Reorganization Agreement
By & Among
AmeriNet Xxxxx.xxx, Inc., a Delaware corporation,
and Xxxxxxx Communications, Inc., a
Florida corporation
Table of Contents
Article I: Plan of Reorganization
1.1 Definitions
1.2 Reorganization
1.3 Effect of the Reorganization
1.4 Articles of Incorporation & Bylaws
1.5 Directors and Officers
1.6 Maximum Shares to Be Issued & Effect on Capital Stock
1.7 Exchange of Certificates
1.8 No Further Ownership Rights in Lorilei's Securities
1.9 Lost, Stolen or Destroyed Certificates
1.10 Tax Consequences and Accounting Treatment
1.11 Taking of Necessary Action & Further Action
Article II: Lorilei's Representations and Warranties
2.1 Organization of Xxxxxxx
2.2 Lorilei's Capital Structure
2.3 Subsidiaries
2.4 Authority
2.5 Lorilei's Financial Statements
2.6 No Undisclosed Liabilities
2.7 No Changes
2.8 Tax and Other Returns and Reports
2.9 Restrictions on Business Activities
2.10 Title of Properties, Absence of Liens and Encumbrances & Condition of
Equipment
2.11 Intellectual Property
2.12 Agreements, Contracts and Commitments
2.13 Interested Party Transactions
2.14 Governmental Authorization
2.15 Litigation
2.16 Accounts Receivable
2.17 Minute Books
2.18 Environmental and OSHA
2.19 Brokers' and Finders' Fees
2.20 Labor Matters
2.21 Insurance
2.22 Compliance with Laws
2.23 Complete Copies of Materials
2.24 Binding Agreements & No Default
2.25 Regulation SB Disclosure Document
2.26 FIRPTA
2.27 Employee Benefit Plans
2.28 Distribution Agreements
2.29 Disclosure to Lorilei's Stockholders
2.30 Representations Complete
Article III: AmeriNet's Representations and Warranties
3.1 Organization, Standing and Power
3.2 Capital Structure
3.3 Authority
3.4 Exchange Act Reports & AmeriNet's Financial Statements
3.5 Broker's and Finders' Fees
3.6 Ownership of Lorilei's Common Stock
3.7 Litigation
3.8 Limited Activities
3.9 No Undisclosed Liabilities
3.10 No Changes
3.11 Tax and Other Returns and Reports
3.12 Environmental and OSHA
3.13 Representations Complete
Article IV: Conduct Prior to the Closing
4.1 Conduct of Business of Xxxxxxx
4.2 No Solicitation
4.3 Conduct of Business of AmeriNet
Article V: Additional Agreements
5.1 Report on Form 8-K
5.2 Consent of Lorilei's Stockholders
5.3 Access to Information
5.4 Confidentiality
5.5 Expenses
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5.6 Public Disclosure
5.7 Consents
5.8 Affiliate Agreements
5.9 Legal Requirements
5.10 Blue Sky Laws
5.11 Best Efforts, Additional Documents and Further Assurances
5.12 Employment Agreements
5.13 Investment by AmeriNet in Xxxxxxx
5.14 Board of Directors
5.15 Additional Covenants by Xxxxxxx
Article VI: Conditions to The Reorganization
6.1 Conditions to Obligations of Each Party to Effect the Reorganization
6.2 Additional Conditions to Obligations of Xxxxxxx
6.3 Additional Conditions to the Obligations of AmeriNet
Article VII: Survival of Condition Subsequent, Representations and Warranties,
Covenants and Undisclosed Liabilities Escrow
7.1 Survival of Condition Subsequent, Representations and Warranties &
Covenants
7.2 Escrow Arrangements
Article VIII: Termination, Amendment and Waiver
8.1 Termination
8.2 Effect of Termination
8.3 Amendment
8.4 Extension & Waiver
Article IX: General Provisions
9.1 Interpretation
9.2 Notice
9.3 Merger of All Prior Agreements Herein
9.4 Survival
9.5 Severability
9.6 Governing Law
9.7 Indemnification
9.8 Dispute Resolution
9.9 Benefit of Agreement
9.10 Further Assurances
9.11 Counterparts
9.12 License
Schedules
Schedule 1.4 Lorilei's Constituent Documents
Schedule 1.7(C) Lorilei's Final Stockholder Data
Schedule 2 Exceptions to Lorilei's Representations & Warranties
Schedule 2.5(A) Lorilei's Financial Statements
Schedule 2.10(A)(1) Real Property
Schedule 2.10(C) Equipment
Schedule 2.11 Intellectual Property
Schedule 2.12 Contracts, Agreements & Commitments
Schedule 2.14 Governmental Authorization
Schedule 2.15 Litigation
Schedule 2.20 List of Employees
Schedule 2.21 Insurance
Schedule 2.27 Employee Benefit Plans
Schedule 2.28 Distribution Agreements
Schedule 4.1 Exceptions to Prohibited Pre- Closing Actions
Schedule 5.7 Consents
Schedule 5.8 Affiliates
Schedule 5.12 List and Summary of Employment Agreements
Schedule 5.13-1 Detailed Three Year Projections
Schedule 5.13-2 Use of Proceeds
Exhibits
Exhibit 2.25 Regulation SB Disclosure Document
Exhibit 3.4 AmeriNet Draft Annual Report
Exhibit 5.8 Affiliate Agreements
Exhibit 5.12 Copies of Contracts, Agreements & Commitments
Exhibit 6.2(D) AmeriNet Legal Opinion
Exhibit 6.3(E) Xxxxxxx Legal Opinion
Exhibit 6.3(K) Confidentiality Agreements
Exhibit 7.2 Escrow Allocation Information
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Reorganization Agreement
This Reorganization Agreement (the "Agreement") is made and entered into by
and among AmeriNet Xxxxx.xxx, Inc., a publicly held Delaware corporation with a
class of securities registered under Section 12(g) of the Securities Exchange
Act of 1934, as amended ("AmeriNet" and the "Exchange Act," respectively);
Xxxxxxx Communications, Inc., a Florida corporation ("Xxxxxxx"); Xxxxxx X.
Xxxxxxxxxx, a Florida resident ("Xx. Xxxxxxxxxx"); and, Xxxxx X. Xxxxxxxxxx, a
Florida resident and Xx. Xxxxxxxxxx'x spouse ("Xxx. Xxxxxxxxxx;" Xxx. Xxxxxxxxxx
being hereinafter collectively referred to with Xx. Xxxxxxxxxx as either "Mr. &
Xxx. Xxxxxxxxxx or as the "Former Xxxxxxx Stockholders" and generically as a
"Former Xxxxxxx Stockholder");" AmeriNet, Xxxxxxx and the Former Xxxxxxx
Stockholders being sometimes hereinafter collectively referred to as the
"Parties" or generically as a "Party").
Preamble:
WHEREAS, the boards of directors of AmeriNet and Xxxxxxx believe it is
in the best interests of each corporation and their respective stockholders that
Xxxxxxx become a wholly owned subsidiary of AmeriNet and, in furtherance
thereof, have approved the Reorganization; and
WHEREAS, pursuant to the terms of the Reorganization, as hereinafter
set forth, among other things, all of the outstanding and reserved securities of
Xxxxxxx (the "Lorilei's Securities") will be exchanged for between 90,839 and
1,145,037 shares of AmeriNet's common stock, $0.01 par value ("AmeriNet's common
stock"), depending on Lorilei's EBITDA during the fiscal period starting on July
1, 2000 and ending on June 30, 2003 and certain contingencies involving disputed
Xxxxxxx accounts payable, as hereinafter described; and
WHEREAS, the Parties intend that AmeriNet invest up to $500,000 within
180 days after completion of the Reorganization and the filing of required
reports with the United States Securities and Exchange Commission (the
"Commission"); and
WHEREAS, Xxxxxxx, AmeriNet and the Former Xxxxxxx Stockholders desire
to make certain representations and warranties and other agreements in
connection with the Reorganization and their subsequent operating and business
relationships; and
WHEREAS, the Parties intend, by executing this Agreement, to adopt a
plan of reorganization within the meaning of Section 368(a)(1)(B) of the
Internal Revenue Code of 1986, as amended (the "Code"):
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, and for other good and valuable consideration,
the Parties, intending to be legally bound, hereby agree as follows:
Witnesseth:
Article I
Plan of Reorganization
1.1 Definitions
The following terms, whether or not initially capitalized, will have
the meanings set forth below:
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(A) 1999 10-KSB: AmeriNet's report on Commission Form 10-KSB for the fiscal
year ended June 30, 1999.
(B) Accredited Investor:
A person or entity that meets the asset or income
requirements for treatment as an accredited investor
specified in Rule 501 of Commission Regulation D promulgated
under the Securities Act
(C) Affiliate: An entity or person that controls, is controlled by or is
under common control with another person.
(D) AmeriNet Financial Statements:
Financial statements, including all related schedules and
the notes thereto, of AmeriNet included in the report on
Commission Form 10-KSB for the period ended June 30, 1999,
as amended; the reports on Commission Form 10-QSB filed
subsequent to June 30, 1999 and the financial statements for
subsidiaries subsequently acquired by AmeriNet included in
current reports on Commission Form 8-K filed since the dates
of the Subsequent Quarterly Reports (the "Subsequent Current
Reports"); all such financial statements being hereinafter
collectively and generically referred to as the "AmeriNet
Financial Statements,"
(E) AmeriNet Schedules:
The schedules referenced by the Section designations of this
Agreement as to which they apply, annexed at the direction
of AmeriNet to this Agreement and constituting a material
component of this Agreement.
(F) (1) Xxxxxxxx Escrow:
The special escrow arrangement established using the
Xxxxxxxx Escrow Shares.
(2) Xxxxxxxx Escrow Agent:
Xx. Xxxxxxxx and any successors in interest as the escrow
agent for the Xxxxxxxx Escrow Shares.
(3) Xxxxxxxx Escrow Shares:
376,176 of the initial 572,519 shares of AmeriNet's common
stock issuable to Lorilei's Stockholders at the Closing
Xxxxx Xxxxxxxx, Esquire, as escrow agent for the Parties
pending determination of certain contingencies involving
Xxxxxxx following the Closing, as provided for in this
Agreement.
(4) Xx. Xxxxxxxx:
Xxxxx Xxxxxxxx, Esquire, a Florida attorney who serves as
legal counsel to the Xxxxxxx Declarants but who will be
acting as escrow agent for the Parties with reference to the
Xxxxxxxx Escrow.
(G) Capital Stock: The generic term used for equity securities, whether common,
preferred or otherwise.
(H) Closing: The event at which the exchange of all of the Xxxxxxx
securities will be exchanged for the initial 572,519 shares
of AmeriNet's common stock.
(I) Closing Date: The date that the Closing takes place.
(J) Commission: The United States Securities and Exchange Commission.
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(K) Code: The Internal Revenue Code of 1986, as amended.
(L) Commercial Software Rights:
Packaged commercially available software programs generally
available to the public through retail dealers in computer
software which have been licensed to end-user licenses and
which are used in the licensee's business but are in no way
a component of or incorporated in any of its products and
related trademarks, technology and know-how.
(M) EBITDA: Earnings before interest, taxes, depreciation and
amortization, determined in accordance with GAAP.
(N) (1) Escrow Agents:
The persons or entities acting as escrow agents pursuant to
the terms of this Agreement, including Yankees and Xx.
Xxxxxxxx.
(2) Escrow Funds:
The accounts maintained by the Escrow Agents for the Escrow
Shares and related distributions.
(O) (1) Escrow Shares:
The collective term for all shares of AmeriNet common stock
held by the Escrow Agents in the Escrow Funds.
(2) Escrow Terms:
The periods of time during which the Escrow Agents hold the
Escrow Shares.
(P) Exchange Act: The Securities Exchange Act of 1934, as amended.
(Q) Exchange Act Reports:
All reports filed by AmeriNet with the Commission pursuant
to the Exchange Act, including all exhibits filed therewith,
and the Draft Annual Report included as Exhibit 3.4.
(R) Exchange Agent:
The person or entity responsible following the Closing, for
issuing and delivering the initial 572,519 shares of
AmeriNet's common stock to Lorilei's Stockholders and the
Escrow Agents.
(S) Exchange Ratio:
The quotient obtained by dividing the initial 572,519 shares
of AmeriNet's common stock by the 111 shares of Lorilei's
common stock.
(T) GAAP: Generally accepted accounting principles, consistently
applied.
(U) Initial Funding Installment:
The sum of $100,000 payable to the order of Xxxxxxx in
satisfaction of AmeriNet's commitment under Section 5.13(A)
(i) of this Agreement but to be expended solely as provided
for in Schedule 5.13-2.
(V) IRS: The United States Internal Revenue Service.
(W) Knowledge: When used to qualify a representation or warranty, the word
"knowledge" or any derivations or variations thereof,
whether in the form of a word or phrase, will mean knowledge
after reasonable inquiry by a senior executive officer of
the legal entity on whose behalf the assertion is made and
will include information that such legal entity should have
had in the exercise of reasonable diligence.
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(X) Xxxxxxx Declarants:
Xxxxxxx, Xx. Xxxxxxxxxx and Xxx. Xxxxxxxxxx, acting
severally.
(Y) Lorilei's Financial Statements:
Lorilei's unaudited financial statements (balance sheets,
income statements and related schedules and footnotes) as of
and for the fiscal year ending December 31, 1999, the
calendar quarter ended March 31, 2000 and Lorilei's balance
sheet as of the day preceding the date of this Agreement,
all prepared in conformity with GAAP.
(Z) Xxxxxxx Schedules:
The schedules referenced by the Section designations of this
Agreement as to which they apply, annexed at the direction
of Xxxxxxx to this Agreement and constituting a material
component of this Agreement.
(AA) Material: When used to qualify a representation or warranty, the word
"material" or any derivations or variations thereof, whether
in the form of a word or phrase, will mean a variance that
could have negatively affected a decision by a reasonably
prudent person to engage in the transactions contemplated by
this Agreement, and will be measured both on the occasion in
which such term is referenced as well as on an aggregate
basis with other similar matters.
(BB) NASD: The National Association of Securities Dealers, Inc., a
Delaware corporation and self regulatory organization
registered with the Commission.
(CC) OTC Bulletin Board:
The over the counter electronic securities market operated
by the NASD.
(DD) Performance Shares:
Up to 572,518 shares of AmeriNet's common stock to be issued
to Lorilei's Stockholders in the future, based on the
performance of Xxxxxxx during the period starting on July 1,
2000 and ending on June 30, 2003.
(EE) Projections: The detailed projections of Lorilei's income and expenses
during the fiscal period starting on July 1, 2000 and ending
on June 30, 2003 included as Schedule 5.13-1 to this
Agreement.
(FF) Securities Act: The Securities Act of 1933, as amended.
(GG) Subsequent Current Reports:
AmeriNet's reports on Commission Form 8-K filed after the
Subsequent Quarterly Reports but prior to the date of this
Agreement.
(HH) Subsequent Exchange Act Reports:
AmeriNet's reports filed with the Commission pursuant to
requirements of the Exchange Act prior to the date of
Closing on this Agreement.
(II) Subsequent Quarterly Reports:
AmeriNet's reports on Commission Form 10-QSB for the
quarterly periods following the 1999 10-KSB filed prior to
the date of this Agreement.
(JJ) Substantial Compliance:
Compliance which the Party for whose benefit or at whose
request an act is performed, or for whose benefit or at
whose request an act is refrained from could under the
circumstances be reasonably expected to accept as full
compliance.
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(KK) Tax: For the purposes of this Agreement, a "Tax" or,
collectively, "Taxes," means any and all federal, state,
local and foreign taxes, assessments and other governmental
charges, duties, impositions and liabilities, including
taxes based upon or measured by gross receipts, income,
profits, sales, use and occupation, and value added, ad
valorem, transfer, franchise, withholding, payroll,
recapture, employment, excise and property taxes, together
with all interest, penalties and additions imposed with
respect to such amounts and any obligations under any
agreements or arrangements with any other person with
respect to such amounts.
(LL) Ten-Day Average:
Price: The average closing transaction price of a share of
AmeriNet's publicly traded common stock for the ten most
recent days that AmeriNet's common stock has traded ending
on the trading day prior to the date in question, as
reported on the OTC Bulletin Board.
(MM) Undisclosed Liabilities Escrow Number:
The 114,504 shares of AmeriNet's common stock held in escrow
as a means of generating funds that may be required to pay
for undisclosed liabilities of Xxxxxxx or to rectify other
violations of Lorilei's obligations under this Agreement.
(NN) Undisclosed Liabilities Escrow Agent:
The Yankee Companies, Inc., a Florida corporation, or such
other person designated for such role by AmeriNet (also
sometimes referred to in roles other than as an escrow
agent, as "Yankees").
(OO) Additional defined terms are specified in certain sections and
subsections below and are characterized by the use of initial letter
capitalization.
1.2 Reorganization
(A) The Reorganization.
(1) At the Closing on this Agreement all of the Lorilei's Stockholders
will exchange all of their Xxxxxxx securities, being an aggregate of
111 shares of common stock, $0.01 par value (the remaining 1,889
shares being unreserved treasury or authorized but heretofore unissued
shares of common stock), for up to 1,145,037 shares of AmeriNet's
common stock, as called for by this Agreement.
(2) The initial 572,519 shares of AmeriNet's common stock will be issued
by the Exchange Agent following the Closing and will be distributed as
follows:
(a) 376,176 shares will be issued to Xxxxx Xxxxxxxx, Esquire (who
serves as legal counsel to the Xxxxxxx Declarants but who will be
acting as escrow agent for the Parties as to this matter), to be
released as follows:
1. As soon after June 30, 2001, as Lorilei's EBITDA can be
definitively determined based on the annual audit of
AmeriNet, 286,260 of the shares will be transferred to:
A. Mr. & Xxx. Xxxxxxxxxx, as tenants by the entirety, if
Lorilei's EBITDA for the fiscal year ended June 30, 2001
is at least $250,000; or
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B. To AmeriNet if Lorilei's EBITDA for the fiscal year
ended June 30, 2001 is less than $250,000.
2. At such time as a final, legally binding determination is
made as to the amount, if any, payable to HGTV based on the
liability currently being challenged by Xxxxxxx, then a pro
rata portion of the remaining 80,916 shares being held in
escrow by Xx. Xxxxxxxx shall be transferred to Mr. & Xxx.
Xxxxxxxxxx, as tenants by the entirety, representing the
portion of such liability that was not payable (e.g., if
only 50% of the liability was payable, then 40,458 shares
would be transferred to Mr. & Xxx. Xxxxxxxxxx), with the
balance, if any, transferred to AmeriNet.
(b) 114,504 of the shares will be issued to The Yankee Companies,
Inc. (a Florida corporation that serves as AmeriNet's strategic
consultant and which, unless replaced by AmeriNet, is expected to
serve as the Undisclosed Liabilities Escrow Agent), to be used
from time to time to discharge undisclosed liabilities of Xxxxxxx
or other violations of its obligations under this Agreement, as
described in Article Seven, with the balance, if any, transferred
to Mr. & Xxx. Xxxxxxxxxx, as tenants by the entirety, at such
time as AmeriNet's audited financial statements for the year
ended June 30, 2001 are filed with the Commission.
(c) 90,839 of the shares will be issued to Mr. & Xxx. Xxxxxxxxxx, as
tenants by the entirety (Lorilei's Stockholders, in proportion to
their holdings of Xxxxxxx common stock immediately prior to the
Closing).
(3) (a) In addition to the initial 572,519 shares of AmeriNet's common
stock, 572,518 shares of AmeriNet's common stock, $0.01 par value
(the "Performance Shares") will be reserved by the Exchange Agent
following the Closing, to be issued to the Former Xxxxxxx
Stockholders, on the following terms and subject to the following
requirements:
(i) If Xxxxxxx attains EBITDA of at least $500,000 during the
period starting on July 1, 2000 and ending on June 30, 2001,
then Lorilei's Stockholders will be issued an aggregate of
114,504 of the Performance Shares;
(ii) If Xxxxxxx attains EBITDA of at least $1,400,000 during the
period starting on July 1, 2001 and ending on June 30, 2002,
then Lorilei's Stockholders will be issued an aggregate of
305,343 of the Performance Shares (including the 114,504
that either were or could have been earned as of June 30,
2001);
(iii) If Xxxxxxx attains EBITDA of at least $2,900,000 during the
period starting on July 1, 2002 and ending on June 30, 2003,
then Lorilei's Stockholders will be issued all 572,518 of
the Performance Shares (including the 305,343 that either
were or could have been earned as of June 30, 2002);
however, all rights to any of the Performance Shares not
earned as of such date will thereupon expire.
(b) The Performance Shares will be allocated among the Lorilei's
Stockholder's, pro rata, based on their ownership of Lorilei's
common stock immediately preceding the Closing, will be reserved
for future issuance immediately following the Closing and will be
issued within 30 days after completion and filing of AmeriNet's
audit for the subject fiscal year confirming the calculations
called for, with the Commission.
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(B) As promptly as practicable after the satisfaction or waiver of the
conditions set forth in Article VI, the Parties will cause the
Reorganization to be consummated by effecting the exchange all of
Lorilei's common stock for the initial 572,519 shares of AmeriNet's
common stock.
(C) The Closing Date and time of the Reorganization will be the date and
time on which the Closing of this Reorganization Agreement is
consummated.
(D) (1) At the Closing the Parties will exchange all closing
documentation, certificates, resolutions, exhibits, schedules and
opinions called for by this Agreement, and
(a) All stockholders of Xxxxxxx will have repaid Xxxxxxx
all debts theretofore owed by them to Xxxxxxx (either
in the form of loans to stockholders or advances to
employees, consultants or independent contractors);
(b) All of Lorilei's outstanding securities (being solely
111 shares of its common stock) will be exchanged
with AmeriNet for 572,519 shares of AmeriNet's common
stock; provided that delivery of the certificates for
the initial 572,519 shares of AmeriNet's common stock
will be made directly to Lorilei's Stockholders and
the Escrow Agents by AmeriNet's stock transfer agent
after the Closing; and
(c) AmeriNet will arrange to wire the Initial Funding
Installment to Lorilei's account at AmSouth Bank in
Ocala, Florida; provided that, if Closing takes place
after normal banking hours, the wire will be arranged
at the opening of business on the following business
day.
1.3 Effect of the Reorganization.
At the Closing, the effect of the Reorganization will be that Lorilei's
will become a wholly owned subsidiary of AmeriNet and that the stockholders of
Xxxxxxx immediately prior to the Closing will become stockholders of AmeriNet at
the Closing, with no further rights, title or interest in Xxxxxxx, other than
indirectly as stockholders of AmeriNet.
1.4 Articles of Incorporation & Bylaws.
Unless otherwise determined by AmeriNet prior to the Closing Date, the
articles of incorporation and bylaws of Xxxxxxx will be amended to conform with
those included in Schedule 1.4.
1.5 Directors and Officers.
Subject to the requirements of Section 5.14(A), the directors of
Xxxxxxx will continue in office following the Closing until their respective
successors are duly elected or appointed and qualified, in accordance with the
requirements of this Agreement.
1.6 Maximum Shares to Be Issued & Effect on Capital Stock.
(A) The number of shares of AmeriNet's common stock to be issued in
exchange for all of the Xxxxxxx Capital Stock (the only Xxxxxxx
securities to be outstanding or reserved at the Closing) will be up to
1,145,037, 572,519 of which will be issued by the Exchange Agent
following the Closing, and up to 572,518 additional shares may be
issued subject to Lorilei's EBITDA during the period starting on July
1, 2000 and ending on June 30, 2003 (as hereinbefore established).
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(B) Adjustments to Exchange Ratio.
The Exchange Ratio (as provided in the foregoing paragraph) will be
adjusted to reflect fully the effect of any stock split, reverse split,
stock dividend (including any dividend or distribution of securities
convertible into AmeriNet's common stock or Lorilei's common stock),
reorganization, recapitalization or other like change with respect to
AmeriNet's common stock or Lorilei's common stock occurring after the
date hereof and prior to the Closing.
(C) Fractional Shares.
No fraction of a share of AmeriNet's common stock will be issued, but
in lieu thereof each holder of shares of Lorilei's common stock who
will otherwise be entitled to a fraction of a share of AmeriNet's
common stock (after aggregating all fractional shares of AmeriNet's
common stock to be received by such holder) will be entitled to receive
from AmeriNet a whole share of AmeriNet's common stock.
1.7 Exchange of Certificates.
(A) Exchange Agent.
Unless modified by AmeriNet prior to the Closing Date, Liberty Transfer
Co., Inc., of Huntington, New York, AmeriNet's current transfer agent,
will serve as the Exchange Agent.
(B) AmeriNet to Provide Common Stock.
Promptly after the Closing, AmeriNet will make available to the
Exchange Agent for exchange in accordance with this Article I the
shares of AmeriNet's common stock issuable pursuant to Section 1.6 in
exchange for all of the outstanding shares of Lorilei's common stock.
(C) Exchange Procedures.
(1) All certificates for shares of Lorilei's outstanding common
stock will be tendered to AmeriNet at the Closing, with
medallion signature guarantees or otherwise in proper form for
immediate transfer to the order of AmeriNet, whereupon
AmeriNet will issue instructions to the Exchange Agent to
issue shares of AmeriNet's common stock, in the quantities and
names set forth in Schedule 1.7(C), subject to Xxxxxxxx Escrow
and the Undisclosed Liabilities Escrow requirements of Article
VII.
(2) (a) As soon as practicable after the Closing, and
subject to and in accordance with the provisions of
Article VII hereof, AmeriNet will cause to be
distributed to the Undisclosed Liabilities Escrow
Agent a certificate or certificates representing that
number of shares of AmeriNet's common stock equal to
the Undisclosed Liabilities Escrow Number which will
be registered in the name of the Undisclosed
Liabilities Escrow Agent.
(b) The shares registered in the name of the Undisclosed
Liabilities Escrow Agent will be beneficially owned
by the holders on whose behalf such shares were
deposited in the Undisclosed Liabilities Escrow Fund
but will be available to compensate AmeriNet for
certain damages as provided in Article VII.
(3) (a) As soon as practicable after the Closing, and
subject to and in accordance with the provisions of
Section 1.2(A)(2)(a) hereof, AmeriNet will cause to
be distributed to the Xxxxxxxx Escrow Agent a
certificate or certificates representing that number
of shares of AmeriNet's common stock equal to the
Xxxxxxxx Escrow Number which will be registered in
the name of the Xxxxxxxx Escrow Agent.
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(b) The shares registered in the name of the Xxxxxxxx
Escrow Agent will be beneficially owned by the
holders on whose behalf such shares were deposited in
the Xxxxxxxx Escrow but will be available for the
purposes described in Section 1.2(A)(2)(a).
(D) Transfers of Ownership.
If any certificate for shares of AmeriNet's common stock is to be
issued in a name other than that in which the certificate surrendered
in exchange therefor is registered, it will be a condition of the
issuance thereof that the certificate so surrendered will be properly
endorsed and otherwise in proper form for transfer and that the person
requesting such exchange will have paid to AmeriNet or any agent
designated by it any transfer or other Taxes required by reason of the
issuance of a certificate for shares of AmeriNet's common stock in any
name other than that of the registered holder of the certificate
surrendered, or established to the satisfaction of AmeriNet, or any
agent designated by it, that such Tax has been paid or is not payable.
(E) No Liability.
Notwithstanding anything to the contrary in this Section 1.7, neither
the Escrow Agents, the Exchange Agent, AmeriNet, Xxxxxxx or any other
person will be liable to a holder of shares of AmeriNet's common stock
or Lorilei's Capital Stock for any amount properly paid to a public
official pursuant to any applicable abandoned property, escheat or
similar law.
1.8 No Further Ownership Rights in Lorilei's Securities.
(A) All shares of AmeriNet's common stock issued upon the surrender for
exchange of shares of Lorilei's common stock in accordance with the
terms hereof will be deemed to have been issued in full satisfaction of
all rights pertaining to such shares of Lorilei's common stock, and
there will be no further registration of transfers on the records of
Xxxxxxx, of shares of Lorilei's Capital Stock which were outstanding
immediately prior to the Closing.
(B) If, after the Closing, Certificates are presented to Xxxxxxx, for any
reason, they will be canceled and exchanged as provided in this Article
I.
1.9 Lost, Stolen or Destroyed Certificates.
In the event any certificates evidencing shares of Lorilei's common
stock will have been lost, stolen or destroyed, Lorilei's transfer
agent or share registrar will, prior to the Closing, have issued in
exchange for such lost, stolen or destroyed certificates, upon the
making of an affidavit of that fact by the holder thereof, such shares
of its common stock as may have been required pursuant to Section 1.6;
provided, however, that AmeriNet may, in its discretion and as a
condition precedent to the issuance of the shares of AmeriNet's common
stock to be exchanged therefor, require the owner of such lost, stolen
or destroyed certificates to deliver a bond in such sum as it may
reasonably direct as indemnity against any claim that may be made
against AmeriNet or the Exchange Agent with respect to the certificates
alleged to have been lost, stolen or destroyed.
1.10 Tax Consequences and Accounting Treatment.
(A) It is intended by the Parties that the Reorganization will constitute a
reorganization within the meaning of Section 368(a)(1)(B) of the Code
and the Parties agree that if modification of the terms of this
Agreement in a non-material manner to attain such qualification is
necessary, they will negotiate in good faith to make such required
modifications.
Page 45
(B) The Parties understand that because of the inclusion of contingencies
in determining the quantity of AmeriNet's common stock being exchanged
for Lorilei's common stock, the reorganization may not qualify for
accounting as a pooling of interests but rather, may be accounted for
under the purchase method.
1.11 Taking of Necessary Action: Further Action.
If, at any time after the Closing, any further action is necessary or
desirable to carry out the purposes of this Agreement including,
without limitation the vesting in AmeriNet of full right, title and
possession to all of Lorilei's Capital Stock or compliance with the
requirements of Code Section 368(a)(1)(B); the officers and directors
of AmeriNet and Xxxxxxx are fully authorized in the name of their
respective corporations or otherwise to take, and will take, all lawful
and necessary action.
Article II
Representations and Warranties of Xxxxxxx
The Xxxxxxx Declarants hereby represent and warrant to AmeriNet, as a
material inducement to its entry into this Agreement, subject only to the
exceptions specifically disclosed in Schedule 2, as follows:
2.1 Organization of Xxxxxxx.
(A) Xxxxxxx is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida.
(B) Xxxxxxx has the corporate power to own its property and to carry on its
business as now being conducted and as proposed to be conducted by
Xxxxxxx.
(C) Xxxxxxx is duly qualified to do business and in good standing as a
foreign corporation in each jurisdiction in which the failure to be so
qualified would have a material adverse effect on the business, assets
(including intangible assets), financial condition, or results of
operations of Xxxxxxx.
(D) Xxxxxxx has delivered a true and correct copy of its articles of
incorporation and bylaws (or similar governing instruments), each as
amended to date, to counsel for AmeriNet.
2.2 Lorilei's Capital Structure.
(A) The authorized Capital Stock of Xxxxxxx consists of 2,000 shares of
common stock, $0.01 par value;
(B) There are 111 shares of Xxxxxxx common stock issued and outstanding,
held by the persons, and in the amounts, set forth on Schedule 1.7(C).
(C) All outstanding shares of Xxxxxxx common stock are duly authorized,
validly issued, fully paid and nonassessable and not subject to
preemptive rights created by statute, the articles of incorporation or
bylaws of Xxxxxxx or any agreement to which Xxxxxxx is a party or is
bound.
(D) Xxxxxxx has no other outstanding or securities reserved for issuance
for any purpose, there being no other obligations directly or
indirectly obligating Xxxxxxx to issue any of its securities to any
person for any purpose, there are no other options, warrants, calls,
rights, commitments or agreements of any character to which Xxxxxxx is
a party or by which it is bound obligating Xxxxxxx to issue, deliver,
sell, repurchase or redeem, or cause to be issued, delivered, sold,
repurchased or redeemed, any shares of the Xxxxxxx Capital Stock or
obligating Xxxxxxx to grant, extend or enter into any such option,
warrant, call, right, commitment or agreement.
Page 46
2.3 Subsidiaries.
Xxxxxxx has no subsidiaries or affiliated companies and does not
otherwise own any shares of stock or any interest in, or control,
directly or indirectly, any other corporation, partnership,
association, joint venture or business entity.
2.4 Authority.
(A) Xxxxxxx has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
(B) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of Xxxxxxx.
(C) This Agreement has been duly executed and delivered by Xxxxxxx and,
subject to the proper authorization of this Agreement by AmeriNet's
board of directors and its due execution and delivery by AmeriNet to
Xxxxxxx, constitutes the valid and binding obligation of Xxxxxxx.
(D) The execution and delivery of this Agreement by Xxxxxxx does not, and
the consummation of the transactions contemplated hereby will not,
conflict with, or result in any violation of, or default under (with or
without notice or lapse of time, or both), or give rise to a right of
termination, cancellation or acceleration of any obligation or loss of
a material benefit under (i) any provision of the articles of
incorporation or bylaws of Xxxxxxx or (ii) any material mortgage,
indenture, lease, contract or other agreement or instrument, permit,
concession, franchise, license, judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to Xxxxxxx or its properties
or assets.
(E) No consent, approval, order or authorization of, or registration,
declaration or filing with, any court, administrative agency or
commission or other governmental authority or instrumentality
("Governmental Entity"), is required by or with respect to Xxxxxxx in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for such
consents, approvals, orders, authorizations, registrations,
declarations and filings as may be required under applicable state and
federal securities laws (e.g., notification on Form D) and the laws of
any foreign country.
2.5 Lorilei's Financial Statements.
(A) Schedule 2.5(A) includes Lorilei's Financial Statements.
(B) Lorilei's Financial Statements are complete and correct in all material
respects and have been prepared in accordance GAAP throughout the
periods indicated.
(C) Lorilei's Financial Statements present fairly the financial condition
and operating results of Xxxxxxx as of the dates and during the periods
indicated therein, subject to normal year-end audit adjustments, which
will not be material in the aggregate.
(D) The unaudited balance sheet of Xxxxxxx as of the day prior to the date
of this Agreement is hereinafter referred to as "Lorilei's Balance
Sheet."
(E) Lorilei's financial statements can and will be audited, at Lorilei's
expense, as required to comply with the requirements for material
acquisitions under Commission Regulation S-B and in a manner permitting
AmeriNet to comply with its obligation under the Securities Act and the
Exchange Act in conjunction therewith.
Page 47
2.6 No Undisclosed Liabilities.
Xxxxxxx does not have any material liabilities or obligations, either
accrued or contingent (whether or not required to be reflected in financial
statements in accordance with generally accepted accounting principles), and
whether due or to become due, which individually or in the aggregate, (i) have
not been reflected in the Xxxxxxx Balance Sheet (including the notes thereto) or
(ii) have not been specifically described in this Agreement or in the Xxxxxxx
Schedules.
