABLE>
The source of this information is America Online quotation services
and broker-dealers making a market in the company's common stock. These prices
reflect inter-dealer prices, without retail markup, mark-down or commission and
may not represent actual transactions.
(b) Holders
As of March 26, 1999, there were approximately 170 holders of record
of the company's common stock (this number does not include beneficial owners
who hold shares at broker/dealers in "street-name").
(c) Dividends
The company has paid no cash dividends on its common stock and
management does not anticipate that such dividends will be paid in the
foreseeable future.
10
<PAGE> 13
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
Results of Operations
Total revenues for the fiscal year ended December 31, 1998, were
$1,021,478, representing a 67% decrease from revenues of $2,365,042 for the
prior fiscal year ended December 31, 1997. The company sustained a net loss of
$11,822,251 in 1998, compared to a net loss of $18,042,742 for fiscal 1997, a
34% improvement. Operating expenses experienced a 40% decrease to $12,276,694
from a total of $20,407,784 for fiscal 1997. In 1998, there were decreases in
most expense categories, in particular salaries and related expenses, contract
services, telephone and travel expenses. The overall decrease in operating
expense and net loss was primarily due to a refocus of the company's efforts
towards basic travel-related teleservice business and away from large-scale
special-event projects that were not financially successful in 1997. However,
despite these efforts, significant losses were experienced and the company made
the decision to discontinue the travel-related portion of its business.
In response to the continuation of the operating losses from the
commission-based, travel-related teleservice operations, the company initiated
aggressive restructuring during the year. The company added several new members
to its management team and is making fundamental changes to its strategic focus
through its reorganization into the divisional structure as noted in the
"Present Business of the Company".
In the TeleServices Division, the company is now targeting its sales
and marketing efforts toward traditional outsourced teleservices. Call center
services will be offered on a time-billing basis, with revenues based upon the
time a customer service representative spends on customer calls as opposed to
commissions generated from sales made. In January 1999, the company was
selected by The Signature Group, a leader in the direct marketing industry, to
provide bilingual teleservice and travel reservation services for its Loyalty
and Rewards program.
Additionally, the company's Product and Services Division, through its
My MusicCard program, has entered into several promotional agreements to market
its discount card and retail music internet site. Agreements have been reached
with the National Music Foundation, a leading charitable organization for the
music industry; TEMPO (The Entertainment Marketing Promotion Organization),
which offers corporate premium and incentive services for the Association For
Independent Music, PolyGram Records and Philips Electronics; and Nettaxi, Inc.
a premier internet community and portal website that has more than 80 million
monthly page views. Each of these promotional affiliations are expected to
substantially increase the sales of both the My MusicCard discount and the
music CDs.
The Online Services division is currently establishing its presence
with a suite of fully-integrated e-commerce and internet hosting products and
services. The first development contract has been executed and client work has
begun.
The company employs sales staff in all three divisions and additional
new business opportunities are continually being developed in all three
business areas.
Limited Working Capital; Financial Instability
As of December 31, 1998, the company had a negative stockholder's
equity of $8,004,726, an accumulated deficit of $37,888,635, and a working
capital deficit of $8,892,289. However, on March 5, 1999, the company's
subsidiary, VSI, filed a voluntary petition for relief under Chapter 7 of the
U.S. Bankruptcy Code, claiming approximately $5.5 million in creditor
liabilities. Although there can be no assurances, the company anticipates that
the eventual resolution of the bankruptcy proceeding will reduce the
consolidated working capital deficit by as much as $5 million, with the company
continuing to be obligated to the Internal Revenue Service for approximately
$475,000 for the trust fund portion of certain payroll taxes accrued by VSI.
Various factors affecting the company's operations raise doubt as to
the company's ability to continue as a going concern. There can be no assurance
that the company will be able to continue as a going concern or achieve
material revenues or profitable operations. The company requires additional
financing. In this event, no assurances
11
<PAGE> 14
can be given that such financing will be available in the amount required or,
if available, that it can be on terms satisfactory to the company.
The Year 2000 issue is the result of computer programs that use two
digits rather than four to define the applicable year. The company has been
evaluating its state of readiness with respect to the Year 2000 issue on a
continuing basis. Investigations to date have determined that affected systems
comprise are very limited, specifically: a) an old reservation system that has
not been used since May 1998; and b) an employee time-clock system, which will
be phased out of use prior to December 1999. An inventory of the remainder of
the company's computer systems is approximately 90% complete. To date, all
computer hardware is Year 2000 compliant. All software has been inventoried and
each software manufacturer has been contacted to verify Year 2000 readiness. To
date it has been determined that no software will need to be replaced, but some
will require minor intervention in the form of software patches. Once the full
inventory is completed and all necessary patches are installed, the company
will perform tests to ensure Year 2000 compliance. The company can make no
assurances regarding the impact of the Year 2000 issue on its business as a
result of acts or omissions not within its control, such as acts or omissions
of non-affiliated parties with whom the company does business.
DIRECTORS AND EXECUTIVE OFFICERS
DIRECTORS OF THE COMPANY
The company has a board of directors (the "Board") which is comprised
of four members. Each director holds office until the next annual meeting of
shareholders or until a successor is elected or appointed. The members of the
board of directors of the company their respective positions (if any) are as
follows:
<TABLE>
<CAPTION>
Director of
Directors Age company Since
------------------- -------------- ---------------
<S> <C> <C>
Robert P. Gordon 48 September 1996
Paul W. Henry 51 September 1996
Michael J .Gordon 41 December 1998
John Hwang 27 January 1999
</TABLE>
ROBERT P. GORDON has served as a director of the company since
September 1996. Mr. Gordon founded the company's subsidiary, VSI, in 1992 to
meet the demanding requirements of the domestic tourism industry. As founder
and chairman of Phoenix Information Systems Corp. ("Phoenix"), a firm that
invested ten years and millions of dollars to develop an airline and hotel
reservation system for international markets, Mr. Gordon recognized that
sophisticated automated destination system software could be programmed to
exceed the specifications of any domestic or international hospitality and
tourism marketing program currently in use. Mr. Gordon is chairman of Heaven
International, Inc. (formerly Harvest International of America, Inc.), a
company engaged in the development of global tourism. Mr. Gordon has a B.A. in
Philosophy and Biology from New York University, where he also did his graduate
studies.
PAUL W. HENRY has served as a director of the company since September
1996. Mr. Henry first joined the company's subsidiary, VSI, as a Director on
March 1, 1996. Mr. Henry was Secretary and a Director of Phoenix Information
Systems Corp. and Phoenix Systems Group, Inc. from April 1992 to October 1998.
During the past ten years, Mr. Henry has been an independent financial
consultant. From 1991 to 1992, he was retained by Essex Investment Management
company, an institutional money management firm. From 1988 to 1991, Mr. Henry
was retained by the Caithness Corporation, a natural resources development
company. From 1988 to 1989 he was an advisor to Veronex Resources, an
international oil and gas exploration company. From 1987 to 1989, Mr. Henry
served as a consultant to Heaven International, Inc. Mr. Henry has a B.A. in
Economics from Yale University, and an MBA from Northeastern University.
12
<PAGE> 15
MICHAEL GORDON has served as a director of the company since December
1998. Mr. Michael Gordon has been employed since May 1998 as Vice President,
Corporate Administration, for BBJ Chemical Compounds, Inc., a privately held
company based in Tampa, Florida. Previously, he was responsible for corporate
administration at Phoenix Information Systems Corp. ("Phoenix") from July 1997
to December 1997, and earlier was responsible for corporate services for VSI,
now a wholly owned subsidiary of the company, from April 1994 to June 1997.
Mr. Gordon has a B.A. in Psychology from S.U.N.Y./Stony Brook.
JOHN HWANG has served as a director of the company since January 1999.
Mr. Hwang became employed by the company in February 1999 as Senior Vice
President, Online Services Division, and as Chief Information Officer. From
March 1998 to February 1999, Mr. Hwang was a managing partner at Cohesive
Technology Solutions, Inc. where he was responsible for consulting in regard to
on-line services, including web sites and e-commerce. From April 1995 to March
1998, he was Chief Executive Officer of I-Consulting Corporation, and prior
thereto was a member of the technical staff of Oracle Corporation. Mr. Hwang
has a B.S in Computer Science from Stanford University.
EXECUTIVE OFFICERS OF THE COMPANY
The executive officers of the company and their respective positions
are as follows:
ROBERT P. GORDON, a director of the company, has served as Chairman of
the company since September 1996 and as Chief Executive Officer ("CEO") since
approximately August 1998. The Chairman is an executive officer of the company.
Mr. Gordon is also presently serving as Chief Financial and Accounting Officer
for the company.
PAUL W. HENRY, a director of the company, has served as Secretary and
Treasurer of the company since September 1996.
JAMES H. GUILD, President of the company since August 1998. From March
1998 to August 1998, Mr. Guild was Vice President of InVISION Management
Systems, Inc. From August 1997 to February 1998, Mr. Guild was Senior Vice
President of Fiserv Solutions, Inc., the nation's largest outsource provider of
financial data processing. From 1993 to August 1998, Mr. Guild held positions
of Vice President and President of Recom Associates, Inc. a company acquired by
FiServ in 1994. Mr. Guild has brought to the company extensive experience in
development and management of technical and customer support functions, call
center operations, and mergers and acquisitions.
SIGNIFICANT EMPLOYEES OF THE COMPANY AND ITS SUBSIDIARIES
JOHN HWANG, a director of the company, became Senior Vice President,
Online Services Division, and Chief Information Officer in February 1999.
ROBERT NEWTON, Senior Vice President, Products and Services Division,
since February 1999. Previously, Mr. Newton was President of Saddleback, Inc.,
d/b/a Hallmark Respiratory Care, a distributor of durable medical equipment,
from April 1991 to January 1999. Mr. Newton graduated from the University of
Alabama with a Bachelor of Science degree in commerce and business
administration and began his career as a CPA with Pensacola-based Cherry,
Bakaert & Holland. Subsequently, Mr. Newton was VP Operations for the Pacific
region of Century 21, where was responsible for developing and managing new
domestic and international markets.
TONY PETERSON, Controller, since August 1998. Previously, Mr. Peterson
was Vice-President, Finance, Exothermal Technology, from June 1997 to May 1998;
Financial Consultant, Entre Resource, Inc., from January 1995 to June 1997; and
Owner, Genelab Medical Products, from May 1993 to December 1994.
TIMOTHY J. HEIDEMANN, Vice President of Call Center Operations,
TeleServices Division, since June 1998. Previously, Mr. Heidemann was for 15
years District Manager, AT&T, where he was responsible for TeleServices call
center and direct mail/direct marketing channel management. Mr. Heidemann
consulted to AT&T's largest inbound clients, including Continental Airlines,
Amoco Motor Club, Mead Data and Thompson Vacations. He was responsible for
managing the center review process for these clients, and presenting and
13
<PAGE> 16
implementing the resulting recommendations relative to workforce management and
overall call center performance and profitability. Mr. Heidemann's extensive
experience includes telemarketing sales, customer service, channel and vendor
management, as well as "hands-on" management of AT&T's largest consumer
acquisition telemarketing program from 1994-1996.
RICHARD OLSON, Vice President, Account Management/Customer Service,
Products and Services Division, joined the company in July 1995. Previously, he
was Regional Vice President, International Hotel Academy, from November 1994 to
June 1995, where he was responsible for account development and revenue growth
for The Grand Wailea Resort, Hotel and Spa (Maui), and the Biltmore Hotel, Los
Angeles. From September 1985 to November 1994, Mr. Olson was Director, National
Accounts, Hyatt Hotels & Resorts, where he was responsible for Convention and
Group Sales for all 86 domestic properties.
JEANNIE L. LEWIN, Vice President of Sales, Online Services Division,
since November 1996, has an extensive hotel sales background with over eleven
years of experience in the hospitality industry. Ms. Lewin joined the company
as Regional Director of Sales for the West Coast in November 1996. Ms. Lewin
spent the prior five years at Hyatt Hotels & Resorts, and before that worked at
Marriott and Hilton Hotels. At Hyatt, she most recently held the position of
Director of Sales and Marketing at the Hyatt Regency Alicante in Anaheim, CA.
Earlier, Ms. Lewin served as Director of Sales and Marketing at the Hyatt
Newporter in Newport Beach, CA and as Associate Director of Sales for the Hyatt
Regency Hilton Head in South Carolina. Ms. Lewin has worked closely with many
Convention and Visitors Bureaus and Tourism Development Councils on marketing
committees and advertising campaigns. She is a member of Professional
Conference Management Association (PCMA), Meeting Planner International (MPI),
and the America Society of Association Executives (ASAE).
FAMILY RELATIONSHIPS
Robert P. Gordon, a director and executive officer, and Michael J.
Gordon, a director, are brothers.
INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS
On September 30, 1994, the Securities and Exchange Commission issued
an Order Instituting Proceedings Pursuant to Section 8A of the Securities Act
of 1933 (the "1933 Act") and Section 21C of the Securities Exchange Act of 1934
(the "1934 Act"), Making Findings and Imposing a Cease and Desist Order against
Harvest International of America, Inc. ("Harvest"), a privately held
corporation, and Robert P. Gordon. The findings and remedial sanctions imposed
by the Order were in accordance with Offers of Settlement dated July 24, 1994
submitted by Harvest and Mr. Gordon, which the S.E.C. accepted. Without
admitting or denying liability, Harvest and Mr. Gordon consented to the Cease
and Desist Order alleging violations of Section 17(a) of the 1933 Act and
Section 10(b) and Rule 10b-5 of the 1934 Act by reason of alleged
misrepresentations in 1990 and 1991 in connection with the offer or sale of
Harvest non-interest bearing promissory notes convertible into common stock of
the predecessors of Phoenix Information Systems Corp. and one of its
subsidiaries and which common stock was to have been issued and registered
within 30 or 60 days from the dates of the various notes. Harvest is now known
as Heaven International, Inc.
In December 1997, Phoenix Information Systems Corp. ("Phoenix")
declared bankruptcy under Chapter 11 of the U.S. Bankruptcy Code. At that time,
Robert P. Gordon and Paul W. Henry were directors and Mr. Henry was an officer
of Phoenix.
On March 5, 1999, the company's wholly-owned subsidiary, VSI, filed a
voluntary petition for relief under Chapter 7 of the United States Bankruptcy
Code for the Middle District of Florida, Tampa Division. Robert P. Gordon and
Paul W. Henry are directors and officers of VSI.
OWNERSHIP OF SECURITIES BY BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth, as of March 31, 1999, the stock
ownership of each person known by the company to be the beneficial owner of
five percent or more of the company's common stock, each executive officer
14
<PAGE> 17
and director individually and all executive officers and directors of the
company as a group. No other class of voting securities is outstanding. Each
person is believed to have sole voting and investment power over the shares
except as noted.
<TABLE>
<CAPTION>
Amount and Nature of
Name and Address of Beneficial Owner (1) Beneficial Ownership(1)(2) Percent of Class (3)
- ---------------------------------------- -------------------------- --------------------
<S> <C> <C>
Robert P. Gordon (4) 40,723,950 34.87%
- ---------------------------------------- -------------------------- --------------------
Paul W. Henry (5) 888,360 1.15
- ---------------------------------------- -------------------------- --------------------
Michael J. Gordon (6) 95,665 *
- ---------------------------------------- -------------------------- --------------------
John Hwang (7) 503,572 *
- ---------------------------------------- -------------------------- --------------------
James H. Guild (8) 194,438 *
- ---------------------------------------- -------------------------- --------------------
Includes all officers and directors of 42,405,985 35.79
the company as a group (5 persons)
======================================== ========================== ====================
</TABLE>
- -----------------------
* Represents less than one percent.
(1) Unless otherwise indicated, all shares are beneficially owned by the
persons named. The address of each person is 100 Second Avenue South,
City Center, Suite 1000, St. Petersburg, Florida 33701.
(2) Includes the amount of shares each person or group has the right to
acquire within 60 days pursuant to options, warrants, rights,
conversion privileges or similar obligations.
(3) Based upon 76,078,966 shares outstanding at March 26, 1999, plus the
amount of shares each person or group has the right to acquire within
60 days pursuant to options, warrants, rights, conversion privileges
or similar obligations.
(4) Robert P. Gordon may be deemed to be a founder of the company. Robert
P. Gordon individually owns 12,086,667 shares; Elizabeth K. Gordon,
his wife, individually owns 909,857, and they jointly own 698,750
shares. Also included are 362,010 shares owned by Heaven
International, Inc., which is controlled by Robert P. Gordon and
Elizabeth K. Gordon. Included in the table are up to 26,666,667 shares
which Mr. Gordon may have the right to acquire pursuant to the
$5,000,000 Revolving Credit Loan Agreement Revolving Credit Master
Note between Mr. Gordon and the company, each dated April 23, 1998, in
the event that the should the full amount of the loan is funded and
should Mr. Gordon elect to convert the debt to shares of restricted
common stock.
(5) Paul W. Henry is Secretary, Treasurer and a Director of the company.
Included in the table are 35,000 shares owned by Mr. Henry; 15,000
shares in a custodian account for his minor son (which is controlled
by Mr. Henry, who disclaims any beneficial ownership thereof); and
options that have vested or will be vested within the next 60 days to
purchase 838,360 shares.
