CONSULTING AGREEMENT
With
AMERI-CAN RAILWAY SYSTEMS, INC
(A New Hampshire Corporation)
1. Parties and General Terms of Agreement. This Agreement is made
effective as of July 1, 1998 by Idaho Consulting Services, Inc.
(the "Consultant" or "ICS") and with the above-referenced client.
2. Consultant's Services In General. The Consultant engages in
securities, business and financial consulting. The Consultant has
been or will be assisting the Client in evaluating alternative
financing plans and securities offerings. The Consultant assists only
on a best effort basis in short term and long term equity financing
arrangements. The Consultant also has the expertise to negotiate
mergers, acquisitions and joint ventures. The Consultant has
available financial analysts, accountants, legal counsel, financial
public relations firms and other experts in financing, securities
markets and acquisition and disposition transactions. The Consultant
does not generally act as, and will not accept any compensation for.
incidental activities generally conducted by a mortgage broker or loan
finder or loan placement firm or investment banker or broker/dealer.
3. Specific Documents and Consultation Agreed Upon.
3A. The Consultant shall provide the Client with the following:
analysis, management consulting, organizational structuring, document
preparation and other services upon receipt of payment.
3A(1) Equity Capitalization Outline. The Consultant
shall present an outline for the Client's raising equity capital and
becoming a publicly traded NASDAQ Bulletin Board listed company. This
will focus on a Regulation D, Rule 504 offering with Form D filings,
in three (3) or more stages. This can require the formation of a new
corporate entity to avoid unknown (or false claims of) stock
obligations or taxes, or other liabilities that can cost time and
money to defeat or settle.
3A(2) Public Relations Contract. The Consultant will
negotiate for the Client a marketing contract with a financial public
relations firm.
3A(3) Business Plan Due Diligence. The Consultant shall
request and review a thorough group of Client-prepared due diligence
documents and the Client's business plan.
3A(4) New Corporation. Form a new corporate entity, if
necessary or desirable.
3A(5) First Stage Offering to Consultant and Public
Relations Firm. The Consultant shall prepare the first stage, Rule
504, Offering Memorandum ("OM"), if deemed necessary, and Form D, for
sale to Consultant or its designees, assignees and/or agents of
1,915,000 free trading shares of Common Stock at $0.0001 per share
($192), including Common shares salable pursuant to terms of the
financial public relations and promotion contracts. Consultant
shall compensate its professional consultants for legal and financial
advice from the shares referred to in this paragraph and the cash
payments described elsewhere herein.
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3A(6) Second Stage Offering. The Consultant shall prepare
the second stage $0.10 OM and Form D for the Company's 1,000,000
shares of free trading Common Stock to be sold at $0.10 per share
($200,000). This offering is intended to provide a shareholder base
for NASD qualification as described below.
3A(7) Third Stage Offering. The Consultant shall prepare
the OM and Form D for the third stage sale of Units of stock and
warrants to purchase stock. Example, 895,000 Units will be sold at
$1.00 per Unit (as agreed here: $1.00 per Unit, or $895,000 total).
The number of Units equals the dollar amount sold in the first and
second stage offerings subtracted from $1,000,000 (the maximum amount
under Rule 504) divided by the Unit price. Each Unit contains one
share of Common Stock, one Series A Warrant with an exercise price of
to be determined per share and one Series B Warrant with an exercise
price of to be determined per share. The exercise price is the amount
per share the warrant holder shall pay to the Client Company or its
agent (warrant transfer agent) to purchase one share of registered
(free trading) Common stock of the Company. See: Paragraph 4B. As
part of this Agreement, the securities counsel shall prepare the
Series A and B Warrants and the related Stock and Warrant Transfer
Agreements.
3A(8) NASD and State Filings. The Consultant shall assist
the Client in preparing Client's S.E.C. Form D, NASD Bulletin Board
application under Rule 15C2-11 and Form 211, and N.Y. State Forms M-11
and U-2. The third stage offering shall be made approximately three
weeks, market conditions permitting, after NASD clearance of the 15C2-11.
3A(9) Market Maker and Transfer Agents. The Consultant
shall recommend to the Client a suitable market maker, stock transfer
agent and warrant transfer agent.
3A(10) S & P Listing. The Consultant shall assist the
Client in completing an application listing the Client's data in the
Standard and Poor's Corporation Records.
3A(11) S.E.C Qualified C.P.A. The Consultant shall
require the Client to engage an S.E.C. qualified certified public
accountant.