2.7 No Changes.
Since the date of Lorilei's Financial Statements there has not been,
occurred or arisen any:
(A) Transaction by Xxxxxxx except in the ordinary course of business as
conducted on that date;
(B) Capital expenditure by Xxxxxxx, either individually or in the aggregate
exceeding $5,000;
(C) Destruction, damage to, or loss of any assets (including without
limitation intangible assets) of Xxxxxxx (whether or not covered by
insurance), either individually or in the aggregate, exceeding $5,000;
(D) Labor trouble or claim of wrongful discharge, sexual harassment or
other unlawful labor practice or action;
(E) Change in accounting methods or practices (including any change in
depreciation or amortization policies or rates, any change in policies
in making or reversing accruals, or any change in capitalization of
software development costs) by Xxxxxxx;
(F) Declaration, setting aside, or payment of a dividend or other
distribution in respect to the shares of Xxxxxxx, or any direct or
indirect redemption, purchase or other acquisition by Xxxxxxx of any of
its shares;
(G) Increase in the salary or other compensation payable or to become
payable by Xxxxxxx to any of its officers, directors or employees, or
the declaration, payment, or commitment or obligation of any kind for
the payment, by Xxxxxxx, of a bonus or other additional salary or
compensation to any such person;
(H) Acquisition, sale or transfer of any asset of Xxxxxxx except in the
ordinary course of business;
(I) Formation, amendment or termination of any distribution agreement or
any material contract, agreement or license to which Xxxxxxx is a
party, other than termination by Xxxxxxx pursuant to the terms thereof;
(J) Loan by Xxxxxxx to any person or entity, or guaranty by Xxxxxxx of any
loan except for expense advances in the ordinary course of business
consistent with past practice;
(K) Waiver or release of any material right or claim of Xxxxxxx, including
any write-off or other compromise of any material account receivable of
Xxxxxxx;
(L) The notice or, to Lorilei's Knowledge, commencement or threat of
commencement of any governmental proceeding against or investigation of
Xxxxxxx or its affairs;
(M) Other event or condition of any character that has or would, in
Lorilei's reasonable judgment, be expected to have a Material Adverse
Effect on Xxxxxxx;
(N) Issuance, sale or redemption by Xxxxxxx of any of its shares or of any
other of its securities other than issuances of shares of common stock
pursuant to outstanding Options and Warrants;
Page 48
(O) Change in pricing or royalties set or charged by Xxxxxxx except for
discounts extended in the ordinary course of business consistent with
past practice;
(P) Any event that if occurring or undertaken during the interim between
the execution of this Agreement and its Closing or earlier termination,
would have required disclosure to AmeriNet pursuant to Section 4.1; or
(Q) Negotiation or agreement by Xxxxxxx to do any of the things described
in the preceding clauses (A) through (Q) (other than negotiations with
AmeriNet and its representatives regarding the transactions
contemplated by this Agreement).
2.8 Tax and Other Returns and Reports.
(A) Tax Returns and Audits.
(1) Xxxxxxx has accurately prepared and timely filed all required
federal, state, local and foreign returns, estimates,
information statements and reports ("Returns") relating to any
and all Taxes relating or attributable to Xxxxxxx or its
operations.
(2) The Returns are true and correct in all material respects and
have been completed in accordance with applicable law in all
material respects.
(3) Xxxxxxx has timely paid all Taxes required to be paid with
respect to such Returns and has withheld with respect to its
employees all federal and state income Taxes, FICA, FUTA and
other Taxes it is required to withhold.
(4) The accruals for Taxes on the books and records of Xxxxxxx are
sufficient to discharge the Taxes for all periods (or the
portion of any period) ending on or prior to the Closing Date.
(5) Xxxxxxx has not been delinquent in the payment of any Tax nor
is there any Tax deficiency outstanding, proposed or assessed
against Xxxxxxx, nor has Xxxxxxx executed any waiver of any
statute of limitations on or extending the period for the
assessment or collection of any Tax.
(6) (a) No audit or other examination of any Return of
Xxxxxxx is presently in progress.
(b) Xxxxxxx does not have any liabilities for unpaid
federal, state, local and foreign Taxes, whether
asserted or unasserted, known or unknown, contingent
or otherwise and Xxxxxxx has no Knowledge of any
basis for the assertion of any such liability
attributable to Xxxxxxx, or their respective assets
or operations.
(c) Xxxxxxx is not (nor has it ever been) required to
join with any other entity in the filing of a
consolidated Tax return for federal Tax purposes or a
consolidated or combined return or report for state
Tax purposes.
(7) Xxxxxxx is not a party to or bound by any Tax indemnity, Tax
sharing or Tax allocation agreement.
(8) Xxxxxxx has provided, or made available, to AmeriNet or its
legal counsel copies of all federal, provincial and state
income and all sales and use Tax Returns of Xxxxxxx for all
periods since its date incorporation.
(9) There are (and as of immediately following the Closing Date
there will be) no liens on the assets of Xxxxxxx relating to
or attributable to Taxes.
Page 49
(10) Xxxxxxx has no Knowledge of any basis for the assertion of any
Tax claim which, if adversely determined, would result in
liens on the assets of Xxxxxxx.
(11) Xxxxxxx has no property which is being sold, conveyed or
transferred pursuant to this Agreement which in the hands of
AmeriNet would be treated as being owned by persons other than
AmeriNet pursuant to Section 168(f)(8) of the Internal Revenue
Code of 1954 as in effect immediately prior to the enactment
of the Tax Reform Act of 1986, or any analogous provisions of
any state law.
(12) None of the assets of Xxxxxxx are treated as "Tax-exempt use
property" within the meaning of Section 168(h) of the Code.
(13) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement,
covering any employee or former employee of Xxxxxxx that,
individually or collectively, could give rise to the payment
of any amount that would not be deductible pursuant to
Sections 280G, 162 or 404 of the Code.
(B) No Penalty.
Xxxxxxx is not subject to any penalty by reason of a violation of any
order, rule or regulation of, or a default with respect to any return,
report or declaration required to be filed with, any Governmental
Entity to which it is subject, which violations or defaults,
individually or in the aggregate, would have a material adverse effect
on Xxxxxxx.
2.9 Restrictions on Business Activities.
There is no agreement, judgment, injunction, order or decree binding
upon Xxxxxxx which has or could reasonably be expected to have the effect of
materially prohibiting or materially impairing any business practice of Xxxxxxx,
any acquisition of property by Xxxxxxx or the conduct of business by Xxxxxxx as
currently conducted or as currently proposed to be conducted.
2.10 Title of Properties, Absence of Liens and Encumbrances & Condition of
Equipment.
(A) (1) Schedule 2.10(A)(1) sets forth a true and complete list of
all real property owned and leased by Xxxxxxx and the
aggregate annual mortgage, rental or other fee payable
therefor or under any such lease.
(2) All real property owned by Xxxxxxx is held in fee simple
absolute, and is subject to no liens, encumbrances,
assessments, obligations running with the land, charges,
pledges, security interests or other impediments to transfer
of title by full warrant deed without exceptions of any kind
or nature whatsoever.
(3) All deeds, titles, leases and mortgages are in good standing,
valid and effective in accordance with their respective terms,
and there is not with respect to Xxxxxxx under any of such
deeds, titles, leases or mortgages, any existing default or
event of default (or event which with notice or lapse of time,
or both, would constitute a default and in respect of which
Xxxxxxx has not taken adequate steps to prevent such default
from occurring), except where the lack of such good standing,
validity and effectiveness or the existence of such default or
event of default would not have a material adverse effect on
Xxxxxxx.
(B) Xxxxxxx holds good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of its
tangible properties and assets, real, personal and mixed, used in its
business, free and clear of any liens, charges, pledges, security
interests or other encumbrances, except as reflected in Lorilei's
Financial Statements and except for such imperfections of title and
encumbrances, if any, which are not substantial in character,
Page 50
amount or extent, and which do not materially detract from the value,
or interfere with the present use, of the property subject thereto or
affected thereby.
(C) (1) The equipment owned or leased by Xxxxxxx is listed in
Schedule 2.10(C) (the "Equipment"), except individual pieces
of equipment owned by Xxxxxxx with an individual value of less
than $100.
(2) The Equipment is, taken as a whole:
(a) Adequate for the conduct of the business of Xxxxxxx
consistent with its past practice;
(b) Suitable for the uses to which it is currently employed;
(c) In good operating condition;
(d) Regularly and properly maintained, reasonable wear and
tear excepted; and
(e) Not obsolete, dangerous or in need of renewal or
replacement, except for renewal or replacement in the
ordinary course of business.
2.11 Intellectual Property.
(A) (1) Xxxxxxx owns, or is licensed to use, all patents, trademarks,
trade names, service marks, copyrights, and any applications
therefor, maskworks, net lists, schematics, technology, know-
how, computer software programs or applications and tangible
or intangible proprietary information or material (excluding
Commercial Software Rights as defined in paragraph [B] below)
that are used or currently proposed to be used in the business
of Xxxxxxx as currently conducted or as currently proposed to
be conducted ("Lorilei's Intellectual Property Rights").
(2) Schedule 2.11 sets forth a complete list of all patents,
trademarks, registered and material unregistered copyrights,
trade names and service marks, and any applications therefor,
included in Xxxxxxx Intellectual Property Rights, and
specifies the jurisdictions in which each such Lorilei's
Intellectual Property Right has been issued or registered or
in which an application for such issuance and registration has
been filed, including the respective registration or
application numbers and the names of all registered owners,
together with a list of all of Lorilei's currently marketed
software products and an indication as to which, if any, of
such software products have been registered for patent or
copyright protection with the United States Office of Patents
and Trademarks or the United States Copyright Office and any
foreign offices and by whom such items have been registered.
(3) (a) Schedule 2.11 also sets forth a complete list of (i)
any requests Xxxxxxx has received to make any such
registration, including the identity of the requestor
and the item requested to be so registered, and the
jurisdiction for which such request has been made and
(ii) all licenses, sublicenses and other agreements
as to which Xxxxxxx is a party and pursuant to which
Xxxxxxx or any other person is authorized to use any
Lorilei's Intellectual Property Right or other trade
secret material to Xxxxxxx, and includes the identity
of all parties thereto, a description of the nature
and subject matter thereof, the applicable royalty
and the term thereof.
(b) Xxxxxxx is not, nor will it be as a result of the
execution and delivery of this Agreement or the
performance of its obligations hereunder, in
violation of any license, sublicense or agreement
described on such list.
Page 51
(4) Xxxxxxx is the sole and exclusive owner or licensee of, with
all right, title and interest in and to (free and clear of any
liens or encumbrances), Xxxxxxx Intellectual Property Rights,
and has sole and exclusive rights (and is not contractually
obligated to pay any compensation to any third party in
respect thereof) to the use thereof or the material covered
thereby in connection with the services or products in respect
of which Xxxxxxx Intellectual Property Rights are being used.
(5) To the Knowledge of Xxxxxxx, no claims with respect to Xxxxxxx
Intellectual Property Rights have been asserted or are
threatened by any person, nor, to the Knowledge of Xxxxxxx, is
there any valid grounds for any bona fide claims (i) to the
effect that the manufacture, sale, licensing or use of any
product as now used, sold or licensed or proposed for use,
sale or license by Xxxxxxx infringes on any copyright, patent,
trade xxxx, service xxxx or trade secret, (ii) against the use
by Xxxxxxx of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software
programs and applications used in Lorilei's business as
currently conducted or as proposed to be conducted, or (iii)
challenging the ownership, validity or effectiveness of any of
Xxxxxxx Intellectual Property Rights.
(6) All trademarks, service marks and copyrights held by Xxxxxxx
are valid and subsisting.
(7) To the Knowledge of Xxxxxxx, there is no material unauthorized
use, infringement or misappropriation of any of Xxxxxxx
Intellectual Property Rights by any third party, including any
employee or former employee of Xxxxxxx.
(8) Xxxxxxx has not been sued or charged as a defendant in any
claim, suit, action or proceeding which involves a claim of
infringement of any patents, trademarks, service marks,
copyrights or violation of any trade secret or other
proprietary right of any third party and which has not been
finally terminated prior to the date hereof nor does it have
any Knowledge of any such charge or claim, and there is not
any infringement liability with respect to, or infringement or
violation by, Xxxxxxx of any patent, trademark, service xxxx,
copyright, trade secret or other proprietary right of another.
(9) To Lorilei's Knowledge, none of Lorilei's Intellectual
Property Rights or products is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting
in any manner the licensing thereof by Xxxxxxx.
(10) There is no outstanding order, judgment, decree or stipulation
on Xxxxxxx, and Xxxxxxx is not party to any agreement,
restricting in any manner the licensing of Lorilei's products
by Xxxxxxx.
(11) Xxxxxxx has not entered into any agreement to indemnify any
other person against any charge of infringement of any
Lorilei's Intellectual Property Right.
(12) Each current and former employee of and consultant to Xxxxxxx
has signed a confidentiality agreement substantially in
Lorilei's standard form as certified by Xxxxxxx, delivered to
AmeriNet and included in Schedule 5.8.
(B) (1) To Lorilei's Knowledge, Xxxxxxx has not breached or
violated the terms of its license, sublicense or other
agreement relating to any Commercial Software Rights and has a
valid right to use such Commercial Software Rights and has a
valid right to use such Commercial Rights under such license
and agreements.
(2) Xxxxxxx is not, nor will it be as a result of the execution
and delivery of this Agreement or the performance of its
obligations hereunder, in violation of any license, sublicense
or agreement relating to Commercial Software Rights.
Page 52
(3) No claims with respect to the Commercial Software Rights have
been asserted or, to the Knowledge of Xxxxxxx, are threatened
by any person against Xxxxxxx, nor to the Knowledge of Xxxxxxx
is there any valid grounds for any bona fide claims (i) to the
effect that the manufacture, sale, licensing or use of any
product as now used, sold or licensed or proposed for use,
sale or license by Xxxxxxx infringes on any copyright, patent,
trade xxxx, service xxxx or trade secret, (ii) against the use
by Xxxxxxx of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software
programs and applications used in Lorilei's business as
currently conducted or as proposed to be conducted, or (iii)
challenging the validity or effectiveness of any of Lorilei's
rights to use Commercial Software Rights.
(4) To the Knowledge of Xxxxxxx, there is no material unauthorized
use, infringement or misappropriation of any of the Commercial
Software Rights by Xxxxxxx or any employee or former employee
of Xxxxxxx during the period of their employment.
(5) To the Knowledge of Xxxxxxx, no Commercial Software Right is
subject to any outstanding order, judgment, decree,
stipulation or agreement restricting in any manner the use
thereof by Xxxxxxx.
2.12 Agreements, Contracts and Commitments.
(A) All of Lorilei's currently effective agreements, contracts and
commitments are listed in Schedule 2.12, including the name of the
contracting part, date of execution and termination, and copies of all
such agreements, contracts and commitments are annexed as exhibits to
schedule 12.
(B) Xxxxxxx does not have, is not a party to nor is it bound by:
(1) Any collective bargaining agreements;
(2) Any agreements that contain any unpaid severance liabilities
or obligations;
(3) Any bonus, deferred compensation, incentive compensation,
pension, profit-sharing or retirement plans, or any other
employee benefit plans or arrangements;
(4) Any employment or consulting agreement, contract or commitment
with an employee or individual consultant or salesperson or
consulting or sales agreement, contract or commitment with a
firm or other organization, not terminable by Xxxxxxx on
thirty days notice without liability, except to the extent
general principles of wrongful termination law may limit
Lorilei's ability to terminate employees at will;
(5) Any agreement or plan, including, without limitation, any
stock option plan, stock appreciation right plan or stock
purchase plan, any of the benefits of which will be increased,
or the vesting of benefits of which will be accelerated, by
the occurrence of any of the transactions contemplated by this
Agreement or the value of any of the benefits of which will be
calculated on the basis of any of the transactions
contemplated by this Agreement;
(6) Any fidelity or surety bond or completion bond;
(7) Any lease of personal property having a value individually in
excess of $2,000;
(8) Any agreement of indemnification or guaranty not entered into
in the ordinary course of business;
Page 53
(9) Any agreement, contract or commitment containing any covenant
limiting the freedom of Xxxxxxx to engage in any line of
business or compete with any person;
(10) Any agreement, contract or commitment relating to capital
expenditures and involving future obligations in excess of
$2,000 in any single instance or $10,000 in the aggregate;
(11) Any agreement, contract or commitment relating to the
disposition or acquisition of assets not in the ordinary
course of business or any ownership interest in any
corporation, partnership, joint venture or other business
enterprise;
(12) Any mortgages, indentures, loans or credit agreements,
security agreements or other agreements or instruments
relating to the borrowing of money, extension of credit or
guaranties;
(13) Any purchase order or contract for the purchase of raw
materials or acquisition of assets involving $1,000 or more in
any single instance or $10,000 or more in the aggregate;
(14) Any construction contracts;
(15) Any distribution, joint marketing or development agreement;
(16) Any other agreement, contract or commitment which involves
$1,000 or more in any single instance or more than $10,000 in
the aggregate and is not cancelable without penalty within
thirty (30) days other than standard end-user licenses of
Lorilei's products and services in the ordinary course of
business consistent with past practice, or
(17) Any agreement which is otherwise material to Lorilei's
business.
(C) (1) Xxxxxxx has not breached, or received any claim or threat
that it has breached, any of the terms or conditions of any
agreement, contract or commitment to which it is bound
(including those set forth in any of Xxxxxxx Schedules) in
such manner as would permit any other party to cancel or
terminate the same.
(2) Each agreement, contract or commitment required to be set
forth in any of Xxxxxxx Schedules is in full force and effect
(assuming such agreement, contract or commitment has been duly
authorized, executed and delivered by the other party or
parties thereto) and, except as otherwise disclosed or
defaults fully remedied or resolved, is not subject to any
material default thereunder of which Xxxxxxx has Knowledge by
any party obligated to Xxxxxxx pursuant thereto.
2.13 Interested Party Transactions.
No officer, director or stockholder of Xxxxxxx (nor any parent,
sibling, descendant or spouse of any of such persons, or any trust, partnership,
corporation or other entity (provided, that ownership of no more than one
percent of the outstanding voting stock of a publicly traded corporation will
not be deemed an "interest in any entity" for purposes of this Section 2.13) in
which any of such persons has or has had an interest), has or has had, directly
or indirectly:
(A) An interest in any entity which furnished or sold, or furnishes or
sells, services or products which Xxxxxxx furnishes or sells, or
proposes to furnish or sell;
(B) Any interest in any entity which purchases from or sells or furnishes
to, Xxxxxxx, any goods or services; or
(C) A beneficial interest in any contract or agreement required to be set
forth in Schedule 2.12.
Page 54
2.14 Governmental Authorization.
(A) Schedule 2.14 accurately lists each material federal, state, county,
local or foreign governmental consent, license, permit, grant, or other
authorization issued to Xxxxxxx:
(1) Pursuant to which Xxxxxxx currently operates or holds any
interest in any of its properties; or
(2) Which is required for the operation of its business or the
holding of any such interest (hereinafter collectively
referred to as the "Xxxxxxx Authorizations").
(B) Xxxxxxx Authorizations are in full force and effect and constitute all
the material authorizations required to permit Xxxxxxx to operate or
conduct its business or hold any interest in its properties.
2.15 Litigation.
(A) Schedule 2.15 annexed hereto accurately lists all suits, actions and
legal, administrative, arbitration or other proceedings and
governmental investigations and all other claims, pending or, to
Lorilei's Knowledge, threatened or which Xxxxxxx expects will
ultimately be threatened or commenced.
(B) None of such suits, actions, proceedings, investigations or claims seek
to prevent the consummation of the Reorganization.
(C) There is no judgment, decree or order enjoining Xxxxxxx in respect of,
or the effect of which is to prohibit, any business practice or the
acquisition of any property or the conduct of business of Xxxxxxx.
(D) Schedule 2.15 also lists all suits and legal actions initiated by
Xxxxxxx.
2.16 Accounts Receivable.
(A) All receivables of Xxxxxxx arose in the ordinary course of business and
the aggregate amounts thereof are the best of Lorilei's Knowledge
collectible (except to the extent reserved against as reflected in
Lorilei's Financial Statements) and are carried at values determined in
accordance with generally accepted accounting principles consistently
applied.
(B) To Lorilei's Knowledge, none of the receivables of Xxxxxxx is subject
to any claim of offset, recoupment, setoff or counterclaim and there
are no facts or circumstances (whether asserted or unasserted) that
would give rise to any such claim.
(C) No receivables are contingent upon the performance by Xxxxxxx of any
obligation or contract except for Lorilei's maintenance obligations
under its maintenance agreements (although no customer has claimed that
Xxxxxxx has failed to perform its maintenance obligations).
(D) No person has any lien, charge, pledge, security interest or other
encumbrance on any of such receivables and no agreement for deduction
or discount has been made with respect to any of such receivables.
2.17 Minute Books.
The minute books of Xxxxxxx made available to counsel for AmeriNet
contain a complete and accurate summary of all meetings of directors and
stockholders since the time of incorporation of Xxxxxxx, and reflect all
transactions referred to in such minutes accurately in all material respects.
Page 55
2.18 Environmental and OSHA.
(A) Hazardous Material.
(1) As of the Closing Date, no material amount of any substance
that is regulated by any Governmental Entity or that has been
designated by any Governmental Entity to be radioactive,
toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos,
urea-formaldehyde and all substances listed pursuant to the
United States Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time
to time, and the United States Resource Recovery and
Conservation Act of 1976, as amended from time to time, and
the regulations and publications promulgated pursuant to said
laws (a "Hazardous Material"), is present, as a result of the
actions of Xxxxxxx (excluding failure of Xxxxxxx to remedy the
presence of a Hazardous Material resulting from the actions of
any previous owner or occupier of Lorilei's Property of which
presence Xxxxxxx does not have Knowledge) in violation of any
law in effect on or before the Closing Date, in, on or under
any property, including the land and the improvements, ground
water and surface water thereof, that Xxxxxxx or any of its
past or present subsidiaries has at any time owned, operated,
occupied or leased (collectively, "Lorilei's Property").
(2) In any event, Xxxxxxx does not know of the presence of any
Hazardous Material in, on, under, adjacent to or in any way
effecting any Lorilei's Property.
(B) Hazardous Materials Activities.
At no time prior to the Closing Date has Xxxxxxx transported, stored,
used, manufactured, released or exposed its employees or others to
Hazardous Materials in violation of any law in effect on or before the
Closing Date, nor has Xxxxxxx disposed of, transferred, sold, or
manufactured any product containing a Hazardous Material (collectively
"Hazardous Materials Activities") in violation of the Comprehensive
Environmental Response, Compensation and Liability Act of 1980, as
amended, the Resource Conservation and Recovery Act of 1976, the Toxic
Substances Control Act of 1976 and any other applicable state or
federal acts (including the rules and regulations thereunder) as in
effect on or before the Closing Date.
(C) Permits.
Xxxxxxx currently holds no environmental approvals, permits, licenses,
clearances and consents and none are necessary for the conduct of
Lorilei's Hazardous Material Activities and other businesses of Xxxxxxx
as such activities and businesses are currently being conducted.
2.19 Brokers' and Finders' Fees.
Xxxxxxx has not incurred, nor will it incur, directly or indirectly,
any liability for brokerage or finders' fees or agents' commissions or any
similar charges in connection with this Agreement or any transaction
contemplated hereby.
2.20 Labor Matters.
(A) Xxxxxxx is in compliance in all material respects with all currently
applicable laws and regulations respecting employment, discrimination
in employment, terms and conditions of employment and wages and hours
and occupational safety and health and employment practices, and is not
engaged in any unfair labor practice.
(B) Xxxxxxx has not received any notice from any Governmental Entity, and
to the Knowledge of Xxxxxxx, there has not been asserted before any
Governmental Entity, any claim, action or proceeding to which Xxxxxxx
is a party or involving Xxxxxxx, and there is neither pending
nor, to the Knowledge of Xxxxxxx, threatened, any investigation
or hearing concerning Xxxxxxx arising out of or based upon any
such laws, regulations or practices.
Page 56
(C) Xxxxxxx has not received notice of and to the best of its Knowledge,
there are no pending claims against Xxxxxxx under any workers
compensation plan or policy or for long term disability.
(D) To Lorilei's Knowledge, it has complied in all material respects with
all applicable provisions of the Consolidated Omnibus Budget
Reconciliation Act of 1985 and has no obligations with respect to any
former employees or qualifying beneficiaries thereunder.
(E) Schedule 2.20 lists all current employees of Xxxxxxx and their current
salary and vacation accruals.
2.21 Insurance.
(A) Schedule 2.21 lists all insurance policies and fidelity bonds covering
the assets, business, equipment, properties, operations, software
errors and omissions, employees, officers and directors of Xxxxxxx as
well as all claims made under any insurance policy by Xxxxxxx since its
incorporation.
(B) There is no claim by Xxxxxxx pending under any of such policies or
bonds as to which coverage has been questioned, denied or disputed by
the underwriters of such policies or bonds.
(C) All premiums payable under all such policies and bonds have been paid
and Xxxxxxx is otherwise in compliance in all material respects with
the terms of such policies and bonds (or other policies and bonds
providing substantially similar insurance coverage).
(D) Such policies of insurance and bonds are of the type and in amounts
customarily carried by persons conducting businesses similar to those
of Xxxxxxx.
(E) Xxxxxxx does not know of any threatened termination of or material
premium increase with respect to any of such policies.
(F) Xxxxxxx has never been denied insurance coverage nor has any insurance
policy of Xxxxxxx ever been canceled for any reason.
2.22 Compliance with Laws.
Xxxxxxx has not received any notices of violation with respect to and
to the best of its Knowledge has complied in all material respects with and is
not in violation in any material respect of any federal, state or local statute,
law or regulation with respect to the conduct of its business, or the ownership
or operation of its business, assets or properties. 2.23 Complete Copies of
Materials.
Xxxxxxx has delivered or made available true and complete copies of
each document (or summaries of same) which has been requested by AmeriNet or its
counsel.
2.24 Binding Agreements: No Default.
Each of the contracts, agreements and other instruments shown on the
Exhibits and Schedules referred to in this Agreement to which Xxxxxxx is a party
is a legal, binding and enforceable obligation in favor of or against Xxxxxxx
(assuming that such contracts, agreements and instruments are binding on all
other parties thereto, Xxxxxxx having no reason to believe that they are not),
in accordance with its terms, and no party with whom Xxxxxxx has an agreement or
contract is, to Lorilei's Knowledge, in default thereunder or has breached any
material terms or provisions thereof (subject to all applicable bankruptcy,
insolvency, reorganization and other laws applicable to creditors' rights and
remedies and to the exercise of judicial discretion in accordance with general
principles of equity).
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2.25 Regulation SB Disclosure Document
(A) The information supplied by Xxxxxxx responding to each Item in Commission
Regulation S-B (other than Items 201, 501, 502, 506, 512 and, to the extent
of audit requirements, Item 310) annexed hereto as Exhibit 2.25 (the
"Regulation S-B Disclosure Documents"), part of which must be included in a
current report on Commission Form 8-K to be filed by AmeriNet within 15
days after the Closing Date, as well as in all other reports which AmeriNet
files thereafter pursuant to the Exchange Act, will not contain any
statement which, at such time and in light of the circumstances under which
it is made, is false or misleading with respect to any material fact, or
will omit to state any material fact necessary in order to make the
statements made therein not false or misleading or omit to state any
material fact necessary to correct any statement which has become false or
misleading.
(B) If at any time prior to the Closing Date any event relating to Xxxxxxx or
any of its affiliates, officers or directors should be discovered by
Xxxxxxx which should be set forth in the Regulation S-B Disclosure
Document, Xxxxxxx will promptly provide such information to AmeriNet, in
writing.
2.26 FIRPTA.
Xxxxxxx is not, and has not been at any time, a "United States real
property holding corporation" within the meaning of Section 897(c)(2) of the
Code.
2.27 Employee Benefit Plans.
(A) Schedule 2.27 lists all employee benefit plans [as defined in Section 3(3)
of the Employee Retirement Income Security Act of 1974, as amended,
"ERISA"] and all bonus, stock option, stock purchase, incentive, deferred
compensation, supplemental retirement, severance and other similar fringe
or employee benefit plans, programs or arrangements, and any current or
former employment or executive compensation or severance agreements,
written or otherwise, for the benefit of, or relating to, any employee of
Xxxxxxx, any trade or business (whether or not incorporated) which is a
member or which is under common control with Xxxxxxx (an "ERISA Affiliate")
within the meaning of Section 414 of the Code, or any subsidiary of Xxxxxxx
(together, the "Employee Plans").
(B) (1) None of the Employee Plans promises or provides retiree medical or
other retiree welfare benefits to any person except as required by
applicable law, including but not limited to COBRA;
(2) (a) To Lorilei's Knowledge: all Employee Plans are in compliance in
all material respects with the requirements prescribed by any and
all applicable statutes (including ERISA and the Code), orders,
or governmental rules and regulations currently in effect with
respect thereto (including all applicable requirements for
notification to participants or beneficiaries or the Department
of Labor, the IRS or Secretary of the Treasury), and Xxxxxxx has
performed in all material respects all obligations required to be
performed by it under, is not in default under or violation of,
and has no Knowledge of any default or violation by any other
party to, any of the Employee Plans;
(b) Each Employee Plan intended to qualify under Section 401(a) of
the Code and each trust intended to qualify under Section 501(a)
of the Code either has received a favorable determination letter
with respect to each such Employee Plan from the IRS or still has
a remaining period of time under applicable Treasury Regulations
or IRS pronouncements in which to apply for such a determination
letter and to make any amendments necessary to obtain a favorable
determination;
Page 58
(c) No Employee Plan is or within the prior six years has been
subject to, and Xxxxxxx has not incurred and does not expect to
incur any liability under, Title IV of ERISA or Section 412 of
the Code; and
(d) To Lorilei's Knowledge, nothing in any Employee Plan precludes or
interferes with AmeriNet's ability to cause Xxxxxxx to terminate
(or consolidate, at AmeriNet's option) any Employee Plan after
the Closing Date; provided that: (i) the Employee Plans may be
terminated prospectively only, subject to rights accrued by
Lorilei's employees at the time of such termination and (ii) not
more than sixty days notice may be required to terminate certain
Employee Plans.
(3) None of the following now exists or has existed within the six-year
period ending on the date hereof with respect to any Employee Plan:
(a) Any act or omission by Xxxxxxx constituting a violation of
Section 402, 403, 404 or 405 of ERISA;
(b) Any act or omission by Xxxxxxx which constitutes a violation of
Sections 406 and 407 of ERISA and is not exempted by Section 408
of ERISA or which constitutes a violation of Section 4975(c) of
the Code and is not exempted by Section 4975(d) of the Code;
(c) Any act or omission by Xxxxxxx constituting a violation of
Section 503, 510 or 511 of ERISA; or (IV) any act or omission by
Xxxxxxx which could give rise to liability under Section 502 of
ERISA or under Sections 4972 or 4975 through 4980 of the Code.
(4) (a) Each Employee Plan has been maintained in substantial
compliance with its terms, and all contributions, premiums
or other payments due from Xxxxxxx or any of its
subsidiaries to (or under) any such Employee Plan have been
fully paid or adequately provided for on the audited
Lorilei's Financial Statements for the most recently-ended
fiscal year.
(b) To Lorilei's Knowledge, all accruals thereon (including,
where appropriate proportional accruals for partial periods)
have been made in accordance with generally accepted
accounting principles consistently applied on a reasonable
basis.
(c) There has been no amendment, written interpretation or
announcement (whether or not written) by Xxxxxxx with
respect to, or change in employee participation or coverage
under, any Employee Plan that would increase materially the
expense of maintaining such plans or arrangements,
individually or in the aggregate, above the level of expense
incurred with respect thereto for the most recently-ended
fiscal year.
(5) Xxxxxxx has provided to AmeriNet complete, accurate and current copies
of all Employee Plans and all amendments, documents, correspondence
and filings relating thereto, including but not limited to any
statements, filings, reports or returns filed with any governmental
agency with respect to the Employee Plans at any time within the
three-year period ending on the date hereof.
Page 59
2.28 Distribution Agreements.
Schedule 2.28 discloses the names, addresses, telephone numbers, fax
numbers, e-mail addresses and federal Tax identification numbers of each third
party or parties who have the right to distribute Lorilei's products or to
market its services, together with a summary of the agreements pursuant to which
Lorilei's products are distributed or its services are marketed.
2.29 Disclosure to Lorilei's Stockholders
Each of Lorilei's Stockholders hereby represents and warrants that he,
she or it:
(A) Has had access through the Commission's Internet web site at
xxx.xxx.xxx, in the XXXXX Archives sub-cite, to all of AmeriNet's
reports filed with the Commission during the past two fiscal years, has
reviewed all such reports and has, either directly or through a
representative, been granted access to all of AmeriNet's officers and
directors, and to all officers and directors of AmeriNet's operating
subsidiaries, for purposes of providing all disclosure required under
applicable federal and state securities laws in conjunction with the
exchange contemplated by this Agreement;
(B) Has been advised that:
(1) The securities to be issued to them by AmeriNet in exchange
for their shares of Lorilei's common stock have not been
registered under the Securities Act, the Exchange Act or any
comparable state securities laws, but rather, are being issued
in reliance on the exemption from registration under the
Securities Act provided by Section 4(2) thereof;
(2) All certificates for their shares of AmeriNet's common stock
will bear legends restricting any transactions therein,
directly or indirectly, unless they are first registered under
applicable federal and state securities laws or the proposed
transaction is exempt from such registration requirements, and
such facts are demonstrated to the satisfaction of AmeriNet
and its legal counsel, based on such third party legal
opinions, affidavits and transfer agency procedures as
AmeriNet will reasonably require or have in place generally;
(3) AmeriNet's transfer agent has been instructed to decline
transfers of certificates for their shares of AmeriNet's
common stock, unless the foregoing requirements have been met
and have been confirmed as having been met by a duly
authorized officer of AmeriNet.
(C) Has independently determined through his, her or its own legal counsel,
that all requirements of their states of domicile for the issuance of
the shares of AmeriNet's common stock called for by this Agreement have
been met, or will have been met, prior to Closing, by such legal
counsel acting on behalf of the Parties to this Agreement.
2.30 Representations Complete.
None of the representations or warranties made by Xxxxxxx or its
stockholders, nor any statement made in any Schedule, Exhibit or certificate
furnished by Xxxxxxx pursuant to this Agreement, when read in its entirety,
contains or will contain any untrue statement of a material fact at the time the
Closing takes place, or omits or will omit to state any material fact necessary
in order to make the statements contained herein or therein, in the light of the
circumstances under which made, not misleading.
Page 60
Article III
Representations and Warranties of AmeriNet
AmeriNet represents and warrants to Xxxxxxx as a material inducement to
its entry into this Agreement, subject to the exceptions specifically disclosed
in the AmeriNet Schedules or in AmeriNet's Exchange Act Reports, as follows:
3.1 Organization, Standing and Power.
(A) AmeriNet is a corporation duly organized, validly existing and in good
standing under the laws of the State of Delaware.
(B) AmeriNet has the corporate power to own its properties and to carry on
its business as now being conducted and is duly qualified to do
business and is in good standing in each jurisdiction in which the
failure to be so qualified would have a material adverse effect on
AmeriNet taken as a whole.