(6) Michael J. Gordon is a director of the company. Included in the table
are 54,000 shares owned by Mr. Michael Gordon; and options that have
vested or will be vested within the next 60 days to purchase 41,665
shares.
(7) John Hwang is a director of the company. Included in the table are
options that have vested or will be vested within the next 60 days to
purchase 503,572 shares.
(8) James H. Guild is President of the company. Included in the table are
options that have vested or will be vested within the next 60 days to
purchase 194,438 shares.
15
<PAGE> 18
EXECUTIVE COMPENSATION
The following information discloses all plan and non-plan compensation
awarded to, earned by, or paid to the company's Chief Executive Officer and
each of the four highest paid executive officers of the company and/or its
subsidiaries.
Summary Compensation Table
The following table sets forth all compensation, including bonuses,
stock option awards and other payments, paid or accrued by the company and/or
its subsidiaries during each of the fiscal years ended December 31, 1998, 1997
and 1996, to or for the company's Chief Executive Officer and each of the other
executive officers of the company and/or its subsidiaries whose total annual
salary and bonus exceeded $100,000 for the year ended 1998.
<TABLE>
<CAPTION>
Annual Compensation
------------------------------------------------------
(a) (b) (c) (d) (e)
Name Year Other
And Ended Annual
Principal December Salary Bonus Compensation
Position 31 ($) ($) ($)
- -------------------------------- ------------ ---------------- ---------------- --------------------
<S> <C> <C> <C> <C>
Robert P. Gordon, 1998 178,846 -0- -0-
Chairman, CEO, Director 1997 $158,247 $ 35,000 -0-
1996 $ 60,000 -0- -0-
</TABLE>
<TABLE>
<CAPTION>
Long Term Compensation
-----------------------------------------------------
Awards Payouts
------------------------------------ ----------------
(a) (b) (f) (g) (h) (i)
Name Year Restricted
and Ended Stock shares LTIP All Other
Principal December Award(s) Underlying Payouts Compensation
Position 31 ($) Options ($) ($)
- ------------------------------- ----------------- ------------------ ----------------- ---------------- ------------------
<S> <C> <C> <C> <C> <C>
Robert P. Gordon, 1998 1,250,000 (n1) 16,809,122 -0- -0-
Chairman, CEO, Director 1997 -0- (n2) -0- -0-
1996 -0- 15,000,000 -0- -0-
2,220,000
</TABLE>
(n1) On December 4 ,1998, Mr. Gordon was issued 5,000,000 shares of
restricted common stock as long-term compensation. The shares are
considered fully-vested and would be eligible to receive dividends, if
any. Although the shares are restricted from resale, the dollar value
of this restricted stock award is required to be calculated for
purposes of this table by multiplying the closing market price of the
company's unrestricted stock on the date of grant by the number of
shares awarded. Using the same formula, the value of the 5,000,000
restricted shares at year end was $2,187,500.
(n2) 1998 total includes 7,000,000 options granted in 1998, and a total of
9,809,122 options originally granted in 1997 that were repriced in
1998. Repricing details are as follows:
16
<PAGE> 19
o 7,000,000 options originally granted on December 8, 1997,
with an original exercise price of $.30 per share, were
repriced to $.20 on January 27, 1998, and were further
repriced to $.15 on April 20, 1998.
o 2,809,122 options originally granted on September 22, 1997,
with an original exercise price of $2.00 per share, were
repriced to $.30 on December 30, 1997 and further repriced to
$.20 on January 27, 1998.
Option/SAR Grants in Last Fiscal Year
The information provided in the table below provides information with
respect to individual grants of stock options during 1998 to each of the
executive officers named in the Summary Compensation Table above. The company
did not grant any stock appreciation rights during 1998.
<TABLE>
<CAPTION>
OPTION/SAR GRANTS IN LAST FISCAL YEAR
Individual Grants
(a) (b) (c) (d) (e)
% of Total
Number of Options/SARS
Securities Granted to
Underlying Employees Exercise or
Options/SARs in Fiscal Base Price Expiration
Name Granted (#) Year (n1) ($/Sh) Date
- --------------------------------- -------------------- ------------------- ------------------- -----------------
<S> <C> <C> <C> <C>
Robert P. Gordon 7,000,000(n2) 22.96 $ .15 04/30/03
</TABLE>
Notes:
(n1) The percentage of total options granted in the fiscal year is based
upon all options (approximately 30,493,113) granted to eligible
participants (which includes officers, directors, employees,
consultants and advisors) under each of the company's employee stock
option plans in fiscal 1998 (not all options granted during 1998
remained outstanding as of December 31, 1998).
(n2) 7,000,000 options were granted on April 20, 1998 with an exercise
price of $.15 per share. All options were exercised in 1998.
Aggregated Option/SAR Exercises in Last Fiscal Year and Fiscal Year-End
Option/SAR Values
The information provided in the table below provides information with
respect to each exercise of stock option during fiscal 1998 by the executive
officers named in the Summary Compensation Table and the fiscal year end value
of unexercised options.
<TABLE>
<CAPTION>
(a) (b) (c) (d) (e)
Value of
Number of Unexercised
Securities Underlying In-the-Money
Unexercised Options/SARs at
shares Value Options/SARs at FY-End($)
Acquired on Realized FY-End (#)
Name Exercise (#) ($)(n1)
Exercisable/ Exercisable/
Unexercisable Unexercisable(n1)
- -------------------------- -------------- --------------- ------------------------- -----------------------------
<S> <C> <C> <C> <C>
Robert P. Gordon 16,809,122 $2,698,240 -0-/-0- N/A
</TABLE>
17
<PAGE> 20
(n1) The aggregate dollar values in columns (c) and (e) are calculated by
determining the difference between the fair market value (based on the
reported low bid quotations) of the common stock underlying the
options and the exercise price for the options at exercise or fiscal
year end, respectively.
Long-Term Incentive Plans ("LTIP") - Awards in Last Fiscal Year
This table has been omitted, as no executive officers named in the
Summary Compensation Table above received any awards pursuant to any LTIP
during fiscal 1998.
Compensation of Directors.
John Hwang was granted options to acquire 1,000,000 shares of the
company's restricted common stock an exercise price of $.30 per share for
agreeing to serve as a director of the company. The options shall vest (and
shall become exercisable at the time they vest), subject to termination of Mr.
Hwang's services as a director, as follows: 50,000 options shall vest on the
first day of each month from January 1999 through April 1999; and 25,000
options shall vest on the first day of each subsequent month for 32 consecutive
months, commencing May 1999. All options shall expire on December 31, 2003. The
following terms and conditions apply to the options: (i) both the number of
options and the exercise price are subject to appropriate adjustments in the
event of any stock split, stock dividend or other change in capital structure
affecting the company's common stock, (ii) the options and the shares of common
stock issuable upon exercise of the options are subject to restrictions on
transfer, as required by applicable federal and state securities laws; (iii)
options which have not vested on or before the date of termination of John
Hwang as a member of the board of directors shall terminate on such date, and
(iv) notwithstanding the expiration date, all vested options must be exercised
within one year after termination as a member of the board of directors.
Subsequent to year-end, the company also engaged Mr. Hwang as Chief Information
Officer (CIO) and a Senior Vice President pursuant to an employment agreement
dated February 2, 1999. Pursuant to the agreement, Mr. Hwang is entitled to a
base salary of $150,000 per year, a signing bonus of $20,000, and will be
entitled to quarterly cash performance bonuses equal to three percent (3%) of
the gross margin (as determined pursuant to generally accepted accounting
principals) derived from the company's "online services" division.
Michael Gordon was granted options to acquire 100,000 shares of the
company's restricted common stock an exercise price of $.30 per share for
agreeing to serve as a director of the company. The options shall vest (and
shall become exercisable at the time they vest), on a pro rata basis, monthly,
for a period of twelve months, commencing January 1, 1999. All options shall
expire on December 31, 2003. The following terms and conditions apply to the
options: (i) both the number of options and the exercise price are subject to
appropriate adjustments in the event of any stock split, stock dividend or
other change in capital structure affecting the Corporation's common stock,
(ii) the options and the shares of common stock issuable upon exercise of the
options are subject to restrictions on transfer, as required by applicable
federal and state securities laws; (iii) options which have not vested on or
before the date of termination of Michael J. Gordon as a member of the board of
directors shall terminate on such date, and (iv) notwithstanding the expiration
date, all vested options must be exercised within one year after termination as
a member of the board of directors.
Pursuant to a consulting agreement dated April 9, 1998, the company
engaged Paul Henry, a director of the company, to continue to serve as
Secretary and Treasurer of the company. Pursuant to the agreement, Mr. Henry
was to be paid $5,000 per month until he was able to devote full-time attention
to the company, after which he would be paid $15,000 per month. Mr. Henry was
also granted options to acquire 1,000,000 shares of the company's common stock
at an exercise price of $.30 per shares, for five years. The options vest and
become exercisable as follows: 250,000 upon execution of the agreement and
30,000 per month thereafter.
Except as set forth above, no compensation was paid by the company to
its Directors for any service provided as a director during the fiscal year
covered by this report. There are no formal or informal understandings or
arrangements relating to compensation; however, Directors may be reimbursed for
all reasonable expenses incurred by them in conducting the company's business.
These expenses would include out-of-pocket expenses for such items as travel,
telephone, postage, and federal express charges.
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<PAGE> 21
Employment Contracts and Termination of Employment and Change-in-Control
Arrangements
The company's board of directors has complete discretion as to the
appropriateness of (a) key-man life insurance, (b) obtaining officer and
director liability insurance, (c) employment contracts with and compensation of
executive officers and directors, (d) indemnification contracts, and (e)
incentive plan to award executive officers and key employees.
Pursuant to an employment agreement dated December 4, 1998, the
company engaged Robert P. Gordon to continue to serve as Chairman (an officer
position) for a term of five years. Pursuant to the agreement, Mr. Gordon will
be paid a salary of $360,000 per year. In addition, Mr. Gordon received a
restricted stock award of 5,000,000 shares of common stock, which are
considered fully-vested. Mr. Gordon is also entitled to the following: car
expense allowance, major medical health benefits equivalent to that provided to
other officers; indemnification from any claim or law suit which may be
asserted against him when acting as an officer of the company provided that
said indemnification is not in violation of any federal or state law or rule or
regulation of the Securities and Exchange Commission. The agreement also
contains certain provisions with respect to disability, termination,
confidentiality and non-competition.
The company also has employment agreements in place with other
officers and significant employees not required to be listed in the
compensation tables.
The company's board of directors is responsible for reviewing and
determining the annual salary and other compensation of the executive officers
and key employees of the company and its subsidiaries. The goals of the company
are to align compensation with business objectives and performance and to
enable the company and its subsidiaries to attract, retain and reward executive
officers and other key employees who contribute to the long-term success of the
company. The company and its subsidiaries provide base salaries to its
executive officers and key employees sufficient to provide motivation to
achieve certain operating goals. Although salaries are not specifically tied
into performance, incentive bonuses are available to certain executive officers
and key employees. In the future, executive compensation may include without
limitation cash bonuses, stock option grants and stock reward grants. In
addition, the company may set up a pension plan or similar retirement plans.
Employee Benefit and Consulting Services Compensation Plans
The company currently has in effect three separate Employee Benefit
and Consulting Services Compensation Plans: 1) The "Visitors Services
International Corp. Employee Benefit and Consulting Services Compensation Plan"
(the "VSI Plan"); 2) the "TeleServices International Group Inc. Employee
Benefit and Consulting Services Compensation Plan" (the "TSIG Plan"); and 3)
the "TeleServices Employee Benefit and Consulting Services Compensation Plan"
(the "TeleServices Plan"). The VSI Plan covers 17,500,000 shares of common
stock, the TSIG Plan covers 10,000,000 shares of common stock, and the
TeleServices Plan covers 20,000,000 shares of common stock. All shares covered
by all three plans have been registered on seven separate Form S-8 registration
statements.
Under all plans the company may issue shares of common stock and/or
grant options to purchase common stock to qualified consultants, advisors,
officers, directors and employees of the company and its subsidiaries. The
purpose of the plans is to promote the best interests of the company and its
stockholders by providing a means of non-cash remuneration to eligible
participants who contribute to operating progress of the company. The plans are
administered by the company's board of directors or a committee thereof which
has the discretion to determine from time to time the eligible participants to
receive an award; the number of shares of stock issuable directly or to be
granted pursuant to option; the price at which the option may be exercised or
the price per share in cash or cancellation of fees or other payment which the
company or its subsidiaries are liable if a direct issue of stock and all other
terms on which each option shall be granted.
19
<PAGE> 22
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On April 23, 1998, the company entered in to a Revolving Credit Loan
Agreement and Revolving Credit Master Note with Robert P. Gordon, the company's
Chairman, whereby Mr. Gordon would loan, at his discretion, up to $5,000,000 to
the Registrant over the following year, if and when requested by the
disinterested members of the board of directors. The loan may be repaid in cash
or in restricted common stock of the Registrant, at the option of Mr. Gordon.
On February 22, 1999, Mr. Gordon elected to convert $1,000,000 in principal due
under the loan into shares of restricted common stock at the conversion rate of
$.15 per share, resulting in the issuance of 6,666,667 shares.
The company acquired a controlling interest in VSI from certain
shareholders of VSI in September of 1996, and completed an exchange offer with
the remaining shareholders of VSI in early 1997. Pursuant to the acquisition of
VSI, the company issued shares of common stock of the company to the following
persons in exchange for their controlling interest (over 80%) in VSI: Robert P.
Gordon, 11,585,472 shares; Elizabeth Gordon (wife of Robert P. Gordon),
1,409,857 shares; Mr. and Mrs. Gordon, jointly, 48,750 shares; Harvest
International of America, Inc. (a corporation controlled by Robert P. Gordon),
362,010 shares; and James F. Gordon (brother of Robert P. Gordon), 1,814,206
shares. The reorganization was reported on Form 8-K dated September 30, 1996.
In October of 1996, the company raised $843,750.75 in cash through a
private placement of its common stock. The company sold 1,124,999 shares of
common stock, par value $.0001 per share, at a cash purchase price of $0.75 per
share. Stephen G. McLean, a former officer and director of both the company and
VSI, purchased 33,333 shares; Paul W. Henry, an officer and director of both
the company and VSI, purchased 50,000 shares, which includes 15,000 shares in
the name of his minor son; the R.P. Gordon Children Family Trust, a trust
benefiting the minor children of Robert P. Gordon (Mr. Gordon has no control
over and disclaims any interest in the trust, beneficial of otherwise)
purchased 333,333 shares; Robert J. Conrads, a former director of VSI,
purchased 400,000 shares; Michael Gordon, brother of Robert P. Gordon and
currently a director of the company, purchased 33,333 shares; Samuel Jacobs, a
former officer of VSI, purchased 33,333 shares; Russell R. Uhlmann, Jr., a
former officer of VSI, purchased 33,333 shares.
VSI was indebted to Robert P. Gordon in the amount of approximately
$1,829,965 in principal for funds loaned to VSI, plus accrued interest. Robert
P. Gordon agreed to convert his debt into shares of restricted common stock of
VSI, in whole or in part, at the rate of $.75 per share. On September 26, 1996,
2,000,000 shares of restricted stock of VSI were issued to Robert P. Gordon for
his conversion of $1,500,000 in principal owed to him by VSI. On October 15,
1996, 439,953 shares of restricted stock of VSI were issued to Robert P. Gordon
for his conversion of the remaining principal balance of $329,965 owed to him
by VSI (all shares of common stock of VSI were converted into shares of
restricted common stock of the company pursuant to the reorganization described
above).
SELLING SECURITYHOLDERS
The following table sets forth the names of the selling
securityholders, the number of shares of common stock beneficially owned by
each selling securityholder as of April 21, 1999, and the number of shares that
each may offer, and the number of shares of common stock beneficially owned by
each selling securityholder upon completion of the offering, assuming all of
the shares are sold. The number of shares sold by each selling securityholder
may depend upon a number of factors, including, among other things, the market
price of the common stock. None of the selling securityholders has, or within
the past three years has had, any position, office or other material
relationship with us or any of our predecessors or affiliates.
20
<PAGE> 23
<TABLE>
<CAPTION>
SHARES
MAXIMUM BENEFICIALLY
SHARES SHARES OWNED AFTER
BENEFICIALLY OFFERED IN OFFERING
NAME OF SELLING OWNED PRIOR OFFERING -------------
SECURITYHOLDER TO OFFERING (1) NUMBER(2) NUMBER PERCENT
- -------------- --------------- --------- ------ -------
<S> <C> <C> <C> <C>
Amro International, S.A. (3) .... 11,224,250 11,224,250 --
Endeavor Capital Fund, S.A. ( 4) 6,050,000 6,050,000 0 --
Basic Investments Ltd. (5) ...... 25,822,640 25,822,640 0 --
Joseph Abergel (6) .............. 1,500,000 1,500,000 0 --
Rebecca F. Walter (7) ........... 2,500,000 2,500,000 0 --
Grady & Hatch and Co., Inc. (8) . 250,000(9) 250,000 0 --
Cliffwood Management (10) ....... 1,000,000 1,000,000 0 --
Michael Johnson (11) ............ 1,000,000 1,000,000 0 --
Frank V. Pelligrini (12) ........ 1,000,000 1,000,000 0 --
</TABLE>
(1) Unless otherwise indicated, each person has sole investment and voting
power with respect to the shares indicated. For purposes of computing
the percentage of outstanding shares held by each selling
securityholder on April 28, 1999, any security which such person has
the right to acquire within 60 days after such date is deemed to be
outstanding for the purpose of computing the percentage ownership for
such person, but is not deemed to be outstanding for the purpose of
computing the percentage ownership of any other person. The debentures
are not convertible for any number of shares in excess of that number
which would render a selling securityholder the beneficial owner of
more than five percent of the then issued and outstanding shares of
common stock.