3A(12) Form 10-SB. The Consultant shall assist the Client
in preparing the Client's Form 10-SB within two (2) months after the
completion of the third stage offering. This S.E.C. registration
statement makes the Client fully reporting as to outstanding stock
under Section 12(g) of the Securities Exchange Act of 1934. The 10-SB
will complete the qualifications to be a fully informational qualified
NASDAQ-listed, electronic Bulletin Board Company.
3A(13) Form SB-1. The Consultant shall assist the Client in
preparing the Client's Form SB-2 (S.E.C. registration statement for
stock sales under the Securities Act of 1933) after the completion of
the third stage offering and the S.E.C has approved the Client
Company's 10-SB filing and the market conditions are favorable; that
is, the stock has stabilized. See 4B. The Form SB-2 will register
the Common stock of the Company underlying the Warrants included in
the third stage Offering.
3B. Introduction. The Consultant shall inform the Client of any
investors it may be aware or become aware of who may be interested in
investing in the Client Company's Regulation D, Rule 504 Offering.
The Consultant shall not accept compensation or a commission for such
a service.
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4. Certain Information.
4A. NASD Clearance Timeframe. Normally the NASD will approve
the Bulletin Board (Rule 15C2-11) over-the-counter electronic listing
of the Client's shares for trading in two to three weeks, subject to
any additional inquiries and/or requests for additional information
made by the NASD.
4B. Warrant Details. The Series A and B Warrants shall be
exercisable after (A) the third stage offering is completed, (B) the
S.E.C. has approved the Client Company's 10-SB filing and (C) the
market conditions are favorable; that is, the stock has stabilized (i)
the stock price's closing bid is averaging approximately $1.00 above
the conversion price of the warrants and (ii) the daily average
trading volume is above 10,000 for at least a month. The A and B
Warrants are redeemable by the Client at $0.02 per Warrant on 30 days'
written notice. Before the Warrants can be exercised (converted), a
Form SB-2 Registration Statement must have been declared effective by
the S.E.C.. In order for the A and B Warrants to be converted
separately, an effective SB-2 registration (prospectus) would be
required for the conversion of the A Warrants and a separate effective
SB-2 registration (prospectus) would be required for the conversion
of the B Warrants.
5. Performance Stock Options. The Client hereby grants the
Consultant five (5) year options to purchase 500,000 shares of Common
Stock at $0.0001 per share. The options vest and are exercisable
immediately. The Consultant or its assignees( Collectively know as
the "Optionee" )may exercise the options in whole or in part from time
to time. The Optionee, also, agrees to enter in to a two year lock-up
commencing on the date of grant. The stock underlying the options
shall be registered on the Company's first S-3 filing, S-8 filing, if
applicable, or in the Form SB-2 filing or at another time pursuant to
"piggy back" registration rights. An Option Certificate is attached.
6. Fees Related to Offering Memorandum.
6A. OM Fees. The following fees are for due diligence,
analysis, structuring the transaction(s) and preparing the required
OM(s) and filings an legal requirements See .item 9. The fees are
$20,000 payable as follows: (i) $10,000 is due upon signing of the
Agreement, and (ii) the balance ($10,000) is payable upon funding of
the second stage offering. See 3A(6). Payment is made payable to
"Xxxxx X. Xxxxx, CPA."
6B. Filing and Preparation Fees. Payable to the Securities
Counsel upon demand from the proceeds of the second stage offering.
See 3A(6). The following estimated fees are required for listing and
trading the Company's Common Stock.
Fees Preparation
------- -----------
Standard & Poor's $6,900 $ 500
First Form M-11 250 500
Second Form X-00 000 000
15c2-11 and 211 -0- 750
------- -------
$7,900 $2,000
7. S.E.C. Analysis and Preparation Fees. Payable from the proceeds of
the third stage offering. See 3A(7).
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3A(12) Form 10-SB $20,000
Each S.E.C. Comment Letter 1,000
3A(13) Form SB-1 (per registration) $30,000 See 4B
Each S.E.C. Comment Letter 1,000
PAYMENT: Item 7. 50% UPON COMMENCEMENT
50% UPON FILING DOCUMENT
PAYMENT FOR EACH S.E.C. COMMENT LETTER PRIOR TO
SUBMISSION OF RESPONSE
8. Other Expenses. ALL TRAVEL EXPENSES INCURRED ON BEHALF OF THE
CLIENT ARE TO BE PREPAID BY THE CLIENT. FILING FEES, FED-EX/U.P.S.,
PRINTING FEES AND ASSOCIATED COSTS WILL BE PAID DIRECTLY BY THE
CLIENT. INCORPORATION FILING AND ESTIMATED PREPARATION FEES OF
$850.00 (NEVADA) OR $600.00 (FLORIDA) WILL BE PAID DIRECTLY TO THE
SECURITIES COUNSEL IF REQUIRED.