(C) A true and correct copy of its articles of incorporation and bylaws, as
amended to date, are available at the Commission's web site in the
XXXXX archives, filed as exhibit's to the report on Form 10-KSB for the
year ended June 30, 1999 and any future modifications thereof will be
filed with the Commission and will also be available at such site.
3.2 Capital Structure.
(A) (1) The authorized stock of AmeriNet consists of 20,000,000
shares of common stock, par value $0.01 per share, and
5,000,000 shares of Preferred Stock, $0.01 par value per
share, the attributes of which are to be determined on a case
by case basis by AmeriNet's board of directors.
(2) AmeriNet had approximately 11,722,410 shares of common stock
issued and outstanding as of March 31, 2000 and no shares of
Preferred Stock have ever been issued.
(3) As of March 31, 2000, AmeriNet had reserved 7,273,815 shares
of common stock (excluding those issuable pursuant to the
terms of this Agreement) for issuance as described in
AmeriNet's annual report on Form 10-KSB for the year ended
June 30, 1999 and the quarterly reports on Form 10-QSB for the
calendar quarters ended September 30, 1999 and December 31,
1999 and any Subsequent Current Reports or Subsequent Exchange
Act Reports.
(4) There are no other options, warrants, calls, rights,
commitments or agreements of any character to which AmeriNet
is a party or by which it is bound obligating AmeriNet to
issue, deliver, sell, repurchase or redeem, or cause to be
issued, delivered, sold, repurchased or redeemed, any shares
of the Capital Stock of AmeriNet or obligating AmeriNet to
grant, extend or enter into any such option, warrant, call,
right, commitment or agreement, other than as may be required
in conjunction with other acquisitions under negotiation,
rights granted to investors under common stock purchase
warrants since December 31, 1999 and as disclosed in the
Exchange Act Reports.
(5) AmeriNet's articles of incorporation permit their amendment by
action of AmeriNet's board of directors without stockholder
approval to increase the amount of authorized Capital Stock.
(B) All of AmeriNet's shares of common and preferred stock have been duly
authorized, and all of their issued and outstanding shares of common
stock have been validly issued, are fully paid and nonassessable and
are free of any liens or encumbrances other than any liens or
encumbrances created by or imposed upon the holders thereof.
Page 61
(C) Subject to the Xxxxxxx Declarants' compliance with their obligations
under this Agreement, the shares of AmeriNet's common stock to be
issued pursuant to the Reorganization will be duly authorized, validly
issued, fully paid, and nonassessable.
3.3 Authority.
(A) AmeriNet has all requisite corporate power and authority to enter into
this Agreement and to consummate the transactions contemplated hereby.
(B) The execution and delivery of this Agreement and the consummation of
the transactions contemplated hereby have been duly authorized by all
necessary corporate action on the part of AmeriNet.
(C) This Agreement has been duly executed and delivered by AmeriNet and,
subject to having also been approved by Lorilei's board of directors
and properly executed and delivered by Xxxxxxx, constitutes a valid and
binding obligation of AmeriNet.
(D) The execution and delivery of this Agreement do not, and the
consummation of the transactions contemplated hereby will not, conflict
with, or result in any violation of, or default (with or without notice
or lapse of time, or both), or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material
benefit under:
(1) Any provision of the articles of incorporation or bylaws of
AmeriNet; or
(2) Any mortgage, indenture, lease, contract or other agreement or
instrument, permit, concession, franchise, license, judgment,
order, decree, statute, law, ordinance, rule or regulation
applicable to AmeriNet or its properties or assets, other than
any such conflicts, violations, defaults, terminations,
cancellations or accelerations which individually or in the
aggregate would not have a material adverse effect on the
ability of AmeriNet to consummate the transactions
contemplated hereby.
(E) No consent, approval, order or authorization of, or registration,
declaration or filing with, any Governmental Entity, is required by or
with respect to AmeriNet in connection with the execution and delivery
of this Agreement by AmeriNet or the consummation by AmeriNet of the
transactions contemplated hereby, except for:
(1) Such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required
under applicable state and federal securities laws (a Form D
Notification Statement) and the laws of any foreign country;
and
(2) Such other consents, authorizations, filings, approvals and
registrations which if not obtained or made would not have a
material adverse effect on the ability of AmeriNet to
consummate the transactions contemplated hereby.
3.4 Exchange Act Reports; AmeriNet Financial Statements.
(A) All materials required to be filed by AmeriNet with the Commission
pursuant to Sections 13 or 15(d) of the Exchange Act since current
management took office starting in November of 1998, have been filed
and are available on the Commission's Internet web site at xxx.xxx.xxx
in its XXXXX Archives sub-site.
(B) To the best of AmeriNet's Knowledge, the Exchange Act Reports comply in
all material respects with the requirements of the Exchange Act and do
not contain any untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements made therein, in light of the circumstances in which they
Page 62
were made, not misleading, except to the extent corrected by a
subsequently filed document with the Commission or by information
provided by AmeriNet to Xxxxxxx.
(C) The AmeriNet Financial Statements comply as to form in all material
respects with applicable accounting requirements and with the published
rules and regulations of the Commission with respect thereto, have been
prepared in accordance with generally accepted accounting principles
consistently applied and fairly present the consolidated financial
position of AmeriNet at the date thereof and of its operations and cash
flows for the period then ended, subject to normal year end audit
adjustments.
(D) There has been no change in AmeriNet accounting policies or estimates
except as described in the notes to AmeriNet's Financial Statements or
in subsequently filed Exchange Act Reports.
(E) AmeriNet has no material obligations, other than:
(1) Those set forth in AmeriNet's Financial Statements
(obligations not required to be set forth in AmeriNet's
Financial Statements under generally accepted accounting
principles being deemed not material);
(2) Those resulting from ongoing acquisition activities which
developed after the date of AmeriNet's Financial Statements
but are not yet definite enough to require filing in the
Exchange Act Reports;
(3) Those pertaining to confidential letters of intent; or
(4) Those disclosed by AmeriNet to Xxxxxxx in writing.
(F) The information provided by AmeriNet in the Current Report on Form 8-K
pertaining to this Reorganization (excluding information provided by or
on behalf of Xxxxxxx, as to which AmeriNet makes no representation)
will not contain any statement which, at such time and in light of the
circumstances under which it will be made, is false or misleading with
respect to any material fact, or will omit to state any material fact
necessary in order to make the statements therein not false or
misleading.
(G) If at any time prior to the Closing Date any event relating to AmeriNet
or any of its affiliates, officers or directors should be discovered by
AmeriNet which should be set forth in a current report on Form 8-K,
AmeriNet will promptly inform Xxxxxxx.
(H) AmeriNet makes no representation or warranty with respect to any
information supplied by Xxxxxxx which is contained in any of the
foregoing documents.
3.5 Broker's and Finders' Fees.
Except as disclosed in the Exchange Act Reports, AmeriNet has not
incurred, and will not incur, directly or indirectly, any liability for
brokerage or finders' fees or agents' commissions or any similar charges in
connection with this Agreement, the Reorganization or any transaction
contemplated hereby.
3.6 Ownership of Lorilei's Capital Stock.
As of the date of execution of this Agreement, AmeriNet does not own
any shares of Lorilei's Capital Stock.
Page 63
3.7 Litigation.
There are no suits, actions or legal, administrative, arbitration or
other proceedings or governmental investigations against AmeriNet pending or, to
AmeriNet's Knowledge, threatened, which (i) if determined adversely to AmeriNet,
could be expected to result in a material adverse effect on the financial
condition or results of operations of AmeriNet, or (ii) seek to prevent the
consummation of the Reorganization.
3.8 Limited Activities
(A) AmeriNet is a holding company with no material operations or assets other
than the shares of its subsidiaries common stock and operations pertaining
to supervision and coordination of the activities of its subsidiaries,
provision of support services for its subsidiaries, acquisition related
activities and compliance with applicable laws, including federal
securities and internal revenue laws.
(B) AmeriNet currently has three operating subsidiaries, Xxxxxxx.xxx, Inc.,
Trilogy International, Inc., and Vista Vacations International, Inc., all
Florida corporations, and is a party to letters of intent to acquire Custom
Software Systems, Inc., a Virginia corporation currently headquartered in
Houston, Texas, and xXXXXxx.xxx, Inc., a Florida corporation being
organized (collectively referred to for purposes of this Section 3.8 as the
"AmeriNet Subsidiaries and Acquisition Candidates").
(C) Xxxxxxx, through its officers, has become familiar with the operations and
prospects of AmeriNet and the AmeriNet Subsidiaries and Acquisition
Candidates, to the extent that information concerning them is available to
AmeriNet or has been filed by AmeriNet with the Commission.
3.9 No Undisclosed Liabilities.
AmeriNet does not have any material liabilities or obligations, either
accrued or contingent (whether or not required to be reflected in financial
statements in accordance with generally accepted accounting principles), and
whether due or to become due, which individually or in the aggregate, (i) have
not been reflected in the AmeriNet Financial Statements (including the notes
thereto) or (ii) have not been specifically described in this Agreement or in
the Exchange Act Reports.
3.10 No Changes.
Since the date of its latest Exchange Act Report there has not been,
occurred or arisen any:
(A) Destruction, damage to, or loss of any assets (including without
limitation intangible assets) of AmeriNet or its subsidiaries (whether
or not covered by insurance), either individually or in the aggregate,
exceeding $30,000, other than losses by subsidiaries in the ordinary
course of business.
(B) Labor trouble or claim of wrongful discharge, sexual harassment or
other unlawful labor practice or action;
(C) Change in accounting methods or practices (including any change in
depreciation or amortization policies or rates, any change in policies
in making or reversing accruals, or any change in capitalization of
software development costs) by AmeriNet or its subsidiaries;
(D) Declaration, setting aside, or payment of a dividend or other
distribution in respect to the shares of AmeriNet or its subsidiaries,
or any direct or indirect redemption, purchase or other acquisition by
AmeriNet or its subsidiaries of any of their shares;
(E) Other event or condition of any character that has or would, in
AmeriNet or its subsidiaries' reasonable judgment, be expected to have
a material adverse effect on AmeriNet or its subsidiaries;
Page 64
(F) Negotiation or agreement by AmeriNet or its subsidiaries to do any of
the things described in the preceding clauses (A) through (F) other
than negotiations with AmeriNet or its subsidiaries and their
representatives regarding the transactions contemplated by this
Agreement or other acquisitions.
3.11 Tax and Other Returns and Reports.
(A) Tax Returns and Audits.
(1) AmeriNet and its subsidiaries have accurately prepared and
filed all required federal, state, local and foreign returns,
estimates, information statements and reports ("Returns")
relating to any and all Taxes relating or attributable to
AmeriNet or its subsidiaries or their operations and such
Returns are true and correct in all material respects and have
been completed in accordance with applicable law in all
material respects.
(2) AmeriNet and its subsidiaries have timely paid all Taxes
required to be paid with respect to such Returns and have
withheld with respect to its employees all federal and state
income taxes, FICA, FUTA and other Taxes they are required to
withhold.
(3) The accruals for Taxes on the books and records of AmeriNet
and its subsidiaries are sufficient to discharge the Taxes for
all periods (or the portion of any period) ending on or prior
to the Closing Date.
(4) AmeriNet and its subsidiaries have not been delinquent in the
payment of any Tax nor, except as disclosed in the Exchange
Act Reports, is there any Tax deficiency outstanding, proposed
or assessed against AmeriNet or its subsidiaries, nor has
AmeriNet or its subsidiaries executed any waiver of any
statute of limitations on or extending the period for the
assessment or collection of any Tax.
(5) Except as disclosed in the Exchange Act Reports:
(a) No audit or other examination of any Return of
AmeriNet or its subsidiaries is presently in progress
(b) AmeriNet and its subsidiaries do not have any
liabilities for unpaid federal, state, local and
foreign Taxes, whether asserted or unasserted, known
or unknown, contingent or otherwise and AmeriNet and
its subsidiaries have no Knowledge of any basis for
the assertion of any such liability attributable to
AmeriNet or its subsidiaries, or their respective
assets or operations.
(6) AmeriNet and its subsidiaries are not parties to or bound by
any tax indemnity, tax sharing or tax allocation agreement.
(7) AmeriNet and its subsidiaries have provided, or made available
to Xxxxxxx or its legal counsel copies of all federal,
provincial and state income and all sales and use Tax Returns
of AmeriNet or its subsidiaries for all periods since January
1, 1999.
(8) There are (and as of immediately following the Closing Date
there will be) no liens on the assets of AmeriNet or its
subsidiaries relating to or attributable to Taxes.
(9) AmeriNet and its subsidiaries have no Knowledge of any basis
for the assertion of any Tax claim which, if adversely
determined, would result in liens on the assets of AmeriNet or
its subsidiaries.
Page 65
(10) There is no contract, agreement, plan or arrangement,
including but not limited to the provisions of this Agreement,
covering any employee or former employee of AmeriNet or its
subsidiaries that, individually or collectively, could give
rise to the payment of any amount that would not be deductible
pursuant to Sections 280G, 162 or 404 of the Code.
(B) No Penalty.
Neither AmeriNet nor its subsidiaries are subject to any penalty by
reason of a violation of any order, rule or regulation of, or a default
with respect to any return, report or declaration required to be filed
with, any Governmental Entity to which it is subject, which violations
or defaults, individually or in the aggregate, would have a material
adverse effect on AmeriNet or its subsidiaries.
3.12 Environmental and OSHA.
(A) Hazardous Material.
(1) As of the Closing Date, no material amount of any substance
that is regulated by any Governmental Entity or that has been
designated by any Governmental Entity to be radioactive,
toxic, hazardous or otherwise a danger to health or the
environment, including, without limitation, PCBs, asbestos,
urea-formaldehyde and all substances listed pursuant to the
United States Comprehensive Environmental Response,
Compensation, and Liability Act of 1980, as amended from time
to time, and the United States Resource Recovery and
Conservation Act of 1976, as amended from time to time, and
the regulations and publications promulgated pursuant to said
laws (a "Hazardous Material"), is present, as a result of the
actions of AmeriNet or its subsidiaries (excluding failure of
AmeriNet or its subsidiaries to remedy the presence of a
Hazardous Material resulting from the actions of any previous
owner or occupier of AmeriNet or its subsidiaries' property of
which presence AmeriNet or its subsidiaries do not have
Knowledge) in violation of any law in effect on or before the
Closing Date, in, on or under any property, including the land
and the improvements, ground water and surface water thereof,
that AmeriNet or its subsidiaries own, operate, occupy or
lease.
(2) In any event, AmeriNet and its subsidiaries do not know of the
presence of any Hazardous Material in, on or under any of
their property.
(B) Hazardous Materials Activities.
At no time prior to the Closing Date has AmeriNet or its subsidiaries
transported, stored, used, manufactured, released or exposed its
employees or others to Hazardous Materials in violation of any law in
effect on or before the Closing Date, nor has AmeriNet or its
subsidiaries disposed of, transferred, sold, or manufactured any
product containing a Hazardous Material (collectively "Hazardous
Materials Activities") in violation of the Comprehensive Environmental
Response, Compensation and Liability Act of 1980, as amended, the
Resource Conservation and Recovery Act of 1976, the Toxic Substances
Control Act of 1976 and any other applicable state or federal acts
(including the rules and regulations thereunder) as in effect on or
before the Closing Date.
(C) Permits.
AmeriNet or its subsidiaries currently holds no environmental
approvals, permits, licenses, clearances and consents and none are necessary for
the conduct of AmeriNet or its subsidiaries' Hazardous Material Activities and
other businesses of AmeriNet or its subsidiaries as such activities and
businesses are currently being conducted.
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3.13 Representations Complete.
None of the representations or warranties made by AmeriNet or its
subsidiaries, nor any statement made in any Schedule, Exhibit or certificate
furnished by AmeriNet or its subsidiaries pursuant to this Agreement, when read
in its entirety, contains or will contain any untrue statement of a material
fact at the Closing Date, or omits or will omit to state any material fact
necessary in order to make the statements contained herein or therein, in the
light of the circumstances under which made, not misleading.
Article IV
Conduct Prior to the Closing
4.1 Conduct of Business of Xxxxxxx.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, Xxxxxxx agrees
(except to the extent that AmeriNet will otherwise consent in writing):
(A) To carry on its business in the usual, regular and ordinary course in
substantially the same manner as heretofore conducted and, to the
extent consistent with such business, use all reasonable efforts
consistent with past practice and policies to preserve intact Lorilei's
present business organizations, keep available the services of its
present officers and key employees and preserve their relationships
with customers, suppliers, distributors, licensors, licensees, and
others having business dealings with it, to the end that Lorilei's
goodwill and ongoing businesses will be unimpaired at the Time of
Closing; and
(B) Not to:
(1) Enter into any commitment or transaction not in the ordinary
course of business (i) to be performed over a period longer
than six (6) months in duration, or (ii) to purchase fixed
assets for a purchase price in excess of $1,000;
(2) Grant any severance or termination pay to any director,
officer or employee except (i) payments made pursuant to
standard written agreements outstanding on the date hereof or
(ii) in the case of employees who are not officers, grants
which are made in the ordinary course of business in
accordance with Lorilei's standard past practices;
(3) Except for licenses granted to end-users pursuant to Lorilei's
standard license agreements, transfer to any person or entity
any rights to Lorilei's Intellectual Property;
(4) Enter into or amend any agreements pursuant to which any other
party is granted exclusive marketing or other rights of any
type or scope with respect to any products of Xxxxxxx;
(5) Violate, amend or otherwise modify the terms of any of the
contracts or agreements required to be set forth in Xxxxxxx
Schedules;
(6) Commence any litigation;
(7) Declare or pay any dividends on or make any other
distributions (whether in cash, stock or property) in respect
of any of its Capital Stock, or split, combine or reclassify
any of its Capital Stock or issue or authorize the issuance of
any other securities in respect of, in lieu of or in
substitution for shares of Capital Stock of Xxxxxxx, or
repurchase or otherwise acquire, directly or indirectly, any
shares of its Capital Stock except from former employees,
directors and consultants in accordance with agreements
providing for the repurchase of shares at cost in connection
with any termination of service to Xxxxxxx;
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(8) Issue, deliver or sell or authorize or propose the issuance,
delivery or sale of, or purchase or propose the purchase of,
any shares of its Capital Stock or securities convertible
into, or subscriptions, rights, warrants or options to
acquire, or other agreements or commitments of any character
obligating it to issue any such shares or other convertible
securities;
(9) Cause or permit any amendments to its articles of
incorporation or bylaws;
(10) Acquire or agree to acquire by merging or consolidating with,
or by purchasing a substantial portion of the assets of, or by
any other manner, any business or any corporation,
partnership, association or other business organization or
division thereof, or otherwise acquire or agree to acquire any
assets which are material, individually or in the aggregate,
to the business of Xxxxxxx;
(11) Sell, lease, license or otherwise dispose of any of its
properties or assets which are material, individually or in
the aggregate, to the business of Xxxxxxx, except in the
ordinary course of business;
(12) Incur any indebtedness for borrowed money or guarantee any
such indebtedness or issue or sell any debt securities of
Xxxxxxx or guarantee any debt securities of others;
(13) Adopt or amend any employee benefit plan, or enter into any
employment contract, pay any special bonus or special
remuneration to any director or employee, or increase the
salaries or wage rates of its employees;
(14) Revalue any of its assets, including without limitation
writing down the value of inventory or writing off notes or
accounts receivable other than in the ordinary course of
business;
(15) Pay, discharge or satisfy in an amount in excess of $1,000 in
any one case any claim, liability or obligation (absolute,
accrued, asserted or unasserted, contingent or otherwise),
other than the payment, discharge or satisfaction in the
ordinary course of business of liabilities reflected or
reserved against in Lorilei's Financial Statements (or the
notes thereto);
(16) Make or change any material election in respect of Taxes,
adopt or change any accounting method in respect of Taxes,
file any material Return or any amendment to a material
Return, enter into any closing agreement, settle any claim or
assessment in respect of Taxes, or consent to any extension or
waiver of the limitation period applicable to any claim or
assessment in respect of Taxes; or
(17) Take, or agree in writing or otherwise to take, any of the
actions described in Sections 4.1(C)(1) through 4.1(C)(16)
above, or any action which would make any of the
representations or warranties or covenants of Xxxxxxx
contained in this Agreement materially untrue or incorrect.
(C) To promptly notify AmeriNet of any event:
(1) Or occurrence or emergency which, in the reasonable judgment
of Xxxxxxx, is not in the ordinary course of business of
Xxxxxxx; and
(2) Which could, in the reasonable judgment of Xxxxxxx, have a
material adverse effect on Xxxxxxx.
4.2 No Solicitation.
(A) Prior to the Closing Xxxxxxx will not (nor will Xxxxxxx permit any of
Lorilei's officers, directors, stockholders affiliated with any officer
or director or Lorilei's agents, representatives or affiliates to)
directly or indirectly, take any of the following actions with any
party other than AmeriNet and its designees:
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(1) Solicit, encourage, initiate or participate in any
negotiations or discussions with respect to, any offer or
proposal to acquire all or substantially all of Lorilei's
business and properties or Capital Stock whether by merger,
purchase of assets, tender offer or otherwise;
(2) Except as required by law and except for disclosures made to
financial institutions and others in the ordinary course of
business, disclose any information not customarily disclosed
to any person other than its attorneys or financial advisors
concerning Lorilei's business and properties or afford to any
person or entity access to its properties, books or records;
or
(3) Assist or cooperate with any person to make any proposal to
purchase all or any part of Lorilei's Capital Stock or of its
assets (other in the ordinary course of business).
(B) In the event Xxxxxxx receives any offer or proposal, directly or
indirectly, of the type referred to in Section 4.2(A)(1) and (3) above,
or any request for disclosure or access pursuant to clause 4.2(A)(2)
above, Xxxxxxx will immediately inform AmeriNet thereof and will
cooperate with AmeriNet by furnishing any information it may reasonably
request.
4.3 Conduct of Business of AmeriNet.
During the period from the date of this Agreement and continuing until
the earlier of the termination of this Agreement or the Closing, as the case may
be, AmeriNet agrees (except to the extent that Xxxxxxx will otherwise consent in
writing), that AmeriNet will promptly notify Xxxxxxx of any event or occurrence
or emergency which is not in the ordinary course of business of AmeriNet and
which is material and adverse to the business of AmeriNet and its subsidiaries
taken as a whole.
Article V
Additional Agreements
5.1 Report on Form 8-K.
(A) Within fifteen days following the Closing Date, AmeriNet, with the
assistance and cooperation of Lorilei's current officers, auditors,
employees and legal counsel, will prepare and file with the Commission
a current report on Commission Form 8-K (the "8-K Report") disclosing
the Reorganization and containing information concerning Xxxxxxx
required by Commission Regulation S-B, except for audited financial
statements that may be filed within 75 days after the Closing Date.
(B) Within sixty days following the Closing Date Xxxxxxx, at its own
expense, will provide AmeriNet with audited financial statements
prepared in accordance with GAAP and meeting all requirements of the
Commission for reports of material acquisitions under the Securities
Act and the Exchange Act, including the requirements imposed by
Commission Regulation S-B.
(C) AmeriNet and Xxxxxxx will use their best efforts to secure the
Commission's acceptance of Lorilei's audited financial statements, as
complying with the requirements of Regulation S-B, and Xxxxxxx will
make any modification's to its financial statements suggested by the
Commission; and, if required, will use best efforts to secure required
extensions from the Commission of time in which to provide materials
complying with Commission Regulation S-B.
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5.2 Consent of Lorilei's Stockholders.
Because each Xxxxxxx Stockholder has independently made the decision to
exchange all of his, her or its Xxxxxxx Securities for shares of AmeriNet's
common stock, no formal stockholder action by Xxxxxxx will be required in
conjunction with authorization of this Agreement or the Closing; however, each
Xxxxxxx Stockholder must have become a party to this Agreement.
5.3 Access to Information.
(A) Xxxxxxx will afford AmeriNet and its accountants, counsel and other
representatives, reasonable access during normal business hours during
the period prior to the Closing to all:
(1) Of its properties, books, contracts, commitments and records; and
(2) Other information concerning the business, properties and
personnel of Xxxxxxx as AmeriNet may reasonably request.
(B) Xxxxxxx agrees to provide to AmeriNet and its accountants, counsel and
other representatives copies of internal financial statements promptly
upon request.
(C) No information or Knowledge obtained in any investigation pursuant to
this Section 5.3 will affect or be deemed to modify any representation
or warranty contained herein or the conditions to the obligations of
the Parties to consummate the Reorganization.
5.4 Confidentiality.
(A) From the date hereof to and including the Closing Date, the Parties
will maintain, and cause their directors, employees, agents and
advisors to maintain, in confidence and not disclose or use for any
purpose, except the evaluation of the transactions contemplated hereby
and the accuracy of the respective representations and warranties of
the Parties contained herein, information concerning the other Parties
and obtained directly or indirectly from such Parties, or their
directors, employees, agents or advisors, or as was in the possession
of such Party prior to obtaining such information from such other Party
as to which the fact of prior possession such possessing Party will
have the burden of proof and such information as is or becomes:
(1) Available to the non-disclosing Party from third parties not
subject to an undertaking of confidentiality or secrecy;
(2) Generally available to the public other than as a result of a
breach by the non-disclosing party hereunder; or
(3) Required to be disclosed under applicable law.
(B) In the event that the transactions contemplated hereby will not be
consummated, all such information which will be in writing will be
returned to the party furnishing the same, including to the extent
reasonably practicable, copies or reproductions thereof which may have
been prepared.
5.5 Expenses.
Whether or not the Reorganization is consummated, all expenses incurred
in connection with the Reorganization and this Agreement will be the obligation
of the Party incurring such expenses.
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5.6 Public Disclosure.
Unless otherwise required by law, prior to the Closing Date no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement will be made by any Party unless approved by AmeriNet and Xxxxxxx
prior to release, provided that such approval will not be unnecessarily
withheld, subject, in the case of AmeriNet, to AmeriNet's obligation to comply
with applicable securities laws.
5.7 Consents.
AmeriNet and Xxxxxxx will promptly apply for or otherwise seek, and use
their best efforts to obtain, all consents and approvals required to be obtained
by them for the consummation of the Reorganization, and Xxxxxxx will use its
best efforts to obtain all consents, waivers and approvals under any of
Lorilei's agreements, contracts, licenses, leases or mortgages in order to
preserve the benefits thereunder for Xxxxxxx and otherwise in connection with
the Reorganization; all of such consents and approvals being set forth in
Schedule 5.7.
5.8 Affiliate Agreements.
(A) Schedule 5.8 sets forth those persons who are, in Lorilei's reasonable
judgment, Affiliates of Xxxxxxx.
(B) Xxxxxxx will provide AmeriNet such information and documents as
AmeriNet will reasonably request for purposes of reviewing such list.
(C) Xxxxxxx will use its best efforts to deliver or cause to be delivered
to AmeriNet, concurrently with the execution of this Agreement (and in
any case prior to the Closing Date) from each of the Affiliates of
Xxxxxxx, an executed Affiliate Agreement in the form annexed hereto as
Exhibit 5.8.
(D) AmeriNet will be entitled to place appropriate legends on the
certificates evidencing any AmeriNet's common stock to be received by
such Affiliates pursuant to the terms of this Agreement, and to issue
appropriate stop transfer instructions to the transfer agent for
AmeriNet's common stock, consistent with the terms of such Affiliate
Agreements, in addition to the legends and stop transfer instructions
placed and issues on all certificates to be issued to Lorilei's
stockholders in conjunction with the Reorganization based on the
Parties reliance on Section 4(2) of the Securities Act
5.9 Legal Requirements.
AmeriNet and Xxxxxxx will take all reasonable actions necessary to
comply promptly with all legal requirements which may be imposed on them with
respect to the consummation of the transactions contemplated by this Agreement
and will promptly cooperate with and furnish information to any Party in
connection with any such requirements imposed upon such other Party in
connection with the consummation of the transactions contemplated by this
Agreement and will take all reasonable actions necessary to obtain (and will
cooperate with the other Parties in obtaining) any consent, approval, order or
authorization of, or any registration, declaration or filing with, any
Governmental Entity or other person, required to be obtained or made in
connection with the taking of any action contemplated by this Agreement.
5.10 Blue Sky Laws.
Legal counsel to Xxxxxxx has taken such steps as may be necessary to
comply with the securities and blue sky laws of all jurisdictions which are
applicable to the issuance of AmeriNet's common stock to the Former Xxxxxxx
Stockholders.
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5.11 Best Efforts: Additional Documents and Further Assurances.
(A) Each of the Parties to this Agreement will use its best efforts to
effectuate the transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to the Reorganization and the
condition subsequent under this Agreement.
(B) Each Party, at the request of another Party, will execute and deliver
such other instruments and do and perform such other acts and things as
may be reasonably necessary or desirable for effecting completely the
consummation of this Agreement and the transactions contemplated
hereby.
(C) The Parties acknowledge that allocation of AmeriNet overhead to its
subsidiaries will constitute a material aspect of AmeriNet's
subsidiaries ability to meet applicable Projections, and consequently,
the management of AmeriNet, Xx. Xxxxxxxxxx and Xxx. Xxxxxxxxxx will use
their best efforts as soon following closing as possible to persuade
AmeriNet's board of directors to pass a resolution defining the method
for allocation of AmeriNet's overhead among its subsidiaries.
5.12 Employment Agreements.
(A) The individuals set forth on Schedule 5.12 will as of the Closing Date
be parties to the employment agreements included in composite Exhibit
5.12 hereto (the "Employment Agreements"), which will supersede all
prior employment agreements or arrangements with any such persons, and
which will conform to the forms of employment agreements established by
AmeriNet for use by all material employees of AmeriNet and its
subsidiaries.
(B) (1) AmeriNet will, immediately following the Closing, reserve
335,378 shares of its common stock for future issuance through
incentive stock options (as defined in Section 422 of the
Code) granted in certain of the Employment Agreements,
provided, however, that rights to such shares will vest on an
annual basis, subject to Lorilei's having complied with its
obligations under this Agreement, the subject employees having
complied with their obligations under their employment
agreements with Xxxxxxx and Lorilei's having attained the
following EBITDA:
(a) If Xxxxxxx attains EBITDA of at least $500,000 during
the period starting on July 1, 2000 and ending on
June 30, 2001, then the first 67,976 shares of
AmeriNet's Common stock reserved for issuance in the
event of exercise of the subject incentive stock
options will vest;
(b) If Xxxxxxx attains EBITDA of at least $1,400,000
during the period starting on July 1, 2000 and ending
on June 30, 2002, then all rights to 179,769
(including the 67,976 shares vested, if any, on June
30, 2001) of the shares of AmeriNet's Common stock
reserved for issuance in the event of exercise of the
subject incentive stock options will vest; and
(c) If Xxxxxxx attains EBITDA of at least $2,900,000
during the period starting on July 1, 2000 and ending
on June 30, 2003, then all rights to all of the
335,378 shares (including the shares vested, if any,
on June 30, 2001 and June 30, 2002) of AmeriNet's
Common stock reserved for issuance in the event of
exercise of the subject incentive stock options will
vest.
(2) All rights to the incentive stock options in the subject
employment agreements that have not vested as of July 1, 2003
will expire on such date, and no further rights of any kind
thereto or to the underlying shares of AmeriNet's common stock
reserved for such purpose will exist thereafter, the
reservation therefor terminating on such date.
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(3) The vested Options will be exercisable during the three fiscal
year period after they vest at a price of $1.3125 per share,
provided that as required by Code Section 422, all rights to
or under the Options will expire within 90 days after
termination of the Employees' employment by Xxxxxxx.
(C) AmeriNet acknowledges that pursuant to the terms of the Employment
Agreements, Mr. & Xxx. Xxxxxxxxxx are each entitled to the following:
(1) Annual salaries of $60,0000;
(2) Annual cash bonuses in an amount equal to 2.5% of Lorilei's net,
pre-tax profits;
(3) Benefits not to exceed $12,000 per fiscal year; and
(4) Election to Lorilei's board of directors.
(D) The Parties acknowledge that Xxxxxxx provides its employees, including
Mr. & Xxx. Xxxxxxxxxx, with paid vacations based on the length of their
employment with Xxxxxxx, as follows:
(1) One week paid vacation at normal weekly salaries after completion
of one full year of employment; and
(2) Two weeks paid vacation at normal weekly salaries after completion
of three full years of employment.
(E) The Parties acknowledge that notwithstanding the foregoing, none of the
expenses referred to in this Section are to be paid using proceeds
obtained from AmeriNet's investment in Xxxxxxx but rather, will be paid
solely from operating income generated by Xxxxxxx.
5.13 Investment by AmeriNet in Xxxxxxx.
(A) Based on Lorilei's attainment of the Projections and subject to
Lorilei's substantial compliance with its material obligations under
this Agreement, including, without limitation, those involving
provision of audited financial statements for its operations for the
time period and in the form required by Commission Regulation S-B for
purposes of material acquisitions, AmeriNet hereby covenants and agrees
(1) To provide the following funds, to be expended solely for the
purposes set forth in Schedule 5.13-2, to Xxxxxxx:
(a) The Initial Funding Installment ($100,000);
(b) Within 60 days after the audited financial statements for
Xxxxxxx required pursuant to Commission Regulation S-B for
material acquisitions have been provided to AmeriNet, filed
with the Commission and not found deficient by the
Commission (the "Funding Trigger Date"), the sum of
$100,000;
(c) Within 120 days after the Funding Trigger Date, the sum of
$100,000;
(d) Within 150 days after the Funding Trigger Date, the sum of
$100,000; and
(e) Within 180 days after the Funding Trigger Date, the sum of
$100,000.
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(2) To use diligent efforts to assist Xxxxxxx and Mr. & Xxx.
Xxxxxxxxxx to refinance current liabilities guaranteed by its
principals and their affiliates in a manner removing such
personal guarantees, provided that, if such efforts have not been
successful prior to December 31, 2000, Xxxxxxx will be permitted
by AmeriNet to enter into an agreement with such guarantors
guaranteeing direct payment of such obligations and to secure
such guarantee with an additional mortgage on the real estate
owned by Xxxxxxx.
(B) The Parties hereby acknowledge that Code Section 368(a)(1)(B) does not
permit stockholders of the corporation whose stock is being acquired to
receive any consideration therefor other than voting equity securities
of the corporation acquiring their common stock; consequently, the
Xxxxxxx Declarants hereby covenant and agree that no part of the
proceeds to be invested by AmeriNet in Xxxxxxx will be used, directly
or indirectly, to make any payments to the persons who were Lorilei's
stockholders immediately prior to the Closing, including any of the
payments required under Employment or other agreements with Xxxxxxx,
all such obligations to be funded solely from Lorilei's operating
income.