(2) Includes (i) the number of shares issuable upon conversion of
debentures, (ii) the number of shares issuable as payment of interest
on the debentures, (iii) the number of shares of common stock issuable
upon exercise in full of the warrants, and (iv) the number of shares
issuable to the selling securityholders in lieu of certain penalties
arising out of the debenture documents because of delays in the filing
and effectiveness of the Registration Statement of which this
prospectus constitutes a part. Because the number of shares of common
stock issuable upon conversion of the debentures, as payment of
interest thereon, and in lieu of certain penalties, and the number of
shares of common stock issuable upon exercise of warrants in the event
of a cashless exercise is dependent in part upon the market price of
the common stock prior to a conversion, the actual number of shares of
common stock that will be issued upon conversion and, consequently,
offered for sale under this registration statement, cannot be
determined at this time. The company has, however, contractually
agreed to include herein a total of 50,346,890 shares of common stock,
which assumes a conversion price of $.10 per share for debentures
which have not yet been converted.
(3) The address of the principal business office of Amro International,
S.A. is c/o Ultrafinance, Grossmuenster Platz 26, Zurich CH 8022.
(4) The address of the principal business office of Endeavour Capital
Fund, S.A. is 14/14 Divrei Chaim St., Jerusalem, Israel 9449.
(5) The address of the principal business office of Basic Investments,
Ltd. is Attn: J.R. Leshufy, 215 East 68th St., Suite 32H, New York,
New York 10021.
(6) The address of the principal business office of Joseph Abergel is c/o
Jomark, 515 Broadway, New York, New York 10012.
(7) The address of the principal business office of Rebecca F. Walter is
3301 Bayshore Blvd., Unit 2309, Tampa Florida 33629.
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<PAGE> 24
(8) The address of the principal business office of Grady & Hatch and Co.,
Inc. is Attn: John Black, 20 Exchange Place, 49th Floor, New York, New
York 10005.
(9) Represents shares that may be acquired upon exercise of warrants
issued to Grady & Hatch and Co., Inc., a registered broker-dealer, for
services rendered in connection with the issuance and sale of the
debentures to the other selling securityholders.
(10) The address of the principal business office of Cliffwood Management
is Attn: Bart Hackley, 113 35th Street, Apt. B, Manhattan Beach,
California 90266.
(11) The address of the principal business office of Michael Johnson is
2929 North 70th Street, Apt. 2091, Scottsdale, Arizona 85251.
(12) The address of the principal business office of Frank V. Pelligrini is
202 Shenandoah Road, Cinnaminson, New Jersey 08077.
We are registering the shares for resale by the selling
securityholders in accordance with registration rights granted to the selling
securityholders. We will pay the registration and filing fees, printing
expenses, listing fees, blue sky fees, if any, and fees and disbursements of
our counsel in connection with this offering, but the selling securityholders
will pay any underwriting discounts, selling commissions and similar expenses
relating to the sale of the shares, as well as the fees and expenses of their
counsel. In addition, we have agreed to indemnify the selling securityholders,
underwriters who may be selected by the selling securityholders and certain
affiliated parties, against certain liabilities, including liabilities under
the Securities Act, in connection with the offering. The selling
securityholders may agree to indemnify any agent, dealer or broker-dealer that
participates in transactions involving sales of the shares against certain
liabilities, including liabilities under the Securities Act. The selling
securityholders have agreed to indemnify us and our directors and officers, as
well as any person controlling the company, against certain liabilities,
including liabilities under the Securities Act. Insofar as indemnification for
liabilities under the Securities Act may be permitted to our directors or
officers, or persons controlling the company, the company has been informed
that in the opinion of the Securities and Exchange Commission such
indemnification is against public policy as expressed in the Securities Act and
is therefore unenforceable.
PLAN OF DISTRIBUTION
The selling securityholders may, from time to time, sell all or a
portion of the shares on the OTC Bulletin Board, in privately negotiated
transactions or otherwise, at fixed prices that may be changed, at market
prices prevailing at the time of sale, at prices related to such market prices
or at negotiated prices. The shares may be sold by the selling securityholders
by one or more of the following methods, without limitation: (a) block trades
in which the broker or dealer so engaged will attempt to sell the shares as
agent but may position and resell a portion of the block as principal to
facilitate the transaction, (b) purchases by a broker or dealer as principal
and resale by such broker or dealer for its account pursuant to this
prospectus, (c) an exchange distribution in accordance with the rules of such
exchange, (d) ordinary brokerage transactions and transactions in which the
broker solicits purchasers, (e) privately negotiated transactions, (f) short
sales and (g) a combination of any such methods of sale. In effecting sales,
brokers and dealers engaged by the selling securityholders may arrange for
other brokers or dealers to participate. Brokers or dealers may receive
commissions or discounts from the selling securityholders (or, if any such
broker-dealer acts as agent for the purchaser of such shares, from such
purchaser) in amounts to be negotiated which are not expected to exceed those
customary in the types of transactions involved. Broker-dealers may agree with
the selling securityholders to sell a specified number of such shares at a
stipulated price per share, and, to the extent such broker-dealer is unable to
do so acting as agent for a selling securityholder, to purchase as principal
any unsold shares at the price required to fulfill the broker-dealer commitment
to the selling securityholders. Broker-dealers who acquire shares as principal
may thereafter resell such shares from time to time in transactions (which may
involve block transactions and sales to and through other broker-dealers,
including transactions of the nature described above) in the over-the-counter
market or otherwise at prices and on terms then prevailing at the time of sale,
at prices then related to the then-current market price or in negotiated
transactions and, in connection with such resales, may pay to or receive from
the purchasers of such shares commissions as described above. The selling
22
<PAGE> 25
securityholders may also sell the shares in accordance with Rule 144 under the
Securities Act, rather than pursuant to this prospectus.
The selling securityholders and any broker-dealers or agents that
participate with the selling securityholders in sales of the shares may be
deemed to be "underwriters" within the meaning of the Securities Act in
connection with such sales. In such event, any commissions received by such
broker-dealers or agents and any profit on the resale of the shares purchased
by them may be deemed to be underwriting commissions or discounts under the
Securities Act.
From time to time the selling securityholders may engage in short
sales, short sales against the box, puts and calls and other transactions in
securities of the company or derivatives thereof, and may sell and deliver the
shares in connection therewith or in settlement of securities loans. If the
selling securityholders engage in such transactions, the conversion price may be
affected. From time to time the selling securityholders may pledge their shares
pursuant to the margin provisions of its customer agreements with its brokers.
Upon a default by the selling securityholders, the broker may offer and sell the
pledged shares from time to time.
The company is required to pay all fees and expenses incident to the
registration of the shares. The company has agreed to indemnify the selling
securityholders against certain losses, claims, damages and liabilities,
including liabilities under the Securities Act.
DESCRIPTION OF SECURITIES
CAPITAL STOCK
The authorized capital stock of the company consists of 100,000,000
shares of common stock, par value $.0001 per share and 10,000,000 shares of
preferred stock, par value $.001 per share.
The company is considering calling and holding a special shareholders'
meeting for the purpose of voting to increase the number of shares of common
stock authorized to be issued.
COMMON STOCK
Each holder of shares of common stock is entitled to one vote for each
share held on all matters to be voted upon by the shareholders generally. The
shares do not have cumulative voting rights, which means that holders of more
than 50% of the shares of common stock voting for the election of directors can
elect all the directors, and that in such an event the holders of the remaining
shares would not be able to elect a single director. Holders of shares of
common stock are entitled to receive pro-rata such dividends, if any, as may be
declared from time to time by the board of directors out of funds legally
available therefor subject to the rights of any holders of preferred stock.
However, it is the present intention of the company not to pay any cash
dividends to holders of common stock but to reinvest earnings, if any, of the
company. In the event of liquidation, dissolution or winding up of the company,
the holders of shares of common stock are entitled to share pro-rata in all
assets remaining after payment of liabilities and the preferences of any
Preferred Shareholders. shares of common stock have no preemptive, conversion
or other subscription rights. There are no redemption or sinking fund
provisions applicable to the common stock.
PREFERRED STOCK
The company's Articles of Incorporation authorize the company to issue
10,000,000 shares of preferred stock, $.001 par value. None are issued. The
preferred stock may be divided into and issued in one or more series as may be
determined by resolution of the board of directors. The board of directors is
authorized, without any further action by the shareholders, to determine
dividend rates, liquidation preferences, redemption provisions, sinking fund
provisions, conversion rights, voting rights, and other rights, preferences,
privileges and restrictions of any wholly unissued series of preferred stock
and the number of shares constituting any such series. In addition, such
preferred stock could have other rights, including voting and economic rights
senior to the common stock so that the issuance of such preferred stock could
adversely affect the market value of the common stock. The creation of one or
more series of preferred stock also may have the effect of delaying, deferring
or preventing a change in control of the company without any action by
shareholders.
23
<PAGE> 26
The company has designated 3,000,000 of the shares of preferred stock
as "Series A Convertible Preferred Stock" (the "Series A"). No shares of Series
A have been issued. The dividend rates, liquidation preferences, redemption
provisions, sinking fund provisions, conversion rights, voting rights, and
other rights, preferences, privileges and restrictions are set forth in the
"Designation of Rights and Preferences of Series A Convertible Preferred
Stock," that was filed as an amendment to the company's Articles of
Incorporation on May 5, 1997.
DEBENTURES AND WARRANTS
The company offered convertible debentures pursuant to a private
placement which commenced in November 1998 and concluded on April 28, 1999. The
debentures bear interest at the rate of 8%, mature on October 31, 1999, and are
convertible into shares of common stock at a 30% discount to the average market
price for the five days prior to the date of conversion. Convertible debentures
totaling $2,369,000 in face value had been sold to 8 investors. Three of the
investors have committed to purchase another $2,800,000 of the debentures if
certain conditions are met when this registration statement for the resale of
the shares of common stock issuable upon conversion of the debentures is
declared effective by the SEC. The company is contractually subject to a
penalties equal to a further discount upon conversion of 5% per month for
failure to timely file the registration statement and to cause the registration
statement to become effective. The company agreed to pay to a placement agent,
Grady & Hatch and Co., Inc. a commission of 10% and a non-accountable expense
allowance of 3% of the gross proceeds on all debentures sold with the assistance
of the placement agent.
In connection with the offering, warrants were also issued to the
placement agent and two of the investors. The company issued 1,274,250 common
stock purchase warrants to two investors, and 250,000 warrants to the placement
agent. The warrants issued to the investors are exercisable to the extent of
25,000 shares for each $100,000 of debentures actually purchased. The warrants
may be converted into shares of common stock at an exercise price of $0.16 per
share, and also contain a "cashless exercise" provision that permits the
warrant holder to exercise the warrant without paying the exercise price and
instead receives fewer shares of common stock.
LEGAL MATTERS
The validity of the securities offered by the prospectus is being
passed upon for the company by Futro & Trauernicht, LLC, 1401 - 17th Street,
11th Floor, Denver, CO 80202. Peter G. Futro, a principal attorney at the firm,
holds options to acquire up to 1,250,000 shares of common stock at an exercise
price of $0.15 per share.
INDEMNIFICATION DISCLOSURE FOR SECURITIES ACT LIABILITIES
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers and controlling persons
of the company pursuant to the Florida General Corporation Law or the
provisions of the company's Articles of Incorporation, as amended, or Bylaws,
or otherwise, the company has been advised that in the opinion of the
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
the indemnification against such liabilities (other than the payment by the
company of expenses incurred or paid by a director, officer or controlling
person of the company in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the company will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.
24
<PAGE> 27
WHERE YOU CAN FIND MORE INFORMATION
We file reports and other information with the Securities and Exchange
Commission (the "Commission). You may read and copy any document we file at the
Public Reference Room of the Commission at Judiciary Plaza, 450 Fifth Street,
N.W., Washington, D.C. 20549 and at the Regional Offices of the Commission at
Seven World Trade Center, Suite 1300, New York, New York 10048 and at 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661-2511. Please call
1-800-SEC-0330 for further information concerning the Public Reference Room.
Our filings also are available to the public from the Commission's website at
www.sec.gov.
We are not required to deliver an annual report to shareholders;
however, upon request, we will provide at no cost to our shareholders, annual
reports containing audited financial statements.
You may request a copy of these filings, at no cost, by writing or
calling us at:
TELESERVICES INTERNATIONAL GROUP INC.
100 Second Avenue South, Suite 1000
St. Petersburg, Florida 33701
Attn: Investor Relations
Telephone: (727) 895-4410
FINANCIAL STATEMENTS
The audited financial statements of the company as of December 31,
1997 and as of December 31, 1998 included in the prospectus have been audited
by Schumacher & Associates, Inc., CPA's, Denver, Colorado, an independent
public accounting firm, as indicated in its report with respect thereto, and
are included herein in reliance upon the authority of Schumacher & Associates,
Inc., as experts in accounting and auditing and in giving said reports.
The company's Financial Statements and Independent Auditor's Report
for the fiscal years ending December 31, 1998 and December 31, 1997 are
included.
25
<PAGE> 28
TELESERVICES INTERNATIONAL GROUP INC.
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998
December 31, 1997
F1
<PAGE> 29
<TABLE>
<CAPTION>
Contents
Pages
-----
<S> <C>
Reports of Independent Certified Public Accountants F3
Consolidated Financial Statements:
Consolidated Balance Sheet F4
Consolidated Statements of Operations F5
Consolidated Statements of Cash Flows F6
Consolidated Statement of Changes in Stockholders' Equity (Deficit) F7
Notes to Consolidated Financial Statements F8
</TABLE>
F2
<PAGE> 30
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
To the Stockholders of
TeleServices International Group Inc.
We have audited the accompanying consolidated balance sheet of TeleServices
International Group Inc. as of December 31, 1998, and the related statements of
operations, changes in stockholders' (deficit), and cash flows for the two
years ended December 31, 1998 and 1997. These financial statements are the
responsibility of the company's management. Our responsibility is to express an
opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of TeleServices
International Group Inc. as of December 31, 1998, and the results of its
operations, its changes in stockholders' (deficit) and its cash flows for the
two years ended December 31, 1998 and 1997, in conformity with generally
accepted accounting principles.
The accompanying consolidated financial statements have been prepared assuming
that the company will continue as a going concern. As discussed in Note 3 to
the accompanying financial statements, the company has suffered recurring
losses from operations and has a net capital deficiency. These conditions raise
substantial doubt about the ability of the company to continue as a going
concern. The financial statements do not include any adjustments that might
result from the outcome of this uncertainty.
Schumacher & Associates, Inc.
Certified Public Accountants
12835 East Arapahoe Road, T-II, #110
Englewood, CO 80112
March 30, 1999
F3
<PAGE> 31
TeleServices International Group Inc.
Consolidated Balance Sheet
At December 31, 1998
<TABLE>
<CAPTION>
ASSETS
<S> <C>
Current assets:
Cash, restricted (Note 2) $ 80,000
Accounts receivable, net of allowance for
doubtful accounts of $ 159,934 80,530
Other Current Assets 159,441
------------
Total current assets 319,971
Equipment, net of accumulated depreciation of
$2,185,218 (Notes 5, 11) 481,577
Investment in Affiliate (Note 2) 380,986
Other assets 25,000
------------
Total assets $ 1,207,534
============
LIABILITIES AND STOCKHOLDERS' (DEFICIT)
Current liabilities:
Accounts payable and accrued expenses (Notes 6,12 and 13) 6,638,702
Loans payable, stockholder (Note 7) 1,351,095
Capital leases payable, current portion (Note 4) 18,790
Notes payable (Note 10) 328,673
Convertible debentures 875,000
------------
Total liabilities $ 9,212,260
------------
Commitments and Contingencies (See Notes) --
Stockholders' (deficit):
Preferred stock, $.001 par value
10,000,000 shares authorized
None issued and outstanding (Note 9) --
common stock, $.0001 par value,
100,000,000 shares authorized,
64,971,638 shares issued and outstanding 6,498
Additional paid-in capital 30,002,411
Treasury Stock, 13,130 shares at cost (125,000)
Accumulated (deficit) (37,888,635)
------------
Total stockholders' (deficit) (8,004,726)
Total liabilities and stockholders' (deficit) $ 1,207,534
============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F4
<PAGE> 32
TeleServices International Group Inc.
Consolidated Statements of Operations
For the Years Ended December 31
<TABLE>
<CAPTION>
1998 1997
<S> <C> <C>
Total Revenues $ 1,021,478 $ 2,365,042
------------ ------------
Operating Expenses:
Salaries and contract services 5,751,964 10,171,693
Payroll taxes 349,547 586,444
Rent 316,383 402,887
Telephone 445,741 1,075,429
Travel and entertainment 124,514 840,817
Advertising and promotion 89,316 133,402
Depreciation and amortization 971,094 966,991
Other expenses (Note 6) 4,228,134 6,230,121
------------ ------------
Total operating expenses 12,276,694 20,407,784
------------ ------------
Net (loss) from operations (11,255,216) (18,042,742)
Other income (expenses):
Interest income 9,832 31,897
Interest (expense) (576,867) (206,451)
------------ ------------
Net (loss) $(11,822,251) $(18,217,296)
============ ============
Net (loss) per share $ (0.23) $ (0.70)
============ ============
Weighted Average shares Outstanding 50,470,972 26,107,902
============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F5
<PAGE> 33
TeleServices International Group, Inc.