9. Legal. The Consultant retains a general and securities counsel.
He shall assist the Client by reviewing, preparing, filing and/or
supervising the preparation of documents pertaining to the Client for
the following: Consultant's Due Diligence Questionnaire and Documents
Request List, Disclosure Questionnaire for Officers, Directors and
Affiliates, Corporate Structure, Securities and Exchange Commission
Filings, State Filings (M-11, U2) State Blue Sky Regulation Filing, if
any, Stock and Warrant Transfer Agreement, Warrants, Standard and
Poor's Corporation Records, Market Makers, NASD (Rule 15C2-11 and Form
211) and related legal opinions. His fees are paid by the Consultant
and shall not be disclosed by him or the Consultant. His background
summary is available upon request.
10. Public Relations Firm. The financial public relations and
promotions firms shall purchase the Client's Rule 504 Common Stock
(free trading), issuable in two or more certificates at purchase price
consistent with the second stage 504 offering ($.0001 per share)
11. Arbitration and Jurisdiction. Any dispute among the parties
arising out of this contract or otherwise shall be settled by
arbitration in accordance with the Commercial Arbitration Rules of the
American Arbitration Association. Judgment upon the award rendered by
the Arbitrator may be entered in any court having venue and
jurisdiction at that location. This Agreement is to be construed in
accordance with the laws of the State of Pennsylvania .
12. Client's Representations and Warranties. The Client represents
that all documents and any other information furnished to the
Consultant are true, correct, complete and not misleading. The Client
also represents and warrants that it has not withheld and will not
withhold any materially important information. The Client accepts and
acknowledges sole liability for defending and paying all damages or
settlements resulting from any actions or claims against the Client or
the Consultant which may arise from the information furnished (or
omitted) by the Client.
13. Use of Proceeds. Client represents and warrants that it will
utilize the Rule 504 funds pursuant to the "Use of Proceeds" as set
forth in the Offering Memorandum(s) and the spirit thereof.
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14. Voluntary Lock-up. Officers, directors and principal
shareholders (ownership of at least 5%) will enter into a Lock-up
Agreement with the Company, agreeing not to sell their Common Stock
in the open market for a period twenty four (24) months. All sales
transactions shall be in accordance with Rules 144 and 145. This Lock-
up Agreement will be administered by the Board of Directors of the
Company (Client).
15. Rights of Rescission. At any time, for any or no reason, within
fifteen days of the completion of the audit of the Company's financial
statements, the Consultant may terminate this Agreement by returning
all funds (except for such funds which may have been expended in the
performance of due diligence), options, share certificates and
documents without any recourse or penalties from the Client.
16. Confidentiality. Consultants and the Client mutually agree to
hold confidential and secret all documents, strategies, relationships
or actions which either party may disclose or perform except as
directly required in performing the obligations as set forth in this
Agreement.
17. Completion, The Consulting Agreement contains three separate
and distinct phases, each one with a specific and identifiable point
of completion and associated costs. Phase One: Regulation D, Rule 504
offering shall be deemed complete upon the Client Company trading and
raising one million dollars before expenses. Phase Two shall be
deemed complete upon the S.E.C. declaring the Client Company's 10-SB
filing effective. Phase Three shall be deemed complete upon the S.E.C.
declaring the Client Company's initial SB-1 filing effective. Either
the Consultant or the Client may elect not to initiate a subsequent
phase upon thirty days' written notice. If the Client elects not to
initiate a phase prior to the start of such a phase, no additional
Consultant fees shall be incurred. If the phase is cancelled, the
Client shall be charged for hours incurred, at a rate of $175.00 per
hour, per individual Consultant.
18. Trickle-Out Assurances. The Consultant shall assist the Client,
on a best efforts basis, in obtaining from the purchaser of the Second
Stage Offering Shares, as referred to in paragraph 3A(6) herein,
assurances that such purchasers shall refrain from sales of the stock
which may adversely affect the market or the price of the Client
company's stock for a period of one hundred and twenty (120) days from
the commencement of public trading of the Company's stock or until the
average daily trading of the Company stock reaches ten thousand
(10,000) shares, whichever event shall occur first.