5.14 Board of Directors.
Subject to Lorilei's substantial compliance with its material
obligations under this Agreement, including, without limitation, those involving
provision of audited financial statements for its operations for the time period
and in the form required by Commission Regulation S-B for purposes of material
acquisitions; and, subject to continuing compliance by Mr. & Xxx. Xxxxxxxxxx
with their obligations under their employment agreements with Xxxxxxx and with
their fiduciary obligations to AmeriNet:
(A) (1) AmeriNet hereby covenants and agrees that it will maintain membership
on the board of directors of Xxxxxxx in the following ratio: two
thirds of the members will be nominees of Mr. & Xxx Xxxxxxxxxx and one
third will be nominees of AmeriNet, provided that:
(a) Xxxxxxx cumulatively attains EBITDA during the following fiscal
periods equal to the following amounts:
1. During each quarter in the fiscal period starting on July 1,
2000 and ending on June 30, 2001, EBITDA of at least at
least 70% of $125,000;
2. During each quarter in the fiscal period starting on July 1,
2001 and ending on June 30, 2002, EBITDA of at least at
least 70% of $225,000; and
3. During each quarter in the fiscal period starting on July 1,
2002 and ending on June 30, 2003, EBITDA of at least 70% of
$375,000; and
(b) Xxxxxxx and the Former Xxxxxxx Stockholders must comply with all
of their obligations under this Agreement, including, without
limitation, those involving provision of audited financial
statements for Lorilei's operations for the time period and in
the form required by Commission Regulation S-B for purposes of
the Reorganization.
(2) Notwithstanding the provisions in Section 5.14(A)(1):
(a) The initial determination by AmeriNet as to the attainment of the
minimum acceptable EBITDA will not be made until two complete
fiscal quarters have passed since the Closing Date;
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(b) After the first year following the Closing Date, the minimum
acceptable EBITDA may be modified periodically by unanimous
action (including the affirmative votes of all AmeriNet nominees)
of the board of directors of Xxxxxxx; provided that after the
third year, unless new minimum acceptable EBITDA are agreed to,
the minimum acceptable EBITDA will increase annually to 150% of
the EBITDA projected for the immediately preceding year;
(c) In the event that the right of Mr. & Xxx. Xxxxxxxxxx to designate
two thirds of the membership on Lorilei's board of directors is
suspended due to failure to meet the minimum acceptable EBITDA,
such right will be reinstated at such time as the deficiency in
meeting the minimum acceptable EBITDA, on a cumulative basis, has
been cured.
(d) As a continuing condition to the right of Mr. & Xxx. Xxxxxxxxxx'x
designees on Lorilei's board of directors to take any corporate
actions, such action may not violate any of the following
restrictions or requirements and any action not in conformity
with such continuing conditions shall be void:
1. The members of Lorilei's board of directors serving as
nominees of Mr. & Xxx. Xxxxxxxxxx must fully comply with
their fiduciary obligations to AmeriNet and Lorilei's
Stockholders and with applicable laws;
2. A quorum for meetings of the board of directors of Xxxxxxx
and action by such board of directors will require the
participation of AmeriNet's nominees; provided that, if a
meeting deemed to involve material issues is adjourned due
to the inability to attain a quorum as a result of the
absence of the AmeriNet nominees, then, upon receipt of
written notice from Lorilei's board of directors, AmeriNet
must assure that its nominees (or their successors if
AmeriNet elects to replace them) attend the reconvened
meeting, which will be held by telephone conference at a
time during a business day designated by AmeriNet within
three days after AmeriNet is provided with the written
notice of the adjourned meeting; and
3. The board of directors of Xxxxxxx will not for so long as
Xxxxxxx remains a subsidiary of AmeriNet, without AmeriNet's
prior written consent specifying the action authorized, be
authorized to:
A. Engage in any material change in Lorilei's business not
contemplated by the Projections;
B. Sell a material portion of Lorilei's assets outside the
normal course of business;
C. Issue any securities;
D. Authorize the borrowing of any funds or pledge of any
assets; or
E. Confess any judgment or settle any material claim of
liability.
(B) Subject to Lorilei's attainment of at least 70% of its EBITDA targets
set forth in the preceding subsection, AmeriNet will nominate Mr. &
Xxx. Xxxxxxxxxx for election to AmeriNet's board of directors on a
continuing basis for a period of not less than three years and shall
use its best efforts to secure their election by AmeriNet's
stockholders.
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5.15 Additional Covenants by Xxxxxxx
As of Closing all accrued obligations by Xxxxxxx to its employees,
consultants and independent contractors involving payments due for services
rendered, whether in the form of salaries, bonuses, benefits, benefit plans, or
other fees or consideration of any kind, will be fully and irrevocably
discharged, except for approximately $25,000 in accrued salary involving
obligations for the most recent pay period and accrued vacation costs.
Article VI
Conditions to the Reorganization
6.1 Conditions to Obligations of Each Party to Effect the Reorganization.
The respective obligations of each party to this Agreement to effect
the Reorganization will be subject to the satisfaction at or prior to the
Closing Date of the following conditions:
(A) No Injunctions or Restraints: Illegality.
No temporary restraining order, preliminary or permanent injunction or
other order issued by any court of competent jurisdiction or other legal
restraint or prohibition preventing the consummation of the Reorganization will
be in effect, nor will any proceeding brought by an administrative agency or
commission or other governmental authority or instrumentality, domestic or
foreign, seeking any of the foregoing be pending; nor will there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Reorganization, which makes the consummation of the
Reorganization illegal.
(B) Xxxxxxx Information Required by Commission Regulation S-B
The provision by Xxxxxxx on a timely basis in full compliance with the
requirements of Commission Regulation S-B for material acquisitions, of all
information concerning its past operations, including audited financial
statements, will constitute a condition subsequent to the obligations of
AmeriNet under this Agreement and in the event of the failure of such condition
subsequent, then, at AmeriNet's sole option:
(1) The Reorganization may be rescinded, and all funds advanced by
AmeriNet to Xxxxxxx will be repaid, with interest at the
annual rate of 8%, to AmeriNet within 30 days after such
rescission; or
(2) The Undisclosed Liabilities Escrow Shares will be deemed
defaulted to AmeriNet and the Reorganization will be
restructured in a manner complying with AmeriNet's reporting
and other obligations under the Exchange Act, including the
sale by AmeriNet of Xxxxxxx.
6.2 Additional Conditions to Obligations of Xxxxxxx.
The obligations of Xxxxxxx to consummate and effect this Agreement and
the transactions contemplated hereby will be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by Xxxxxxx:
(A) Representations, Warranties and Covenants.
The representations and warranties of AmeriNet in this Agreement will
be true and correct in all material respects on and as of the Closing
Date as though such representations and warranties were made on and as
of such time and AmeriNet will have performed and complied in all
material respects with all covenants, obligations and conditions of
this Agreement required to be performed and complied with by it as of
the Closing Date.
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(B) Certificate of AmeriNet.
Xxxxxxx will have been provided with a certificate executed on behalf
of AmeriNet by its President and its Chief Financial Officer, Treasurer
or officer exercising such functions to the effect that, as of the
Closing Date:
(1) All representations and warranties made by AmeriNet under this
Agreement are true and complete in all material respects; and
(2) All covenants, obligations and conditions of this Agreement to
be performed by AmeriNet on or before such date have been so
performed in all material respects.
(C) Satisfactory Form of Legal Matters.
The form, scope and substance of all legal and accounting matters
contemplated hereby and all documents and other papers delivered
hereunder prior to and on the Closing Date will be reasonably
acceptable to counsel to Xxxxxxx.
(D) Legal Opinion.
Xxxxxxx will have received a legal opinion from legal counsel to
AmeriNet, substantially in the form of Exhibit 6.2(D) hereto.
(E) No Material Adverse Changes.
There will not have occurred any event, fact or condition that has had
or reasonably would be expected to have a material adverse effect on
AmeriNet.
(F) Tax Opinion.
(1) The Xxxxxxx Declarants will have received a written opinion
from their legal counsel or tax advisors to the effect that
the Reorganization will constitute a reorganization within the
meaning of Section 368(a)(1)(B) of the Code.
(2) In rendering such opinion such legal counsel or tax advisor
may rely on (and to the extent reasonably required, the
Parties and Lorilei's stockholders will make) reasonable
representations related thereto.
6.3 Additional Conditions to the Obligations of AmeriNet.
The obligations of AmeriNet to consummate and effect this Agreement and
the transactions contemplated hereby will be subject to the satisfaction at or
prior to the Closing Date of each of the following conditions, any of which may
be waived, in writing, exclusively by AmeriNet:
(A) Representations, Warranties and Covenants.
(1) The representations and warranties of Xxxxxxx in this
Agreement will be true and correct in all material respects on
and as of the Closing Date as though such representations and
warranties were made on and as of such time and Xxxxxxx will
have performed and complied in all material respects with all
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covenants, obligations and conditions of this Agreement
required to be performed and complied with by it as of the
Closing Date.
(2) AmeriNet will have no remedy against the Undisclosed
Liabilities Escrow Fund in respect of an untrue representation
or warranty if prior to the Closing Date Xxxxxxx delivers to
AmeriNet in accordance with Section 9.2 a written statement:
(a) Advising AmeriNet that an event (a "Post-Execution
Event") has occurred (specifying in reasonable detail
such event) subsequent to the date of execution of
this Agreement that would render any representation
or warranty made by Xxxxxxx in this Agreement untrue
if such representation or warranty were made as of
the Closing; and
(b) Confirming that such representation or warranty was
true as of the date of execution of this
Agreement, and
(c) AmeriNet subsequently waives the failure to satisfy
the condition set forth in Section 6.3(A) with
respect to such representation or warranty, in
writing.
(B) Certificate of Xxxxxxx.
AmeriNet will have been provided with a certificate executed on behalf
of Xxxxxxx by its President and Chief Financial Officer to the effect
that, as of the Closing Date, all:
(1) Representations and warranties made by Xxxxxxx under this
Agreement are true and complete in all material respects; and
(2) Covenants, obligations and conditions of this Agreement to be
performed by Xxxxxxx on or before such date have been so
performed in all material respects.
(C) Third Party Consents.
Any and all consents, waivers and approvals required from third Parties
relating to the contracts and agreements of Xxxxxxx so that the
Reorganization and other transactions contemplated hereby do not
adversely affect the rights of, and benefits to, Xxxxxxx thereunder
will have been obtained.
(D) Satisfactory Form of Legal and Accounting Matters.
The form, scope and substance of all legal and accounting matters
contemplated hereby and all documents and other papers delivered
hereunder prior to and on the Closing Date will be reasonably
acceptable to AmeriNet's counsel (provided that the condition
subsequent concerning the compliance of information provided by Xxxxxxx
with the requirements of Commission Regulation S-B, on a timely basis,
will survive the Closing).
(E) Legal Opinion.
AmeriNet will have received a legal opinion from legal counsel to
Xxxxxxx, in substantially the form of Exhibit 6.3(E) hereto.
(F) No Material Adverse Changes.
There will not have occurred any event, fact or condition which has had
or reasonably would be expected to have a material adverse effect on
Xxxxxxx.
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(G) Affiliate Agreements.
AmeriNet will have received from each of the Affiliates of Xxxxxxx an
executed Affiliate Agreement which will be in full force and effect.
(H) Employment Agreements.
The Employment Agreements will have been duly executed and delivered
and will be in full force and effect.
(I) Minimum Net Worth.
Xxxxxxx will on the Closing Date have net tangible assets (tangible
assets in excess of liabilities) based on replacement cost valuation of
not less than $300,000; no net current payables (excess of current
payables over current receivables), a total of not more than $280,000
in long term payables; at least $162,000 EBITDA for calendar year 1999
based on revenues of at least $1,100,000, with a pre-tax net profit of
approximately $20,000; and, projected EBITDA for the fiscal years
ending June 30, 2001, 2002 and 2003 of $500,000, $900,000 and
$1,500,000, respectively.
(J) Tax Opinion.
(1) AmeriNet will have received a written opinion from its general
counsel to the effect that the Reorganization will constitute
a reorganization within the meaning of Section 368(a)(1)(B) of
the Code.
(2) In rendering such opinion, counsel may rely on (and to the
extent reasonably required, the Parties and Lorilei's
stockholders will make) reasonable representations related
thereto.
(K) Confidentiality Agreements.
Each current employee, consultant or other person having access to
Lorilei's confidential information will have executed a confidentiality
agreement in the form annexed hereto as Exhibit 6.3(K).
(L) Non-accredited Investors.
Except as disclosed in the Xxxxxxx Warranty Exceptions listed in
Schedule 2, there will be no stockholders of Xxxxxxx who are not
Accredited Investors.
(M) Obligations to Xxxxxxx Personnel
All obligations by Xxxxxxx to its employees, consultants and
independent contractors involving payments due for services rendered
will have been fully discharged, as of the Closing date.
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Article VII
Survival of Condition Subsequent, Representations and Warranties,
Covenants & Undisclosed Liabilities Escrow
7.1 Survival of Condition Subsequent, Representations and Warranties &
Covenant.
All conditions subsequent to the Reorganization and covenants to be
performed after the Closing, and all representations and warranties in this
Agreement or in any instrument delivered pursuant to this Agreement will survive
the Closing and continue until the date the audit of AmeriNet's financial
statements for the year ending June 30, 2001 has been completed and AmeriNet has
received a signed opinion from its independent auditors certifying such
financial statements (the "2001 Audit Date").
7.2 Escrow Arrangements.
(A) Undisclosed Liabilities Escrow Fund.
(1) As soon as practicable after the Closing Date, a portion of
the shares of AmeriNet's common stock to be issued in the
Reorganization equal to the Undisclosed Liabilities Escrow
Number plus any additional New Shares (as defined below) as
may be issued in respect thereof after the Closing Date)
(collectively, the "Undisclosed Liabilities Escrow Shares"),
without any act of any stockholder, will be registered in the
name of Yankees, AmeriNet's strategic planning consultant, or
such other person or legal entity as may otherwise be selected
by AmeriNet prior to the Closing, as escrow agent (the
"Undisclosed Liabilities Escrow Agent"), and will be deposited
with a financial institution acceptable to AmeriNet and the
Agent [as defined in Section 7.2(H) below)], such deposit to
constitute an escrow fund (the "Undisclosed Liabilities Escrow
Fund") to be governed by the terms set forth herein and at
AmeriNet's sole cost and expense.
(2) (a) The portion of AmeriNet's common stock in the
Undisclosed Liabilities Escrow Fund contributed on
behalf of each stockholder of Xxxxxxx is listed
opposite such stockholders' name on Exhibit 7.2.
(b) The Undisclosed Liabilities Escrow Fund will be
available to compensate AmeriNet and its affiliates
for any claim, loss, expense, liability or other
damage, including reasonable attorneys' fees, that
such person has incurred or reasonably anticipates
incurring by reason of the successful assertion by a
third party of any claims for liabilities of the
Xxxxxxx Declarants that were not disclosed as
required pursuant to this Agreement ("Undisclosed
Liabilities"), but only to the extent that such
Undisclosed Liabilities exceed $20,000.
(c) AmeriNet and Xxxxxxx each acknowledge that such
Undisclosed Liabilities, if any, would relate to
unresolved contingencies existing at the Time of
Closing which if resolved at the Closing would have
led to a reduction in the total number of shares of
AmeriNet's common stock AmeriNet would have agreed to
issue in connection with the Reorganization or to
AmeriNet's decision not to acquire Xxxxxxx.
(3) Nothing herein will limit the liability of the Xxxxxxx
Declarants for any misrepresentation or breach of warranty
except that resort to the Undisclosed Liabilities Escrow Fund
will be the exclusive contractual remedy of AmeriNet for
recovery of monetary damages resulting from any such
undisclosed liability; provided, however, that nothing herein
will limit any noncontractual remedy for fraud or relief in
the form of remedies other than recovery of monetary damages.
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(4) (a) Subject to the following requirements, the Undisclosed
Liabilities Escrow Fund will remain in existence until the
2001 Audit Date (the "Undisclosed Liabilities Escrow
Period").
(b) Upon the expiration of such Undisclosed Liabilities Escrow
Period, the Undisclosed Liabilities Escrow Fund will
terminate with respect to all Undisclosed Liabilities Escrow
Shares; provided, however, that the number of Undisclosed
Liabilities Escrow Shares which, in the reasonable judgment
of AmeriNet, subject to the objection of the Agent and the
subsequent arbitration of the matter in the manner provided
in Section 7.2(G) hereof, are necessary to satisfy any
unsatisfied claims specified in any Officer's Certificate
delivered to the Undisclosed Liabilities Escrow Agent prior
to the expiration of the Undisclosed Liabilities Escrow
Period with respect to facts and circumstances existing on
or prior to the 2001 Audit Date will remain in the
Undisclosed Liabilities Escrow Fund (and the Undisclosed
Liabilities Escrow Fund will remain in existence) until such
claims have been resolved.
(c) As soon as all such claims have been resolved, the
Undisclosed Liabilities Escrow Agent will deliver to the
Former Xxxxxxx Stockholders all AmeriNet's common stock and
other property remaining in the Undisclosed Liabilities
Escrow Fund and not required to satisfy such claims.
(d) Deliveries of AmeriNet's common stock and other property to
the Former Xxxxxxx Stockholders pursuant to this Section
7.2(A) will be made in proportion to their respective
original contributions to the Undisclosed Liabilities Escrow
Fund.
(B) Xxxxxxxx Escrow Fund.
(1) As soon as practicable after the Closing Date, a portion of the
shares of AmeriNet's common stock to be issued in the
Reorganization equal to the Xxxxxxxx Escrow Number plus any
additional New Shares (as defined below) as may be issued in
respect thereof after the Closing Date) (collectively, the
"Xxxxxxxx Escrow Shares"), without any act of any stockholder,
will be registered in the name of Xxxxx Xxxxxxxx, Esquire, the
Xxxxxxx Declarants' legal counsel, or such other person or legal
entity as may otherwise be selected by the Parties prior to the
Closing as escrow agent (the "Xxxxxxxx Escrow Agent"), and will
be deposited with a financial institution acceptable to AmeriNet
and the Agent [as defined in Section 7.2(H) below)], such deposit
to constitute an escrow fund (the "Xxxxxxxx Escrow Fund") to be
governed by the terms set forth herein and at AmeriNet's sole
cost and expense.
(2) (a) The portion of AmeriNet's common stock in the Xxxxxxxx
Escrow Fund contributed on behalf of each stockholder of
Xxxxxxx is listed opposite such stockholders' name on
Exhibit 7.2.
(b) The Xxxxxxxx Escrow Fund will be held and distributed in the
manner and for the purposes set forth in Section
1.2(A)(2)(a).
(3) The Xxxxxxxx Escrow Shares will constitute AmeriNet's exclusive
monetary remedy for damages resulting as a result of the
contingencies involved; provided, however, that nothing herein
will limit any noncontractual remedy for fraud or relief in the
form of remedies other than recovery of monetary damages.
(C) Protection of Escrow Shares.
The Escrow Agents will hold and safeguard the Escrow Shares during the
Escrow Terms, will treat the Escrow Shares as a trust fund in
accordance with the terms of this Agreement and not as the property of
the Parties and will hold and dispose of the Escrow Shares only in
accordance with the terms hereof.
Page 81
(D) Distributions; Voting.
(1) (a) Any shares of AmeriNet's common stock or other
equity securities issued or distributed by AmeriNet,
including shares issued upon a stock split or any
stock dividend or distribution ("New Shares") in
respect of AmeriNet's common stock in the Escrow
Funds which have not been released from the Escrow
Funds will be added to the Escrow Funds and become a
part thereof.
(b) New Shares issued in respect of AmeriNet's common
stock which have been released from the Escrow Funds
will not be added to the Escrow Funds, but will be
distributed to the holders thereof.
(c) When and if cash dividends on AmeriNet's common stock
in the Escrow Funds will be declared and paid, they
will be added to the Escrow Funds and become a part
thereof.
(2) Each stockholder of Xxxxxxx will have voting rights with
respect to the shares of AmeriNet's common stock contributed
to the Escrow Funds on behalf of such stockholder (and on any
voting securities added to the Escrow Funds in respect of such
shares of AmeriNet's common stock) so long as such shares of
AmeriNet's common stock or other voting securities are held in
the Escrow Funds.
(E) Claims Upon Escrow Funds.
(1) Subject to the objection procedure established below, the
Undisclosed Liabilities Escrow Agent will deliver to AmeriNet
out of the Undisclosed Liabilities Escrow Fund, as promptly as
practicable, shares of AmeriNet's common stock or other assets
held in the Undisclosed Liabilities Escrow Fund in an amount
equal to the funds required to recover the monetary damages
resulting from such Undisclosed Liabilities, provided that
(a) A written claim of loss has been provided by AmeriNet
to the Undisclosed Liabilities Escrow Agent at any
time on or before the last day of the Undisclosed
Liabilities Escrow Period in the form of a
certificate signed by any officer of AmeriNet (an
"Officer's Certificate"), with a copy to Xxxxxxx:
1. Stating that AmeriNet has paid or properly
accrued or reasonably anticipates that it
will have to pay or accrue as a result of
such Undisclosed Liabilities, and
2. Specifying in reasonable detail the
individual items of included in the amount
so stated, the date each such item was paid
or properly accrued, or the basis for such
anticipated liability, and the nature of the
misrepresentation, breach of warranty or
claim to which such item is related.
(b) For the purposes of determining the number of shares
of AmeriNet's common stock to be delivered to
AmeriNet out of the Undisclosed Liabilities Escrow
Fund pursuant to Section 7.2(E)(1), the shares of
AmeriNet's common stock will be valued at the average
closing transaction price therefor during the
preceding ten trading days, as reported on the
highest rated securities market or securities
exchange on which AmeriNet's common stock is actually
traded.
(2) (a) Shares will be delivered from the Xxxxxxxx Escrow
in the manner and at the times specified in Section
1.2(A)(2)(a), subject to the provisions set forth in
Section 7.2(E)(2)(c), within thirty days after
presentation to the Xxxxxxxx Escrow Agent of written
evidence that the event requiring distribution has
Page 82
occurred and indicating the number of shares or cash
to be distributed and the basis for such calculation
(the "Delivery Date" and the "Xxxxxxxx Distribution
Notice," respectively).
(b) Within three business days after a Xxxxxxxx
Distribution Notice is received by the Xxxxxxxx
Escrow Agent, the Xxxxxxxx Escrow Agent shall forward
a copy thereof to the other potential claimant with a
written notice advising such other claimant that
unless written objections to such distribution
specifying the basis for such objections are provided
to the Xxxxxxxx Escrow Agent on or before the
Delivery Date (the "Notice of Objections"),
distribution as requested will be made.
(c) In the event a Notice of Objection is provided, the
Xxxxxxxx Escrow Agent will refrain from making the
requested distribution and will provide the Parties
with written notice that unless the Parties mutually
agree to a distribution or initiate action pursuant
to the g eneral dispute resolution procedures of this
Agreement within ten business days, the Xxxxxxxx
Escrow Agent will initiate an action in the nature of
an interpleader in the Circuit Court sitting in and
for Alachua County, Florida and will deposit the
shares or funds in controversy in the registry of
such court, whereupon the Parties will be required to
determine ownership thereof, with all expenses of
litigation for the Parties and the Xxxxxxxx Escrow
Agent to be charged and awarded by such court to
against the non-prevailing Party or Parties.
(d) If an action pursuant to the general dispute
resolution procedures of this Agreement is initiated
within ten business days, the Xxxxxxxx Escrow Agent
will continue to hold the shares or funds in
controversy during the pendency of such proceeding
and will thereafter distribute them in accordance
with the final award therein.
(F) Objections to Undisclosed Liabilities Escrow Claims.
(1) At the time of delivery of any Officer's Certificate to the
Undisclosed Liabilities Escrow Agent, a duplicate copy of such
certificate will be delivered to the Agent [as defined in
Section 7.2(H)] and for a period of thirty (30) days after
such delivery, the Undisclosed Liabilities Escrow Agent will
make no delivery to AmeriNet of shares of AmeriNet's common
stock, pursuant to Section 7.2(E)(1) hereof unless the
Undisclosed Liabilities Escrow Agent will have received
written authorization from the Agent to make such delivery.
(2) After the expiration of such thirty (30) day period, the
Undisclosed Liabilities Escrow Agent will make delivery of the
shares of AmeriNet's common stock or other property in the
Undisclosed Liabilities Escrow Fund in accordance with Section
7.2(F) hereof, provided that no such payment or delivery may
be made if the Agent will object in a written statement to the
claim made in the Officer's Certificate, and such statement
will have been delivered to the Undisclosed Liabilities Escrow
Agent prior to the expiration of such thirty day period.
(G) Resolution of Undisclosed Liabilities Escrow Conflicts; Arbitration.
(1) (a) In case the Agent will so object in writing to
any claim or claims made in any Officer's
Certificate, the Agent and AmeriNet will attempt in
good faith to agree upon the rights of the respective
Parties with respect to each of such claims.
(b) If the Agent and AmeriNet should so agree, a
memorandum setting forth such agreement will be
prepared and signed by both Parties and will be
furnished to the Undisclosed Liabilities Escrow
Agent.
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(c) The Undisclosed Liabilities Escrow Agent will be
entitled to rely on any such memorandum and
distribute shares of AmeriNet's common stock or other
property from the Undisclosed Liabilities Escrow Fund
in accordance with the terms thereof.
(2) (a) If no such agreement can be reached after good
faith negotiation, either AmeriNet or the Agent may
demand arbitration of the matter unless the amount of
the damage or loss is at issue in pending litigation
with a third party, in which event arbitration will
not be commenced until such amount is ascertained or
both Parties agree to arbitration; and in either such
event the matter will be settled by arbitration
conducted by three arbitrators.
(b) AmeriNet and the Agent will each select one
arbitrator, and the two arbitrators so selected will
select a third arbitrator.
(c) The arbitrators will set a limited time period and
establish procedures designed to reduce the cost and
time for discovery while allowing the Parties an
opportunity, adequate in the sole judgment of the
arbitrators, to discover relevant information from
the opposing Parties about the subject matter of the
dispute.
(d) The arbitrators will rule upon motions to compel or
limit discovery and will have the authority to impose
sanctions, including attorneys fees and costs, to the
extent as a court of competent law or equity, should
the arbitrators determine that discovery was sought
without substantial justification or that discovery
was refused or objected to without substantial
justification.
(e) The decision of a majority of the three arbitrators
as to the validity and amount of any claim in such
Officer's Certificate will be binding and conclusive
upon the Parties to this Agreement, and
notwithstanding anything in Section 7.2(E)(1) hereof,
the Undisclosed Liabilities Escrow Agent will be
entitled to act in accordance with such decision and
make or withhold payments out of the Undisclosed
Liabilities Escrow Fund in accordance therewith.
(f) Such decision will be written and will be supported
by written findings of fact and conclusions which
will set forth the award, judgment, decree or order
awarded by the arbitrators.
(3) (a) (i) Judgment upon any award rendered by the
arbitrators may be entered in any court
having jurisdiction.
(ii) Any such arbitration will be held in Broward
County, Florida, under the rules then in
effect of the American Arbitration
Association to the extent such rules are not
inconsistent with this Section 7.2(G).
(b) For purposes of this Section 7.2(G), in any
arbitration hereunder in which any claim or the
amount thereof stated in the Officer's Certificate is
at issue, AmeriNet will be deemed to be the
Non-Prevailing Party in the event that the
arbitrators award AmeriNet less than the sum of 50%
of the disputed amount plus any amounts not in
dispute; otherwise, the Former Xxxxxxx Stockholders
as represented by the Agent will be deemed to be the
Non-Prevailing Party.
(c) The Non-Prevailing Party to an arbitration will pay
its own expenses, the fees of each arbitrator, the
administrative fee of the American Arbitration
Association, and the expenses, including without
limitation, reasonable attorneys' fees and costs,
incurred by the other party to the arbitration.
Page 84
(H) Agent of the Stockholders: Power of Attorney.
(1) (a) (i) Xxxxxx X. Xxxxxxxxxx is hereby irrevocably appointed as the
agent and attorney-in-fact (the "Agent") for each
stockholder of Xxxxxxx, for and on behalf of the Former
Xxxxxxx Stockholders, to give and receive notices and
communications, to authorize delivery to AmeriNet of
AmeriNet's common stock or other property from the Escrow
Funds in satisfaction of claims by AmeriNet, to object to
such deliveries, to agree to, negotiate, enter into
settlements and compromises of, and demand arbitration and
comply with orders of courts and awards of arbitrators with
respect to such claims, and to take all actions necessary or
appropriate in the judgment of Agent for the accomplishment
of the foregoing.
(ii) Such agency may be changed by the Former Xxxxxxx
Stockholders from time to time upon not less than thirty
(30) days prior written notice to AmeriNet; provided that
the Agent may not be removed unless holders of a two-thirds
interest of the common stock comprising the subject Escrow
Fund agree to such removal and to the identity of the
substituted agent.
(iii) No bond will be required of the Agent, and the Agent will
not receive compensation for his or her services.
(iv) Notices or communications to or from the Agent will
constitute notice to or from each of the Former Xxxxxxx
Stockholders.
(b) The Agent will be entitled to submit a claim and receive
reimbursement from the Escrow Funds for all reasonable,
documented out-of-pocket expenses incurred by the Agent as a
result of his acting as the Agent; provided, however, that such
right to reimbursement will be subordinate to AmeriNet's claims
on the Escrow Funds, if any, and will be paid only after all such
claims have been satisfied.
(c) Any such reimbursement will be paid in shares of AmeriNet's
common stock out of the Escrow Fund.
(d) For purposes of such reimbursement of the Agent only, such shares
will be valued at the average of the closing prices of AmeriNet's
common stock for the ten trading days ending on the day prior to
the date the Undisclosed Liabilities Escrow Agent pays such
reimbursement amount.
(2) (a) The Agent will not be liable for any act done or omitted
hereunder as Agent while acting in good faith and in the exercise
of reasonable judgment.
(b) The Former Xxxxxxx Stockholders on whose behalf shares of
AmeriNet's common stock were contributed to the subject Escrow
Fund will severally indemnify the Agent and hold the Agent
harmless against any loss, liability or expense incurred without
negligence or bad faith on the part of the Agent and arising out
of or in connection with the acceptance or administration of the
Agent's duties hereunder, including the reasonable fees and
expenses of any legal counsel retained by the Agent.
Page 85
(I) Actions of the Agent.
(1) A decision, act, consent or instruction of the Agent will
constitute a decision of all the stockholders for whom shares
of AmeriNet's common stock otherwise issuable to them are
deposited in the Escrow Funds and will be final, binding and
conclusive upon each of such stockholders, and the Escrow
Agents and AmeriNet may rely upon any such decision, act,
consent or instruction of the Agent as being the decision,
act, consent or instruction of every such stockholder.
(2) The Escrow Agents and AmeriNet are hereby relieved from any
liability to any person for any acts done by them in
accordance with such decision, act, consent or instruction of
the Agent.
(J) Third-Party Claims.
(1) In the event AmeriNet becomes aware of a third-party claim
which AmeriNet believes may result in a demand against the
Undisclosed Liabilities Escrow Fund, AmeriNet will notify the
Agent of such claim, and the Agent and the Former Xxxxxxx
Stockholders will be entitled, at their expense, to
participate in any defense of such claim.
(2) AmeriNet will have the right in its sole discretion to settle
any such claim; provided, however, that except with the
consent of the Agent, no settlement of any such claim with
third-party claimants will alone be determinative of the
validity of any claim against the Undisclosed Liabilities
Escrow Fund.
(3) In the event that the Agent has consented to any such
settlement, the Agent will have no power or authority to
object under any provision of this Article VII to the amount
of any claim by AmeriNet against the Undisclosed Liabilities
Escrow Fund with respect to such settlement.
(K) Escrow Agents' Duties.
(1) (a) The Escrow Agents will be obligated only for the performance
of such duties as are specifically set forth herein, and as
set forth in any additional written escrow instructions
which the Escrow Agents may receive after the date of this
Agreement which are signed by an officer of AmeriNet and the
Agent, and may rely and will be protected in relying or
refraining from acting on any instrument reasonably believed
to be genuine and to have been signed or presented by the
proper party or Parties.
(b) The Escrow Agents will not be liable for any act done or
omitted hereunder as Escrow Agents while acting in good
faith and in the exercise of reasonable judgment, and any
act done or omitted pursuant to the advice of counsel will
be conclusive evidence of such good faith.
(2) (a) The Escrow Agents are hereby expressly authorized to
disregard any and all warnings given by any of the Parties
or by any other person, excepting only orders or process of
courts of law, and is hereby expressly authorized to comply
with and obey orders, judgments or decrees of any court.
(b) In case the Escrow Agents obey or comply with any order,
judgment or decree of any court, the Escrow Agents will not
be liable to any of the Parties or to any other person by
reason of such compliance, notwithstanding any such order,
judgment or decree being subsequently reversed, modified,
annulled, set aside, vacated or found to have been entered
without jurisdiction.
Page 86
(3) The Escrow Agents will not be liable in any respect on account
of the identity, authority or rights of the Parties executing
or delivering or purporting to execute or deliver this
Agreement or any documents or papers deposited or called for
hereunder.
(4) The Escrow Agents will not be liable for the expiration of any
rights under any statute of limitations with respect to this
Agreement or any documents deposited with the Escrow Agents.
(5) The Escrow Agents may resign at any time upon giving at least
thirty (30) days written notice to AmeriNet and the Agent to
this Agreement; provided, however, that no such resignation
will become effective until the appointment of a successor
escrow agent which will be accomplished as follows:
(a) AmeriNet and the Agent will use their best efforts to
mutually agree upon a successor agent within thirty
(30) days after receiving such notice.
(b) If the Parties fail to agree upon a successor escrow
agent within such time, AmeriNet will have the right
to appoint a successor escrow agent authorized to do
business in Florida.
(c) The successor escrow agent selected in the preceding
manner will execute and deliver an instrument
accepting such appointment and it will thereupon be
deemed the subject Escrow Agent hereunder and it will
without further acts be vested with all the estates,
properties, rights, powers, and duties of the
predecessor Escrow Agent as if originally named as
Escrow Agent.
(d) Thereafter, the predecessor Escrow Agent will be
discharged for any further duties and liabilities
under this Agreement.
Article VIII
Termination, Amendment And Waiver
8.1 Termination.
This Agreement may be terminated and the Reorganization abandoned at
any time prior to the Closing Date, as follows:
(A) By mutual consent of Xxxxxxx and AmeriNet.
(B) By AmeriNet if it is not in material breach of its obligations under
this Agreement and there has been a material breach of any
representation, warranty, covenant or agreement contained in this
Agreement on the part of Xxxxxxx and such breach has not been cured
within fifteen days after notice to Xxxxxxx.
(C) By Xxxxxxx if it is not in material breach of its respective
obligations under this Agreement and there has been a material breach
of any representation, warranty, covenant or agreement contained in
this Agreement on the part of AmeriNet and such breach has not been
cured within 15 days after notice to AmeriNet;
(D) By any Party if:
(1) The Reorganization has not occurred by May 31, 2000;
(2) There will be a final nonappealable order of a federal or state
court in effect preventing consummation of the Reorganization;
Page 87
(3) There will be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed
applicable to the Reorganization by any Governmental Entity
which would make consummation of the Reorganization illegal;
or
(4) There will be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed
applicable to the Reorganization by any Governmental Entity,
which would:
(a) Prohibit AmeriNet's or Lorilei's ownership or
operation of all or a material portion of the
business of Xxxxxxx, or compel AmeriNet or Xxxxxxx to
dispose of or hold separate all or a material portion
of the business or assets of Xxxxxxx or AmeriNet as a
result of the Reorganization; or
(b) Render AmeriNet or Xxxxxxx unable to consummate the
Reorganization, except for any waiting period
provisions.