Consolidated Statements of Cash Flow
For the Years Ended December 31
<TABLE>
<CAPTION>
1998 1997
------------ ------------
<S> <C> <C>
Cash flows from operating activities:
Net (loss) $(11,822,251) $(18,217,296)
Adjustments to reconcile net (loss) to net cash (used in) operating
activities:
Decrease in accounts receivable 82,118 103,846
Depreciation and Amortization 971,094 966,991
Increase in accounts payable and accrued expenses 1,000,105 4,484,325
Other (116,115) 86,233
------------ ------------
Net cash (used in)operating activities (9,885,049) (12,575,901)
------------ ------------
Cash flows from investing activities:
(Acquisition) of equipment (802,710) (754,417)
(Investment) in affiliate company (380,986)
------------ ------------
Net cash (used in) investing activities (1,183,697) (754,417)
------------ ------------
Cash flows from financing activities:
(Repayment of) leases payable (82,978) (11,052)
Cash proceeds from (repayment of) loans from stockholders 1,291,780 (353,344)
Issuance of common stock 9,136,450 13,622,335
Sale of convertible debentures 875,000
Acquisition of treasury stock (125,000)
(Repayment of) notes payable (121,506) (21,753)
(Increase) decrease in cash collateral 95,000 (25,000)
------------ ------------
Net cash provided by financing activities 11,068,747 13,211,186
------------ ------------
Increase (decrease) in cash 0 (119,130)
Cash, beginning of period 0 119,130
------------ ------------
Cash, end of period $ 0 $ 0
============ ============
Interest paid $ 576,867 $ 206,451
============ ============
Income taxes paid $ -- $ --
============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F6
<PAGE> 34
TeleServices International Group Inc.
Consolidated Statement of Changes in Stockholders' Equity (Deficit)
From September 30, 1995 through December 31, 1998
<TABLE>
<CAPTION>
common stock Additional
Paid-in Accumulated
shares Amount Capital Deficit Total
---------- ------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C>
Balance, December 31, 1996 22,059,856 $2,206 $ 7,247,917 $ (7,849,087) $ (598,964)
Issuance of common stock 8,096,091 810 13,621,525 -- 13,622,335
(Note 7)
Net (loss) year ended
December 31, 1997 -- -- -- (18,217,296) (18,217,296)
---------- ------ ------------ ------------ ------------
Balance, December 31, 1997 30,155,947 3,016 20,869,442 (26,066,383) (5,193,925)
Issuance of common stock 34,815,691 3,482 8,757,969 -- 8,761,450
(Note 7)
Imputed Interest on Convertible -- -- 375,000 -- 375,000
debentures
Acquisition of Treasury Stock -- -- (125,000) -- (125,000)
Net (loss) year ended
December 31, 1998 -- -- -- (11,822,251) (11,822,251)
---------- ------ ------------ ------------ ------------
Balance, December 31, 1998 64,971,638 $6,498 $ 29,877,411 $(37,888,635) $ (8,004,726)
========== ====== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of the Financial Statements.
F7
<PAGE> 35
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
Organization and Operations:
TeleServices International Group Inc. (TSIG), formerly Dynasty Capital
Corporation (Dynasty), was incorporated under the laws of the State of Florida
on October 1, 1986. TSIG issued common stock for 100% of the issued and
outstanding common stock of Visitors Services, Inc. (VSI). This transaction was
accounted for as a reverse acquisition since the former controlling
shareholders of VSI control TSIG after the business combination. Prior to the
transaction TSIG was an inactive public shell corporation with no net assets.
VSI was incorporated under the laws of the State of Florida in November 1992 to
provide automated reservations and information services specifically designed
to support the special needs of convention and visitors bureaus and other
organizations. On March 5, 1999, VSI filed a voluntary petition for relief
under Chapter 7 of the United States Bankruptcy Code for the Middle District of
Florida, Tampa Division.
American International Travel Agency, Inc. (AIT), a wholly-owned subsidiary of
TSIG, was incorporated under the laws of the State of Florida on September 27,
1977 to provide retail travel services. AIT was acquired by VSI on December 6,
1996 (see Note 11).
Compact Connection, Inc. (CCI), a Delaware corporation, was incorporated on
April 17, 1998, as a wholly-owned subsidiary of TSIG for the purpose of
establishing an internet-based discount retail music CD and cassette tape
business.
The source of sales revenue during the years 1998 and 1997 are summarized as
follows:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
TSIG 0% 0%
VSI 87% 80%
AIT 12% 20%
CCI 1% 0%
Total 100% 100%
</TABLE>
F8
<PAGE> 36
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
Summary of Significant Accounting Policies
(a) Principles of Consolidation
The consolidated financial statements of TSIG and subsidiaries (the
company) include the accounts of TSIG, VSI and AIT for the entire
years ended December 31, 1998 and 1997 and the accounts of CCI since
April 17, 1998, the date if its formation. All intercompany accounts
and transactions have been eliminated in the consolidation.
(b) Concentration of Credit Risk
Financial instruments which potentially subject the company to
concentrations of credit risk consist principally of temporary cash
investments and trade accounts receivable. The company grants credit
to various business and entities, in the U.S.A. The company does not
require collateral for its accounts receivable. The company maintains
its cash balance in one financial institution located in Florida. The
balances are insured by the Federal Deposit Insurance Corporation up
to $100,000. At December 31, 1998 the company had no uninsured cash
balances, but at various times throughout the year, the balance
exceeded the insured limit.
(c) Income Tax
The company has net operating loss carryovers totaling approximately
$37,000,000 at December 31, 1998 which expire in various years through
2013. The company has deferred tax assets of approximately $5,500,000
at December 31, 1998 related to loss carryovers but due to the
uncertainty of the company's ability to utilize these carryovers, a
valuation allowance of the total $5,500,000 has been provided.
Therefore, as of December 31, 1998 the company's financial statements
do not include any provision for deferred tax assets. A change in
ownership of more than 50% of the company could reduce or eliminate
the company's ability to utilize these loss carryovers.
(d) Equipment - Equipment is carried at cost, net of accumulated
depreciation. Depreciation is computed using the straight-line method
over the estimated useful lives of the assets ranging from 3 to 5
years. Equipment is principally owned by VSI, which filed a petition
for relief under Chapter 7 of the United States Bankruptcy Code.
Therefore, the equipment has been written down to its estimated net
realizable value (see Note 11).
(e) Per Share Information
The per share information is computed based upon the weighted average
shares outstanding.
F9
<PAGE> 37
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
(f) Use of Estimates in the Preparation of Financial Statements
Preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements and the reported amounts of revenue
and expenses during the reporting periods. Significant assumptions in
the accompanying financial statements relate to the company's ability
to continue as a going concern as described in note 3 and estimated
useful lives of equipment as disclosed in note 2(d). The ultimate
resolution of the reasonableness of the related assumptions cannot
presently be determined. Actual results could differ from the
company's estimates.
(g) Bad Debts
An allowance for uncollectible accounts has been provided based on the
company's past collection history.
(h) Advertising and Promotion Costs
Advertising and promotion costs are expensed as incurred.
(i) Geographic Area of Operations
The company provides services to customers in the U.S.A. The potential
for severe financial impact can result from negative effects of
economic conditions within the market or geographic area. Since the
company's business is principally in one area and in one industry,
this concentration of operations results in an associated risk and
uncertainty.
(j) Restricted Cash
Included in cash on December 31, 1998 is $80,000 being held in
separate certificates of deposit as collateral for notes payable,
accounts payable and operating licenses.
(k) Software Development
The company incurred $810,000 in total costs related to the
development of computer software designed for the purpose of (1)
maintaining travel property inventory and reservation information for
VSI and (2) providing an internet-based order transaction system for
CCI. The total cost was expensed in 1998 as a result of the closing of
VSI's travel-related business and the development of a new CCI
internet site to replace the original one.
F10
<PAGE> 38
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
(l) Write Down of Equipment Value
During 1998 and 1997, the company wrote down the value of its property
and equipment $325,000 and $500,000, respectively, due to reasonable
doubt as to its ability to be able to recover the full value from
future operations.
(m) Investment in Affiliate
Included on the balance sheet is $380,986 invested in an affiliate
company, equal to the costs related to attempting to complete the
proposed acquisition of certain entities. During 1998, the efforts to
complete the proposed acquisitions were terminated and certain former
employees of the company resigned from the company and acquired these
entities. In exchange for transferring the rights, if any, the company
had with regard to these acquisitions and in exchange for terminating
various employment and severance agreements, the company was issued an
equity position in the entity. Subsequent to December 31, 1998, the
company sold its equity position for $706,000 in cash, resulting in a
1999 gain of $326,000.
Basis of Presentation - Going Concern
The accompanying financial statements have been prepared in conformity with
generally accepted accounting principles, which contemplates continuation of the
company as a going concern. However, the company has sustained recurring
operating losses since its inception and has a working capital deficit.
Management is attempting to raise additional capital. In view of these matters,
realization of certain assets in the accompanying balance sheet is dependent
upon continued operations of the company, which in turn is dependent upon the
company's ability to meet its financial requirements, raise additional capital,
and the success of its future operations. Management believes that its ability
to raise additional capital provides the opportunity for the company to continue
as a going concern. The financial statements do not include any adjustments that
might result from the outcome of this uncertainty.
Lease Commitments
In September, 1995 the company entered into an operating lease agreement for its
office facilities for a term of seven years. Minimum future rental payments
under operating leases with terms greater than one year are summarized as
follows:
<TABLE>
<CAPTION>
Year ending December 31
<S> <C>
1999 $ 349,822
2000 $ 307,353
2001 $ 278,702
2002 $ 158,468
</TABLE>
F11
<PAGE> 39
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
Lease Commitments, continued
At December 31, 1998 the company's financial statements included equipment
leased through capital leases in the amount of approximately $87,300 with
accumulated depreciation of approximately $39,900 . Total future minimum lease
payments under this capital lease are summarized as follows:
<TABLE>
<S> <C>
Year ending December 31, 1999 $ 15,433
Year ending December 31, 2000 4,146
Amount representing interest (789)
Net after interest reduction 18,790
Current portion 14,435
Non-current portion $ 4,355
========
</TABLE>
Equipment
The company's equipment as of December 31, 1998 is summarized as follows:
<TABLE>
<S> <C>
Furniture, fixtures and office equipment $ 490,430
Telephone equipment 1,367,549
Computer equipment and software 1,265,912
Leasehold improvements 42,905
Allowance for idle and excess capacity equipment (500,000)
-----------
2,666,796
Accumulated depreciation (2,185,218)
$ 481,578
===========
</TABLE>
OTHER EXPENSES
In addition to normal other operating expenses, other expenses include the
following:
<TABLE>
<CAPTION>
1998 1997
---- ----
<S> <C> <C>
Provision for litigation contingencies $ 666,886 $1,277,250
Loss on special event contract 1,100,158
Write off software development 810,795
Write off of goodwill 801,665
Provision for severance pay 272,808
Provision for equipment writedown 325,283 500,000
---------- ----------
$1,802,964 $3,951,881
========== ==========
</TABLE>
F12
<PAGE> 40
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
Related Party Transactions
The stockholders of the company have made various demand loans to the company
for expansion and operating capital. During the year ended December 31, 1998
the stockholders converted $2,752,244 into 17,110,522 shares of the common
stock of the company. During the year ended December 31, 1997 the stockholders
converted $9,797,635 into 7,410,878 shares of common stock.
As of December 31, 1998 loans payable to a stockholder totaled $1,351,095,
accruing interest at 11% per annum. The loan is payable on demand and is
uncollateralized. Subsequent to December 31, 1998, a $1,000,000 portion of the
loan balance was exchanged for 6,666,667 shares of the company's common stock
that was registered with the Securities and Exchange Commission on a
Registration Form S-8. The exchange price was $.15 per share.
Effective December 4, 1998 TSIG entered into a five-year employment agreement
with its Chairman of the board of directors. Annual compensation according to
the terms of the agreement is $360,000. In addition, the Chairman was awarded
5,000,000 shares of restricted common stock of the company for services. At
December 4, 1998 the closing price for the company's common stock was $.25 per
share. Due to the large block and the restrictive nature of the stock issued
for services, the compensation was recorded at 50% of the closing price for the
common stock on December 4, 1998. The employment agreement also entitles the
Chairman to receive a car allowance, major medical insurance benefits,
indemnification from any claim or law suit which may be asserted against him
when acting as an officer of the company provided that said indemnification is
not in violation of any federal or state law or rule or regulation of the
Securities and Exchange commission. The agreement also contains certain
provisions with respect to disability, termination, confidentially and
non-competition.
Stock Options
<TABLE>
<CAPTION>
Number of Weighted Average
Options Exercise Price
------- --------------
<S> <C> <C>
Outstanding at December 31, 1997 30,366,746 $ .1675
Outstanding at December 31, 1998 3,643,726 $ .3027
Exercisable at December 31, 1998 3,577,042 $ .3027
Options granted during 1998 19,795,755 $ .1779
Options exercised during 1998 29,815,691 $ .1747
Options forfeited or expired during 1998 2,811,334 $1.4973
</TABLE>
Options outstanding as of December 31, 1998 expire at various dates through May
31, 2003.
F13
<PAGE> 41
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
Preferred Stock
The company is authorized to issue 10,000,000 shares of preferred stock, having
a par value of $.001 each. The preferred stock may be issued in a series from
time to time with such designation, rights, preferences and limitations as the
board of directors of the company may determine by resolution.
Notes and Debentures Payable
The company had notes payable, principally to a bank, of approximately $328,000
at December 31, 1998, collateralized by certain equipment. Of this amount
$50,000 was due and payable as of December 31, 1998. The remaining notes are
payable in monthly payments totaling approximately $18,000, with interest at an
approximate weighted average of 10% per annum. Since the notes are in default,
the total balance has been included as a current liability.
In November, 1998, the company authorized the issuance of $2,000,000 of
convertible debentures. As of December 31, 1998, $875,000 was received as
proceeds from the issuance of the debentures. The terms of the debentures
include interest at 8% per annum and are due and payable one year from
issuance. The debentures are convertible at the option of the holder into
common stock of the company at 70% of the market price of the common stock
based upon the average bid price for the five days immediately preceding the
date of conversion. Interest expense in the amount of $375,000 has been
credited to additional paid in capital on the balance sheet in the 1998
financial statements for the 30% conversion discount.
The majority of the notes payable are personally guaranteed by a stockholder of
the company.
Maturities of the notes and debentures payable are summarized as follows:
Year ending December 31,1999 $1,203,673
Subsequent Events
On March 5, 1999, VSI filed a voluntary petition for relief under Chapter 7 of
the United States Bankruptcy Code for the Middle District of Florida, Tampa
Division. As summarized in Note 1, 87% and 80% of operating revenues during
1998 and 1997, respectively, were generated by VSI.
The company's board of directors prepared a unanimous written consent dated
December 3, 1998 approving the acquisition of AIT by TSIG from VSI by
assumption of approximately $72,000 of AIT debt and a credit to TSIG's
intercompany receivable from VSI of $20,000. As a transaction
F14
<PAGE> 42
TELESERVICES INTERNATIONAL GROUP INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 1998 and December 31, 1997
Subsequent Events, continued
among wholly-owned subsidiaries of TSIG, there was neither a contract nor a
bill of sale documenting this transaction; there also was no stock certificate
prepared evidencing this transaction. The bankruptcy filing of VSI did not
include AIT as an asset of VSI but did disclose that TSIG acquired AIT from VSI
on December 3, 1998. During November, 1998, a judgement in the amount of
$530,000 was entered against VSI that may entitle the judgement creditor to a
first position on the liquidation of the assets of VSI, including a claim of
preference of creditor action against TSIG for its acquisition of AIT after the
date of the judgement.
During April, 1998, according to the documents evidencing the transaction, VSI
acquired certain telephone switching equipment at a cost of approximately
$600,000. Using capital raised by TSIG, a deposit was made to a VSI bank
account for an amount sufficient to allow VSI to pay for the equipment. TSIG
recorded this equipment on its financial statements as an asset of TSIG rather
than VSI and did not include this equipment with the assets of VSI listed in
its bankruptcy filing.
Creditors of VSI, including the Internal Revenue Service, may have a claim
against TSIG for preference of creditors related to the foregoing transactions.
A contingency exists with respect to these matters, including final
determination if the transactions between TSIG and VSI are legitimate
transactions allowable by Federal Bankruptcy Code or if they are determined to
be violations of preference of creditor statutes, rules and regulations.
Litigation
The company is a party to numerous litigation and threatened litigation matters
related to alleged nonperformance of contracts and nonpayment of various
obligations. Contingencies exist with respect to these matters. The ultimate
costs, if any, related to these matters cannot presently be determined. The
financial statements as of December 31, 1998 include a $2,488,066 provision for
estimated potential costs related to these matters.
Creditor Delinquencies
The company is materially delinquent on payment of various creditor obligations
including various obligations to the Internal Revenue Service. Failure to pay
these balances due could result in the inability of the company to continue in
business.