19. Final Agreement. This Agreement replaces, supercedes and renders
void all and any prior Agreements written and verbal. Any and all
modifications and or changes to this Agreements shall be mutually
agreed in writing by both parties.
20. Signatures. Signed as of July 1, 1998.
CLIENT: CONSULTANT:
Name: /s/ Xxxxxx Xxxxxxx Name: /s/ Xxxxxx X. Xxxxxx, Esq.
Title: Chairman & CEO Title: President & Director
Company: Ameri-can Railway Company: Idaho Consulting Services, Inc.
Systems, Inc.
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Performance Option Grant
500,000 Shares of Common Stock, $0.0001 par value, Granted to and
Idaho Consulting Services, Inc.
Parties and General Terms of Option Certificate and Agreement.
This Option Certificate and Agreement is made effective as of July 1,
1998 among Client Company's or its successor's ("Optionor"), and
Idaho Consulting Services, Inc. (the "Consultant" or "ICS") .
Idaho Consulting Services, Inc. (the "Consultant" or "ICS") and
with the above-referenced client. or its assignees, designees agents
or transferees ("Optionee"). The purpose of this Option Certificate
and Agreement is to set forth the terms pursuant to which the Optionor
is granting and the Optionee is accepting an option to purchase shares
of Client Company's or its successor's Common Stock, $0.0001 par value
per share.
2. Grant of Option. The Optionee is hereby granted an
option to purchase Five Hundred Thousand (500,000) Shares of Optionor,
Common Stock, $0.0001 par value per share, at the exercise (purchase)
price and on the other terms stated herein.
3. Exercise Price. The exercise price of this Option to
purchase the shares subject hereto is One Dollar ($0.0001) per share.
4. Escrow/Pledge of Shares. The certificate representing the
shares underlying this Option, and an Assignment of Stock, hereto,
shall be held to secure the issuance of shares, pursuant to the
enclosed Standard Escrow Terms.
5. Exercise of Option. This option is exercisable from time to
time, in whole or in part, by the sending to Optionor with a copy to
the Escrow Agent (if required) of signed written notice (on a copy of
the Exercise Notice Form contained herein, or otherwise) with payment
by Optionee of the exercise price on or before the date which is five
(5) years from the date of this Option. The Escrow Agent shall
effectuate the transfer upon receipt of the notice with a copy of the
check mailed to Optionor or upon forwarding the check to Optionors if
received by the Escrow Agent. The Client will register the stock
underlying the Performance Options on an S-3, an S-8 or any other
registration statement that may be filed with the Securities and
Exchange Commission upon the exercise of these Performance Options.
6. Purpose and Conditions of Option. This option is an
incentive and vests and is exercisable immediately. Optionee may
exercise the options in whole or in part from time to time. The
Optionee, as a part of this agreement, has entered into a two
year lock-up agreement which commences on the date of grant
(July 1, 1998). The stock underlying the options is deemed to
be issued prusuant to Rule 144, and if required shall be registered
on the Company's first S-3 filing, S-8 filing, if applicable, or
in the Form SB-2 filing or at another time pursuant to "piggy back"
registration rights.
7. Signatures. IN WITNESS WHEREOF, the parties have executed
this Agreement as of the date first set forth herein.
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Counterparts or multiple originals may be executed and collectively
shall be deemed to be one instrument.
OPTIONEE OPTIONER
Signature: Signature: /s/ Xxxxxx Xxxxxxx
Name Xxxxxx X. Xxxxxx, Esq. Name: Xxxxxx Xxxxxxx
Title President & Director Title Chairman & CEO
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EXERCISE NOTICE FORM
As To Stock Option
To:
Copy to: Escrow Agent.
The undersigned hereby irrevocably elects to exercise the
attached Option Certificate and Agreement to the extent of 500,000
Shares of __________________________________________, Inc.
Common Stock, $0.0001 par value per share, and hereby makes payment of
$_______________ ($1.00 per share) in payment of the purchase
(exercise) price thereof, ________________________________, Inc.,
check enclosed herewith.
(Please typewrite or print in block letters the name (s) on the Option
Certificate or assignees, designees, agents or transferees. If a
transferee is named, then a bank, must guarantee the registered
owner(s) signature(s) below or in a separate letter or form.)
Date: ____________, 199__ Signature:_______________________
Name:
Title: ___________________________
(If officer, trustee, etc.)
Enclosure: $____________Check
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