(E) Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it will be sufficient for such action to be authorized by
the board of directors (as applicable) of the Party taking such action.
8.2 Effect of Termination.
In the event of termination of this Agreement as provided in Section
8.1, this Agreement will forthwith become void and there will be no liability or
obligation on the part of AmeriNet or Xxxxxxx or their respective officers,
directors or stockholders, except if such termination results from the breach by
a Party of any of its representations, warranties, covenants or agreements set
forth in this Agreement (it being understood that termination of this Agreement
because of failure of Xxxxxxx to satisfy the condition set forth in Section
6.3(A) as a result of the occurrence of a Post-Execution Event will not be
deemed to be a termination resulting from such a breach of representation or
warranty.)
8.3 Amendment.
(A) This Agreement may be amended by the Parties at any time before or
after approval of matters presented in connection with the Closing by
the stockholders of those Parties required by applicable law to so
approve but, after any such stockholder approval, no amendment will be
made which by law requires the further approval of stockholders of a
party without obtaining such further approval.
(B) This Agreement may not be amended except by an instrument in writing
signed on behalf of each of the Parties.
8.4 Extension & Waiver.
(A) At any time prior to the Closing any Party may, to the extent legally
allowed:
(1) Extend the time for the performance of any of the obligations or other
acts of the other Parties;
(2) Waive any inaccuracies in the representations and warranties made to
such party contained herein or in any document delivered pursuant
hereto; or
(3) Waive compliance with any of the agreements or conditions for the
benefit of such Party contained herein.
(B) Any agreement on the part of a Party to any such extension or waiver will
be valid only if set forth in an instrument in writing signed on behalf of
such Party.
Page 88
Article IX
General Provisions
9.1 Interpretation.
(A) When a reference is made in this Agreement to Schedules or Exhibits,
such reference will be to a Schedule or Exhibit to this Agreement
unless otherwise indicated.
(B) The words "include," "includes" and "including" when used herein will
be deemed in each case to be followed by the words "without
limitation."
(C) The table of contents and headings contained in this Agreement are for
reference purposes only and will not affect in any way the meaning or
interpretation of this Agreement.
(D) The captions in this Agreement are for convenience and reference only
and in no way define, describe, extend or limit the scope of this
Agreement or the intent of any provisions hereof.
(E) All pronouns and any variations thereof will be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the
Party or Parties, or their personal representatives, successors and
assigns may require.
(F) The Parties agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction
providing that ambiguities in an agreement or other document will be
construed against the party drafting such agreement or document.
9.2 Notice.
(A) All notices, demands or other communications given hereunder will be in
writing and will be deemed to have been duly given on the first
business day after mailing by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(1) To AmeriNet:
AmeriNet Xxxxx.xxx, Inc.
Crystal Corporate Center; 0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000-X;
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxx, President
Telephone (000) 000-0000, Fax (000) 000-0000; and,
e-mail xxxxxxx@xxxxxxxxxxxxx.xxx; with a copy to
Xxxxxx Xxxxxxxx, Esquire; General Counsel
AmeriNet Xxxxx.xxx, Inc.
0000 Xxxxxxxxx 00xx Xxxxxxx; Xxxxx, Xxxxxxx
00000 Telephone (000) 000-0000, Fax (000) 000-0000; and,
e-mail, xxxxxxxx@xxxxxxxx.xxx.
(2) To Xxxxxxx:
Xxxxxxx Communications, Inc.
Post Office Box 770787; Xxxxx, Xxxxxxx 00000
0000 Xxxxxxxxx 00xx Xxxxxx; Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, President
Telephone (000) 000-0000; Fax (000) 000-0000;
e-mail xxxxxxx@xxxxxxxxxxx.xxx; with a copy to
Page 89
Xxxxx Xxxxxxxx, Esquire
Xxxxxxxx & Associates
000 Xxxxxxxxx 0xx Xxxxxx, Xxxxx X; Xxxxxxxxxxx, Xxxxxxx 00000
Telephone (000) 000-0000; Fax (000) 000-0000;
and, e-mail xxxxxxxxx@xxxxxxx.xxx;
(3) To Xx. Xxxxxxxxxx:
Xxxxxx X. Xxxxxxxxxx
00000 Xxxxxxxxx 00xx Xxxxxx; Xxxxx, Xxxxxxx
00000 Telephone (000) 000-0000; Fax (000) 000-0000; e-mail
xxxxxx@xxxxxxxxxxx.xxx;
(4) To Xxx. Xxxxxxxxxx
Xxxxx X. Xxxxxxxxxx
00000 Xxxxxxxxx 00xx Xxxxxx; Xxxxx, Xxxxxxx
00000 Telephone (000) 000-0000; Fax (000) 000-0000; e-mail
xxxxxx@xxxxxxxxxxx.xxx;
(5) To the Undisclosed Liabilities Escrow Agent:
The Yankee Companies, Inc.
Crystal Corporate Center; 0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000;
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxx Xxxxxx, President
Telephone (000) 000-0000, Fax (000) 000-0000; and,
e-mail xxxxxxxxxx@xxxxxx.xxx;
(6) To the Xxxxxxxx Escrow Agent:
Xxxxx Xxxxxxxx, Esquire
Xxxxxxxx & Associates
000 Xxxxxxxxx 0xx Xxxxxx, Xxxxx X; Xxxxxxxxxxx, Xxxxxxx 00000
Telephone (000) 000-0000; Fax (000) 000-0000; and,
e-mail xxxxxxxxx@xxxxxxx.xxx
or such other address or to such other person as any Party will
designate to the other for such purpose in the manner hereinafter set
forth.
(B) At the request of any Party, notice will also be provided by overnight
delivery, facsimile transmission or e-mail, provided that a
transmission receipt is retained.
(C) (1) The Parties acknowledge that Yankees serves as a strategic
consultant to AmeriNet and has acted as scrivener for the
Parties in this transaction but that Yankees is neither a law
firm nor an agency subject to any professional regulation or
oversight.
(2) Because of the inherent conflict of interests involved,
Yankees has advised all of the Parties to retain independent
legal and accounting counsel to review this Agreement and its
exhibits and incorporated materials on their behalf.
(3) The decision by any Party not to use the services of legal
counsel in conjunction with this transaction will be solely at
their own risk, each Part acknowledging that applicable rules
of the Florida Bar prevent AmeriNet's general counsel, who has
reviewed, approved and caused modifications on behalf of
AmeriNet, from representing anyone other than AmeriNet in this
transaction.
Page 90
9.3 Merger of All Prior Agreements Herein.
(A) This instrument, together with the instruments referred to herein,
contains all of the understandings and agreements of the Parties with
respect to the subject matter discussed herein.
(B) All prior agreements whether written or oral are merged herein and
will be of no force or effect.
9.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein will survive the execution hereof and the Closing and will be
effective regardless of any investigation that may have been made or may be made
by or on behalf of any Party.
9.5 Severability.
If any provision or any portion of any provision of this Agreement,
other than one of the conditions precedent or subsequent, or the application of
such provision or any portion thereof to any person or circumstance will be held
invalid or unenforceable, the remaining portions of such provision and the
remaining provisions of this Agreement or the application of such provision or
portion of such provision as is held invalid or unenforceable to persons or
circumstances other than those to which it is held invalid or unenforceable,
will not be affected thereby.
9.6 Governing Law.
This Agreement will be construed in accordance with the substantive and
procedural laws of the State of Delaware (other than those regulating Taxation
and choice of law).
9.7 Indemnification.
(A) Each Party hereby irrevocably agrees to indemnify and hold the other
Parties harmless from any and all liabilities and damages (including
legal or other expenses incidental thereto), contingent, current, or
inchoate to which they or any one of them may become subject as a
direct, indirect or incidental consequence of any action by the
indemnifying Party or as a consequence of the failure of the
indemnifying Party to act, whether pursuant to requirements of this
Agreement or otherwise.
(B) In the event it becomes necessary to enforce this indemnity through an
attorney, with or without litigation, the successful Party will be
entitled to recover from the indemnifying Party, all costs incurred
including reasonable attorneys' fees throughout any negotiations,
trials or appeals, whether or not any suit is instituted.
9.8 Dispute Resolution.
(A) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement any
proceedings pertaining directly or indirectly to the rights or
obligations of the Parties hereunder will, to the extent legally
permitted, be held in Broward County, Florida, and the prevailing Party
will be entitled to recover its costs and expenses, including
reasonable attorneys' fees up to and including all negotiations,
alternative dispute resolution proceedings, trials and appeals, whether
or not any formal proceedings are initiated.
(B) Except for the arbitration procedures outlined in paragraphs 7.2(G)(2)
and 7.2(G)(3) which will govern any arbitration proceeding described
therein, in the event of any dispute arising under this Agreement, or
the negotiation thereof or inducements to enter into the Agreement, the
dispute will, at the request of any Party, be exclusively resolved
through the following procedures:
Page 91
(1) (a) First, the issue will be submitted to mediation
before a mediation service in Broward County, Florida
to be selected by lot from six alternatives to be
provided, three by AmeriNet and three by Xxxxxxx.
(b) The mediation efforts will be concluded within ten
business days after their initiation unless the
Parties unanimously agree to an extended mediation
period;
(2) In the event that mediation does not lead to a resolution of
the dispute then at the request of any Party, the Parties will
submit the dispute to binding arbitration before an
arbitration service located in Broward County, Florida to be
selected by lot, from six alternatives to be provided, three
by AmeriNet and Three by Xxxxxxx.
(3) (a) Expenses of mediation will be borne equally by the
Parties, if successful.
(b) Expenses, including reasonable attorneys' fees, of
mediation, if unsuccessful, and of arbitration, will
be borne by the Party or Parties against whom the
arbitration decision is rendered.
(c) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration will be borne equally by
the Parties involved.
9.9 Benefit of Agreement.
The terms and provisions of this Agreement will be binding upon and
inure to the benefit of the Parties, their successors, assigns, personal
representatives, estate, heirs and legatees but are not intended to confer upon
any other person any rights or remedies hereunder.
9.10 Further Assurances.
The Parties agree to do, execute, acknowledge and deliver or cause to
be done, executed, acknowledged or delivered and to perform all such acts and
deliver all such deeds, assignments, transfers, conveyances, powers of attorney,
assurances, stock certificates and other documents, as may, from time to time,
be required herein to effect the intent and purpose of this Agreement.
9.11 Counterparts.
(A) This Agreement may be executed in any number of counterparts.
(B) All executed counterparts will constitute one Agreement notwithstanding
that all signatories are not signatories to the original or the same
counterpart.
(C) Execution by exchange of facsimile transmission will be deemed legally
sufficient to bind the signatory; however, the Parties will, for
aesthetic purposes, prepare a fully executed original version of this
Agreement which will be the document filed with the Commission.
9.12 License.
(A) This form of agreement is the property of Yankees and has been
customized for this transaction with the consent of Yankees by Xxxxxx
Xxxxxxxx, Esquire, AmeriNet's general counsel.
(B) The use of this form of agreement by the Parties is authorized hereby
solely for purposes of this transaction.
Page 92
(C) The use of this form of agreement or of any derivation thereof without
Yankees' prior written permission is prohibited.
In Witness Whereof, AmeriNet, Xxxxxxx, the Former Xxxxxxx Stockholders and
the Escrow Agents (with respect to the Escrow Agents, as to matters set forth in
Section 1.2(A)(2)(a) and Article VII only) have caused this Agreement to be
executed by themselves or their duly authorized respective officers, all as of
the last date set forth below:
Signed, sealed and delivered
In Our Presence:
AmeriNet Xxxxx.xxx, Inc.
_________________________________ (A Delaware corporation)
_________________________________ By: /s/ Xxxxxxx X. Xxxxxx
_____________________________
Xxxxxxx X. Xxxxxx, President
Dated: May 11, 2000
Attest: /s/ Xxxxxxx X. Xxxxxxx
_____________________________
Xxxxxxx X. Xxxxxxx, Secretary
State of Florida }
County of Xxxxxx } ss.: (Corporate Seal)
On this 11th day of May, 2000, before me, a notary public in and for
the county and state aforesaid, personally appeared Xxxxxxx X. Xxxxxx and
Xxxxxxx X. Xxxxxxx, to me known, and known to me to be the president and
secretary of AmeriNet Xxxxx.xxx, Inc., the above-described corporation, and to
me known to be the persons who executed the foregoing instrument, and
acknowledged the execution thereof to be their free act and deed, and the free
act and deed of AmeriNet Xxxxx.xxx, Inc., for the uses and purposes therein
mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year in this certificate first above written. My commission
expires the ___day of ______________, ____.
{Seal} /s/ Xxxxxx Xxxxx
-----------------------------
Notary Public
Xxxxxxx Communications, Inc.
_________________________________ (a Florida corporation)
_________________________________ By: /s/ Xxxxxx X. Xxxxxxxxxx
_____________________________
Xxxxxx X. Xxxxxxxxxx, President
Dated: May 11, 2000
Attest: /s/ Xxxxx X. Xxxxxxxxxx
_____________________________
Xxxxx X. Xxxxxxxxxx, Secretary
State of Florida }
County of Xxxxxx } ss.: (Corporate Seal)
On this 11th day of May, 2000, before me, a notary public in and for
the county and state aforesaid, personally appeared Xxxxxx X. Xxxxxxxxxx and
Xxxxx X. Xxxxxxxxxx, to me known, and known to me to be the president and
secretary of Xxxxxxx Communications, Inc., the above-described corporation, and
to me known to be the persons who executed the foregoing instrument, and
acknowledged the execution thereof to be their free act and deed, and the free
act and deed of Xxxxxxx Communications, Inc., for the uses and purposes therein
mentioned.
Page 93
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year in this certificate first above written. My commission
expires the ___day of _______________, ____.
(Seal) /s/ Xxxxxx Xxxxx
-----------------------------
Notary Public
Former Xxxxxxx Stockholders
---------------------------------
/s/ Xxxxxx X. Xxxxxxxxxx
--------------------------------- -----------------------------
Xxxxxx X. Xxxxxxxxxx
Dated: May 11, 2000
---------------------------------
/s/ Xxxxx X. Xxxxxxxxxx
--------------------------------- -----------------------------
Xxxxx X. Xxxxxxxxxx
Dated: May 11, 2000
State of Florida }
County of Xxxxxx } ss.:
On this 11th day of May, 2000, before me, a notary public in and for
the county and state aforesaid, personally appeared Xxxxxx X. Xxxxxxxxxx and
Xxxxx X. Xxxxxxxxxx, to me known, and known to me to be the former stockholders
of Xxxxxxx Communications, Inc., the above-described corporation, and to me
known to be the persons who executed the foregoing instrument, and acknowledged
the execution thereof to be their free act and deed, for the uses and purposes
therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year in this certificate first above written. My commission
expires the ___day of _______________, ____.
(Seal)
/s/ Xxxxxx Xxxxx
-----------------------------
Notary Public
Page 94
The Escrow Agents
Executing this Agreement solely with reference to the provisions
specifically pertaining to the performance of their duties as Escrow Agents:
The Yankee Companies, Inc.
_________________________________ (a Florida corporation)
_________________________________ By: /s/ Xxxxxxx X. Xxxxx, III
____________________________
Xxxxxxx X. Xxxxx, III, Vice President
Dated: May 11, 2000
Attest: Xxxxxxx X. Xxxxxxx
____________________________
Xxxxxxx X. Xxxxxxx, Secretary
State of Florida }
County of Xxxxxx } ss.: (Corporate Seal)
On this 11th day of May, 2000, before me, a notary public in and for
the county and state aforesaid, personally appeared Xxxxxxx X. Xxxxx, III and
Xxxxxxx X. Xxxxxxx, to me known, and known to me to be the vice president and
secretary of the Yankee Companies, Inc., the above-described corporation, and to
me known to be the persons who executed the foregoing instrument and
acknowledged the execution thereof to be their free act and deed, and the free
act and deed of the Yankee Companies, Inc., as the Undisclosed Liabilities
Escrow Agent, the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year in this certificate first above written. My commission
expires the ___day of _______________, ____.
(Seal)
/s/ Xxxxxx Xxxxx
-----------------------------
Notary Public
Xxxxxxxx & Associates
---------------------------------
_________________________________ By: /s/ Xxxxx Xxxxxxxx
____________________________
Xxxxx Xxxxxxxx, Esquire, Principal
Dated: May 11, 2000
State of Florida }
County of Xxxxxx } ss.:
On this 11th day of May, 2000, before me, a notary public in and for
the county and state aforesaid, personally appeared Xxxxx Xxxxxxxx, Esquire, the
duly authorized principal of Xxxxxxxx & Associates, a Florida law firm, to me
known, and known to me to be person described as the Xxxxxxxx Escrow Agent in
the foregoing instrument and to me known to be the person who executed the
foregoing instrument, and acknowledged the execution thereof to be the free act
and deed of Xxxxxxxx & Associates, for the uses and purposes therein mentioned.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed my notarial
seal the day and year in this certificate first above written. My commission
expires the ___day of _______________, ____.
(Seal)
/s/ Xxxxxx Xxxxx
------------------------
Notary Public
Page 95
Schedule 1.4 can be found as Exhibit 3.5 and 3.6 to this 8-K.
Schedules to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Xxxxxxx Communications, Inc., a Florida Corporation
SCHEDULE 1.4 CONSTITUENT DOCUMENTS
1. Amended Articles of Incorporation
2. Amended Bylaws
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Xxxxxx X. Xxxxxxxxxx
__________________________________
Xxxxxx X. Xxxxxxxxxx, President
Xxxxxxx Communications, Inc.
/s/ Xxxxx X. Xxxxxxxxxx
__________________________________
Xxxxx X. Xxxxxxxxxx, Vice President Sales
Xxxxxxx Communications, Inc.
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Xxxxxxx Communications, Inc., a Florida Corporation
SCHEDULE 1.7(C) FINAL STOCKHOLDER DATA
No. Date Name No. Shares
01 7/1/94 Xxxxxx Xxxxxxxxxx and 000
Xxxxx Xxxxxxxxxx, Ten. by Ent.
02 Void
03 5/16/98 Xxxx X. Xx Xxxxxxx Trans. to
Cert. 04, 05
04 12/29/99 Xxxxxx Xxxxxxx Trans. from Cert.
03, Trans. to Cert. 06
05 12/29/99 Xxxxxx Xxxxxxxxxx and Xxxxx 5.5
Xxxxxxxxxx, Ten. by Ent. Trans.
from Cert. 03
06 12/29/99 Xxxxxx Xxxxxxxxxx and Xxxxx 5.5
Xxxxxxxxxx, Ten. by Ent. Trans.
from Cert. 04
Total Shares Outstanding to date: 111
In accordance with Article IV of the Articles of Incorporation, Xxxxxxx
Communications, Inc. is authorized to issue 7,500 shares of ONE DOLLAR ($1.00)
par value common stock, which shall be designated "Common Shares".
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Xxxxxx X. Xxxxxxxxxx
__________________________________
Xxxxxx X. Xxxxxxxxxx, President
Xxxxxxx Communications, Inc.
/s/ Xxxxx X. Xxxxxxxxxx
__________________________________
Xxxxx X. Xxxxxxxxxx, Vice President Sales
Xxxxxxx Communications, Inc.
Page 96
Schedules to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Xxxxxxx Communications, Inc., a Florida Corporation
SCHEDULE 2 - EXCEPTIONS TO LORILEI'S REPRESENTATION & WARRANTS
The consent letter from Small Business Loan Source that is attached to Schedule
5.7 is hereby disclosed as an exception.
To the knowledge of Lorilei's officers, there is no destruction, damage, or loss
to any assets in accordance with paragraph 2.7(C).
The past due account receivable for XxxxxxXX.xxx in the amount of $132,543.30 is
a not collectible debt. This amount will be written off to bad debt prior to the
closing of this transaction.
The past due account receivable for Citrus Hills Marketing in the amount of
$1,388.60 is not collectible debt. This amount will be written off to bad debt
prior to the closing of this transaction.
Currently, not on the books of Xxxxxxx is a debt in the amount of $21,420.00 to
HGTV. The reason why this debt is not on the books is because we are disputing
the validity of the spots aired on behalf of our client. Trade industry reports
made allegations that HGTV covered network spots on the local system level. In
other words, HGTV apparently inserted national spots in the local break slots
that they say our client's spot ran. To date, they have not provided us any
proof that our client's spots were run properly.
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Xxxxxx X. Xxxxxxxxxx
__________________________________
Xxxxxx X. Xxxxxxxxxx, President
Xxxxxxx Communications, Inc.
/s/ Xxxxx X. Xxxxxxxxxx
__________________________________
Xxxxx X. Xxxxxxxxxx, Vice President Sales
Xxxxxxx Communications, Inc.
Page 97
March 16, 2000
Xx. Xxxxxx X. Xxxxxxxxxxx
Credit Manager
HGTV
X X Xxx 00000
Xxxxxxxxx, XX 00000
Re: Quiltingly Yours
Dear Xx. Xxxxxxxxxxx:
I am in receipt of your letter dated February 25, 2000. Army Court-faxed this
letter to me on 3/15/00. Your break down of the aired information does not
satisfy our needs. We still have no proof from HGTV or the cable systems that
they did not insert a national spot in the local break slot that you say
Quiltingly Yours ran. We have no affidavit supporting this information and that
is the proof that we need before any type of payment is made. Keep in mind that
this issue would of never been brought up if no allegations were made against
HGTV for inserting national spots in local breaks.
I look forward to hearing from you in the near future.
Sincerely,
/s/ Xxxx X. Xxx
Business Manager
Home & Garden Television Network
P O. Box 80970
Xxxxxxxxx, Xxxxxxxxx 00000
February 25, 2000
Xxxx X. Xxx, Business Manager
Firm Multimedia
P, 0. Xxx 000000
Xxxxx, XX 00000-0%00
re: Quiltingly Yours
Dear Xx. Xxx:
Attached you will find a breakdown of all spots aired by your company
compared to actual times that local inserts were placed. As you will note, all
times from your three invoices fell outside of the local insert breaks and were
never in question. If you have any questions regarding this analysis, please
call me at 000-000-0000.
Sincerely
Xxxxxx X. Krabbenho
Credit Manager
attachment
cc- Xxxxx Xxxxxxxxx, Xx. VP, Ad Sales
Xxxxxx XxXxxx, Director of Revenue
Page 98
November 16, 1999
Mr. Xxxxx Xxxxxx
Senior Vice President, Ad Sales
HG TV
P U Box X0970
Knoxville, TN 379>0
Dear Xx. Xxxxxx:
Thank you for your response to our correspondence regarding discrepancies in
scheduling our client's spots on HGTV. While we appreciate your review of the
times our spots aired, the information supplied in and of itself is no proof
that the spots actually aired on all your affiliate cable systems.
In order to resolve this matter you need to furnish us with a breakdown of when
the network takes national breaks, and when it takes affiliate breaks. With this
information xxx can then at lest make some determination of whether or not an
adjustment to our invoice is warranted.
Sincerely,
/s/ Xxxx X. Xxx
Business Manager
HGTV
HOME BURDEN TELEVISION
November 3, 1999
Xx. Xxxx X. Xxx
Business Manager
The Firm Multimedia
P. 0. Xxx 000000
Xxxxx, XX 00000
Dear Xx. Xxx:
Thank you for your letter of October 26. Although many of the allegations
in the article were unfounded, the audit firrn of Deloitte & Touche has reviewed
our accounting procedure. In some cases, it has been ascertained that national
spots ran in local breaks and, in all cases, we are contacting those clients and
offering makegoods to reconcile the discrepancies.
While I can certainly appreciate your concern; I have reviewed your account
and find that no part of your advertising schedule fell into the local avails. I
have enclosed a spot placement report to verify your commercial placement.
I trust the enclosed is proof of the validity of your advertising schedule,
Please don't hesitate to call if you have questions.
Warm regards,
Xxxxx Xxxxxx
Senior Vice President, Ad Sales
SN:ht
Enc.
Mail: XX Xxx 00000 x Xxxxxxxxx XX 00000 o Ship: 0000 Xxxxxxx Xxxxxx,
Xxxxxxxxx XX 00000 o (000) 000.0000 o Fax (423)
000-0000
Page 99
October 26, 1999
Home & Garden Television Network
P O. Xxx 00000
Xxxxxxxxx, Xxxxxxxxx 00000
Attention: Accounts Receivable Manager
CERTIFIED MAIL
Re: Account 100654
Dear HGTV
We are deeply concerned regarding recent trade industry reports with allegations
that your network covered network spots on the local system level. The most
recent report in Electronic Media verifies that your company is readying itself
for make-goods or refunds.
As our buy was for the full network, we are concerned that ours is one of the
accounts affected by policy.
We cannot in good conscience process your invoices further until this dispute is
resolved. Please provide us with a proposal to adjust our outstanding balance,
or with clear and convincing proof that our spots cleared at the local cable
system level.
Sincerely,
/s/ Xxxx X. Xxx
Business Manager
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Xxxxxxx Communications, Inc., a Florida Corporation
SCHEDULE 2.5(A) FINANCIAL STATEMENTS
1. Balance Sheet and Profit and Loss as of May 10, 2000
2. Balance Sheet and Profit and Loss quarter ending March 31, 2000
3. Balance Sheet and Profit and Loss year ending December 31, 1999
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Xxxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxxxx, President
Xxxxxxx Communications, Inc.
/s/ Xxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxx X. Xxxxxxxxxx, Vice President Sales
Xxxxxxx Communications, Inc.