Fourth Quarter Adjustments
The company recognized as expenses various previously unrecorded accruals for
potential litigation matters and various other accrued expenses and provisions
for losses, which were recorded in the fourth quarter. These fourth quarter
material adjustments totaled approximately $2,000,000.
F15
<PAGE> 43
PART II - INFORMATION NOT REQUIRED IN PROSPECTUS
INDEMNIFICATION OF DIRECTORS AND OFFICERS
INDEMNIFICATION AND LIMITATION OF DIRECTORS' LIABILITY. The company's by-laws
provide that the company shall indemnify in the manner and to the extent
permitted by law, any person (or that person's testator or intestate successor)
made or threatened to be made a party to any action or proceeding, whether
domestic or foreign, civil or criminal, judicial or administrative, or federal
or state, by reason of the fact that the person was a director or officer of
the company or served any other corporation in any capacity at the request of
the company. Further, the company has entered into agreements with several
officers and directors of the company and its subsidiaries, and may enter into
agreements with additional officers and directors, to indemnify and hold such
persons harmless, to the maximum extent permitted by law in the event any
claims or legal actions are brought against such person arising out of his acts
or decisions done or made in the authorized scope of such person's employment
or position with the company.
The company currently has directors' and officers' liability insurance
policies with an aggregate limit of liability of $10,000,000 (inclusive of
costs of defense). The current policies expire May 27, 1999.
The General Corporation Law of Florida eliminates the personal
liability of its directors to the company or its stockholders for monetary
damages for breach of fiduciary duty of loyalty and care as a director, unless:
(a) the director breached or failed to perform his duties as a director; and
(b) the directors breach of, or failure to perform, those duties constitutes:
(i) a violation of criminal law, unless the director had reasonable cause to
believe his conduct was lawful or had no reasonable cause to believe his
conduct was unlawful; (ii) a transaction from which the director derived an
improper person benefit, either directly or indirectly; (iii) a circumstance
under which a director votes for or assents to an unlawful distribution; (iv)
in a proceeding by or in the right of the company to procure a judgment in its
favor or in the right of a shareholder, conscious disregard for the best
interests of the company, or willful misconduct; or (v) in a proceeding by or
in the right of someone other than the company or a shareholder with,
recklessness or an act of omission which was committed in bad faith or with
malicious purpose or in a manner exhibiting wanton and willful disregard of
human rights, safety or property.
The company has been advised that it is the position of the Securities
and Exchange Commission that insofar as the foregoing provisions may be invoked
to disclaim liability for damages arising under the 1933 Act, that such
provisions are against public policy as expressed in the 1933 Act and are
therefore unenforceable.
OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The estimated expenses in connection with the issuance and
distribution of the securities being registered, other than underwriting
compensation, are:
<TABLE>
<S> <C>
SEC filing fee for Registration Statement $ 4,408
Accounting Fees $ 40,300
Legal Fees and Expenses $ 181,350
Miscellaneous $ 20,150
Total: $ 246,208
</TABLE>
All of the expenses listed above will be paid by the company.
RECENT SALES OF UNREGISTERED SECURITIES
Recent Sales of Unregistered Securities.
A. The company offered convertible debentures pursuant to a private placement
which commenced in November 1998 and concluded on April 28, 1999. The
debentures bear interest at the rate of 8%, mature on October 31, 1999, and are
convertible into shares of common stock at a 30% discount to the average market
price
27
<PAGE> 44
for the five days prior to the date of conversion. Convertible debentures
totaling $2,369,000 in face value had been sold to 8 investors. Three of the
investors have committed to purchase another $2,800,000 of the debentures if
certain conditions are met when this registration statement for the resale of
the shares of common stock issuable upon conversion of the debentures is
declared effective by the SEC. The company is contractually subject to a
penalties equal to a further discount upon conversion of 5% per month for
failure to timely file the registration statement and to cause the registration
statement to become effective. The company agreed to pay to a placement agent,
Grady & Hatch and Co., Inc. a commission of 10% and a non-accountable expense
allowance of 3% of the gross proceeds on all debentures sold with the
assistance of the placement agent.
In connection with the offering, warrants were also issued to the
placement agent and two of the investors. The company issued 1,274,250 common
stock purchase warrants to two investors, and 250,000 warrants to the placement
agent. The warrants issued to the investors are exercisable to the extent of
25,000 shares for each $100,000 of debentures actually purchased. The warrants
may be converted into shares of common stock at an exercise price of $0.16 per
share, and also contain a "cashless exercise" provision that permits the
warrant holder to exercise the warrant without paying the exercise price and
instead receives fewer shares of common stock.
In connection with the offering, a total of 17,000,000 shares of
restricted common stock were placed in escrow for five of the investors. The
company does not consider these shares to be outstanding unless and until the
debentures are converted. Debentures totaling $486,736 have been converted by
one investor and 2,000,000 of the escrowed shares have been delivered to the
investor.
All purchasers are accredited investors, and the company believes that
this private placement is exempt from registration pursuant to Sections 4(2),
4(6) and/or Rule 506 of the Securities Act of 1933.
B. On February 24, 1997, the company acquired all of the outstanding common
stock of GuaranTEE Time, Inc. "(GTT") in exchange for shares of restricted
common stock of the company. The company issued 100,000 shares of restricted
common stock to the selling shareholders of GTT. The company believes that this
transaction is exempt from registration pursuant to Section 4(2) and/or Rule
506 of Regulation D of the Securities Act of 1933. The transaction was reported
on Form 8-K dated March 11, 1997.
C. On September 26, 1996, the company executed an Agreement and Plan of
Reorganization ("Agreement") with Visitors Services, Inc. ("VSI"), and certain
Stockholders of VSI, pursuant to which a minimum of 80% of the issued and
outstanding shares of VSI were to be exchanged on a one share for one share
basis for shares of restricted stock of the company. Pursuant to the Agreement,
the company issued a total 15,220,295 shares of common stock of the company to
the following persons in exchange for their controlling interest (over 80%) in
VSI: Robert P. Gordon, 11,585,472 shares; Elizabeth Gordon (wife of Robert P.
Gordon), 1,409,857 shares; Mr. and Mrs. Gordon, jointly, 48,750 shares; Heaven
International, Inc. (formerly Harvest International of America, Inc.) (a
corporation controlled by Robert P. Gordon), 362,010 shares; and James F.
Gordon (brother of Robert P. Gordon). The "Exchange Offer" was completed in
1997, which resulted in the company owning 100% of VSI. A total of 19,446,647
shares of common stock of the company were issued pursuant to the transaction.
No underwriters were used and no commissions were paid. The company believes
that this transaction is exempt from registration pursuant to Section 4(2)
and/or Rule 506 of Regulation D of the Securities Act of 1933. The transaction
was reported on Form 8-K dated September 30, 1996.
D. In October of 1996, the company raised $843,750.75 in cash through a private
placement of its common stock. The company sold 1,124,999 shares of common
stock, par value $.0001 per share, at a cash purchase price of $0.75 per share.
Stephen G. McLean, a former officer and director of both the company and VSI,
purchased 33,333 shares; Paul W. Henry, an officer and director of both the
company and VSI, purchased 50,000 shares, which includes 15,000 shares in the
name of his minor son; the R.P. Gordon Children Family Trust, a trust
benefiting the minor children of Robert P. Gordon (Mr. Gordon has no control
over and disclaims any interest in the trust, beneficial of otherwise)
purchased 333,333 shares; Robert J. Conrads, a former director of VSI,
purchased 400,000 shares; Michael Gordon, brother of Robert P. Gordon and
currently a director of the company, purchased 33,333 shares; Samuel Jacobs, a
former officer of VSI, purchased 33,333 shares; Russell R. Uhlmann, Jr., a
former officer of VSI, purchased 33,333 shares. The balance of 208,334 shares
were purchased by four other persons. No underwriters were used and no
commissions were paid. All purchasers are accredited investors, and the company
28
<PAGE> 45
believes that this private placement is exempt from registration pursuant to
Sections 4(2) and/or 4(6) of the Securities Act of 1933. All shares are
restricted securities under the Act.
E. Prior to the reorganization described above, the company's subsidiary, VSI
raised cash of $1,050,000 through a private placement of 700,000 shares of VSI
stock (equivalent to $1.50 per share) between January 24, 1996 and July 15,
1996. This private placement was made by VSI in reliance on Section 4(2) and/or
Rule 506 of the Securities Act of 1933. All shares of common stock of VSI were
converted into shares of restricted common stock of the company pursuant to the
reorganization with the company and the terms of the Exchange Offer.
29
<PAGE> 46
EXHIBIT INDEX
Exhibit Number Description
-------------- -----------
2.1 Agreement and Plan of Reorganization between Dynasty Capital
Corporation and Visitors Services, Inc., dated September 26,
1996. (Incorporated by reference to Exhibit 2.1 to the
company's Form 8-K dated and filed on September 30, 1996).
2.7 Termination Agreement dated February 2, 1999 regarding
termination of previous agreements relating to proposed
acquisition of assets of Compact Connection, Inc.
(Incorporated by reference to Exhibit 2.7 of the company's
current report on Form 8-K/A-2 dated April 30, 1998 and filed
on February 16, 1999).
3.5 Articles of Incorporation, as amended and currently in
effect. (Incorporated by reference to Exhibit 3.5 of the
company's Form 10-QSB for the quarter ended March 31, 1997
and filed on May 15, 1997).
3.6 Bylaws as restated April 22, 1999. (Filed herewith).
4.3 Form of Debenture Purchase Agreement for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.3 of the company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
4.4 Form of 8% Convertible Debenture for private placement which
commenced in November 1998. (Incorporated by reference to
Exhibit 4.4 of the company's Form 10-KSB for the fiscal year
ended December 31, 1998, filed March 31, 1999).
4.5 Form of Registration Rights Agreement for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.5 of the company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
4.6 Form of Escrow Agreement for private placement which
commenced in November 1998. (Incorporated by reference to
Exhibit 4.6 of the company's Form 10-KSB for the fiscal year
ended December 31, 1998, filed March 31, 1999).
4.7 Form of Common Stock Purchase Warrant for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.7 of the company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
5.8 Opinion of Counsel, Futro & Trauernicht, LLC. (Filed
herewith).
10.1 TeleServices International Group Inc. (formerly Visitors
Services International Corp.) Employee Benefit and Consulting
Services Compensation Plan (the "TSIG Plan"). (Incorporated
by referenced to Exhibit 10.1 to the company's Post-Effective
Amendment No. 1 to the Registration Statement on Form S-8
(file no. 333-14271) filed February 19, 1997).
30
<PAGE> 47
10.3 TeleServices Stock Option Plan (the "TeleServices Plan").
(Incorporated by reference to Exhibit 10.3 the registration
statement filed on Form S-8 for the TeleServices Stock Option
Plan, Registration No. 333-52271, filed May 8, 1998).
10.5 Revolving Credit Loan Agreement and Revolving Credit Master
Note between the company and Robert P. Gordon, each dated
April 23, 1998. (Incorporated by referenced to Exhibit 10.5
to the company's Form 10-QSB for the quarter ended March 31,
1998, filed on May 20, 1998).
10.6 Employment Agreement between the company and James H. Guild
dated August 24, 1998. (Incorporated by referenced to Exhibit
10.6 to the company's Form 10-QSB for the quarter ended
September 30, 1998, filed on November 13, 1998).
10.7 Visitors Services, Inc. Employee Benefit and Consulting
Services Compensation Plan (the "VSI Plan"), as restated
March 15, 1999. (Incorporated by referenced to Exhibit 10.7
to the company's Registration Statement on Form S-8 (file no.
333-74561) filed March 17, 1999).
10.8 Addendum to Employment Agreement between the company and
James H. Guild dated December 2, 1998. (Incorporated by
reference to Exhibit 10.8 of the company's Form 10-KSB for
the fiscal year ended December 31, 1998, filed March 31,
1999).
10.9 Employment Agreement between the company and Robert P. Gordon
dated December 4, 1998. (Incorporated by reference to Exhibit
10.9 of the company's Form 10-KSB for the fiscal year ended
December 31, 1998, filed March 31, 1999).
10.10 Agreement to Serve as a Director between the company and John
Hwang dated December 7, 1998. (Incorporated by reference to
Exhibit 10.10 of the company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
10.11 Employment Agreement and Indemnification Agreement between
the company and John Hwang, each dated February 2, 1999.
(Incorporated by reference to Exhibit 10.11 of the company's
Form 10-KSB for the fiscal year ended December 31, 1998,
filed March 31, 1999).
10.12 Consulting Agreement between the company and Paul W. Henry
dated April 9, 1998. (Filed herewith).
21.3 List of Subsidiaries of the company. (Incorporated by
reference to Exhibit 10.10 of the company's Form 10-KSB for
the fiscal year ended December 31, 1998, filed March 31,
1999).
23.17 Consent of Schumacher & Associates, Inc., Certified Public
Accountants. (Filed herewith).
23.18 Consent of Futro & Trauernicht, LLC. (Incorporated by
reference to Exhibit 5.8 of this Registration Statement).
27 Financial Data Schedule (Filed herewith).
31
<PAGE> 48
UNDERTAKINGS
(a) The undersigned Registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration
statement:
(i) To include any prospectus required by section
10(a)(3) of the Securities Act;
(ii) To reflect in the prospectus any facts or events
which, individually or together, represent a
fundamental change in the information in the
registration statement; and notwithstanding the
forgoing, any increase or decrease in volume of
securities offered (if the total dollar value of
securities offered would not exceed that which was
registered) and any deviation from the low or high
end of the estimated maximum offering range may be
reflected in the form of prospects filed with the
Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in the volume and price
represent no more than a 20% change in the maximum
aggregate offering price set forth in the
"Calculation of Registration Fee" table in the
effective registration statement; and
(iii) To include any additional or changed material
information on the plan of distribution.
(2) For the purpose of determining any liability under the
Securities Act, to treat each post-effective amendment as a
new registration statement of the securities offered, and the
offering of such securities at that time to be the initial
bona fide offering.
(3) To file a post-effective amendment to remove from
registration any of the securities that remain unsold at the
termination of the offering.
(b) The undersigned Registrant, hereby requesting acceleration of the
effective date of the registration statement under Rule 461 under the
Securities Act, hereby undertakes to include the following:
Insofar as indemnification for liabilities arising under the
Securities Act of 1933 (the "Securities Act") may be permitted to
directors, officers and controlling persons of the small business
issuer pursuant to the foregoing provisions, or otherwise, the small
business issuer has been advised that in the opinion of the Securities
and Exchange Commission such indemnification is against public policy
as expressed in the Securities Act and is, therefore, unenforceable.
In the event that a claim for indemnification against such liabilities
(other than the payment by the small business issuer of the expenses
incurred or paid by a director, officer, or controlling person of the
small business issuer in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the small
business issuer will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and
will be governed by the final adjudication of such issue.
32
<PAGE> 49
SIGNATURES
In accordance with the requirements of the Securities Act of 1933, the
company certifies that it has reasonable grounds to believe that it meets all
of the requirements of filing on Form SB-2 and authorized this registration
statement to be signed on its behalf by the undersigned, in the City of St.
Petersburg, State of Florida on May 7, 1999.
TELESERVICES INTERNATIONAL GROUP INC.
By: /s/ Robert P. Gordon
--------------------------------
Robert P. Gordon, Chairman
In accordance with the requirements of the Securities Act of 1933,
this registration statement was signed by the following persons in the
capacities and on the dates stated.
<TABLE>
<CAPTION>
Name Title Date
---- ----- ----
<S> <C> <C>
/s/ Robert P. Gordon Chairman, CEO and May 7, 1999
- -------------------------------- Director
Robert P. Gordon
/s/ Paul W. Henry Secretary, Treasurer, and May 7, 1999
- -------------------------------- Director
Paul W. Henry
/s/ Michael J. Gordon Director May 7, 1999
- --------------------------------
Michael J. Gordon
/s/ John Hwang Director May 7, 1999
- --------------------------------
John Hwang
</TABLE>
33
<PAGE> 50
EXHIBITS
<TABLE>
<CAPTION>
Exhibit Number Description
-------------- -----------
<S> <C>
2.1 Agreement and Plan of Reorganization between Dynasty Capital
Corporation and Visitors Services, Inc., dated September 26,
1996. (Incorporated by reference to Exhibit 2.1 to the
company's Form 8-K dated and filed on September 30, 1996).
2.7 Termination Agreement dated February 2, 1999 regarding
termination of previous agreements relating to proposed
acquisition of assets of Compact Connection, Inc.
(Incorporated by reference to Exhibit 2.7 of the company's
current report on Form 8-K/A-2 dated April 30, 1998 and filed
on February 16, 1999).
3.5 Articles of Incorporation, as amended and currently in
effect. (Incorporated by reference to Exhibit 3.5 of the
company's Form 10-QSB for the quarter ended March 31, 1997
and filed on May 15, 1997).
3.6 Bylaws as restated April 22, 1999. (Filed herewith).
4.3 Form of Debenture Purchase Agreement for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.3 of the company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
4.4 Form of 8% Convertible Debenture for private placement which
commenced in November 1998. (Incorporated by reference to
Exhibit 4.4 of the company's Form 10-KSB for the fiscal year
ended December 31, 1998, filed March 31, 1999).
4.5 Form of Registration Rights Agreement for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.5 of the company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
4.6 Form of Escrow Agreement for private placement which
commenced in November 1998. (Incorporated by reference to
Exhibit 4.6 of the company's Form 10-KSB for the fiscal year
ended December 31, 1998, filed March 31, 1999).
4.7 Form of Common Stock Purchase Warrant for private placement
which commenced in November 1998. (Incorporated by reference
to Exhibit 4.7 of the company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
5.8 Opinion of Counsel, Futro & Trauernicht, LLC. (Filed
herewith).
10.1 TeleServices International Group Inc. (formerly Visitors
Services International Corp.) Employee Benefit and Consulting
Services Compensation Plan (the "TSIG Plan"). (Incorporated
by referenced to Exhibit 10.1 to the company's Post-Effective
Amendment No. 1 to the Registration Statement on Form S-8
(file no. 333-14271) filed February 19, 1997).
</TABLE>
<PAGE> 51
<TABLE>
<S> <C>
10.3 TeleServices Stock Option Plan (the "TeleServices Plan").
(Incorporated by reference to Exhibit 10.3 the registration
statement filed on Form S-8 for the TeleServices Stock Option
Plan, Registration No. 333-52271, filed May 8, 1998).
10.5 Revolving Credit Loan Agreement and Revolving Credit Master
Note between the company and Robert P. Gordon, each dated
April 23, 1998. (Incorporated by referenced to Exhibit 10.5
to the company's Form 10-QSB for the quarter ended March 31,
1998, filed on May 20, 1998).
10.6 Employment Agreement between the company and James H. Guild
dated August 24, 1998. (Incorporated by referenced to Exhibit
10.6 to the company's Form 10-QSB for the quarter ended
September 30, 1998, filed on November 13, 1998).
10.7 Visitors Services, Inc. Employee Benefit and Consulting
Services Compensation Plan (the "VSI Plan"), as restated
March 15, 1999. (Incorporated by referenced to Exhibit 10.7
to the company's Registration Statement on Form S-8 (file no.
333-74561) filed March 17, 1999).
10.8 Addendum to Employment Agreement between the company and
James H. Guild dated December 2, 1998. (Incorporated by
reference to Exhibit 10.8 of the company's Form 10-KSB for
the fiscal year ended December 31, 1998, filed March 31,
1999).
10.9 Employment Agreement between the company and Robert P. Gordon
dated December 4, 1998. (Incorporated by reference to Exhibit
10.9 of the company's Form 10-KSB for the fiscal year ended
December 31, 1998, filed March 31, 1999).
10.10 Agreement to Serve as a Director between the company and John
Hwang dated December 7, 1998. (Incorporated by reference to
Exhibit 10.10 of the company's Form 10-KSB for the fiscal
year ended December 31, 1998, filed March 31, 1999).
10.11 Employment Agreement and Indemnification Agreement between
the company and John Hwang, each dated February 2, 1999.
(Incorporated by reference to Exhibit 10.11 of the company's
Form 10-KSB for the fiscal year ended December 31, 1998,
filed March 31, 1999).
10.12 Consulting Agreement between the company and Paul W. Henry
dated April 9, 1998. (Filed herewith).
21.3 List of Subsidiaries of the company. (Incorporated by
reference to Exhibit 10.10 of the company's Form 10-KSB for
the fiscal year ended December 31, 1998, filed March 31,
1999).
23.17 Consent of Schumacher & Associates, Inc., Certified Public
Accountants. (Filed herewith).
23.18 Consent of Futro & Trauernicht, LLC. (Incorporated by
reference to Exhibit 5.8 of this Registration Statement).
27 Financial Data Schedule (Filed herewith).
</TABLE>
<PAGE> 1
EXHIBIT 3.6
TELESERVICES INTERNATIONAL GROUP INC.
BYLAWS
(AS RESTATED APRIL 22, 1999)
ARTICLE I
OFFICES
1.1 PRINCIPAL OFFICE: The principal offices of the Corporation is
located at 100 Second Avenue South, Suite 1000, St. Petersburg, Florida 33701,
but the Board of Directors, in its discretion, may keep and maintain offices
wherever the business of the Corporation may require.
1.2 REGISTERED OFFICE AND AGENT: The Corporation shall have and
continuously maintain in the State of Florida a registered office, which may be
the same as its principal office, and a registered agent whose business office
is identical with such registered office. The Board of Directors may change the
Corporation's registered office or change its registered agent, or both, upon
filing a statement as specified by law in the office of the Secretary of State
of Florida.
ARTICLE II
SHAREHOLDERS
2.1 TIME AND PLACE: Any meeting of the shareholders may be held at such
time and place, within or outside of the State of Florida, as may be fixed by
the Board of Directors or as shall be specified in the notice of the meeting or
waiver of notice of the meeting.
2.2 ANNUAL MEETING: The annual meeting of the shareholders shall be
held at such place and on such date as the Board of Directors may determine. In
accordance with Florida law, failure to hold the annual meeting does not affect
the validity of any corporate action and shall not work a forfeiture of or
dissolution of the corporation.
2.3 SPECIAL MEETINGS: Special meetings of the shareholders, for any
purpose or purposes, may be called by the Chairman, the Chief Executive Officer,
the Board of Directors, or the holders of not less than 30% of the shareholders
entitled to vote at the meeting.
2.4 CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE: For the purpose
of determining shareholders entitled to notice of or to vote at any meeting of
shareholders or any adjournment thereof, or shareholders entitled to receive
payment of any dividend, or in order to make a determination of shareholders for
any other proper purpose, the Board of Directors may provide that the stock
transfer books shall be closed for any stated period not exceeding fifty (50)
days. If the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least ten (10) days immediately preceding such
meeting. In lieu of closing the stock transfer books, the Board of Directors may
fix in advance a date as the record date for any such determination of
shareholders, such date in any case to be not more than seventy (70) days, and
not less than ten (10) days, prior to the date on which the particular action,
requiring such determination of shareholders, is to be taken. If the stock
transfer books are not closed and no record date is fixed for the determination
of shareholders entitled to notice of or to vote at a meeting of shareholders,
or shareholders entitled to receive payment of a dividend, the date on which
notice of the meeting is mailed or the date on which the resolution of the Board
of
- --------------------------------------------------------------------------------
TELESERVICES INTERNATIONAL GROUP INC. PAGE 1 OF 12
BYLAWS AS RESTATED APRIL 22, 1999
<PAGE> 2
Directors declaring such dividend is adopted, as the case may be, shall be the
record date for such determination of shareholders. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof except where the determination has been made through the closing of the
stock transfer books and the stated period of the closing has expired.
2.5 VOTING LIST: At least ten (10) days before each meeting of
shareholders, the Secretary of the Corporation shall make a complete list of the
shareholders entitled to vote at such meeting, or any adjournment of such
meeting, which list shall be arranged in alphabetical order and shall contain
the address of and number of shares held by each shareholder. This list shall be
kept on file at the principal office of the Corporation for period of ten (10)
days prior to such meeting, shall be produced and kept open at the meeting, and
shall be subject to inspection by any shareholder for any purpose germane to the
meeting during usual business hours of the Corporation and during the whole time
of the meeting.
2.6 NOTICES: Written notice stating the place, day and hour of the
meeting and, in case of a special meeting, the purpose or purposes for which the
meeting is called, shall be delivered not less than ten (10) days nor more than
sixty (60) days before the date of the meeting. Notice shall be given either
personally or by mail, by or at the direction of the Chairman, Chief Executive
Officer, Secretary, or the officer or person calling the meeting, to each
shareholder of record entitled to vote at such meeting. If mailed, such notice
shall be deemed to be delivered when deposited in the United States mail,
postage prepaid, addressed to the shareholder at his or her address as it
appears on the stock transfer books of the Corporation.
2.6.1 If requested by the person or persons lawfully calling
such meeting, the Secretary shall give notice thereof at corporate
expense. No notice need be sent to any shareholder of record if three
successive letters mailed to the last known address of such shareholder
have been returned as undeliverable until such time as another address
for such shareholder is provided to the Corporation by such
shareholder. In order to be entitled to receive notice of any meeting,
a shareholder shall advise the Corporation in writing of any change in
such shareholder's mailing address as shown on the Corporation's books
and records.
2.6.2 When a meeting is adjourned to another time or place,
notice need not be given of the adjourned meeting if the time arid
place of such meeting are announced at the meeting at which the
adjournment is taken. At the adjourned meeting the Corporation may
transact any business which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after
the adjournment a new record date is fixed for the adjourned meeting, a
notice of the adjourned meeting shall be given to each shareholder of
record entitled to vote at the meeting.
2.6.3 By attending a meeting, either in person or by proxy, a
shareholder waives objection to lack of notice or defective notice of
the meeting unless the shareholder, at the beginning of the meeting,
objects to the holding of the meeting or the transacting of business of
the meeting. By attending the meeting, the shareholder also waives any
objection to consideration at the meeting of a matter not within the
purpose or purposes described in the meeting notice unless the
shareholder objects to considering the matter when it is presented.
- --------------------------------------------------------------------------------
TELESERVICES INTERNATIONAL GROUP INC. PAGE 2 OF 12
BYLAWS AS RESTATED APRIL 22, 1999
<PAGE> 3
2.7 CERTIFICATION PROCEDURE FOR BENEFICIAL OWNERS: The Board of
Directors may adopt by resolution a procedure whereby a shareholder of the
Corporation may certify in writing to the Corporation that all or a portion of
the shares registered in the name of such shareholder are held for the account
of a specified person or persons. The resolution shall set forth: (i) the
classification of shareholder who may certify; (ii) the purpose or purposes for
which the certification may be made; (iii) the form of certification and the
information to be contained therein; (iv) if the certification is with respect
to a record date or closing of the stock transfer books, the time within which
the certification must be received by the Corporation; and (v) such other
provisions with respect to the procedure that the Board of Directors deems
necessary or desirable. Upon receipt by the Corporation of a certificate
complying with this procedure, the persons specified in the certification shall
be deemed, for the purpose or purposes set forth in the certification, to be the
holders of record of the number of shares specified in place of the shareholder
making the certification.
2.8 QUORUM: Except as otherwise provided by law, one-third of the
shares entitled to vote, represented in person or by proxy, shall constitute a
quorum at any meeting of the shareholders. If a quorum shall not be present or
represented, the shareholders present in person or by proxy may adjourn the
meeting from time to time, without notice other than announcement at the
meeting, for a period not to exceed sixty days at any one adjournment, until the
number of shares required for a quorum shall be present. At any such adjourned
meeting at which a quorum is represented, any business may be transacted which
might have been transacted at the meeting originally called. The shareholders
present or represented at a duly organized meeting may continue to transact
business until adjournment, notwithstanding the withdrawal of enough
shareholders to leave less than a quorum.
2.9 VOTING AND PROXIES: Except as otherwise provided by law, all
matters shall be decided by vote of the majority of the shares represented at
the meeting and entitled to vote on the subject matter. Each outstanding share
shall be entitled to one vote on such matters submitted to a vote of the
shareholders. A shareholder may vote either in person or by proxy executed in
writing by the shareholder or by his duly authorized attorney-in-fact. Such
proxy shall be filed with the Secretary of the Corporation before or at the time
of the meeting. No proxy shall by valid after eleven months from the date of its
execution, unless otherwise provided in the proxy. Voting shall be oral, except
as otherwise provided by law, but shall be by written ballot if such written
vote is demanded by any shareholder present in person or by proxy and entitled
to vote.
2.10 VOTING OF SHARES BY CERTAIN HOLDERS: Neither treasury shares, nor
shares of its own stock held by the Corporation in a fiduciary capacity, nor
shares held by another corporation if a majority of the shares entitled to vote
for the election of directors of such other corporation is held by this
Corporation shall be voted at any meeting or counted in determining the total
number of outstanding shares at any given time.
Redeemable shares which have been called for redemption shall not be
entitled to vote on and after the date on which written notice of redemption has
been mailed to shareholders and a sum sufficient to redeem such shares has been
deposited with a bank or trust company with irrevocable instruction and
authority to pay the redemption price to the holders of the shares upon
surrender of certificates therefor.
Shares standing in the name of another corporation may be voted by such
officer, agent, or proxy as the bylaws of such corporation may prescribe or, in
the absence of such provision, as the Board of Directors of such corporation may
determine.
- --------------------------------------------------------------------------------
TELESERVICES INTERNATIONAL GROUP INC. PAGE 3 OF 12
BYLAWS AS RESTATED APRIL 22, 1999
<PAGE> 4
Shares entitled to vote and held by a personal representative,
custodian, guardian or conservator may be voted by him, either in person or by
proxy, without a transfer of such shares into his name. Shares standing in the
name of a receiver may be voted by such receiver, and shares held by or under
the control of a receiver may be voted by such receiver without the transfer
thereof into his name if he is authorized to vote the shares In an appropriate
order of the court by which the receiver was appointed. Unless the Secretary of
the Corporation is given written note of alternate voting provisions and is
furnished with a copy of the instrument or order wherein the alternate voting
provisions are stated, if shares or other securities having voting power are
held of record in the name of two or more persons, whether fiduciaries, members
of a partnership, joint tenants, tenants in common, tenants by the entirety, or
otherwise, or if two or more persons have the same fiduciary relationship
respecting the same shares, voting with respect to the shares shall have the
following effect: (1) if only one person votes, his vote binds all; (2) if two
or more persons vote, the act of the majority in interest so voting binds all;
or (3) if two or more persons vote, but the vote is evenly split on any
particular matter, each faction may vote the securities in question
proportionately, or any person voting the shares of a beneficiary, if any, may
apply to any court of competent jurisdiction in the State of Florida to appoint
an additional person to act with the persons so voting the shares. The shares
shall then be voted as determined by a majority of such persons and the person
appointed by the court. If a tenancy is held in unequal interests, a majority
even split for the purpose of this item (3) of this subparagraph shall be a
majority or even split in interest. All other shares may be voted only by the
record holder thereof, except as may be otherwise required by the laws of
Florida.
2.11 WAIVER: Whenever law or these bylaws require a notice of a meeting
to be given, a written waiver of notice signed by a shareholder entitled to
notice, whether before, at, or after the time stated in the notice, shall be
equivalent to the giving of notice. Attendance of a shareholder in person or by
proxy at a meeting constitutes a waiver of notice of a meeting, except where a
shareholder attends a meeting for the express purpose of objection to the
transaction of any business because the meeting is not lawfully called or
convened.
2.12 ACTION BY SHAREHOLDERS WITHOUT A MEETING: Any action required to
or which may be taken at a meeting of the shareholders may be taken without a
meeting if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to such action.
Such consent may be executed in counterparts and shall be effective as of the
date specified in the consent.
ARTICLE III
DIRECTORS
3.1 AUTHORITY OF BOARD OF DIRECTORS: The business and affairs of the
Corporation shall be managed by a Board of Directors which shall exercise all
the powers of the Corporation, except as otherwise provided by Florida law or
the Articles of Incorporation of the Corporation.
3.2 NUMBER: The number of directors of this Corporation shall, in no
case, be less than one (1), nor more than five (5). Subject to such limitations,
the number of directors shall be fixed by resolution of the Board of Directors,
and may be increased or decreased by resolution of the Board of Directors, but
no decrease shall have the effect of shortening the term of any incumbent
director.
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3.3 QUALIFICATION: Directors shall be natural persons at the age of
eighteen years or older, but need not be residents of the State of Florida or
shareholders of the Corporation. Directors shall be removed in the manner
provided by the Florida Business Corporation Act.
3.4 ELECTION: The Board of Directors shall be elected at the annual
meeting of shareholders or at a special meeting called for that purpose.
3.5 TERM: Each director shall be elected to hold office until the next
annual meeting of shareholders and until his or her successor shall have been
elected and qualified.
3.6 REMOVAL AND RESIGNATION: Any director may be removed at a
shareholders meeting expressly called for that purpose, with or without cause,
by a vote of the holders of the majority of shares entitled to vote at an
election of directors. Any director may resign at any time by giving written
notice to the Chairman, Chief Executive Officer or the Secretary, and acceptance
of such resignation shall not be necessary to make it effective unless the
notice so provides.
3.7 VACANCIES: Any vacancy occurring on the Board of Directors and any
directorship to be filled by reason of an increase in the size of the Board of
Directors shall be filled by the affirmative vote of the remaining majority of
directors. A director elected to fill a vacancy shall hold office during the
unexpired term of his or her predecessor in office. A director elected to fill a
position resulting from an increase in the Board of Directors shall hold office
until the next annual meeting of shareholders and until his or her successor
shall have been elected and qualified.
3.8 MEETINGS: A regular meeting of the Board of Directors shall be held
immediately after, and at the same place as, the annual meeting of shareholders.
No notice of this meeting of the Board of Directors need be given. The Board of
Directors, or any committee designated by the Board of Directors, may, by
resolution, establish a time and place for additional regular meetings which may
thereafter be held without further notice.
3.9 SPECIAL MEETINGS: Special meetings of the Board of Directors may be
called by or at the request of the Chairman, the Chief Executive Officer or any
two Directors. The persons or persons authorized to call special meetings of the
Board of Directors may fix any place, either within or outside Florida, as the
place for holding any special meeting of the Board of Directors called by them.