Page 100
5/12/00
The Firm Multimedia
Profit and Loss
January 1 through May 10, 2000
Jan 1 - May 10, '00
Ordinary Income/Expense Inc
Income
4500 - Fee Income
4500-02 - Retainer 20,000.00
4500-03 - Video Production 68,517.41
4500-04 - Graphics
4500-20 - Printing 7,223.41
4500-21 - Layout & Design 13,346.00
4500-23 - General Graphics 10,302.00
Total 4500-04 - Graphics 30,871.41
4500-09 - CD-Rom Authoring 12,995.00
4500-10 - Web Design 2,260.00
4500-12 - Still Photography 800.00
4500-13 - Audio Production 436.00
4500-14 - Pre-Press 629.00
4500-16 - Website Maintenance 5,100.00
4500-17 - Website Hosting 455.00
4500-18 - Client Promotions 5,590.00
4500-19 - Shipping Revenue 6,719.03
4500-05 - Commercial Leased Access 228,226.00
4500-25 - Spot Airtime 146,226.90
4500 - Fee Income - Other 38,796.50
Total 4500 - Fee Income 567,622.25
4530 - Reimbursed Expenses 15.86
Total Income 567,638.11
Cost of Goods Sold
6230 - Commercial Leased Access
6230-31 - Rockford Press 19,265.56
6230-30 - Xxxxx Xxxxxx CLA 5,818.96
6230-29 - Snappy Lock 2,858.54
6230-27 - Ocala News Tonight 16,119.05
6230-26 - XxxxxxXX.Xxx 16,275.95
6230-23 - Fairbanks Construction 433.73
0000-00 - Xxxxxxxxxx Xxxxxxxx (618.72)
6230-19 - Class 1 772.90
6230 - Commercial Leased Access - Other (120.21)
Total 6230 - Commercial Leased Access 60,805.76
6231 - Spot Airtime 60,633.37
6237 - Airtime-Program 1,870.00
6232 - Client Promotions 16,598.37
6233 - Internet Fees 656.16
6234 - Outdoor Advertising 22,414.50
6260 - Graphics
6260-03 - Printing 19,355.02
6260-05 - Supplies 56.92
6260-06 - Service Bureau
6260.07 - Film Output 180.00
Total 6260-06 - Service Bureau 180.00
6260-07 - Shipping Costs 1,443.04
6260-08 - Pre-Press Supplies 1,169.01
Total 6260 - Graphics 22,203.99
6265 - Production
6265-01 - Tapes 2,502.76
6265-02 - Production Equipment 1,271.72
6265-04 - Talent Fees 275.00
6265-05 - Staging & Props 2.96
6265-07 - Shipping Costs 3,057.80
6265-08 - VHS Sleeves 1,522.50
6265-09 - Tape Duplication 19,667.06
6265 - Production - Other 21.19
Total 6265 - Production 28,320.99
Page 101
05/12/00
The Firm Multimedia
Profit and Loss
January 1 through May 10, 2000
Jan 1 - May 10,2000
Total COGS 213,503.14
Gross Profit 354,134.97
Expense
4540 - Sales Tax 358.14
6105 - Advertising
6105-02 - Personnel Advertising 2,981.67
6105-03 - Telephone Book Advertising 337.50
6105-04 - Press Release (50.00)
6105-06 - Print Advertising 938.00
Total 6105 - Advertising 4,207.17
6115 - Automobile Expense
6115-01 - Fuel 6,327.40
6115-02 - Auto Maintanence 279.64
6115-05 - Auto -Volvo Lease 1,268.82
Total 6115 - Automobile Expense 7,875.86
6125 - Bank Service Charges 120.87
6140 - Communications
6140-01 - Internet fees 2,446.31
Total 6140 - Communications 2,446.31
6150 - Company Fees
6150-01 - Non Compete Fees 90.00
6150-04 - Other Fees 692.75
6150-05 - NDC Payment System Fees 366.84
Total 6150 - Company Fees 1,149.59
6165 - Dues and Subscriptions 892.72
6170 - Employee Moving Expenses 500.00
6175 - Equipment Rental 503.50
6185 - Insurance
6185-01 - Auto Insurance 2,991.70
6185-02 - Building/Property Insurance 1,703.50
6185-04 - Work Comp 950.40
6185-05 - Life Insurance 446.60
Total 6185 - Insurance 6,092.20
6205 - Interest Expense
6205-01 - Finance Charge Late charges 3,991.38
6205-01 - Finance Charge - Other 2,228.69
Total 6205-01 - Finance Charge 6,220.07
6205-02 - Loan Int.-Capital Leases 7,454.40
6205-03 - Mortgage - Interest 8,994.06
6205 - Interest Expense - Other 3,697.81
Total 6205 - Interest Expense 26,366.34
6220 - Janitorial / Maintenance
6220-02 - Supplies 57.06
6220-03 - Sanitation 556.80
6220-04 - Pest Control 106.00
Total 6220 - Janitorial / Maintenance 719.86
6235 - Licenses and Permits 45.10
6306 - Office Rent
6306-01 - Jacksonville Rent 418.00
Total 6306 - Office Rent 418.00
6255 - Postage and Delivery
6255-01 - Postage (USPS) 713.81
6255-02 - Shipping (Unishippers) 2,567.74
6255-03 - Shipping (UPS) 976.84
6255-04 - Shipping (Airborne) 114.00
Total 6255 - Postage and Delivery 4,372.39
Page 102
The Firm Multimedia
5/12/00
Profit and Loss
January 1 through May 10, 2000
Jan 1 - May 10, '00
6275 - Professional Fees
6275-01 - Accounting 1,987.00
6275-03 - Legal Fees 1,291.39
6275-05 - Personnel 337.61
Total 6275 - Professional Fees 3,616.00
6305 - Repairs and Maintenance
6305-01 - Building Repairs 114.55
6305-02 - Computer Repairs 256.00
6305-03 - Equipment Repairs 1,044.11
6305 - Repairs and Maintenance - Other 60.26
Total 6305 - Repairs and Maintenance 1,474.92
6345 - Telephone
6345-02 - Cellular Telephones 1,505.33
6345-03 - Local Telephone Service 2,545.39
6345-04 - Long Distance 3,048.86
6345-05 - Paging 457.43
Total 6345 - Telephone 7,557.01
6355 - Travel
6355-05 - Meals 177.83
6355-06 - Tolls & Parking 92.35
6355 - Travel - Other 428.65
Total 6355 - Travel 698.83
6395 - Utilities
6395-01 - Electric 1,660.27
Total 6395 - Utilities 1,660.27
6540 - Miscellaneous 675.34
6550 - Office Supplies
6550-01 - Printing 1,213.13
6550-02 - Grocery 562.33
6550-04 - Video Production Supplies 354.08
6550-05 - Graphic Supplies 423.55
6550-06 - Film Processing 58.14
6550-07 - Audio Production Supplies 14.82
6550 - Office Supplies - Other 2,198.41
Total 6550 - Office Supplies 4,824.46
6560 - Payroll Expenses
6560-01 - Medical Insurance 7,468.66
6560-02 - FUTA 949.76
6560-03 - SUTA 784.93
6560-04 - Officer's Salaries 23,833.36
6560-05 - Salaries & Wages 128,850.90
6560-06 - Commission Wages 14,345.60
6560-07 - Federal Payroll Taxes-Company 12,837.68
6560 - Payroll Expenses - Other 782.85
Total 6560 - Payroll Expenses 189,853.74
6610 - Sales Expenses
6610-01 - Misc. Expenses 3.00
6610-03 - Sales Incentives 486.04
6610-04 - Direct Mail 661.98
Total 6610 - Sales Expenses 1,151.02
6640 - Taxes
6640-01 - Federal 112.00
6640-02 - Intangible / Tangible 229.00
6640-03 - Leases - Personal Property 917.42
6640-04 - Real Estate Taxes 4,640.46
6640-06 - State 455.29
6640-06 - Personal Property 5,631.74
Total 6640 - Taxes 11,985.91
7006 - Bad Debt
7006-01 - Adjust Client Acct. 1,942.79
7006 - Bad Debt - Other 134,409.77
Total 7006 - Bad Debt 136,352.56
Total Expense 415,918.11
Net Ordinary Income (61,783.14)
Net Income (61,783.14)
Page 103
The Firm Multimedia
05/12/00
Balance Sheet
As of May 10, 2000
May 10, '00
ASSETS
Current Assets
Checking/Savings
1015 - Amsouth - Operating Account 2,767.36
1030 - Xxxxx Cash 49.11
Total Checking/Savings 2,816.47
Accounts Receivable
1200 - Accounts Receivable 211,663.27
Total Accounts Receivable 211,663.27
Other Current Assets
1475 - Electric Deposit 400.00
Total Other Current Assets 400.00
Total Current Assets 214,879.74
Fixed Assets
1575 - A/A - Organizational Cost (585.00)
1570 - Organizational Costs 585.00
0000 - Xxxxxxxx - 0000 XX 00xx Xx
0000-00 - Sign 1,560.00
1590-02 - Studio Drape 2,989.20
1590-03 - Canopies 2,400.00
1590-04 - Land 25,000.00
0000 - Xxxxxxxx - 0000 XX 00xx Xx - Other 214,964.60
Total 1590 - Building - 0000 XX 00xx Xx 246,913.80
1600 - Office Furniture
1600-01 - Cost 30,324.10
1600-02 - Office Furniture -Staples 7,874.46
1600 - Office Furniture - Other 890.44
Total 1600 - Office Furniture 39,089.00
1700 - Equipment
1700-01 - Computer Equipment 78,054.79
1700-02 - Production Equipment 254,159.85
1700-03 - Office Equipment 24,084.20
1700-04 - Trade Show Booth 5,011.65
1700 - Equipment - Other 2,352.60
Total 1700 - Equipment 363,663.09
1710 - Automobiles 65,611.63
1800 - LESS -Accumulated Depreciation (324,616.00)
Total Fixed Assets 390,661.52
TOTAL ASSETS 605,541.26
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
2000 - Accounts Payable 204,489.03
Total Accounts Payable 204,489.03
Other Current Liabilities
2100 - Payroll Liabilities 5,003.31
2200 - Sales Tax Payable (1,535.25)
2250 - Working Capital Loan -Amsouth 30,975.77
2251 - Mountaineer Loan 19,795.08
2252 - Volvo Loan 24,852.13
2275 - Loan from Shareholders 45,301.28
2280 - Loan from Shareholder- JLT 49,785.01
Total Other Current Liabilities 174,177.33
Total Current Liabilities 378,666.36
Page 104
The Firm Multimedia
05/12/00
Balance Sheet
As of May 10, 2000
May 10, '00
Long Term Liabilities
Leases
2486 - Preferred Capital Corporation 14,265.53
2450 - Freedom Capital 4,961.35
2300 - Associates Leasing Inc. 1,720.02
2320 - Colonial Pacific Leasing #2 11,816.65
2380 - Credential Leasing Corporation 7,122.46
2385 - The Manifest Group-Interactive 1,782.40
2419 - FINOVA - Imagesetter 14,319.17
2420 - ORIX - Scanner 6,384.94
2421 - ORIX - Voice M/Comp. 5,765.68
2422 - Colonial Pacific-Production Equ 5,939.16
2423 - Colonial Pacific, Inc./Off. Equ 3,440.14
2440 - Colonial Pacific/Harbour Capita 1,257.76
Total Leases 78,775.26
2395 - Chrysler Financial - Caravan 11,605.93
2400 - Small Business Loan Source 189,115.52
Total Long Term Liabilities 279,496.71
Total Liabilities 658,163.07
Equity
3100 - Common Stock 111.00
3900 - Retained Earnings 9,050.33
Net Income (61,783.14)
Total Equity (52,621.81)
TOTAL LIABILITIES & EQUITY 605,541.26
Page 105
The Firm Multimedia
05/12/00
Profit and Loss
January through March 2000
Jan - Mar '00
Ordinary Income/Expense
Income
4500 - Fee Income
4600-02 - Retainer 11,100.00
4500-03 - Video Production 51,378.00
4600-04 - Graphics
4500-20 - Printing 6,028.41
4500-21- Layout & Design 10,366.00
4500-23 - General Graphics 10,190.00
Total 4600-04 - Graphics 26,584.41
4500-09 - CD-Rom Authoring 12,995.00
4600-10 - Web Design 2,260.00
4600-13 - Audio Production 436.00
4600-16 - Website Maintenance 4,620.00
4500-17 - Website Hosting 120.00
4500-18 - Client Promotions 5,590.00
4600-19 - Shipping Revenue 5,562.82
4600-06 - Commercial Leased Access 167,444.00
4600-26 - Spot Airtime 96,202.75
4500 - Fee Income - Other 34,649.29
Total 4600 - Fee Income 418,942.27
4530 - Reimbursed Expenses 3.32
Total Income 418,945.59
Cost of Goods Sold
6230 - Commercial Leased Access
6230-31 - Rockford Press 19,265.56
6230-30 - Xxxxx Xxxxxx CLA 2,583.20
6230-29 - Snappy Lock 2,858.54
6230-27 - Ocala News Tonight 10,446.50
6230-26 - XxxxxxXX.Xxx 16,275.95
6230-23 - Fairbanks Construction 433.73
0000-00 - Xxxxxxxxxx Xxxxxxxx (618.72)
6230-19 - Class 1 772.90
6230 - Commercial Leased Access -Other (120.21)
Total 6230 - Commercial Leased Access 51,897.45
6231 - Spot Airtime 33,111.54
6237 - Airtime-Program 1,870.00
6232 - Client Promotions 16,598.37
6233 - Internet Fees 376.16
6234 - Outdoor Advertising 19,800.75
6260 - Graphics
6260-03 - Printing 10,120.02
6260-06 - Supplies 56.92
6260-06 - Service Bureau
6260.07 - Film Output 180.00
Total 6260-06 - Service Bureau 180.00
6260-07 - Shipping Costs 276.72
Total 6260 - Graphics 10,633.66
6266 - Production
6266-01 - Tapes 1,729.96
6266-02 - Production Equipment 1,059.95
6266-04 - Talent Fees 150.00
6266-06 - Staging & Props 2.96
6265-07 - Shipping Costs 2,541.68
6265-08 - VHS Sleeves 1,522.50
6266-09 - Tape Duplication 8,747.44
6266 - Production - Other 21.19
Total 6265 - Production 15,775.68
Total COGS 150,063.61
Page 106
The Firm Multimedia
05/12/00
Profit and Loss
January through March 2000
Jan - Mar '00
Gross Profit 268,881.98
Expense
4540 - Sales Tax 648.24
6105 - Advertising
6105-02 - Personnel Advertising 354.31
6105-03 - Telephone Book Advertising 234.75
6105-04 - Press Release (50.00)
6106-06 - Print Advertising 688.00
Total 6105 - Advertising 1,227.06
6115 - Automobile Expense
6115-01 - Fuel 4,486.51
6115-02 - Auto Maintanence 244.64
6115-05 - Auto - Volvo Lease 1,268.82
Total 6115 - Automobile Expense 5,999.97
6125 - Bank Service Charges 110.87
6140 - Communications
6140-01 - Internet fees 1,397.95
Total 6140 - Communications 1,397.95
6150 - Company Fees
6150-01 - Non Compete Fees 60.00
6150-04 - Other Fees 534.00
6150-05 - NDC Payment System Fees 286.84
Total 6150 - Company Fees 880.84
6165 - Dues and Subscriptions 455.17
6170 - Employee Moving Expenses 500.00
6175 - Equipment Rental 302.10
6185-Insurance
6185-01 - Auto Insurance 1,080.50
6185-02 - Building/Property Insurance 1,210.50
6185-04 - Work Comp 692.80
6185-05 - Life Insurance 338.10
Total 6185 - Insurance 3,321.90
6205 - Interest Expense
6205-01 - Finance Charge Late charges 3,041.22
6205-01 - Finance Charge - Other 1,229.27
Total 6205-01 - Finance Charge 4,270.49
6205-02 - Loan Int.-Capital Leases 6,099.22
6205-03 - Mortgage - Interest 7,131.19
6205 - Interest Expense - Other 2,564.44
Total 6205 - Interest Expense 20,065.34
6220 - Janitorial / Maintenance
6220-02 - Supplies 41.72
6220-03 - Sanitation 281.00
6220-04 - Pest Control 106.00
Total 6220 - Janitorial / Maintenance 428.72
6235 - Licenses and Permits 45.10
6306 - Office Rent
6306-01 - Jacksonville Rent 418.00
Total 6306 - Office Rent 418.00
6255 - Postage and Delivery
6255-01 - Postage (USPS) 516.82
6255-02 - Shipping (Unishippers) 2,459.83
6255-03 - Shipping (UPS) 284.04
6255-04 - Shipping (Airborne) 114.00
Total 6255 - Postage and Delivery 3,374.69
Page 107
The Firm Multimedia
05/12/00
Profit and Loss
January through March 2000
Jan - Mar '00
6275 - Professional Fees
6275-01 - Accounting 137.00
6275-03 - Legal Fees 869.50
Total 6275 - Professional Fees 1,006.50
6305 - Repairs and Maintenance
6305-01 - Building Repairs 114.55
6305-02 - Computer Repairs 256.00
6305-03 - Equipment Repairs 916.91
6305 o Repairs and Maintenance - Other 60.26
Total 6305 - Repairs and Maintenance 1,347.72
6345 - Telephone
6345-02 - Cellular Telephones 980.78
6345-03 - Local Telephone Service 1,646.00
6345-04 - Long Distance 1,792.83
6345-05 - Paging 350.09
Total 6345 - Telephone 4,769.70
6355 - Travel
6355-05 - Meals 163.14
6355-06 - Tolls & Parking 92.35
Total 6355 - Travel 255.49
6395 - Utilities
6395-01 - Electric 1,198.86
Total 6395 - Utilities 1,198.86
6540 . Miscellaneous 664.90
6550 - Office Supplies
6550-01 - Printing 693.17
6550-02 - Grocery 363.18
6550-04 - Video Production Supplies 302.49
6550-05 - Graphic Supplies 361.42
6550-06 - Film Processing 58.14
6550-07 - Audio Production Supplies 14.82
6550 - Office Supplies - Other 1,739.88
Total 6550 - Office Supplies 3,533.10
6560 . Payroll Expenses
6560-01 - Medical Insurance 4,358.56
6560-02 - FUTA 691.16
6560-03 - SUTA 591.11
6560-04 - Officer's Salaries 14,895.85
6560-05 - Salaries & Wages 80,808.51
6560-06 - Commission Wages 7,628.78
6560-07 - Federal Payroll Taxes-Company 7,941.57
6560 - Payroll Expenses - Other 477.85
Total 6560 - Payroll Expenses 117,393.39
6610 - Sales Expenses
6610-01 - Misc. Expenses 3.00
6610-03 - Sales Incentives 477.03
6610-04 - Direct Mail 661.98
Total 6610 - Sales Expenses 1,142.01
6640 - Taxes
6640-01 - Federal 112.00
6640-02 - Intangible / Tangible 229.00
6640-03 - Leases - Personal Property 854.53
6640-04 - Real Estate Taxes 4,640.46
6640-05 - State 284.35
6640-06 - Personal Property 5,631.74
Total 6640 - Taxes 11,752.08
7005 - Bad Debt
7005-01 - Adjust Client Acct. 779.20
7005 - Bad Debt - Other 477.87
Total 7005 - Bad Debt 1,257.07
Total Expense 183,496.77
Net Ordinary Income 85,385.21
Net Income 85,385.21
Page 108
The Firm Multimedia
05/12/00
Balance Sheet
As of March 31, 2000
Mar 31, '00
ASSETS
Current Assets
Checking/Savings
1015 - Amsouth - Operating Account 13,657.99
1030 - Xxxxx Cash 2.35
Total Checking/Savings 13,660.34
Accounts Receivable
1200 - Accounts Receivable 307,530.88
Total Accounts Receivable 307,530.88
Other Current Assets
1475 - Electric Deposit 400.00
Total Other Current Assets 400.00
Total Current Assets 321,591.22
Fixed Assets
1575 - A/A - Organizational Cost (585.00)
1570 - Organizational Costs 585.00
0000 - Xxxxxxxx - 0000 XX 00xx Xx
0000-00 - Sign 1,560.00
1590-02 - Studio Drape 2,989.20
1590-03 - Canopies 2,400.00
1590-04 - Land 25,000.00
0000 - Xxxxxxxx - 0000 XX 00xx Xx - Other 214,964.60
Total 1590 - Building - 0000 XX 00xx Xx 246,913.80
1600 - Office Furniture
1600-01 - Cost 30,324.10
1600-02 - Office Furniture -Staples 7,874.46
1600 - Office Furniture - Other 890.44
Total 1600 - Office Furniture 39,089.00
1700 - Equipment
1700-01 - Computer Equipment 78,054.79
1700-02 - Production Equipment 254,159.85
1700-03 - Office Equipment 24,084.20
1700-04 - Trade Show Booth 5,011.65
1700 - Equipment - Other 2,352.60
Total 1700 - Equipment 363,663.09
1710 - Automobiles 65,611.63
1800 - LESS - Accumulated Depreciation (324,616.00)
Total Fixed Assets 390,661.52
TOTAL ASSETS 712,252.74
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
2000 - Accounts Payable 153,621.61
Total Accounts Payable 153,621.61
Other Current Liabilities
2100 - Payroll Liabilities 5,789.76
2200 - Sales Tax Payable (1,340.27)
2250 - Working Capital Loan -Amsouth 32,654.85
2251 - Mountaineer Loan 20,091.20
2252 - Volvo Loan 25,213.67
2275 - Loan from Shareholders 45,301.28
2280 - Loan from Shareholder- JLT 49,785.01
Total Other Current Liabilities 177,495.50
Total Current Liabilities 331,117.11
Page 109
The Firm Multimedia
05/12/00
Balance Sheet
As of March 31, 2000
Mar 31, '00
Long Term Liabilities
Leases
2486 - Preferred Capital Corporation 14,492.80
2450 - Freedom Capital 5,213.78
2300 - Associates Leasing Inc. 2,377.54
2320 - Colonial Pacific Leasing #2 12,346.41
2380 - Credential Leasing Corporation 7,370.18
2385 - The Manifest Group-Interactive 1,959.87
2419 - FINOVA - Imagesetter 14,644.85
2420 - ORIX - Scanner 6,801.54
2421 - ORIX - Voice M/Comp. 5,894.23
2422 - Colonial Pacific-Production Equ 6,507.39
2423 - Colonial Pacific, Inc./Off. Equ 3,586.48
2440 - Colonial Pacific/Harbour Capita 1,370.39
Total Leases 82,565.46
2395 - Chrysler Financial -Caravan 12,141.98
2400 - Small Business Loan Source 189,277.65
Total Long Term Liabilities 283,985.09
Total Liabilities 615,102.20
Equity
3100 - Common Stock 111.00
3900 - Retained Earnings 11,654.33
Net Income 85,385.21
Total Equity 97,150.54
TOTAL LIABILITIES & EQUITY 712,252.74
Page 110
The Firm Multimedia
05/21/00
Profit and Loss
January through December 1999
Jan - Dec '99
Ordinary Income/Expense Income
4500 - Fee Income
4500-01 - Commission Income 5,341.63
4500-02 - Retainer 34,580.00
4500-03 - Video Production 267,212.12
4500-04 - Graphics
4500-15 - CD Laser Art 350.00
4500-20 - Printing 84,166.59
4500-21 - Layout 8 Design 123,831.32
4500-22 - 3D Animation 11,461.68
4500-23 - General Graphics 5,873.25
Total 4500-04 - Graphics 225,682.84
4500-06 - Fee Income - Other (54.11)
4500-07 - Public Relations 4,910.00
4500-09 - CD-Rom Authoring 4,999.00
4500-10 - Web Design 11,735.00
4500-13 - Audio Production 23,943.64
4500-14 - Pre-Press 1,621.00
4500-16 - Website Maintenance 4,971.00
4500-17 - Website Hosting 5,093.00
4500-18 - Client Promotions 10,850.00
4500-19 - Shipping Revenue 15,029.06
4500-05 - Commercial Leased Access 276,334.00
4500-25 - Spot Airtime 165,787.00
4600 - Fee Income - Other 35,216.04
Total 4600 - Fee Income 1,093,251.22
5010 - Program Airtime 8,489.00
4530 - Reimbursed Expenses 588.89
Total Income 1,102,329.11
Cost of Goods Sold
6230 - Commercial Leased Access
6230-26 - XxxxxxXX.Xxx 152.50
6230-25 - WSA Marketing 575.65
6230-23 - Fairbanks Construction 1,035.10
6230-01 - The Firm Multimedia 307.00
0000-00 - Xxxxxxxxxx Xxxxxxxx 24,047.45
6230-15 - Xxxxxx Chevrolet 982.40
6230-16 - Xxxxx Management 3,708.86
6230-18 - Quiltingly Yours 13,179.28
6230-19 - Class 1 1,820.28
6230-21 - Citrus Hills Marketing 2,971.50
6230 - Commercial Leased Access - Other (37.50)
Total 6230 - Commercial Leased Access 48,742.52
6231 - Spot Airtime 42,676.08
6237 - Airtime-Program 3,655.00
6232 - Client Promotions 29,204.84
6233 - Internet Fees 1,712.23
6234 - Outdoor Advertising 61,000.25
6260 - Graphics
6260-01 - Graphics Equipment 313.99
6260-02 - Photos 275.59
6260-03 - Printing 69,972.48
6260-05 - Supplies 441.36
6260-06 - Service Bureau 0.00
6260-07 - Shipping Costs 4,672.35
Total 6260 - Graphics 75,675.77
6265 - Production
6265-01 - Tapes 4,695.44
6265-02 - Production Equipment 616.28
6265-04 - Talent Fees 4,320.00
6265-05 - Staging & Props 968.54
Page 111
The Firm Multimedia
05/21/00
Profit and Loss
January through December 1999
Jan - Dec '99
6266-07 - Shipping Costs 13,695.54
6265-08 - VHS Sleeves 503.44
6265-09 - Tape Duplication 32,500.58
6265 - Production - Other 62.54
Total 6265 - Production 57,362.36
Total COGS 320,029.05
Gross Profit 782,300.06
Expense
6156 - Amortization Expense 58.00
4640 - Sales Tax 169.38
6106 - Advertising
6105-02 - Personnel Advertising 4,166.80
6105-03 - Telephone Book Advertising 3,250.09
6105-04 - Press Release 50.00
6105-06 - Promotion Advertising 5,970.02
6106-06 - Print Advertising 2,408.00
6106-09 - Firm Misc. Advertising 428.06
6106 - Advertising - Other 296.00
Total 6105 - Advertising 16,568.97
6115 - Automobile Expense
6116-01 - Fuel 12,027.35
6115-02 - Auto Maintanence 3,171.09
6115-03 - Vehicle Registration 78.20
6115-04 - Mercury Mountaineer Lease 1,347.52
6116-05 - Auto -Volvo Lease 2,834.76
6115 - Automobile Expense - Other 170.66
Total 6115 o Automobile Expense 19,629.58
6126 - Bank Service Charges 378.11
6140 - Communications
6140-01 - Internet fees 4,203.38
Total 6140 - Communications 4,203.38
6160 - Company Fees
6150-01 - Non Compete Fees 160.00
6150-02 - Documentation Fees 553.65
6160-04 - Other Fees 1,150.25
6150-06 - NDC Payment System Fees 513.77
6150 - Company Fees - Other 180.00
Total 6150 - Company Fees 2,557.67
6160 - Education 81.05
6161 - Conventions 750.00
6166 - Dues and Subscriptions 949.50
6170 - Employee Moving Expenses
6170-01 - Moving Van Rental 1,531.00
6170-02 - Fuel 407.27
6170-03 - Lodging 135.57
Total 6170 - Employee Moving Expenses 2,073.84
6176 - Equipment Rental 3,502.77
6185-Insurance
6186-01 - Auto Insurance 2,184.92
6186-02 - Building/Property Insurane 1,383.94
6185-03 - Media Liability Ins. 5,605.13
6185-04 - Work Comp 3,460.60
6185-05 - Life Insurance 2,009.09
6185 - Insurance - Other (7,910.93)
Total 6185 - Insurance 6,732.75
6205 - Interest Expense
6205-01 - Finance Charge Late charges 4,778.62
Page 112
The Firm Multimedia
05/21/00
Profit and Loss
January through December 1999
Jan - Dec '99
6205-01 - Finance Charge - Other 5,550.72
Total 6205-01 - Finance Charge 10,329.34
6205-02 - Loan Int.-Capital Leases 14,054.89
6205-03 - Mortgage - Interest 18,713.31
6205-04 - Loan Interest-Xxxx X. XxXxxxxxx 200.00
6205 - Interest Expense - Other 5,171.75
Total 6205 - Interest Expense 48,469.29
6220 - Janitorial / Maintenance
6220-02 - Supplies 494.71
6220-03 - Sanitation 818.00
6220-04 - Pest Control 421.90
6220 - Janitorial I Maintenance - Other 25.39
Total 6220 - Janitorial / Maintenance 1,760.00
6235 - Licenses and Permits 481.05
6306 - Office Rent
6306-01 - Jacksonville Rent 1,063.88
Total 6306 - Office Rent 1,063.88
6255 - Postage and Delivery
6255-01 - Postage (USPS) 3,072.43
6255-02 - Shipping (Unishippers) 4,652.07
6255-04 - Shipping (Airborne) 52.00
6255-06 - Shipping - FedEx 89.07
6255 - Postage and Delivery - Other 25.00
Total 6255 - Postage and Delivery 7,890.57
6275 - Professional Fees
6275-01 - Accounting 6,992.16
6275-03 - Legal Fees 2,966.23
6275-04 - Talent 109.50
6275-05 - Personnel 3,427.78
6275-06 - Collection Agent Fees 299.71
Total 6275 - Professional Fees 13,795.38
6305 - Repairs and Maintenance
6305-01 - Building Repairs 1,916.33
6305-02 - Computer Repairs 5,426.15
6305-03 - Equipment Repairs 3,819.70
6305 - Repairs and Maintenance - Other 266.04
Total 6305 - Repairs and Maintenance 11,428.22
6345 - Telephone
6345-02 - Cellular Telephones 2,338.29
6345-03 - Local Telephone Service 5,349.09
6345-04 - Long Distance 8,655.76
6345-05 - Paging 791.59
6345 - Telephone - Other 374.78
Total 6345 - Telephone 17,509.51
6355 - Travel
6355-01 - Airline Travel 2,557.50
6355-02 - Car Rental 69.32
6355-03 - Entertainment 840.25
6355-04 - Lodging 2,951.99
6355-05 - Meals 4,445.18
6355-06 - Tolls & Parking 621.16
6355 - Travel - Other 206.50
Total 6355 - Travel 11,691.90
6395 - Utilities
6395-01 - Electric 4,586.91
Total 6395 - Utilities 4,586.91
6540 - Miscellaneous 2,689.75
Page 113
The Firm Multimedia
5/12/00
Profit and Loss
January through December 1999
Jan - Dec '99
6660 - Office Supplies
6550-01 - Printing 3,529.71
6550-02 - Grocery (9.73)
6660-03 - Refrigerator 0.00
6650-06 - Film Processing 111.68
6650-07 - Audio Production Supplies 538.55
6650-08 - Graphics Equipment 223.83
6650-09 - Interactive Supplies 396.94
6650 - Office Supplies - Other 5,820.82
Total 6660 - Office Supplies 10,611.80
6660-06 - Graphic Supplies
6660.01 - Pre-Press Supplies 4,365.59
6550-06 - Graphic Supplies - Other 3,553.04
Total 6660-06 - Graphic Supplies 7,918.63
6660-04 - Video Production Supplies
6660.02 - Tapes 2,143.04
6660-04 - Video Production Supplies - Other 1,814.53
Total 6660-04 - Video Production Supplies 3,957.57
6660 - Payroll Expenses
6660-01 - Medical Insurance 8,261.91
6660-02 - FUTA 1,206.85
6660-03 - SUTA 660.14
6660-04 - Officer's Salaries 68,520.91
6660-06 - Salaries & Wages 294,521.19
6660-06 - Commission Wages 34,075.96
6660-07 - Federal Payroll Taxes-Company 30,543.82
6660 - Payroll Expenses - Other 2,147.17
Total 6660 - Payroll Expenses 439,937.95
6680 - Refunds -Client 2,945.33
6610 - Sales Expenses
6610-01 - Misc. Expenses 528.59
6610-02 - Trade Shows 3,013.63
6610-03 - Sales Incentives 968.56
6610-06 - Lead Referral Source 1,290.16
Total 6610 - Sales Expenses 5,800.94
6640 - Taxes
6640-01 - Federal (2,413.76)
6640-02 - Intangible / Tangible 377.48
6640-03 - Leases - Personal Property 1,564.85
6640-06 - State 1,651.86
Total 6640 - Taxes 1,180.43
7006 - Bad Debt
7006-01 - Adjust Client Acct. 8,827.93
7006 - Bad Debt - Other 11,364.27
Total 7006 - Bad Debt 20,192.20
Total Expense 671,566.31
Net Ordinary Income 110,733.75
Other Income/Expense
Other Income
7016 - Interest Income 11.67
Total Other Income 11.67
Other Expense
6166 - Depreciation Expense 86,319.00
Total Other Expense 86,319.00
Net Other Income (86,307.33)
Net Income 24,426.42
The Firm Multimedia
05/21/00
Balance Sheet
As of December 31, 1999
Dec 31, '99
ASSETS
Current Assets
Checking/Savings
1015 - Amsouth - Operating Account 989.63
1030 - Xxxxx Cash 27.59
Total Checking/Savings 1,017.22
Accounts Receivable
1200 - Accounts Receivable 187,932.67
Total Accounts Receivable 187,932.67
Other Current Assets
1475 - Electric Deposit 400.00
Total Other Current Assets 400.00
Total Current Assets 189,349.89
Fixed Assets
1575 - A/A - Organizational Cost (585.00)
1570 - Organizational Costs 585.00
0000 - Xxxxxxxx - 0000 XX 00xx Xx
0000-00 - Sign 1,560.00
1590-02 - Studio Drape 2,989.20
1590-03 - Canopies 2,400.00
1590-04 - Land 25,000.00
0000 - Xxxxxxxx - 0000 XX 00xx Xx - Other 214,964.60
Total 1590 - Building - 0000 XX 00xx Xx 246,913.80
1600 - Office Furniture
1600-01 - Cost 30,324.10
1600-02 - Office Furniture - Staples 4,949.46
1600 - Office Furniture - Other 890.44
Total 1600 - Office Furniture 36,164.00
1700 - Equipment
1700-01 - Computer Equipment 78,054.79
1700-02 - Production Equipment 246,931.90
1700-03 - Office Equipment 24,084.20
1700-04 - Trade Show Booth 5,011.65
1700 - Equipment - Other 332.60
Total 1700 - Equipment 354,415.14
1710 - Automobiles 40,038.44
1800 - LESS - Accumulated Depreciation (324,616.00)
Total Fixed Assets 352,915.38
TOTAL ASSETS 542,265.27
LIABILITIES 8 EQUITY
Liabilities
Current Liabilities
Accounts Payable
2000 - Accounts Payable 91,263.61
Total Accounts Payable 91,263.61
Other Current Liabilities
2100 - Payroll Liabilities 4,494.78
2200 - Sales Tax Payable (1,454.06)
2250 - Working Capital Loan - Amsouth 33,704.66
2251 - Mountaineer Loan 20,964.97
2275 - Loan from Shareholders 33,062.28
2280 - Loan from Shareholder- JLT 49,785.01
Total Other Current Liabilities 140,557.64
Total Current Liabilities 231,821.25
Long Term Liabilities
Page 115
The Firm Multimedia
05/21/00
Balance Sheet
As of December 31, 1999
Dec 31, '99
Leases
2486 - Preferred Capital Corporation 15,069.55
2450 - Freedom Capital 6,166.03
2300 - Associates Leasing Inc. 3,332.54
2320 - Colonial Pacific Leasing #2 14,384.28
2350 - The Manifest Group 1,626.37
2380 - Credential Leasing Corporation 8,097.50
2385 - The Manifest Group-Interactive 2,471.06
2419 - FINOVA - Imagesetter 16,230.73
2420 - ORIX - Scanner 7,995.37
2421 - ORIX - Voice M/Comp. 6,273.56
2422 - Colonial Pacific-Production Equ 8,115.40
2423 - Colonial Pacific, Inc./Off. Equ 4,419.75
2440 - Colonial Pacific/Harbour Capita 2,099.45
Total Leases 96,281.59
2395 - Chrysler Financial - Caravan 12,669.64
2400 - Small Business Loan Source 189,727.46
Total Long Term Liabilities 298,678.69
Total Liabilities 530,499.94
Equity
3100 - Common Stock 111.00
3150 - Add'I Paid in Capital 60,400.00
3900 - Retained Earnings (73,172.09)
Net Income 24,426.42
Total Equity 11,765.33
TOTAL LIABILITIES & EQUITY 542,265.27
Page 116
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Xxxxxxx Communications, Inc., a Florida Corporation
SCHEDULE 2.10(A)(1) REAL PROPERTY
1. Commercial lease dated September 1, 1999 between Corporate Investment
International, Inc. and The Firm. Property located at 0000 Xxxx Xxxxxxxx
Xxxxx, Xxxxx 000, Xxxxxxx, Xxxxxxx. Lease term is for one year expiring
August 31, 2000. Rent is $371.00 per month and is a trade-out for
production.
2. Mortgage with Small Business Loan Source for property at 0000 XX 00xx
Xxxxxx, Xxxxx, Xxxxxxx 00000. Loan amount $194,000.00. Fluctuating interest
rate, currently at 11.75%. Mortgage payment is $2,025.00 per month. The
current balance is $189,277.65. Supporting documents to follow are:
a. Settlement Statement
b. Notice of Commencement
c. Note with Exhibit A
d. Agreement Regarding Closing of Loan with Exhibit A
e. Financing Statement with Schedule
f. Security Agreement - Commercial
g. Affidavit of No Adverse Change
h. Borrowing Affidavit
i. Guaranty
j. Acknowledgements
k. Certificate of the Secretary of Xxxxxxx
x. Notice of Entire Agreement
m. Authorization and Loan Agreement
n. Compensation Agreement
o. Environment Certificate
p. Borrowing Certificate
q. Letter to Publicize
r. Acknowledgement Insurance and Financials
s. Certification as to Child Support
t. Affidavit Regarding Business Permits
u. Financial Agreement
v. Assignment of Life Insurance Policy
x. Xxxxxxxxx Contracting, Inc. Construction Agreement
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Xxxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxxxx, President
Xxxxxxx Communications, Inc.
/s/ Xxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxx X. Xxxxxxxxxx, Vice President Sales
Xxxxxxx Communications, Inc.
Page 117
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Xxxxxxx Communications, Inc., a Florida Corporation
SCHEDULE 2.10(C) EQUIPMENT
Attached to this schedule is a complete equipment inventory list. Any
item without a * is owned outright by Xxxxxxx Communications, Inc.