3.10 NOTICES: Notice of a special meting stating the date, hour and
place of such meeting shall be given to each member of the Board of Directors,
or committee of the board, by the Secretary, Chairman, Chief Executive Officer
or the members of the Board or such committee calling the meeting. The notice
may by deposited in the United States mail at least five (5) days before the
meeting addressed to the Director at the last address he or she has furnished to
the Corporation for this purpose, and any notice so mailed shall be deemed to
have been given at the time it is mailed. Notice may also be given at least two
(2) days before the meeting in person, or by telephone, prepaid telegram, telex,
facsimile, cablegram or radiogram, and such notice shall be deemed to have been
given at the time when the personal or telephone conversation occurs, or when
the telegram, telex, facsimile, cablegram or radiogram is either personally
delivered to the Director or delivered to the last address of the director
furnished to the Corporation by him or her for this purpose.
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3.11 QUORUM: Except as provided in Section 3.7 of these bylaws, a
majority of the number of directors fixed in accordance with these bylaws shall
constitute a quorum for the transaction of business at all meetings of the Board
of Directors. The act of a majority of the directors present at any meeting at
which a quorum is present shall be the act of the Board of Directors except as
otherwise specifically required by law.
3.12 WAIVER: A written waiver of notice signed by a director entitled
to notice, whether before, at, or after the time stated therein, shall be
equivalent to the giving of notice. Attendance of a director at a meeting
constitutes a waiver of notice of such meeting, except where a Director attends
a meeting for the express purpose of objecting to the transaction of any
business because the meeting is not lawfully called or convened.
3.13 ATTENDANCE BY TELEPHONE: Members of the Board of Directors or any
committee designated by the Board of Directors may participate in a meeting of
the Board of Directors or committee by means of conference telephone or similar
communications equipment by which all persons participating in the meeting can
hear each other at the same time. Such participation shall constitute presence
in person at the meeting.
3.14 ACTION BY DIRECTORS WITHOUT A MEETING: Any action required to or
which may be taken at a meeting of the Board of Directors, executive committee,
or other committee of the directors may be taken without a meeting if a consent
in writing, setting forth the action so taken, shall be signed by all of the
directors, executive or other committee members entitled to vote with respect to
the proposed action. Such consent may be executed in counterparts and shall be
effective as of the date of the last signature thereon.
3.15 PRESUMPTION OF ASSENT: A director of the Corporation who is
present at a meeting of the Board of Directors or committee of the Board of
Directors at which action on any corporate matter is taken shall be presumed to
have assented to the action taken unless (i) he objects at the beginning of the
meeting to the holding of the meeting or the transaction of business at the
meeting; (ii) he contemporaneously requests that his dissent be entered in the
minutes of the meeting; or (iii) he gives written notice of his dissent to the
presiding officer of the meeting before its adjournment or delivers such dissent
by registered mail to the Secretary of the Corporation immediately after the
adjournment of the meeting. A director may dissent to a specific acting at a
meeting, while assenting to others. The right to dissent to a specific action
taken at a meeting of the Board of Directors or a committee of the board shall
not be available to a director who voted in favor of such action.
ARTICLE IV
COMMITTEES
4.1 COMMITTEES: The Board of Directors, by resolution adopted by a
majority of the full Board of Directors, may designate from among its members an
executive committee and one or more other committees each of which, to the
extent provided in the resolution, shall have all of the authority of the Board
of Directors, except that no such committee shall have the authority to: (i)
declare dividends or distributions; (ii) approve or recommend to shareholders
actions or proposals required by the Florida Business Corporation Act to be
approved by shareholders; (iii) fill vacancies on the Board of Directors or any
committee thereof; (iv) amend the bylaws; (v) approve a plan of merger not
requiring shareholder approval; (vi) reduce earned or capital surplus; (vii)
authorize or approve the reacquisition of shares unless pursuant to a general
formula or method specified by the Board of Directors; or (viii) authorize or
approve the issuance or sale of, or any contract to issue or sell, shares or
designate the terms of a series of
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a class of shares provided that the Board of Directors, having acted regarding
general authorization for the issuance or sale of shares or any contract thereof
and, in the case of a series, the designation thereof, may, pursuant to a
general formula or method specified by the Board of Directors by resolution or
by adoption of a stock option or other plan, authorize a committee to fix the
terms of any contract for the sale of the shares and to fix the terms upon which
such shares may be issued or sold, including, without limitation, the price, the
dividend rate, provisions for redemption, sinking fund, conversion, or voting or
preferential rights, and provisions for other features of a class of shares or a
series of a class of shares, with full power in such committee to adopt any
final resolution setting forth all terms thereof and to authorize the statement
of the terms of a series for filing with the Secretary of State under the
Florida Business Corporation Act.
Neither the designation of any such committee, the delegation of
authority to such committee, nor any action by such committee pursuant to its
authority shall alone constitute compliance by any member of the Board of
Directors, nor a member of the committee in question, with his responsibility to
conform to the standard of care set forth in Article V of these Bylaws.
ARTICLE V
STANDARD
5.1 STANDARD OF CARE: A director shall perform his duties as a
director, including his duties as a member of any committee of the board upon
which he may serve, in good faith, in a manner he reasonably believes to be in
the best interests of the Corporation and with such care as an ordinarily
prudent person in a like position should use under similar circumstances. In
performing his duties, a director shall be entitled to rely on information,
opinions, reports, or statements, including financial statements and other
financial data, in each case prepared or presented by the persons herein
designated; but he shall not be considered to be acting in good faith if he has
knowledge concerning the matter in question that would cause such reliance to be
unwarranted. A person who so performs his duties shall not have any liability by
reason of being or having been a director of the Corporation. Any provision in
these bylaws to the contrary notwithstanding, to the fullest extent permitted by
the Florida Business Corporation Act as the same exists or may hereafter be
amended, a director of this Corporation shall not be liable to the Corporation
or its shareholders for monetary damages for breach of fiduciary duty as a
director.
The designated persons on whom a director is entitled to rely are: (1)
one or more officers or employees of the Corporation whom the director
reasonably believes to be reliable and competent in the matters presented; (2)
counsel, public accountants, or other persons as to matters which the director
reasonably believes to be within such persons' professional or expert
competence; or (3) a committee of the board upon which the director does not
serve, duly designated in accordance with Article IV of these bylaws, as to
matters within its designated authority, which committee the director reasonably
believes to merit confidence.
ARTICLE VI
OFFICERS
6.1 NUMBER AND ELECTION: The officers of the Corporation shall be a
Chief Executive Officer, a Secretary and a Treasurer, who shall be elected by
the Board of Directors and who shall hold office until their successors are duly
elected and qualified. In addition, the Board of Directors may elect a Chairman,
a President, one or more Vice Presidents, Assistant
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<PAGE> 8
Secretaries or Assistant Treasurers, and such other subordinate officers as they
shall deem necessary, who shall hold their offices for such terms and shall
exercise such powers and perform such duties as shall be determined from time to
time by the Board of Directors. The officers shall be elected at the first
meeting of the Board of Directors after each annual meeting. Any two or more
offices may be held by the same person.
6.2 CHAIRMAN: The Chairman of the Board of Directors, if one be
elected, shall preside at all meetings of the Board of Directors and shall have
and perform such other duties as from time to time may be assigned to him by the
Board of Directors.
6.3 CHIEF EXECUTIVE OFFICER: The Chief Executive Officer shall, in the
absence or non-election of a Chairman, preside at all meetings of shareholders
and of the Board of Directors. Subject to the direction and control of the Board
of Directors, he or she shall have general and active management of the business
of the Corporation and shall see that all orders and resolutions of the Board of
Directors are carried into effect. He or she may execute contracts, deeds and
other instruments on behalf of the Corporation as is necessary and appropriate.
He or she shall also perform such additional functions and duties as are
normally considered appropriate and customary for the office of President, if a
separate President has not been elected, and such additional functions and
duties as the Board of Directors may prescribe from time to time.
6.4 PRESIDENT: The President, if one be elected, shall perform such
have such powers and perform such duties as shall be assigned to him by the
Board of Directors.
6.5 VICE PRESIDENT: One or more Vice Presidents may be elected by the
Board of Directors, who shall, in the order determined by the Board of
Directors, be the officer(s) next in seniority after the Chief Executive Officer
and the President, if one has been appointed by the Board of Directors. Each
Vice President shall perform such duties and exercise such powers as are
appropriate and as are prescribed by the Board of Directors.
6.6 SECRETARY: The Secretary shall give, or cause to be given, notice
of all meetings of the shareholders and special meetings of the Board of
Directors, keep the minutes of such meetings, have charge of the corporate seal
and stock records, be responsible for the maintenance of all corporate records
and files and the preparation and filing of reports to governmental agencies,
other than tax returns, have authority to affix the corporate seal to any
instrument requiring it (and, when so affixed, it may be attested by his or her
signature), and perform such other functions and duties as are appropriate and
customary for the office of Secretary as the Board of Directors may prescribe
from time to time.
6.7 ASSISTANT SECRETARY: One or more Assistant Secretaries may be
elected by the Board of Directors, who shall, under the supervision of the
Secretary, perform such duties and have such powers as the Board of Directors
may prescribe from time to time.
6.8 TREASURER: The Treasurer shall have control of the funds and the
care and custody of all stocks, bonds, and other securities owned by the
Corporation and shall be responsible for the preparation and filing of tax
returns. He or she shall receive all moneys paid to the Corporation, and shall
have authority to give receipts and vouchers, to sign and endorse checks and
warrants in its name and on its behalf, and give full discharge for the same. He
or she shall also have charge of disbursement of the funds of the Corporation,
shall keep full and accurate records of the receipts and disbursements, and
shall deposit all moneys and other valuable effects in the name and to the
credit of the Corporation in such depositories as shall be
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<PAGE> 9
designated by the Board of Directors. He or she shall perform such other duties
and have such other powers as are appropriate and customary for the office of
Treasurer as the Board of Directors may prescribe from time to time.
6.9 ASSISTANT TREASURER: One or more Assistant Treasurers may be
elected by the Board of Directors, who shall, under the supervision of the
Treasurer, perform such duties and have such powers as the Board of Directors
may prescribe from time to time.
6.10 REMOVAL AND RESIGNATION: Any officer elected or appointed by the
Board of Directors may be removed at any time by the affirmative vote of a
majority of the Board of Directors. Any officer may resign at any time by giving
written notice of his or her resignation to the Chief Executive Officer or to
the Secretary, and acceptance of such resignation shall not be necessary to make
it effective, unless the notice so provides. Any vacancy occurring in any office
of the Corporation may be filled by the affirmative vote of a majority of the
Board of Directors for the unexpired portion of the term.
6.11 COMPENSATION: Officers shall receive such compensation for their
services as may be authorized or ratified by the Board of Directors. Election or
appointment of an officer shall not of itself create a contract right to
compensation for services performed as such officer.
ARTICLE VII
STOCK
7.1 CERTIFICATES: Certificates representing shares of the capital stock
of the Corporation shall be in such form as may be approved by the Board of
Directors and shall be signed by the Chairman or Chief Executive Officer and by
the Secretary or any Assistant Secretary. All certificates shall be
consecutively numbered and the names of the owners, the number of the shares and
the date of issue shall be entered on the books of the Corporation. Each
certificate representing shares shall state upon its face: (1) that the
Corporation is organized under the laws of the State of Florida; (2) the name of
the person to whom issued; (3) the number of shares which the certificate
represents; (4) the par value, if any, of each share represented by the
certificate; and (5) any restrictions placed upon the transfer of the shares
represented by the certificate.
7.2 FACSIMILE SIGNATURES: When a certificate is signed (1) by a
transfer agent other than the Corporation or its employee, or (2) by a registrar
other than the Corporation or its employee, any other signature on the
certificate may be facsimile. In case any officer, transfer agent, or registrar
who has signed, or whose facsimile signature or signatures have been place upon,
any certificate, shall cease to be such officer, transfer agent, or registrar,
whether because of death, resignation, or otherwise, before the certificate is
issued by the Corporation, it may nevertheless be issued by the Corporation with
the same effect as if he or she were such officer, transfer agent, or registrar
at the date of issue.
7.3 CONSIDERATION FOR SHARES: Shares shall be issued for such
consideration, expressed in dollars (but not less than the par value thereof) as
shall be fixed from time to time by the Board of Directors. Such consideration
may consist of any tangible or intangible property or benefit to the
Corporation, including cash, promissory notes, services performed, promises to
perform services evidenced by a written contract, or other securities of the
Corporation. Treasury shares shall be disposed of for such consideration
expressed in dollars as may be fixed from time to time by the Board of
Directors.
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<PAGE> 10
7.4 LOST CERTIFICATES: In case of the alleged loss, destruction or
mutilation of a certificate of stock, the Board of Directors may direct the
issuance of a new certificate in lieu thereof upon such terms and conditions in
conformity with law as it may prescribe. The Board of Directors may in its
discretion require a bond in such form and amount and with such surety as it may
determine before issuing a new certificate.
7.5 TRANSFER OF STOCK: Transfers of shares shall be made on the books
of the Corporation only upon presentation of the certificate or certificates
representing such shares properly endorsed by the person or persons appearing
upon the face of such certificate, except as may otherwise be expressly provided
by the statutes of the State of Florida or by order of a court of competent
jurisdiction. The officers or transfer agents of the Corporation may, in their
discretion, require a signature guaranty before making any transfer. The
Corporation shall be entitled to treat the person in whose name any share of
stock is registered on its books as the owner of those shares for all purposes,
and shall not be bound to recognize any equitable or other claim or interest in
the shares on the part of any other person, whether or not the Corporation shall
have notice of such claim or interest.
7.6 TRANSFER AGENT, REGISTRARS, AND PAYING AGENTS: The Board of
Directors may at its discretion appoint one or more transfer agents, registrars
and agents for making payment upon any class of stock, bond, debenture, or other
security of the Corporation. Such agents and registrars may be located either
within or outside Florida. They shall have such rights and duties and shall be
entitled to such compensation as may be agreed.
ARTICLE VIII
INDEMNIFICATION OF CERTAIN PERSONS
8.1 AUTHORITY FOR INDEMNIFICATION: Any person who was or is a party or
is threatened to be made a party to any threatened, pending, or completed
action, suit, or proceeding, whether civil, criminal, administrative, or
investigative, and whether formal or informal, by reason of the fact that he is
or was a director, officer, employee, fiduciary or agent of the Corporation or
is or was serving at the request of the Corporation as a director, officer,
partner, trustee, employee, fiduciary or agent of the Corporation or is or was
serving at the request of the Corporation as a director, officer, partner,
trustee, employee, or agent of any foreign or domestic corporation or of any
partnership, joint venture, trust, other enterprise or employee benefit plan
("Any Proper Person"), shall be indemnified by the Corporation against expenses
(including attorneys fees), judgments, penalties, fines, (including an excise
tax assessed with respect to an employee benefit plan) and amounts paid in
settlement reasonably incurred by him in connection with such action, suit or
proceeding if it is determined by the groups set forth in Section 8.4 of this
Article that he conducted himself in good faith and that he: (1) reasonably
believed, in the case of conduct in his official capacity with the Corporation,
that his conduct was in the Corporation's best interests; or (2) in all other
cases (except criminal cases) believed that his conduct was at least not opposed
to the Corporation's best interests; or (3) with respect to criminal proceedings
had no reasonable cause to believe his conduct was unlawful. A person will be
deemed to be acting in his official capacity while acting as a director,
officer, employee or agent of this Corporation and when he is acting on this
Corporation's behalf for some other entity. No indemnification shall be made
under this section to a director with respect to any claim, issue or matter in
connection with a proceeding by or in the right of a corporation in which the
director was adjudged liable to the Corporation or in connection with any
proceeding charging improper personal benefit to the director, whether or not
involving action in his official capacity, in which he was adjudged liable on
the basis that personal benefit was improperly received by him. Further,
indemnification under this Section in connection with a
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<PAGE> 11
proceeding brought by or in the right of the Corporation shall be limited to
reasonable expenses, including attorneys' fees, incurred in connection with the
proceeding. These limitations shall apply to directors only and not to officers,
employees, fiduciaries or agents of the Corporation.
8.2 RIGHT TO INDEMNIFICATION: The Corporation shall indemnify any
Proper Person who has been wholly successful on the merits or otherwise, in
defense of any action, suit, or proceeding referred to in Section 8.1 of this
Article against expenses (including attorneys' fees) reasonably incurred by him
in connection with the proceeding without the necessity of any action by the
Corporation other than the determination in good faith that the defense has been
wholly successful.
8.3 EFFECT OF TERMINATION OF ACTION: The termination of any action,
suit or proceeding by judgment, order, settlement or conviction, or upon a plea
of nolo contendere or its equivalent shall not of itself create a presumption
that the person seeking indemnification did not meet the standards of conduct
described in Section 1 of this Article. Entry of a judgment by consent as part
of a settlement shall not be deemed an adjudication of liability.
8.4 GROUPS AUTHORIZED TO MAKE INDEMNIFICATION DETERMINATION: In all
cases except where there is a right to indemnification set forth in Section 8.2
of this article or where indemnification is ordered by a court, any
indemnification shall be made by the Corporation only as authorized in the
specific case upon a determination by a proper group that indemnification of the
Proper Person is permissible under the circumstances because he has met the
applicable standards of conduct set forth in Section 1 of this Article. This
determination shall be made by the Board of Directors by a majority vote of a
quorum, which quorum shall consist of directors not parties to the proceeding
("Quorum"). If a Quorum cannot be obtained, the determination shall be made by a
majority vote of a committee of the board designated by the Board of Directors,
which committee shall consist of two or more directors not parties to the
proceeding except that directors who are parties to the proceeding may
participate in the designation of directors for the committee. If a Quorum of
the Board of Directors cannot be obtained or the committee cannot be
established, or even if a Quorum can be obtained or the committee can be
established but such Quorum or committee so directs, the determination shall be
made by independent legal counsel selected by a vote of a quorum of the Board of
Directors or a committee in the manner specified in this Section, or, if a
Quorum of the full Board of Directors cannot be obtained and a committee cannot
be established, by independent legal counsel selected by a majority vote of the
full Board of Directors (including directors who are parties to the action) or
by a vote of the shareholders.
8.5 COURT ORDERED INDEMNIFICATION: Any Proper Person may apply for
indemnification to the court conducting the proceeding or to another court of
competent jurisdiction for mandatory indemnification under Section 8.2 of this
Article, including indemnification for reasonable expenses incurred to obtain
court-ordered indemnification. If the court determines that the director is
fairly and reasonably entitled to indemnification in view of all the relevant
circumstances, whether or not he met the standards of conduct set forth in
Section 1 of this Article or was adjudged liable in the proceeding, the court
may order such indemnification as the court deems proper except that if the
individual has been adjudged liable, indemnification shall be limited to
reasonable expenses incurred.
8.6 ADVANCE OF EXPENSES: Expenses (including attorneys fees) incurred
in defending a civil or criminal action, suit or proceeding may be paid by the
Corporation to any Proper Person in advance of the final disposition of such
action, suit or proceeding upon receipt of: (1) a written affirmation of such
Proper Person's good faith belief that he has met the
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<PAGE> 12
standards of conduct prescribed by Section 1 of this Article; (2) a written
undertaking, executed personally or on his behalf, to repay such advances if it
is ultimately determined that he did not meet the prescribed standards of
conduct (the undertaking shall be an unlimited general obligation of the Proper
Person but need not be secured and may be accepted without reference to
financial ability to make repayment); and (3) a determination is made by the
proper group (as described in Section 4 of this Article), that the facts as then
known to the group would not preclude indemnification.
8.7 REPORT TO SHAREHOLDERS: Any indemnification of or advance of
expenses to a director in accordance with this Article, if arising out of a
proceeding by or on behalf of the Corporation, shall be reported in writing to
the shareholders with or before the notice of the next shareholders' meeting.
ARTICLE IX
PROVISION OF INSURANCE
By action of the Board of Directors, notwithstanding any interest of
the directors in the action, the Corporation may purchase and maintain
insurance, in such scope and amounts as the Board of Directors deems
appropriate, on behalf of any person who is or was a director, officer,
employee, fiduciary, or agent of the Corporation, or who, while a director,
officer, employee, fiduciary or agent of the Corporation, is or was serving at
the request of the Corporation as a director, officer, partner, trustee,
employee, fiduciary or agent of any other foreign or domestic corporation or of
any partnership, joint venture, trust, other enterprise or employee benefit
plan, against any liability asserted against, or incurred by, him in any such
capacity or arising out of his status as such, whether or not the Corporation
would have the power to indemnify him against such liability under the
provisions of Article VIII or applicable law.
ARTICLE X
MISCELLANEOUS
10.1 FISCAL YEAR: The Board of Directors may, by resolution, adopt a
fiscal year for this Corporation.
10.2 AMENDMENT OF BYLAWS: These bylaws may at any time and from time to
time, be amended, supplemented, restated or repealed by the Board of Directors.
These bylaws were adopted as the restated bylaws of the Corporation by
a resolution of the Board of Directors dated April 22, 1999.
/s/ Paul W. Henry
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Paul W. Henry, Secretary
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<PAGE> 1
EXHIBIT 5.8
[FUTRO & TRAUERNICHT LLC LETTERHEAD]
May 6, 1999
Board of Directors
TeleServices International Group Inc.
100 second Avenue South, Suite 1000
St. Petersburg, FL 33701
Gentlemen:
You have requested our opinion, as counsel for TeleServices
International Group Inc., a Florida corporation (the "Company"), in connection
with the registration statement on Form SB-2 (the "Registration
Statement"),under the Securities Act of 1933, filed by the Company with the
Securities and Exchange Commission for the sale of 50,346,890 shares (the
"Registered Shares") of common stock, $.0001 par value (the "Common Stock"), by
the selling securityholders named in the Registration Statement, including (i)
up to 48,822,640 shares that they may acquire upon conversion of the Company's
Convertible Debentures (the "Debentures") and (ii) upon exercise of Common Stock
Purchase Warrants (the "Warrants") to purchase up to an aggregate of 1,524,250
shares of Common Stock.
We have examined such records and documents and made such examinations
of law as we have deemed relevant in connection with this opinion. In our
examination, we have assumed the genuineness of all signatures, the legal
capacity of natural persons, the authenticity of all documents submitted to us
as originals, the conformity to original documents of all documents submitted to
us as certified or photostatic copies and the authenticity of the originals of
such copies.
Based upon the foregoing and in reliance thereon, and subject to the
limitation set forth in the Company's Articles of Incorporation with respect to
the maximum number of shares of Common Stock that the Company is authorized to
issue, we are of the opinion that the 48,822,640 shares of Common Stock issuable
upon the conversion of the Debentures and the 1,524,250 shares of Common Stock
issuable upon exercise of the Warrants in accordance with their respective
terms, when issued, will be duly and validly authorized, legally issued, fully
paid and non-assessable.
We hereby consent to the filing of this opinion as an exhibit to the
Registration Statement. We hereby further consent to the reference to us under
the caption "Legal Matters" in the prospectus included in the Registration
Statement.
Sincerely,
/s/ FUTRO & TRAUERNICHT LLC
<PAGE> 1
EXHIBIT 10.12
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT (the "Agreement") is made and entered into
this 9th day of April, 1998, by and between PAUL W. HENRY an individual whose
principal address is at 56 Lawrence Road, Chestnut Hill, Massachusetts 02167,
(the "Consultant"), and TELESERVICES INTERNATIONAL GROUP INC., a corporation
whose principal place of business is at 100 Second Avenue South, Suite 1000, St.
Petersburg, Florida 33701 (the "Client").
WHEREAS, the Consultant is willing and capable of providing various
consulting services, hereinafter defined, for and on behalf of the Client; and
WHEREAS, the Client desires to retain the Consultant as an independent
consultant and the Consultant desires to be retained in that capacity upon the
terms and conditions hereinafter set forth.
NOW, THEREFORE, in consideration of the mutual promises and agreements
hereinafter set forth, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto agree as follows:
1. Consulting Services. The Client hereby retains the Consultant as an
independent consultant to the Client and the Consultant hereby accepts and
agrees to such retention. The Consultant shall render to the Client such
services as set forth on Exhibit A, attached hereto and by reference
incorporated herein.
It is acknowledged and agreed by the Client that Consultant is
not rendering legal advice or performing accounting services, nor acting as an
investment advisor or broker-dealer within the meaning of applicable state and
federal securities laws. It is further acknowledged and agreed by the Client
that the consulting advisory services to be provided to the Client hereunder
shall not be rendered in connection with the offer and sale of securities in a
capital raising transaction.
2. Time, Place and Manner of Performance. The Consultant shall be
available for advice and counsel to Client and representatives and agents of the
Client at such reasonable and convenient times and places as may be mutually
agreed upon. Except as aforesaid, the time, place and manner of performance of
the services hereunder, including the amount of time to be allocated by the
Consultant to any specific service, shall be determined in the sole discretion
of the Consultant.
3. Term of Agreement. The term of this Agreement shall commence on the
date hereof, and shall terminate on May 31, 2000; subject, however, to prior
termination as hereinafter provided.
4. Compensation. In full consideration of the services to be provided
for the Client by the Consultant, as fully set forth in Exhibit A, upon
execution of this Agreement, the Client agrees to compensate Consultant in the
manner set forth on Exhibit B.
5. Expenses. Consultant shall be solely responsible for all expenses
and disbursements anticipated to be made in connection with its performance
under this Agreement, except for those to be paid by Client as set forth on
Exhibit B.
6. Termination. This Agreement may be terminated at any time and for
any reason by either party hereof upon receipt of written notice by the
non-terminating party, and all future rights and obligations of both parties, as
set forth in Exhibits A and B, shall immediately cease.
7. Confidentiality. The Consultant recognizes and acknowledges that it
has and will have access to certain confidential information of the Client and
its affiliates that are valuable, special and unique assets and property of the
Client and such affiliates. The Consultant will not, during or after the term of
this
- --------------------------------------------------------------------------------
Initials: Consultant______ Client______ Page 1
<PAGE> 2
Agreement, disclose, without the prior written consent or authorization of the
Client, any of such information to any person, except to authorized
representatives of the Consultant or its affiliates, for any reason or purpose
whatsoever. In this regard, the Client agrees that such authorization or consent
to disclosure may be conditioned upon the disclosure being made pursuant to a
secrecy agreement, protective order, provision of statute, rule, regulation or
procedure under which the confidentiality of the information is maintained in
the hands of the person to whom the information is to be disclosed or in
compliance with the terms of a judicial order or administrative process.
8. Conflict of Interest. The Consultant shall be free to perform
services for other persons. The Consultant will notify the Client of
Consultant's performance of consulting services for any other person which could
conflict with Consultant's obligations under this Agreement. Upon receiving such
notice, the Client may terminate this Agreement or consent to the Consultant's
outside consulting activities.
9. Disclaimer of Responsibility for Acts of the Client. The obligations
of Consultant described in this Agreement consist solely of the furnishing of
information and advice to the Client in the form of services. In no event shall
Consultant be required by this Agreement to represent or make management
decisions for the Client. All final decisions with respect to acts and omissions
of the Client or any affiliates and subsidiaries, shall be those of the Client
or its affiliates, and Consultant shall under no circumstances be liable for any
expense incurred or loss suffered by the Client as a consequence of such acts or
omissions.
10. Indemnity by the Client. The Client shall protect, defend,
indemnify and hold Consultant and its assigns and attorneys, accountants,
employees, officers and directors harmless from and against all losses,
liabilities, damages, judgments, claims, counterclaims, demands, actions,
proceedings, costs and expenses (including reasonable attorneys' fees) of every
kind and character resulting from or relating to or arising out of (a) the
inaccuracy, non-fulfillment or breach of any representation, warranty, covenant
or agreement made by the Client herein; or (b) any legal action, including any
counterclaim, to the extent it is based upon alleged facts that, if true, would
constitute a breach of any representation, warranty, covenant or agreement made
by the Client herein; or (c) negligent actions or omissions of the Client or any
employee or agent of the Client, or any reckless or willful misconduct,
occurring during the term hereof with respect to any of the decisions made by
the Client.
11. Notices. Any notices required or permitted to be given under this
Agreement shall be sufficient if in writing and delivered or sent by registered
or certified mail or overnight courier to the principal office of each party.
12. Waiver or Breach. Any waiver by either party of a breach of any
provision of this Agreement by the other party shall not operate or be construed
as a waiver of any subsequent breach by any party.
13. Assignment. This Agreement and the rights and obligations of the
Consultant hereunder shall not be assignable without the written consent of the
Client.
14. Applicable Law. It is the intention of the parties hereto that this
Agreement and the performance hereunder and all suits and special proceedings
hereunder be construed in accordance with and under and pursuant to the laws of
the State of Florida and that in any action, special proceeding or other
proceeding that may be brought arising out of, in connection with or by reason
of this Agreement, shall be brought only in a court of competent jurisdiction
within the county of Pinellas, Florida.
- --------------------------------------------------------------------------------
Initials: Consultant______ Client______ Page 2
<PAGE> 3
15. Severability. All agreements and covenants contained herein are
severable, and in the event any of them shall be held to be invalid by any
competent court, the Agreement shall be interpreted as if such invalid
agreements or covenants were not contained herein.
16. Entire Agreement. This Agreement constitutes and embodies the
entire understanding and agreement of the parties and supersedes and replaces
all prior understandings, agreements and negotiations between the parties.
17. Waiver and Modification. Any waiver, alteration or modification of
any of the provisions of this Agreement shall be valid only if made in writing
and signed by the parties hereto. Each party hereto, from time to time, may
waive any of its rights hereunder without effecting a waiver with respect to any
subsequent occurrences or transactions hereof.
18. Attorneys' Fees and Costs. In the event of any dispute arising out
of the subject matter of this Agreement, the prevailing party shall recover, in
addition to any damages assessed, its attorneys' fees and court costs incurred
in litigating or otherwise settling or resolving such dispute. In construing
this Agreement, none of the parties hereto shall have any term or provision
construed against such party solely by reason of such party having drafted the
same.
19. Counterparts and Facsimile Signatures. This Agreement may be
executed simultaneously in two or more counterparts, each of which shall be
deemed an original, but all of which taken together shall constitute one and the
same instrument. Execution and delivery of this Agreement by exchange of
facsimile copies bearing the facsimile signature of a party hereto shall
constitute a valid and binding execution and delivery of this Agreement by such
party. Such facsimile copies shall constitute enforceable original documents.
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered
this Agreement as of the day and year first above written.
CONSULTANT: CLIENT:
PAUL W. HENRY TELESERVICES INTERNATIONAL GROUP INC.
/S/ Paul W. Henry By: /s/ Robert P. Gordon
- ------------------------------- ----------------------------------
Robert P. Gordon, Chairman
- --------------------------------------------------------------------------------
Page 3
<PAGE> 4
EXHIBIT A
CONSULTANT AGREES TO PROVIDE THE FOLLOWING SERVICES TO CLIENT:
Consultant shall make himself available to consult with Client and
representatives and agents of Client, as requested by Client, for and in
connection with the duties of the offices of Secretary and Treasurer, as
described in the Bylaws of Client.
CONSULTANT: CLIENT:
PAUL W. HENRY TELESERVICES INTERNATIONAL GROUP INC.
By:
- ------------------------------- ----------------------------------
Robert P. Gordon, Chairman
- --------------------------------------------------------------------------------
Exhibit A
<PAGE> 5
EXHIBIT B
UPON EXECUTION HEREOF, FOR ALL SERVICES RENDERED BY CONSULTANT UNDER THIS
AGREEMENT, THE CLIENT AGREES TO COMPENSATE CONSULTANT AS FOLLOWS:
Client shall pay to Consultant a consulting fee of $5,000 per month,
such fee to be increased to $15,000 per month as of the later of (a) June 30,
1998 or (b) the end of the period when Consultant is paid $10,000 or more per
month, exclusive of severance pay, for his services as a consultant to the
estate of Phoenix Information Systems Corp.
Client shall grant to Consultant options to acquire one million
(1,000,000) shares of common stock of Client, exercisable for a period of five
(5) years at an exercise price of $.30 per share. The options shall vest and
become exercisable at the rate of 250,000 upon execution of this Agreement, and
at the rate of 30,000 every month thereafter, so long as Client continues to
perform services for Client as a consultant or an employee.
Client shall reimburse Consultant for reasonable and necessary
expenses, pre-approved by the Client, incurred while performing services for
Client, upon presentation by Consultant of an itemized account of such
authorized expenditures. However, Consultant shall be responsible for paying his
routine travel expenses and lodging between Massachusetts and St. Petersburg,
Florida.
If, during the term of this Agreement, Client requests Consultant to
travel to Florida on a date or dates that are not during Consultant's routine
travel schedule to Florida, (e.g., for a special event, board meeting, etc.),
Client shall reimburse Consultant for reasonable and pre-approved travel and
rent or lodging, but not food or meals, incurred by Consultant for such
"non-routine" travel to Florida.
CONSULTANT: CLIENT:
PAUL W. HENRY TELESERVICES INTERNATIONAL GROUP INC.
By:
- ------------------------------- ----------------------------------
Robert P. Gordon, Chairman
- --------------------------------------------------------------------------------
Exhibit B
<PAGE> 1
EXHIBIT 23.17
{LETTERHEAD}
CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT
We hereby consent to the use in this Registration Statement of our
report included herein dated March 30, 1999, relating to the consolidated
financial statements of TeleServices International Group Inc. and subsidiaries.
/s/ Schumacher & Associates, Inc., CPA's
----------------------------------------
Schumacher & Associates, Inc., CPA's
Denver, Colorado
May 6, 1999
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<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-START> JAN-01-1998
<PERIOD-END> DEC-31-1998
<CASH> 80,000
<SECURITIES> 0
<RECEIVABLES> 240,464
<ALLOWANCES> (159,934)
<INVENTORY> 0
<CURRENT-ASSETS> 319,971
<PP&E> 2,666,795
<DEPRECIATION> (2,185,218)
<TOTAL-ASSETS> 1,207,534
<CURRENT-LIABILITIES> 9,212,260
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0
0
<COMMON> 6,498
<OTHER-SE> 29,877,411
<TOTAL-LIABILITY-AND-EQUITY> 1,207,534
<SALES> 0
<TOTAL-REVENUES> 1,021,478
<CGS> 0
<TOTAL-COSTS> 2,111,726
<OTHER-EXPENSES> 10,732,003
<LOSS-PROVISION> 159,934
<INTEREST-EXPENSE> 576,867
<INCOME-PRETAX> (11,822,251)
<INCOME-TAX> 0
<INCOME-CONTINUING> (11,822,251)
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