Equipment Inventory
Reception Office
Computer AST Adventure 686 16mb Ram
Monitor AstVision 4
Keyboard Ast
Typewriter Display 900 Dictionary
Postage Meter Neopost Model 9512
Scale Pelouze XX0X0-X
Xxxxxxxxx Xxxxx XXX-X0000 Plain Paper
Reception Desk
4 Guest Chairs w/ 2 Tables
Kitchen
Refrigerator
Table w/ 4 Chairs
Framed Art Work
Coke Machine
Microwave
Coffee Pot
Business Office
Computer 24X Max Pentium 32mb Ram
Monitor AstVision 7L
Keyboard Windows
Printer Cannon LBP 460
Shredder Fellowes Powershred P540
Calculator Casio HR 150LB
2 Guest Chairs
1 Corner Plant
Sales Department
Computer Packard Xxxx Legend Supreme
Monitor Samsung
Keyboard Packard Xxxx
Scanner Microtek Scanmaker 11SP
Misc. Polaroid Sprint Scan 35
Lap Top 3 Toshiba SAT 2515CDS P266MMX 4.3G 32MB Computer
Networkcard for all notebooks
Projector Panasonic LCD Projector*
Model PT-L5
Serial Number 7-91871-11035-5
Value $2,695.00
Leasing Co. Freedom Capital
00 Xxxxxxx Xxxxx
Xxxxxxx, XX 00000
Framed Art Work
Page 118
Project Coordinator's Office
Computer Authentic AMD 32mb Ram
Monitor Max Tech
Keyboard Windows
Facsimile Canon B640 Plain Paper Fax
Sharp UX-1000 Plain Paper Fax
Media Buyer Office
Computer Pentium 32mb
Monitor Max Tech
Keyboard Windows
Conference Room
Television Magnavox
VCR Sharp
Conference Table 6 Chairs
Framed Art Work
Leigh's Office
Computer Ast Advantage Adventure 824 Pentium 16mb
Monitor Samsung
Keyboard Ast
Printer HP DeskJet 600
Printer HP DeskJet 612C
Lap Top Vaio PCG-F340 Sony Lap Top*
Leasing Co. *Preferred Lease
X.X. Xxx 00000
Xxxxxxxxxxxx, XX 00000-0000
Lease #000-0000000-000
2 Guest Chairs
1 Corner Plant
JVC Radio/CD
Framed Art Work
Gerry's Office
Computer Compaq Pentium 64mb
Monitor Compaq Presairo
Keyboard Compaq
Printer Canon BJC-4300 Color BubbleJet
Shredder Fellowes Powershred P540
File Cabinet 4 Drawer Vertical File Cabinet
2 Drawer Vertical File Cabinet
Globe
Hutch
2 Guest Chairs
1 Corner Plant
JVC Radio/CD
Page 119
Graphics Department
Computer Mac G3* Power PC 8100 Power Computing 132 PowerMac G3
350MT*** PowerMac G3 000 XX***
Xxxxxxxx Power Computing
Apple *
Apple
2 Power Mac Keyboards***
Monitor OptiQuest V773*
Maglnnovatinos (2)
.26MM 66HZ Monitor***
Printer Lexmark Optra R
Epson Stylus 000 Xxxxx**
Xxxxxx Xxxxxxxx Xxx Xxxxx (3)
LaCie HD
Smart Storage Solutions External HD
External Jaz Drive
AVA 2906-SCSI Card***
CD-Rewritable Drive***
Misc. Dynatek CE Burner
Scanner Astra Color Scanner
Leasing Co. *Bank Vest Capital Corp. AKA ORIX and FINOVA
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
(000)000-0000
Lease #047011-001
Lease #047011-002
Lease #047011-003
**Colonial Pacific Leasing
X.X. Xxx 0000
Xxxxxxxx, Xxxxxx 00000-0000
(000)000-0000
Lease #108025002
Lease #108025003
Lease #108025004
***Freedom Capital
00000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxxxxx Xxxxx, XX 00000
(000)000-0000
PP Tax Paid over 12 months
Clipper
CD Photo Library
Medium Format Still Camera w/ lenses
Still Photo Lights and Stands
Light Box
Page 120
Pre Press Office
Computer Mac G3*
Keyboard Apple*
Monitor Spectrum 7GLR*
Printer 3M Rainbow*
Agfa 9800*
Misc. Agfa Rapidline 43 Film Developer*
Leasing Co. *Bank Vest Capital Corp. AKA ORIX and FINOVA
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
(000)000-0000
Lease #047011-001
Lease #047011-002
Lease #047011-003
PP Tax Paid over 12 months
General Office Area
Printer HP LaserJet 4
Copier Minolta EP 4233
Binder GBC Image Maker 1000
Animation/Website Artist's Office
Computer Power Mac 6500*
Power Mac G3
Hard Drive 6-GIG External*
Monitor Nokia 17"*
Optiquest 17"
Keyboard Apple*
Apple
Scanner UMAX Astra 000 X Xxxxxxx*
Xxxxxx DT-S101S Drum
CD Writer Yamaha CRV4260*
Camera Olympus D-500L Digital
Leasing Co. *The Manifest Group
000 Xxxx Xxxxxxxx
Xxxxxxxx, XX 00000-0000
Lease #556150
Lease #624826
PP Tax Paid over 12 months
Page 121
Production - Master Control Office
1. IBM PC 386
2. Sony Monitor
3. Generic Keyboard
4. HP DeskJet 500C
5. Compuvideo/Wave Form Monitor
6. Panasonic 13" Monitors (5)
7. Panasonic 21" Monitors (2)
8. Sony Speakers (2)
9. Amiga 4000 Computer with Video Toaster System
10. Amiga Keyboard
11. Mackie CR1604-VLZ Audio Mixing Board
12. Sony FXE-100 Video Editing/Switcher System
13. Intercom System
14. Radio Shack Amplifier
15. LabTech LCS-150 Computer Speakers (2)
16. UVW 1800 Sony Beta Cam Deck (2)**
17. Sony VO-9800 3 1/4 Umatic SP
18. Video Patch Bay
19. Tascam Patch Audio Bay
20. Alesis 3630 Compressor
21. Pioneer PD103 CD Player
22. Tascam DA-20 Digital Audio Tape Players
23. JVC RX 212 AM-FM Receiver
24. Sony EVO-9850 HI 8 Video Deck***
25. Panasonic RCUWV-RC36 Remote Control Unit
26. NADY Receiver - 4 Channel
27. Video Tek VDA-16 Black Burst Generator***
28. Zip Drive 100
29. Kinyo Beta Tape Rewinder
30. Horita CSG-50 Bars/Tone Generator
31. Serial Port Switch Xxx
00. Sony EVO-9850 3/4 Tape Deck ****
33. Sony CMA****
34. Quasar VHQ 830 VCR
35. Production Desk with Shelves
Leasing Co. **Colonial Pacific Leasing
X.X. Xxx 0000
Xxxxxxxx, Xxxxxx 00000-0000
(000)000-0000
Lease #108025002
Lease #108025003
Lease #108025004
***Associates Leasing Inc.
X.X. Xxx 0000
Xxxxx Xxxxxx, XX 00000-0000
Page 122
(000)000-0000
Lease #0006581-000
****The Manifiest Group
000 Xxxx Xxxxxxxx
Xxxxxxxx, XX 00000-0000
(000)000-0000
Lease #556150
Lease #624826
PP Tax Paid over 12 months
Production - Back Office in Master Control
1. Power Mac 7200/75
2. Apple Keyboard
3. NEC Multi Scan Monitor
4. Microtech Scan Maker 2 HR
5. Sony CDP-XE 500 CD Player
6. Power Mac 7200/75
7. Interex Keyboard
8. Portrait Pivet 1700 Monitor
9. 2 Workstation Desks
Production - Edit Room - Station 1
1. Sony 21" TV
2. Media 100 System - Power Mac 8100/80 with Apple Keyboard and Supermatch
17" Monitor*
3. Xxxxxxx 0000X Xxxxx (1)*
4. Xxxxxxx 0000X Xxxxx (2)*
5. Micropolis 8681M Drive (1)
6. Media 100 Digital Video Editor**
Leasing Co. *Bank Vest Capital Corp. AKA ORIX and FINOVA
000 Xxxxxxxxx Xxxx
Xxxxxxxxx, XX 00000
(000)000-0000
Lease #047011-001
Lease #047011-002
Lease #047011-003
**Colonial Pacific Leasing
X.X. Xxx 0000
Xxxxxxxx, Xxxxxx 00000-0000
(000)000-0000
Lease #108025002
Lease #108025003
Lease #108025004
PP Tax Paid over 12 months
Page 123
Production - Edit Room - Station 2
1. *PCI System Media 100 Nubus $8999.95
*Purchased by Media 100
*Power Mac G3/G4 DIMM PC $379.00
*Remus Lite Disk Array Software $129.00
*Adobe After Effects Production Bundle $1,399.00
*18.2 GB Barracuda $505.00
*Adobe Photoshop Software $589.00
*Data Silo DS 100 $429.00
*Data Silo Cable Kit $149.00
*Tech Tools Pro Software $89.00
*Power Domain SCSI $349.00
*17" E773 Monitor $299.01
Leasing Co. Preferred Capital Corporation
X.X. Xxx 00000
Xxxxxxxxxxxx, XX 00000-0000
Lease #000-0000000-000
2. Micro Tek 2 HR Scanner
3. Sony Speakers (2)
4. Samsung TV/VCR 13" Combo
5. Panasonic 13" Monitor
6. LabTech CS-900 Computer Speakers (2)
7. APC-UPS 450 Battery Back Up
8. Panasonic PV-S 4480 Super VHS Deck
9. GE VG4056 VCRS (2)
10. GE SV4053 VCRS (2)
11. Symphonic 6480 VCRS (2)
12. 16 Port Video Patch Bay (2)
13. Neutrik Audio Patch Bay
14. Technics SLPG350 CD Player
15. Tascam DA20 Digital Audio Tape
16. JVC RX - 212 FM/AM Receiver
17. Sony UVW 1800 Beta SP Deck
18. Mackie 1202-VLZ Mixing Board
19. Panasonic WVF 300 Camera*
Leasing Co. *Colonial Pacific Leasing
X.X. Xxx 0000
Xxxxxxxx, Xxxxxx 00000-0000
(000)000-0000
Lease #108025002
Lease #108025003
Lease #108025004
PP Tax Paid over 12 months
Page 124
Studio
1. Sears TV
2. Rid Lowcost Teleprompter System (2) 1*
3. Panasonic 300 CLE WFV 300 Video Cameras (2)
4. ITE Pedastals (2) 1
5. HI 8 Video Camera (2)
6. Bogen Tripod (3) 1 ***
7. Anton Battery Charger***
8. Sony UVW 100 w/ Lens ***
9. Sony PVM 8020 AC/DC Monitor $712.00***
10. Sony PVM 8042 Color Monitor***
11. Sony UVW 100 Camera w/ Lens ****
12. Sony BC 1WD Charger w/ Batteries
13. K-3 Camera 16MM
14. Sony 8800 3/4 VTR
15. Metal Desk
16. 2 Xxxxxx Lighting Kits
17. 10 Wireless Mikes
18. 1 Studio Light Grid
19. Studio Lights and Stands
20. Metal Storage Reels
21. Sets, Background and Bluescreen
22. Misc. Set and Building Tools
Leasing Co. *Bank Vest Capital Corp. AKA ORIX and FINOVA
000 Xxxxxxxxx Xxxx Xxxxxxxxx, XX 00000 (800)532-7317
Lease #047011-001 Lease #047011-002 Lease #047011-003
***Colonial Pacific Leasing X.X. Xxx 0000 Xxxxxxxx,
Xxxxxx 00000-0000 (000)000-0000 Lease #108025002
Lease #108025003 Lease #108025004 **** The Manifiest
Group 000 Xxxx Xxxxxxxx Xxxxxxxx, XX 00000-0000
(000)000-0000 Lease #556150 Lease #624826
PP Tax Paid over 12 months
Page 125
Office Furniture
1. 8 Leather Chairs
2. 3 Desks
3. 2 Returns
4. 3 Hutch
5. 1 Storage Unit
6. 8 Steno Chairs
7. 1 Work Center
8. 7 4 PC Work Centers
9. 2 2 Drawer File Cabinet
Audio Studio
1. Xxxxxx XX-800 Workstation
2. Xxxxxx 6-800 Synthesizser
3. Samsung 13" TV
4. Technics CD Player SL-P1200
5. Tascam 32 Reel to Reel Tape Deck
6. Sony A-6 Digitial Tape Deck
7. Neutek Patch Bay
8. 2 Rolls Mike Compressor Leg HRIIC
9. Behringer Composer Compressor MDX 2100
10. ART Dual Compressor
11. JVC R-K22 Tuner/Amplifier
12. Fischer CRW683 Dual Cassette Deck
13. TM Century Music Library
14. Realistic Eraser
15. 2 AK6 D3800 Mikes
16. CD Stand
17. Copy Holder
18. 2 Rolls Headphone Amps
19. Koss Pro 4 AA Headphones
20. Roland Boss U7-1 - Voice Transformer*
21. Music Software Systems
22. Music Bakery Discs
23. Midiator
Leasing Co. *Bank Vest Capital Corp. AKA ORIX and FINOVA
200 Nickerson Road
Marlboror, MA 01752
(800)532-7317
Lease #047011-001
Lease #047011-002
Lease #047011-003
PP Tax Paid over 12 months
Page 126
Phone System
1. Samsung Digital Telephone System*
Leasing Co. *Creditial Leasing Corp.
1501 Corporate Drive
Suite 280
Boynton Beach, FL 33426-6654
(800)688-3088
Lease #0354401
PP Tax Paid over 12 months
Voice Mail System
1. Minitel 128 Voice Mail System*
Leasing Co. *Bank Vest Capital Corp. AKA ORIX
200 Nickerson Road
Marlboror, MA 01752
(800)532-7317
Lease #047011-001
Lease #047011-002
Lease #047011-003
PP Tax Paid over 12 months
Ocala News Tonight
1. (3) Leightronics Event Controller/Switcher $2,833.40
Purchased from Markertek and by Credit Card
2. 4 Sony VP 9000 S/N
2 Sony 7600 Umatic S/N
Purchased from Hi-Tech Enterprises $3,845.58
3. 4 Secretarial Chairs & One Lap Top Table $200.00
Purchased from Staples
5. Media 100 System Nubus Component Suite Deal w/ Mac 8100/80 AV
6. Sony VO 5800 VCR $600.00
Audio Visual Consultants - Paid MC
7. Police Scanner $300.
8. 31 avalier mikes $350.00
9. 3 corded mikes $225.00
10. Assorted cables and wires $200.00
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 127
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 2.11 INTELLECTUAL PROPERTY
1. Attached is a schedule of Trademarks and Copyrights.
Lorilei Communications, Inc.
Trademarks and Copyrights
Mark Serial # Date In Force Abandoned
---- -------- ---- ------------- ---------
THE FIRM MULTIMEDIA 75/335702 8/13/98 X
WE CREATE DEMAND 75/335756 9/1/98 X
CREDIT NOW 75/364030 7/1/98 X
CREDIT NOW 75/364030 3/2/99 X
SELL-O-VISION 75/109714 5/24/96 X
Copyrights
------------
CREDIT NOW PA 860-881 7/15/97
COOL IDEAS PA 860-887 7/15/97
* The owner of each trademark and copyright is Lorilei Communications, Inc.
with and address at 7325 SW 32nd Street, Ocala, Florida 34474
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 128
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 2.12 CONTRACTS, AGREEMENTS & COMMITMENTS 2.12 (A)
1. Amsouth Bank - Line of Credit. Balance is around $32,650.00. Monthly
payments are around $1,000.00 per month. Account opened 12/97. This account
is a line of credit therefore, there is no termination. Copies of the
application have been requested to Amsouth.
2. Amsouth Bank - Auto Loan on Ford Mountaineer. Balance is $20,091.20.
Monthly payments are $463.55. Execution of this loan is 9/30/99 and the end
of the loan is 9/30/04.
3. Bank of America - Auto Loan on Volvo. Balance is $25,213.67. Monthly
payments are $503.37. Execution of this loan is 3/10/00 and the end of the
loan is 3/10/05.
4. Chrysler Financial Group - Auto Loan on Dodge Caravan. Balance is
$12,141.98. Monthly payments are $363.08. Execution of this loan is 5/29/98
and the end of the loan is 6/13/03.
5. Promissory Note to John and Marcia LaTorraca Trust for $46,143.00.
Principal balance is $46,143.00 with interest accruing at 8.5% per annum
since 12/31/98. In 1999, two interest payments of $200.00 ($400.00 total)
were made. As of 4/26/00 the balance of note, principal plus interest is
$50,922.91. The principal amount was used for working capital. Execution of
this Promissory Note is 12/31/98 and there is not termination date.
6. Leigh and Gerry Cunningham, the officers/shareholders, have loaned the
company $45,301.28. This money has been loaned over the course of years in
business. This money was used for working capital. The beginning date of
the officers/shareholders loaning money to the company was 10/29/98. The
termination date is unknown.
Attached are supporting documents for the above referenced.
The following is a list of equipment leases. These leases are attached to this
schedule. Each lease provides term, amount per month and equipment description.
1. The Associates - Monthly Payment $357.52, Balance $3,018.31
2. Colonial Pacific Leasing #108025002 - Monthly Payment $768.35, Balance
$12,867.92
3. Colonial Pacific Leasing #108025003 - Monthly Payment $378.20, Balance
$6,507.39
4. Colonial Pacific Leasing #108025004 - Monthly Payment $200.67, Balance
$3,730.63
5. Colonial Pacific Leasing #108025005 - Monthly Payment $148.40, Balance
$1,589.09 6. Credential Leasing - Monthly Payment $347.43, Balance
$7,615.24 7. FINOVA Financial - Monthly Payment $483.15, Balance $16,230.73
8. Freedom Capital - Monthly Payment $442.03, Balance $5,460.33 9 The
Manifest Group AKA Flex Lease #556150 - Monthly Payment $595.95, Balance
$1,626.37 10. The Manifest Group AKA Flex Lease #624826 - Monthly Payment
$212.80, Balance $1,782.40 11. ORIX Credit Alliance #02324-7 - Monthly
Payment $574.78, Balance $6,801.54 12. ORIX Credit Alliance #02325-4 -
Monthly Payment $188.27, Balance $5,894.23 13. Preferred Lease - Monthly
Payment $506.36, Balance $15,149.17
2.12 (B)
Under this section only the following items apply:
#4 - Refer to Exhibit 5.12 for a copy of New Position Offer for Sheryl Wolf.
#12 - Refer to Schedule 2.10(A)(1) for mortgage information
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 129
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 2.14 GOVERNMENTAL AUTHORIZATION
1. Fictitious Name Registration - Ocala News Tonight, Ocala, Marion County, FL
2. Fictitious Name Registration - The Firm Multimedia, Ocala, Marion County, FL
3. State of Florida, Marion County Drinking Water System Operating Permit
4. Marion County Occupational License 1999-2000
5. Florida Department of Revenue Certificate of Registration to Collect Sales
and Use Taxes for State of Florida
Attached are supporting documents to the above referenced.
Note: The fictitious name registration for "THE FIRM" has expired and
Lorilei will not be renewing.
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 2.15 LITIGATION
We agree to all statements as detailed in Schedule 2.15, in the above mentioned
document entitled "Litigation," with the following exceptions:
2.15 (D): Lorilei may file a collection suit against XxxxxxXX.xxx in the amount
of $132,543.30 plus interest and late fees for failure to fulfill
it's contractual obligation.
Attached is a copy of the contract with XxxxxxXX.xxx and a copy of a standard
channel lease agreement with one of the cable systems.
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 130
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 2.20 LIST OF EMPLOYEES
Attached to this schedule is a list of all employees, current salaries,
vacation, personal time, and comp time accruals. Prior to the date of closing
this transaction, comp time accruals will no longer be allowed. Comp time that
has been previously accrued has to be used within 6 months from the date of
accrual. Otherwise, comp time is forfeited.
Lorilei Communications, Inc. d/b/a The Firm Multimedia d/b/a Ocala News Tonight
Employee Information May 15, 2000
Employee Salary Vacation Personal Comp Time
Time Hours Time Hours Hours
1. Bryan Allen $13,800.00 0 0 0
2. Richard Andrews $17,400.00 0 40 0
3. Kim Avery $21,900.00 40 37
4. Melissa Barfield $12.50/hour 0 0 0
5. Bountham Chanthalansy $22,400.00 0 31 0
6. Gerry Cunningham $60,000.00 0 0 0
7. Leigh Cunningham $60,000.00 0 0 0
8. Stacey Dolezal $30,000.00 0 40 0
9. William Fraker $9.00/hour 0 0 0
10. Patricia Gale $24,000.00 0 40 0
11. Jeanne Harding $6.50/hour 0 0 0
12. Leslie Kinney $22,800.00 40 31.50 17
13. Mary Lee $31,200.00 6.50 0 0
14. Dustin McCollum $25,200.00 0 24
15. Nadyne McDonald $14,400.00 0 40 0
16. John Miller $10,800.00 0 0 0
17. Debbie Tilton $7.33/hour 0 0 0
18. Penny Tomberlin $18,180.00 32 45.50 0
19. Brian Trahan $35,100.00 0 13.75 0
20. Lawrence Uelmen $25,000.00 0 0 0
21. Kim Ullery $17,520.00 0 40 0
22. Sheryl Wolf $21,000.00 13 0 0
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 131
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 2.21 INSURANCE
1. Workers Comp Insurance - Hanover Insurance
2. Auto Insurance - Hanover Insurance
3. Commercial General Liability Insurance - Hanover Insurance
4. Professional Liability Insurance - Scottsdale Insurance Company
5. Health Insurance - HealthPlan Southeast
6. Schedule of Life Insurance for Officers
7. Westfield Life Insurance - For Officers Only
8. Lincoln Benefit Life Insurance - For Officers Only
9. Midland National Life Insurance - For Officers Only
10. First Penn Pacific Life Insurance - For Officers Only
11. Copies of letters to First Penn Pacific, Midland National, Westfield
Life, requesting additional policy information.
Note: We are in the process of formulating an errors and omissions policy on
Ocala News Tonight.
Attached are supporting documents to the above referenced.
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 2.27 EMPLOYEE BENEFIT PLANS
1. Currently, there are no employee benefit plans in place.
2. Lorilei Communications, Inc. pays $85.00 per month towards the employee's
health insurance premium. Lorilei pays entire premium for officers of the
company.
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 132
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 2.28 DISTRIBUTION AGREEMENTS
We agree to all statements as detailed in Schedule 2.28, in the above mentioned
document entitled "Distribution Agreements," with the following exception:
2.28A We have posted blocks of commercial leased access airtime for sale through
Ad Xxxxxx.xxx, a broker in the advertising space, time and banner sales
business. Ad Outlet marks up our gross sale price to compensate itself with a
sales commission. Potential sales generated by Ad Outlet are subject to
Lorilei's final approval. No sales have been generated under this plan thus far.
There is no contract between Lorilei Communications, Inc. and XxXxxxxx.xxx.
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 4.1 EXCEPTIONS TO PROHIBITED PRE CLOSING ACTIONS
We agree to all statements as detailed in Schedule 4.1, in the above mentioned
document entitled "Conduct of Business of Lorilei," without exception.
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 133
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 5.7 CONSENTS
The current mortgage holder on the building and real estate at 7325 Southwest
32nd Street, Ocala, Florida 34774 is Small Business Loan Source (SBLS) located
at 5333 Westheimer, Suite 840, Houston, Texas 77056. This is an SBA guaranteed
type 7a loan.
Exhibit A of the mortgage stipulates that if the property or a beneficial
interest in the property is transfered without Mortgagee's prior written
consent, the mortgage may then be accelerated. A copy of the Mortgagee's written
consent is attached.
Other Notices
The mortgage specifies that 3 weeks prior notice of prepayment is required,
otherwise Mortgagor will be required to pay 3 weeks interest on the unpaid
prinicpal as of the date of prepayment.
A commercial security agreement exists as part of the mortgage and is attached.
Under part F "other provisions" of the SBA Authorization and Loan agreement,
item #7 limits annual expenditures for acquisition of fixed assets to $10,000,
however part 6 of the borrowing certificate sets this amount at $25,000 without
Lender's prior approval, approval of which will not be unreasonably withheld.
Although the deed restrictions (attached) Airport Industrial Park call for
underground utilities, the developer has given us a verbal "no action" inasmuch
as the general contractor neglected to run underground electrical service from
the street to the building.
The Airport Industrial Park is in the process of being annexed into the City of
Ocala from Marion County and will soon have city water service. Lorilei has
received notice (attached) that an assessment of approximately $536.00 impact
fee and a meter installation charge based on the meter size for connecting to
the service, plus construction costs of running the line for the connection at
$8.50 per front foot on the road. Some of this cost may be mitigated by lower
fire insurance premiums due to the proximity of a working fire hydrant.
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 5.8 AFFILIATES
Gerald R. Cunningham
Leigh A. Cunningham
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 134
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 5.12 LIST AND SUMMARY OF EMPLOYEE AGREEMENTS
1. List of Employees can be found in Schedule 2.20
2. Non Compete Agreements
3. Talent Releases
4. New Position Offer for Sheryl Wolf
5. Employment Agreement for Gerald R. Cunningham
6. Employment Agreement for Leigh A. Cunningham
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 5.13-1 PROJECTIONS
1. Attached to this schedule is the projection for years ending 2000 to 2001.
Lorilei Communications, Inc FY ending 6/30/2001
July Aug Sep Oct Nov Dec Jan Feb Mar Apr May June Total
Income
Commission 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
ONT Ad sales 18,000 18,000 22,000 24,000 30,000 27,000 24,000 24,000 28,000 30,000 33,000 30,000 308,000
Retainer 5,000 5,000 5,000 5,000 5,000 5,000 6,000 6,000 6,000 6,500 6,500 6,500 67,500
Video Production 35,000 35,000 30,000 34,000 32,000 60,000 32,000 30,000 40,000 40,000 45,000 40,000 453,000
Graphics 30,000 30,000 30,000 30,000 35,000 35,000 35,000 30,000 30,000 30,000 40,000 40,000 395,000
Pre-press 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Airtime 75,000 75,000 75,000 50,000 50,000 50,000 40,000 40,000 60,000 65,000 75,000 65,000 720,000
Brokered Spot airtime 10,000 20,000 20,000 10,000 7,000 20,000 7,500 5,000 12,000 40,000 40,000 50,000 241,500
Fees-Misc 2,500 2,500 2,500 6,000 6,000 6,000 10,000 6,000 6,000 8,000 6,000 22,000 83,500
Web Design 3,000 3,500 4,000 4,000 4,000 4,000 6,000 4,000 4,000 4,000 4,000 5,000 49,500
Still Photography 800 800 800 800 800 800 800 800 800 800 800 800 9,600
CD-Rom 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 10,000 65,000
Audio Production 1,000 1,000 1,000 7,500 4,000 6,500 10,000 6,000 5,000 5,000 5,000 5,000 57,000
Public Relations 2,000 2,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 34,000
Client Promotions 5,000 5,000 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 35,000
Web Maintenance 1,300 1,300 1,500 1,500 1,500 1,500 1,500 2,000 2,000 2,500 2,500 3,450 22,550
Shipping Revenue 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Total Income 198,600 209,100 207,300188,300 190,800231,300 188,300169,300 209,300247,300 273,300288,250 2,601,150
Cost of Goods Sold
Spot Airtime 6,600 13,200 13,200 6,600 4,620 13,200 4,950 3,300 7,920 26,400 26,400 33,000 159,390
CLA 33,750 33,750 33,750 22,500 22,500 22,500 18,000 18,000 27,000 29,250 33,750 29,250 324,000
Program Airtime 1,500 1,500 1,500 1,000 1,000 1,000 800 800 1,200 1,300 1,500 1,300 14,400
ONT CLA 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 54,000
Total 46,350 52,950 52,950 34,600 32,620 41,200 28,250 26,600 40,620 61,450 66,150 68,050 551,790
Page 135
Client Promotions 1,750 1,750 875 875 875 875 875 875 875 875 875 875 12,250
Internet Fees 429 429 495 495 495 495 495 660 660 825 825 1,139 7,442
Total 2,179 2,179 1,370 1,370 1,370 1,370 1,370 1,535 1,535 1,700 1,700 2,014 19,692
Graphics
Photos 150 150 150 150 150 150 150 150 150 150 150 150 1,800
Printing 15,000 15,000 15,000 15,000 17,500 17,500 17,500 15,000 15,000 15,000 20,000 20,000 197,500
Pre-press supplies 250 250 250 250 250 250 250 250 250 250 250 250 3,000
Misc Supplies 0 0 225 0 0 225 0 0 225 0 0 225 900
Total 15,400 15,400 15,625 15,400 17,900 18,125 17,900 15,400 15,625 15,400 20,400 20,625 203,200
Video Production
Tapes 1,000 1,750 1,500 1,700 1,600 3,000 1,600 1,500 2,000 2,000 2,250 2,000 21,900
Software/equipment 500 500 0 0 0 0 0 0 0 140 0 427 1,567
Printing 3,000 0 0 0 0 0 0 0 0 0 0 0 3,000
Talent Fees 700 700 600 680 640 1,200 640 600 800 800 900 800 9,060
Staging & Props 350 350 300 340 320 600 320 300 400 400 450 400 4,530
Rentals 350 350 300 340 320 600 320 300 400 400 450 400 4,530
Shipping 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 21,600
Tape Duplication 3,850 3,850 3,300 3,740 3,520 6,600 3,520 3,300 4,400 4,400 4,950 4,400 49,830
Total 11,550 9,300 7,800 8,600 8,200 13,800 8,200 7,800 9,800 9,940 10,800 10,227 116,017
Total COGS 75,479 79,829 77,745 59,970 60,090 74,495 55,720 51,335 67,580 88,490 99,050 100,916 890,699
Gross Profit 123,121 129,271 129,555128,330 130,710156,805 132,580117,965 141,720158,810 174,250187,335 1,710,452
Firm Expenses
Advertising
Prod/Office personnel 750 750 750 750 750 750 750 750 750 750 750 750 9,000
CD Dup/Printing 0 2,400 0 0 2,500 0 0 0 2,000 0 0 0 6,900
Yellow Pages 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Print 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Misc. Firm Advertising 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Total Advertising 1,950 4,350 1,950 1,950 4,450 1,950 1,950 1,950 3,950 1,950 1,950 1,950 30,300
Automobile
Maintenance 450 450 450 450 450 450 450 450 450 450 450 450 5,400
Caravan payment 364 364 364 364 364 364 364 364 364 364 364 363 4,367
New ONT vehicles 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Mercury 464 464 464 464 464 464 464 464 464 464 464 464 5,568
Volvo 504 504 504 504 504 504 504 504 504 504 504 504 6,048
Fuel 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000
Vehicle Registration 0 0 200 0 79 0 0 0 0 0 0 0 279
Total Automobile 3,682 3,682 3,882 3,682 3,761 3,682 3,682 3,682 3,682 3,682 3,682 3,681 44,462
Bank Charges 35 35 35 35 35 35 35 35 35 35 35 35 420
Contributions 0 1,000 0 0 0 0 0 0 0 0 0 0 1,000
Company Fees
Copyright/Trademark 245 0 0 0 0 0 0 0 0 0 0 0 245
Internet Fees 375 375 425 425 425 425 550 550 550 550 550 550 5,750
Dues and Subscriptions 366 365 252 153 45 63 110 0 0 95 0 0 1,449
Education 183 0 0 0 0 82 0 0 0 0 100 0 365
Equipment Rental 101 101 1,200 101 757 1,695 575 101 0 101 101 101 4,934
NDC Payment Systems 150 308 458
Misc. Fees 0 0 544 0 963 0 0 85 215 167 599 0 2,573
Total Company Fees 1,420 841 2,421 679 2,190 2,265 1,235 736 765 913 1,350 959 15,774
Insurance
Auto 450 450 450 450 450 450 450 450 450 450 450 450 5,400
Building/Property 275 275 275 275 275 275 275 275 275 275 275 275 3,300
Health 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Media Liability 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Addlt Liability 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Life Insurance 175 175 175 175 175 175 175 175 175 175 175 175 2,100
Worker's Comp 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Total Insurance 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 32,400
Page 136
Interest
Late charges 300 300 150 150 150 150 150 150 150 150 150 150 2,100
Finance Charges 450 450 450 450 450 450 450 450 450 450 450 450 5,400
Loan Int-Capital leases 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,162
Mortgage Interest 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 21,600
Other interest 200 122 0 121 235 115 0 113 111 182 107 564 1,870
Lines of credit 200 0 266 0 0 253 265 437 0 309 300 250 2,280
Total Interest 4,950 4,672 4,666 4,521 4,635 4,768 4,665 4,950 4,511 4,891 4,807 5,214 57,250
Janitorial/Maintenance
Pest Control 50 0 50 0 50 0 50 0 50 0 172 0 422
Cleaning/Supplies 156 109 227 114 179 62 256 194 67 21 238 150 1,773
Sanitation 0 0 0 0 189 44 44 44 44 44 44 44 497
Total Janitorial/Maintenance 206 109 277 114 418 106 350 238 161 65 454 194 2,692
Licenses and Permits 0 0 0 0 150 0 0 11 0 191 0 60 412
Leases
Audio Visual 379 450 277 280 284 288 291 295 299 303 307 311 3,764
Computer Equip 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 14,400
Phone System 328 328 328 328 328 328 328 328 328 328 328 328 3,936
Production Equip 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 42,000
Total Leases 5,407 5,478 5,305 5,308 5,312 5,316 5,319 5,323 5,327 5,331 5,335 5,339 64,100
Lines of Credit
AmSouth 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200
Total-Lines of credit 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200
Office Space
Mortgage principal 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Jax Office rent 209 209 209 209 209 209 209 209 209 209 209 209 2,508
Orl Office rent 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Total Office Mort/Rent 809 809 809 809 809 809 809 809 809 809 809 809 9,708
Non-COGS Supplies
Office Supplies 695 800 400 700 650 350 400 300 600 800 650 550 6,895
Graphics software/equipment 700 200 200 200 200 200 200 200 200 200 200 200 2,900
Video software/equipment 1,250 1,250 500 500 500 500 500 500 500 500 500 500 7,500
Interactive software/equipment 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Printing 942 0 86 628 34 46 34 95 754 218 201 532 3,570
Grocery 25 25 25 25 25 25 25 25 25 25 25 25 300
Video Production Supplies 300 300 400 400 500 400 400 400 400 400 400 400 4,700
Graphic Supplies 595 0 400 72 392 100 373 0 130 0 0 30 2,092
Film Processing 58 0 0 0 0 0 0 0 0 28 15 0 101
Pre-Press Supplies 100 100 100 100 100 100 100 100 100 100 100 100 1,200
Audio Supplies 0 0 108 352 0 0 83 0 0 0 0 543
Total Office supplies 4,865 2,875 2,419 3,177 2,601 1,921 2,232 1,903 2,909 2,471 2,291 2,537 32,201
Payroll
Officers 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000
Staff 32,000 32,000 34,000 35,000 35,000 36,000 38,000 38,000 38,000 38,000 38,000 38,000 432,000
FUTA/SUTA 320 320 340 350 350 360 380 380 380 380 380 380 4,320
Commissions 9,930 10,455 10,365 9,415 9,540 11,565 9,415 8,465 10,465 12,365 13,665 14,413 130,058
Federal/Fica Tax 7,980 7,980 8,360 8,550 8,550 8,740 9,120 9,120 9,120 9,120 9,120 9,120 104,880
Staff incentives 100 100 100 100 100 100 100 100 100 100 100 100 1,200
Total Payroll 60,330 60,855 63,165 63,415 63,540 66,765 67,015 66,065 68,065 69,965 71,265 72,013 792,458
Page 137
Postage and Delivery
USPS 325 325 325 325 325 325 325 325 325 325 325 325 3,900
Unishippers 470 470 470 470 470 470 470 470 470 470 470 470 5,640
Other 25 25 25 25 25 25 25 25 25 25 25 25 300
Total Postage & Delivery 820 820 820 820 820 820 820 820 820 820 820 820 9,840
Professional Fees
Accountant 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Consulting 150 150 150 150 150 150 150 150 150 150 150 150 1,800
Legal 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Collection Agent 993 1,046 1,037 942 954 1,157 942 847 1,047 1,237 1,367 1,441 13,006
Personnel 0 0 0 1,000 0 0 1,000 0 0 1,000 0 0 3,000
Total Professional Fees 2,543 2,596 2,587 3,492 2,504 2,707 3,492 2,397 2,597 3,787 2,917 2,991 34,606
Repairs and Maintenance
Computer repairs 250 500 250 500 250 500 250 500 250 500 250 500 4,500
Equipment repairs 450 450 1,500 450 450 450 450 450 450 450 450 450 6,450
Building repairs 150 150 150 150 150 150 150 150 150 150 150 150 1,800
Total Repairs & Maintenance 850 1,100 1,900 1,100 850 1,100 850 1,100 850 1,100 850 1,100 12,750
Sales Expenses
Sales Recruitment 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Direct Mailers 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Sales contest/bonus 100 100 100 100 100 100 100 100 100 100 100 100 1,200
Misc. Sales Expenses 100 100 100 100 100 100 100 100 100 100 100 100 1,200
Total Sales Expenses 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200
Taxes
Personal property Firm 0 0 0 0 0 0 0 0 5,000 0 0 0 5,000
Real Estate 0 0 0 0 0 0 0 5,000 0 0 0 0 5,000
Sales Tax - Firm 205 286 465 493 366 314 333 200 0 1,190 438 200 4,490
Intangible/Tangible 0 0 98 280 0 0 0 0 0 0 0 0 378
Personal property Leases 41 351 41 233 41 41 312 41 41 41 292 184 1,659
State 0 0 0 0 0 110 0 106 138 126 0 90 570
Total tax 246 637 604 1,006 407 465 645 5,347 5,179 1,357 730 474 17,097
Telephone
Cellular 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Local service 350 350 350 350 350 350 350 350 350 350 350 350 4,200
Long Distance 650 650 650 650 650 650 650 650 650 650 650 650 7,800
Paging 75 75 75 75 75 75 75 75 75 75 75 75 900
Other 25 25 25 25 25 25 25 25 25 25 25 25 300
Total Telephone 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000
Travel
Car Rental 55 55 55 55 55 55 55 55 55 55 55 55 660
Airfare 250 250 250 250 250 250 250 250 250 250 250 250 3,000
Entertainment 120 120 120 120 120 120 120 120 120 120 120 120 1,440
Travel other 120 120 120 120 120 120 120 120 120 120 120 120 1,440
Lodging 225 225 225 225 225 225 225 225 225 225 225 225 2,700
Meals 225 225 225 225 225 225 225 225 225 225 225 225 2,700
Tolls/Parking 50 50 50 50 50 50 50 50 50 50 50 50 600
Total Travel 1,045 1,045 1,045 1,045 1,045 1,045 1,045 1,045 1,045 1,045 1,045 1,045 12,540
Utilities
Electric 500 500 500 475 475 400 400 350 350 375 375 400 5,100
Total Utilities 500 500 500 475 475 400 400 350 350 375 375 400 5,100
Miscellaneous
Non compete fees 40 10 20 10 0 10 0 30 10 10 10 30 180
Misc. Expenses 0 0 0 79 329 368 127 150 0 60 0 0 1,113
Total Miscellaneous 40 10 20 89 329 378 127 180 10 70 10 30 1,293
Bad Debt 3,575 3,764 3,731 3,389 3,434 4,163 3,389 3,047 3,767 4,451 4,919 5,189 46,821
Gross Profit 123,121 129,271 129,555128,330 130,710156,805 132,580117,965 141,720158,810 174,250187,335 1,710,452
Total Expenses 99,673 101,577 102,536101,506 104,165105,095 104,460106,388 111,232109,708 110,044111,239 1,267,623
Pre-tax Profit* 23,448 27,694 27,019 26,824 26,545 51,710 28,120 11,577 30,488 49,102 64,206 76,095 442,829
EBITDA 500,277
GPM 66%
*Does not include depreciation
Certain expense items covered under use of investment proceeds are not included
Page 138
Lorilei Communications, Inc. FY ending June 30, 2002
July Aug Sep Oct Nov Dec Jan Feb Mar April May June Total
Income
Commission 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000
ONT Ad sales 25,000 25,000 30,000 32,000 36,000 34,000 34,000 34,000 38,000 38,000 40,000 40,000 406,000
North County Ad sales 15,000 25,000 25,000 30,000 30,000 35,000 30,000 28,000 35,000 40,000 45,000 45,000 383,000
Retainer 5,000 5,500 5,500 6,000 6,000 6,000 6,500 6,500 7,500 7,500 7,500 7,500 77,000
Video Production 40,000 40,000 45,000 50,000 55,000 60,000 45,000 50,000 55,000 50,000 65,000 60,000 615,000
Graphics 40,000 40,000 40,000 40,000 40,000 45,000 45,000 45,000 45,000 40,000 45,000 50,000 515,000
Pre-press 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000
Airtime 60,000 60,000 65,000 65,000 70,000 60,000 65,000 55,000 70,000 70,000 75,000 70,000 785,000
Brokered Spot airtime 25,000 25,000 30,000 25,000 30,000 30,000 25,000 20,000 30,000 35,000 40,000 40,000 355,000
Fees-Misc 2,250 2,250 2,250 3,000 3,000 8,500 10,000 8,500 9,000 10,000 10,000 10,000 78,750
Web Design 6,500 6,500 6,500 6,500 10,000 6,500 6,500 7,000 10,000 7,000 7,000 8,000 88,000
Still Photography 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 14,400
CD-Rom 12,000 12,000 6,500 8,000 10,000 8,000 7,000 7,000 8,000 10,000 10,000 10,000 108,500
Audio Production 2,000 2,000 2,000 4,000 6,000 7,000 6,000 7,000 7,000 7,500 8,000 8,000 66,500
Public Relations 3,500 3,500 3,500 3,500 4,500 3,500 3,500 3,500 4,000 4,000 4,000 5,000 46,000
Client Promotions 2,500 5,000 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 42,500
Web Maintenance 3,800 3,500 3,500 3,500 4,500 4,500 4,500 5,000 5,000 5,000 5,000 5,500 53,300
Shipping Revenue 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Interest Income 150 150 150 150 150 150 150 150 150 150 150 150 1,800
Total Income 254,400 267,100 280,100291,850 320,350323,350 303,350291,850 338,850339,350 376,850374,350 3,761,750
Cost of Goods Sold
Spot Airtime 16,500 16,500 19,800 16,500 19,800 19,800 16,500 13,200 19,800 23,100 26,400 26,400 234,300
CLA 27,000 27,000 29,250 29,250 31,500 27,000 29,250 24,750 31,500 31,500 33,750 31,500 353,250
Program Airtime 1,200 1,200 1,300 1,300 1,400 1,200 1,300 1,100 1,400 1,400 1,500 1,400 15,700
ONT CLA 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 5,200 62,400
North County CLA 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 78,000
Total 56,400 56,400 62,050 58,750 64,400 59,700 58,750 50,750 64,400 67,700 73,350 71,000 743,650
Client Promotions 875 1,750 1,225 1,225 1,225 1,225 1,225 1,225 1,225 1,225 1,225 1,225 14,875
Internet Fees 1,254 1,155 1,155 1,155 1,485 1,485 1,485 1,650 1,650 1,650 1,650 1,815 17,589
Total 2,129 2,905 2,380 2,380 2,710 2,710 2,710 2,875 2,875 2,875 2,875 3,040 32,464
Graphics
Photos 150 150 150 150 150 150 150 150 150 150 150 150 1,800
Printing 20,000 20,000 20,000 20,000 20,000 22,500 22,500 22,500 22,500 20,000 22,500 25,000 257,500
Pre-press supplies 375 375 375 375 375 375 375 375 375 375 375 375 4,500
Misc Supplies 0 0 355 0 0 355 0 0 355 0 0 355 1,420
Misc. Shipping 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Total 21,025 21,025 21,380 21,025 21,025 23,880 23,525 23,525 23,880 21,025 23,525 26,380 271,220
Video Production
Tapes 2,500 2,500 3,000 3,500 3,000 3,500 2,250 2,500 3,000 3,000 3,250 3,000 35,000
Software/equipment 1,000 500 1,000 500 0 0 0 0 0 140 0 500 3,640
Printing 3,000 0 0 0 0 0 0 0 0 0 0 0 3,000
Talent Fees 750 1,000 1,200 1,200 1,200 1,200 1,200 1,800 1,200 1,200 1,800 1,200 14,950
Staging & Props 500 600 800 1,000 800 1,200 900 1,200 1,000 1,000 1,500 1,200 11,700
Rentals 400 400 450 500 550 600 450 500 550 500 650 600 6,150
Shipping 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 2,700 32,400
Tape Duplication 4,400 4,400 4,950 5,500 6,050 6,600 4,950 5,500 6,050 5,500 7,150 6,600 67,650
Total 15,250 12,100 14,100 14,900 14,300 15,800 12,450 14,200 14,500 14,040 17,050 15,800 174,490
Total COGS 94,804 92,430 99,910 97,055 102,435102,090 97,435 91,350 105,655105,640 116,800116,220 1,221,824
Gross Profit 159,596 174,670 180,190194,795 217,915221,260 205,915200,500 233,195233,710 260,050258,130 2,539,926
Firm Expenses
Advertising
Page 139
Ocala News Tonight 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000
Prod/Office personnel 750 750 750 750 750 750 750 750 750 750 750 750 9,000
CD Dup/Printing 0 3,000 0 0 3,000 0 0 3,000 0 0 3,000 0 12,000
Yellow Pages 450 450 450 450 450 450 450 450 450 450 450 450 5,400
Promotions 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Print 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Direct - Infomercials 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Misc. Firm Advertising 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Total Advertising 9,500 12,500 9,500 9,500 12,500 9,500 9,500 12,500 9,500 9,500 12,500 9,500 126,000
Automobile
Maintenance 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Caravan payment 364 364 364 364 364 364 364 364 364 364 364 364 4,368
New ONT vehicles 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Mercury 464 464 464 464 464 464 464 464 464 464 464 464 5,568
Volvo 504 504 504 504 504 504 504 504 504 504 504 504 6,048
Fuel 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 1,750 21,000
Vehicle Registration 0 0 200 0 79 0 0 0 0 0 0 0 279
Total Automobile 4,082 4,082 4,282 4,082 4,161 4,082 4,082 4,082 4,082 4,082 4,082 4,082 49,263
Bank Charges 40 40 40 40 40 40 40 40 40 40 40 40 480
Contributions 0 0 0 0 0 0 0 0 0 0 0 0 0
Company Fees
Copyright/Trademark 245 0 0 0 0 0 0 0 0 0 0 0 245
Internet Fees 900 900 900 900 900 900 900 900 900 900 900 900 10,800
Dues and Subscriptions 366 365 252 153 45 63 110 0 0 95 0 0 1,449
Education 200 0 0 300 0 300 0 300 0 300 100 300 1,800
Equipment Rental 101 101 1,200 101 757 1,695 575 101 0 101 101 101 4,934
Employee Moving Expenses 500 500 0 500 0 500 0 0 500 0 500 500 3,500
NDC Payment Systems 150 100 100 100 100 100 308 958
Misc. Fees 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Total Company Fees 2,762 2,166 2,752 2,254 2,102 3,758 1,985 1,601 1,800 1,696 2,001 2,409 27,286
Insurance
Auto 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Building/Property 425 425 425 425 425 425 425 425 425 425 425 425 5,100
Health 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 2,000 24,000
Media Liability 700 700 700 700 700 700 700 700 700 700 700 700 8,400
Addlt Liability 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Life Insurance 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Worker's Comp 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Total Insurance 5,125 5,125 5,125 5,125 5,125 5,125 5,125 5,125 5,125 5,125 5,125 5,125 61,500
Interest
Late charges 50 50 50 50 50 50 50 50 50 50 50 50 600
Finance Charges 450 450 450 450 450 450 450 450 450 450 450 450 5,400
Loan Int-Capital leases 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 2,200 24,162
Mortgage Interest 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 21,600
Other interest 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Lines of credit 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Total Interest 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 4,900 58,800
Janitorial/Maintenance
Pest Control 50 0 50 0 50 0 50 0 50 0 172 0 422
Cleaning/Supplies 156 109 227 114 179 62 256 194 67 21 238 150 1,773
Sanatation 44 44 44 44 44 44 44 44 44 44 44 44 528
Total Janitorial/Maintenance 250 153 321 158 273 106 350 238 161 65 454 194 2,723
Licenses and Permits 150 0 0 0 150 0 0 11 0 191 0 60 562
Page 140
Leases
Audio Visual 379 450 277 280 284 288 291 295 299 303 307 311 3,764
Computer Equip 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 14,400
Phone System 328 328 328 328 328 328 1,500 0 0 0 0 0 3,468
Production Equip 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
Total Leases 6,907 6,978 6,805 6,808 6,812 6,816 7,991 6,495 6,499 6,503 6,507 6,511 81,632
Lines of Credit
AmSouth 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200
Total-Lines of credit 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200
Office Space
Mortgage principal 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Jax Office rent 209 209 209 209 209 209 209 209 209 209 209 209 2,508
Orl Office rent 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Tampa Office rent 400 400 400 400 400 400 400 400 400 400 400 400 4,800
S. Florida Office rent 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Total Office Mort/Rent 1,709 1,709 1,709 1,709 1,709 1,709 1,709 1,709 1,709 1,709 1,709 1,709 20,508
Non-COGS Supplies
Office Supplies 695 800 400 700 650 350 400 300 600 800 650 550 6,895
Graphics software/equipment 700 200 200 200 200 200 200 200 200 200 200 200 2,900
Video software/equipment 1,250 1,250 500 500 500 500 500 500 500 500 500 500 7,500
Interactive software/equipment 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Printing 942 0 86 628 34 46 34 95 754 218 201 532 3,570
LAN Equip 100 100 100 100 100 100 100 100 100 100 100 100 1,200
Acct Software 0 0 1,000 0 0 0 0 0 0 0 0 0 1,000
Grocery 25 25 25 25 25 25 25 25 25 25 25 25 300
Video Production Supplies 500 500 500 500 500 400 500 400 500 400 500 500 5,700
Graphic Supplies 600 0 650 72 600 100 600 0 600 0 600 600 4,422
Film Processing 95 95 0 95 0 95 0 0 95 0 95 570
Pre-Press Supplies 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Audio Supplies 50 50 50 50 50 50 50 50 50 50 50 50 600
Total Office supplies 5,457 3,425 4,106 3,275 3,254 2,271 3,004 2,170 3,829 2,888 3,326 3,652 40,657
Payroll
Officers 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000
Staff 42,000 42,000 42,000 42,000 42,000 42,000 44,000 44,000 44,000 44,000 44,000 46,000 518,000
FUTA/SUTA 420 420 420 420 420 420 440 440 440 440 440 460 5,180
Commissions 15,264 16,026 16,806 17,511 19,221 19,401 18,201 17,511 20,331 20,361 22,611 22,461 225,705
Federal/Fica Tax 9,880 9,880 9,880 9,880 9,880 9,880 10,260 10,260 10,260 10,260 10,260 10,640 121,220
Staff incentives 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Total Payroll 78,064 78,826 79,606 80,311 82,021 82,201 83,401 82,711 85,531 85,561 87,811 90,061 996,105
Postage and Delivery
USPS 350 350 350 350 350 350 350 350 350 350 350 350 4,200
Unishippers 550 550 550 550 550 550 550 550 550 550 550 550 6,600
Other 50 50 50 50 50 50 50 50 50 50 50 50 600
Total Postage & Delivery 950 950 950 950 950 950 950 950 950 950 950 950 11,400
Professional Fees
Accountant 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Consulting 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Legal 550 550 550 550 550 550 550 550 550 550 550 550 6,600
Collection Agent 1,272 1,336 1,401 1,459 1,602 1,617 1,517 1,459 1,694 1,697 1,884 1,872 18,809
Personnel 0 0 0 1,000 0 0 1,000 0 0 1,000 0 0 3,000
Total Professional Fees 3,222 3,286 3,351 4,409 3,552 3,567 4,467 3,409 3,644 4,647 3,834 3,822 45,209
Repairs and Maintenance
Computer repairs 250 500 250 500 250 500 250 500 250 500 250 500 4,500
Equipment repairs 450 450 1,500 450 450 450 450 450 450 450 450 450 6,450
Building repairs 200 150 200 150 200 150 300 150 300 150 300 150 2,400
Total Repairs & Maintenance 900 1,100 1,950 1,100 900 1,100 1,000 1,100 1,000 1,100 1,000 1,100 13,350
Sales Expenses
Sales Recruitment 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Direct Mailers 650 650 650 650 650 650 650 650 650 650 650 650 7,800
Sales contest/bonus 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Misc. Sales Expenses 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Total Sales Expenses 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 19,800
Page 141
Taxes
Personal property Firm 0 0 0 0 0 0 0 0 6,000 0 0 0 6,000
Real Estate 0 0 0 0 0 0 0 0 0 6,000 0 0 6,000
Sales Tax - Firm 530 530 530 530 530 530 530 530 530 530 530 530 6,360
Intangible/Tangible 0 0 98 280 0 0 0 0 0 0 0 0 378
Personal property Leases 41 351 41 233 41 41 312 41 41 41 292 184 1,659
State 0 500 0 0 0 110 0 106 138 126 0 90 1,070
Total tax 571 1,381 669 1,043 571 681 842 677 6,709 6,697 822 804 21,467
Telephone
Cellular 550 550 550 550 550 550 550 550 550 550 550 550 6,600
Local service 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Long Distance 800 800 800 800 800 800 800 800 800 800 800 800 9,600
Paging 85 85 85 85 85 85 85 85 85 85 85 85 1,020
Other 50 50 50 50 50 50 50 50 50 50 50 50 600
Total Telephone 1,985 1,985 1,985 1,985 1,985 1,985 1,985 1,985 1,985 1,985 1,985 1,985 23,820
Travel
Car Rental 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Airfare 500 500 700 700 700 500 500 500 500 500 500 500 6,600
Entertainment 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Travel other 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Lodging 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Meals 350 350 350 350 350 350 350 350 350 350 350 350 4,200
Tolls/Parking 100 100 100 100 100 100 100 100 100 100 100 100 1,200
Total Travel 2,350 2,350 2,550 2,550 2,550 2,350 2,350 2,350 2,350 2,350 2,350 2,350 28,800
Utilities
Electric 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Total Utilities 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Miscellaneous
Non compete fees 30 30 30 30 30 30 30 30 30 30 30 30 360
Misc. Expenses 150 150 150 150 400 400 150 150 150 150 150 150 2,300
Total Miscellaneous 180 180 180 180 430 430 180 180 180 180 180 180 2,660
Bad Debt 4,579 4,808 5,042 5,253 5,766 5,820 5,460 5,253 6,099 6,108 6,783 6,738 67,712
Gross Profit 159,596 174,670 180,190194,795 217,915221,260 205,915200,500 233,195233,710 260,050258,130 2,539,926
Total Expenses 137,033 139,293 139,172138,983 143,101140,741 142,671140,837 149,444149,627 149,710149,522 1,720,133
Pre-tax Profit* 22,563 35,377 41,018 55,812 74,814 80,519 63,244 59,663 83,751 84,083 110,340108,608 819,793
EBITDA 900,060
*Does not include depreciation GPM 68%
Certain expense items covered under use of investment proceeds are not included
NPM 22%
Page 142
Lorilei Communications, Inc. FY ending June 30, 2003
July Aug Sep Oct Nov Dec Jan Feb Mar April May June Total
Income
Commission 7,000 7,000 7,000 7,000 7,000 8,000 8,000 8,000 8,000 8,000 8,000 8,000 91,000
ONT Ad sales 40,000 40,000 45,000 40,000 50,000 45,000 45,000 40,000 45,000 50,000 55,000 50,000 545,000
North County Ad sales 40,000 40,000 45,000 40,000 50,000 45,000 45,000 40,000 45,000 50,000 60,000 50,000 550,000
Inland Empire Ad sales 10,000 15,000 20,000 20,000 25,000 25,000 30,000 30,000 35,000 40,000 45,000 45,000 340,000
Retainer 8,000 8,000 8,000 8,000 8,000 8,000 10,000 10,000 10,000 10,000 10,000 10,000 108,000
Video Production 60,000 60,000 70,000 70,000 65,000 60,000 65,000 55,000 65,000 65,000 80,000 65,000 780,000
Graphics 45,000 45,000 45,000 45,000 50,000 45,000 45,000 45,000 45,000 45,000 45,000 45,000 545,000
Pre-press 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000
Airtime 75,000 75,000 80,000 85,000 85,000 80,000 80,000 70,000 90,000 85,000 95,000 95,000 995,000
Brokered Spot airtime 40,000 40,000 40,000 45,000 50,000 50,000 50,000 40,000 45,000 45,000 45,000 40,000 530,000
Fees-Misc 10,000 10,000 15,000 10,000 10,000 10,000 10,000 8,000 9,000 10,000 12,000 10,000 124,000
Web Design 8,000 8,000 10,000 8,000 10,000 8,000 8,000 7,000 10,000 8,000 12,000 8,000 105,000
Still Photography 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 1,200 14,400
CD-Rom 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000
Audio Production 4,000 4,000 7,000 5,000 8,000 5,000 6,000 4,000 5,000 5,000 8,000 6,000 67,000
Public Relations 5,000 5,000 6,000 5,000 5,000 4,500 5,000 4,500 5,000 5,000 6,000 5,000 61,000
Client Promotions 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000
Web Maintenance 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 5,500 66,000
Shipping Revenue 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000
Interest Income 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Total Income 378,500 383,500 424,500414,500 449,500420,000 433,500388,000 443,500452,500 507,500463,500 5,159,000
Cost of Goods Sold
Spot Airtime 26,400 26,400 26,400 29,700 33,000 33,000 33,000 26,400 29,700 29,700 29,700 26,400 349,800
CLA 33,750 33,750 36,000 38,250 38,250 36,000 36,000 31,500 40,500 38,250 42,750 42,750 447,750
Program Airtime 1,500 1,500 1,600 1,700 1,700 1,600 1,600 1,400 1,800 1,700 1,900 1,900 19,900
ONT CLA 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 4,500 54,000
North County CLA 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 78,000
Inland Empire CLA 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 6,500 78,000
Total 79,150 79,150 81,500 87,150 90,450 88,100 88,100 76,800 89,500 87,150 91,850 88,550 1,027,450
Client Promotions 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 1,400 16,800
Internet Fees 1,815 1,815 1,815 1,815 1,815 1,815 1,815 1,815 1,815 1,815 1,815 1,815 21,780
Total 3,215 3,215 3,215 3,215 3,215 3,215 3,215 3,215 3,215 3,215 3,215 3,215 38,580
Graphics
Photos 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Printing 22,500 22,500 22,500 22,500 25,000 22,500 22,500 22,500 22,500 22,500 22,500 22,500 272,500
Pre-press supplies 425 425 425 425 425 425 425 425 425 425 425 425 5,100
Misc Supplies 0 0 500 0 0 500 0 0 500 0 0 500 2,000
Misc. Shipping 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Total 23,725 23,725 24,225 23,725 26,225 24,225 23,725 23,725 24,225 23,725 23,725 24,225 289,200
Video Production
Tapes 2,500 2,500 3,000 3,500 3,000 3,500 3,250 2,750 3,000 3,000 4,000 3,250 37,250
Software/equipment 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Printing 3,000 0 0 0 0 0 3,000 0 0 0 0 0 6,000
Talent Fees 750 1,000 1,200 1,200 1,200 1,200 1,200 1,800 1,200 1,200 1,800 1,300 15,050
Staging & Props 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 1,500 18,000
Rentals 750 750 750 750 750 750 750 750 750 750 750 750 9,000
Shipping 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 3,600 43,200
Tape Duplication 6,600 6,600 7,700 7,700 7,150 6,600 7,150 6,050 7,150 7,150 8,800 7,150 85,800
Total 19,700 16,950 18,750 19,250 18,200 18,150 21,450 17,450 18,200 18,200 21,450 18,550 226,300
Total COGS 125,790 123,040 127,690133,340 138,090133,690 136,490121,190 135,140132,290 140,240134,540 1,581,530
Gross Profit 252,710 260,460 296,810281,160 311,410286,310 297,010266,810 308,360320,210 367,260328,960 3,577,470
Firm Expenses
Advertising
Ocala News Tonight 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 2,500 30,000
North County News Tonight 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 3,500 42,000
Prod/Office personnel 750 750 750 750 750 750 750 750 750 750 750 750 9,000
CD Dup/Printing 0 3,000 0 0 3,000 0 0 3,000 0 0 3,000 0 12,000
Yellow Pages 650 650 650 650 650 650 650 650 650 650 650 650 7,800
Promotions 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Print 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 4,000 48,000
Direct - Infomercials 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 5,000 60,000
Misc. Firm Advertising 750 750 750 750 750 750 750 750 750 750 750 750 9,000
Total Advertising 17,450 20,450 17,450 17,450 20,450 17,450 17,450 20,450 17,450 17,450 20,450 17,450 221,400
Page 143
Automobile
Maintenance 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Caravan payment 364 364 364 364 364 364 364 364 364 364 364 364 4,368
ONT vehicles 400 400 400 400 400 400 400 400 400 400 400 400 4,800
North County news vehicles 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Mercury 464 464 464 464 464 464 464 464 464 464 464 464 5,568
Volvo 504 504 504 504 504 504 504 504 504 504 504 504 6,048
Fuel 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 2,600 31,200
Vehicle Registration 300 0 300 0 300 0 0 0 0 0 0 0 900
Total Automobile 5,632 5,332 5,632 5,332 5,632 5,332 5,332 5,332 5,332 5,332 5,332 5,332 64,884
Bank Charges 60 60 60 60 60 60 60 60 60 60 60 40 700
Contributions 0 0 0 1,000 0 0 0 0 0 0 0 0 1,000
Company Fees
Copyright/Trademark 245 0 0 0 0 245 0 0 0 0 0 0 490
Internet Fees 950 950 950 950 950 950 950 950 950 950 950 950 11,400
Dues and Subscriptions 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Education 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Equipment Rental 101 101 1,200 101 757 1,695 575 101 101 101 101 101 5,035
Employee Moving Expenses 500 500 0 500 0 500 0 0 500 0 500 500 3,500
NDC Payment Systems 150 100 100 100 100 100 308 958
Misc. Fees 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Total Company Fees 2,746 2,351 3,050 2,351 2,607 4,190 2,425 1,851 2,451 1,851 2,451 2,659 30,983
Insurance
Auto 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 1,600 19,200
Building/Property 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Health 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Media Liability 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Addlt Liability 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Life Insurance 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Worker's Comp 700 700 700 700 700 700 700 700 700 700 700 700 8,400
Total Insurance 7,700 7,700 7,700 7,700 7,700 7,700 7,700 7,700 7,700 7,700 7,700 7,700 92,400
Interest
Late charges 50 50 50 50 50 50 50 50 50 50 50 50 600
Finance Charges 450 450 450 450 450 450 450 450 450 450 450 450 5,400
Loan Int-Capital leases 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 2,400 24,162
Mortgage Interest 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 21,600
Other interest 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Lines of credit 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Total Interest 5,100 5,100 5,100 5,100 5,100 5,100 5,100 5,100 5,100 5,100 5,100 5,100 61,200
Janitorial/Maintenance
Pest Control 50 0 50 0 50 0 50 0 50 0 172 0 422
Cleaning/Supplies 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Sanatation 88 88 88 88 88 88 88 88 88 88 88 88 1,056
Total Janitorial/Maintenance 338 288 338 288 338 288 338 288 338 288 460 288 3,878
Licenses and Permits 150 0 0 0 150 0 0 11 0 191 0 60 562
Leases
Audio Visual 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Computer Equip 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 1,800 21,600
Phone System 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Production Equip 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 6,000 72,000
Total Leases 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 8,600 103,200
Lines of Credit
AmSouth 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200
Total-Lines of credit 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 1,100 13,200
Office Space
Mortgage principal 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Jax Office rent 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Orl Office rent 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Tampa Office rent 400 400 400 400 400 400 400 400 400 400 400 400 4,800
S. Florida Office rent 750 750 750 750 750 750 750 750 750 750 750 750 9,000
North County Studio/office 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 3,000 36,000
Total Office Mort/Rent 5,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 2,350 64,200
Page 145
Non-COGS Supplies
Office Supplies 695 800 400 700 650 350 400 300 600 800 650 550 6,895
Graphics software/equipment 700 200 200 200 200 200 200 200 200 200 200 200 2,900
Video software/equipment 1,250 1,250 500 500 500 500 500 500 500 500 500 500 7,500
Interactive software/equipment 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Printing 942 0 86 628 34 46 34 95 754 218 201 532 3,570
LAN Equip 100 100 100 100 100 100 100 100 100 100 100 100 1,200
Acct Software 0 0 1,000 0 0 0 0 0 0 0 0 0 1,000
Grocery 25 25 25 25 25 25 25 25 25 25 25 25 300
Video Production Supplies 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Graphic Supplies 600 0 650 72 600 100 600 0 600 0 600 600 4,422
Film Processing 95 95 0 95 0 95 0 0 95 0 95 570
Pre-Press Supplies 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Audio Supplies 50 50 50 50 50 50 50 50 50 50 50 50 600
Total Office supplies 5,457 3,425 4,106 3,275 3,254 2,371 3,004 2,270 3,829 2,988 3,326 3,652 40,957
Payroll
Officers 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 10,000 120,000
Staff 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 52,000 624,000
FUTA/SUTA 520 520 520 520 520 520 520 520 520 520 520 520 6,240
Commissions 22,710 23,010 25,470 24,870 26,970 25,200 26,010 23,280 26,610 27,150 30,450 27,810 309,540
Federal/Fica Tax 11,780 11,780 11,780 11,780 11,780 11,780 11,780 11,780 11,780 11,780 11,780 11,780 141,360
Staff incentives 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Total Payroll 97,510 97,810 100,270 99,670 101,770100,000 100,810 98,080 101,410101,950 105,250102,610 1,207,140
Postage and Delivery
USPS 350 350 350 350 350 350 350 350 350 350 350 350 4,200
Unishippers 550 550 550 550 550 550 550 550 550 550 550 550 6,600
Other 50 50 50 50 50 50 50 50 50 50 50 50 600
Total Postage & Delivery 950 950 950 950 950 950 950 950 950 950 950 950 11,400
Professional Fees
Accountant 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Consulting 400 400 400 400 400 400 400 400 400 400 400 400 4,800
Legal 550 550 550 550 550 550 550 550 550 550 550 550 6,600
Collection Agent 1,893 1,918 2,123 2,073 2,248 2,100 2,168 1,940 2,218 2,263 2,538 2,318 25,795
Personnel 0 0 0 1,000 0 0 1,000 0 0 1,000 0 0 3,000
Total Professional Fees 3,843 3,868 4,073 5,023 4,198 4,050 5,118 3,890 4,168 5,213 4,488 4,268 52,195
Repairs and Maintenance
Computer repairs 250 500 250 500 250 500 250 500 250 500 250 500 4,500
Equipment repairs 450 450 1,500 450 450 450 450 450 450 450 450 450 6,450
Building repairs 200 150 200 150 200 150 300 150 300 150 300 150 2,400
Total Repairs & Maintenance 900 1,100 1,950 1,100 900 1,100 1,000 1,100 1,000 1,100 1,000 1,100 13,350
Sales Expenses
Sales Recruitment 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Direct Mailers 650 650 650 650 650 650 650 650 650 650 650 650 7,800
Sales contest/bonus 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Misc. Sales Expenses 200 200 200 200 200 200 200 200 200 200 200 200 2,400
Total Sales Expenses 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 1,650 19,800
Taxes
Personal property Firm 0 0 0 0 0 0 0 0 6,000 0 0 0 6,000
Real Estate 0 0 0 0 0 0 0 0 0 6,000 0 0 6,000
Sales Tax - Firm 600 600 600 600 600 600 600 600 600 600 600 600 7,200
Intangible/Tangible 0 0 98 280 0 0 0 0 0 0 0 0 378
Personal property Leases 200 200 200 200 200 200 200 200 200 200 200 200 2,400
State 0 500 0 0 0 110 0 106 138 126 0 90 1,070
Total tax 800 1,300 898 1,080 800 910 800 906 6,938 6,926 800 890 23,048
Page 146
Telephone
Cellular 550 550 550 550 550 550 550 550 550 550 550 550 6,600
Local service 750 750 750 750 750 750 750 750 750 750 750 750 9,000
Long Distance 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Paging 125 125 125 125 125 125 125 125 125 125 125 125 1,500
Other 50 50 50 50 50 50 50 50 50 50 50 50 600
Total Telephone 2,475 2,475 2,475 2,475 2,475 2,475 2,475 2,475 2,475 2,475 2,475 2,475 29,700
Travel
Car Rental 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Airfare 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 1,000 12,000
Entertainment 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Travel other 300 300 300 300 300 300 300 300 300 300 300 300 3,600
Lodging 500 500 500 500 500 500 500 500 500 500 500 500 6,000
Meals 350 350 350 350 350 350 350 350 350 350 350 350 4,200
Tolls/Parking 100 100 100 100 100 100 100 100 100 100 100 100 1,200
Total Travel 2,850 2,850 2,850 2,850 2,850 2,850 2,850 2,850 2,850 2,850 2,850 2,850 34,200
Utilities
Electric 600 800 800 800 800 800 800 800 800 800 800 800 9,400
Total Utilities 600 800 800 800 800 800 800 800 800 800 800 800 9,400
Miscellaneous
Non compete fees 30 30 30 30 30 30 30 30 30 30 30 30 360
Misc. Expenses 150 150 150 150 400 400 150 150 150 150 150 150 2,300
Total Miscellaneous 180 180 180 180 430 430 180 180 180 180 180 180 2,660
Bad Debt 6,813 6,903 7,641 7,461 8,091 7,560 7,803 6,984 7,983 8,145 9,135 8,343 92,862
Gross Profit 252,710 260,460 296,810281,160 311,410286,310 297,010266,810 308,360320,210 367,260328,960 3,577,470
Total Expenses 178,254 176,642 179,223177,845 182,255177,316 177,895174,977 184,714185,249 186,507180,447 2,161,319
Pre-tax Profit* 74,457 83,819 117,588103,316 129,156108,994 119,116 91,833 123,647134,962 180,754148,514 1,416,151
EBITDA 1,500,399
*Does not include depreciation GPM 69%
Certain expense items covered under use of investment proceeds are not included
NPM 27%
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 147
Schedule to Reorganization Agreement
by and among
Amerinet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
SCHEDULE 5.13-2 USE OF PROCEEDS
Attached are the Use of Proceeds
Use of Proceeds
Set forth below is Lorilei's anticipated use of the cash available to
Lorilei after deduction of estimated remaining offering expenses of $12,500.
Pursuant to the Reorganization Agreement. Lorilei would receive $487,500 of
net proceeds from this reorganization after deduction of the expenses of the
reorganization. The net proceeds of this offering will be used:
To pay existing accounts receivable and personal property and real estate
taxes.; To repair existing equipment and purchase new equipment To employ
additional support staff To pay advertising and marketing costs, and to provide
working capital.
The amounts and timing of expenditures for each purpose is subject to the
broad discretion of the management and will depend on factors such as the amount
of net proceeds available to Lorilei and the effects of competition, many of
which are beyond Lonlei's control.
Accounts Payable and Taxes $198,854.00
Equipment 8,000.00
Salaries 30,646.00
Advertising/Marketing 100,000.00
Working Capital 150.000.00
Total $487,500.00
The initial $100,000 payment made to Lorilei will be used to pay
approximately $42,000 of the accounts payable and taxes with the balance being
use to pay equipment, salaries and working capital. The remaining four (4)
payments of $100,000 w-ill be applied pro rata among the balance of the accounts
receivable, advertising/marketing and working capital.
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 148
Exhibit to Reorganization Agreement
by and among
AmeriNet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
EXHIBIT 2.25 REGULATION SB DISCLOSURE DOCUMENT
Attached to this exhibit is the supporting document for the above
referenced.
Exhibit 2.25 Regulation SB Disclosure Documents
Item 101. Description of Business
Lorilei Communications, Inc., a Florida corporation ("Lorilei"), was organized
in July of 1994 by Gerald R. Cunningham, its current president, and Leigh A.
Cunningham, its current secretary/treasurer. Lorilei is the successor to a
Florida general partnership doing business as "The Firm."
Lorilei is a full-service advertising/marketing company under the trade name
"The Firm Multimedia". Lorilei offers an array of advertising and marketing
services including in-house production of video, audio, internet authoring,
interactive CD-Rom, graphics, and pre-press. We believe our pricing market is
companies wishing to enter the direct response and e-commerce markets, rather
than traditional "image" advertisers.
Lorilei was formed to provide advertising services to regional and local
advertisers, as well as marketers who needed an incremental program. We believe
that Lorilei's ability to provide production services in-house as a result of
new lower cost technology provides it with competitive advantages in speed,
quality and price over larger advertising agencies and marketing companies which
subcontract most of their production.
As a result of seeking solutions for direct response clients and in order to
further enhance its capabilities, Lorilei has used commercial leased access
(CLA) to cable systems and has been instrumental in the formulation of FCC rules
regulating CLA.
Through CLA, Lorilei has the capacity to offer clients cable access for 1/2 hour
or longer television programming on a full-time or part-time basis, including
cable access in prime-time. Through a proprietary database developed over a
four-year period, Lorilei has the ability to place television programs on
virtually any cable television system in the United States. Under FCC rules, the
cost of CLA access is only the minimal fees determined by the FCC's "implicit
fee" formula, plus any actual costs of tape playback or satellite reception.
Therefore, Lorilei believes it is positioned as a resource for direct response
airtime placement as rates which are regulated by the Federal government, and as
a result, are significantly lower than the rates charged by broadcast
television.
In January, 2000 Lorilei started a venture under the trade name "Ocala News
Tonight" (ONT). ONT is a half-hour advertiser-supported television news program
featuring local news, weather and sports cablecast at 6:30 PM and again at 10:30
PM to approximately 73,000 cable households in the Marion County, Florida area.
This geographic area is part of the Orlando, FL television ADI, however the area
receives very little local television news coverage from the distant Orlando
television outlets.
ONT is the prototype of a concept Lorilei intends to replicate in other market
areas with similar characteristics across the nation. Utilizing efficiencies in
desktop video, and new technological innovations in "prosumer" cameras, this
concept allows television news to be produced at a much lower cost than was
previously possible, allowing for profitability on a community basis.
Lorilei maintains web sites under each of its trade names. The Firm Multimedia
web site features video/audio clips demonstrating our work, as well as examples
of graphic design and links to authored web sites. Our web site is a major
source of client lead generation for the company. Ocala news tonight also has a
website used primarily as an interactive focal point for the viewing audience.
It includes content updated on a daily basis with highlights from the newscast,
as well as viewer opinion polls. Advertising is accepted at the ONT website.
Lorilei currently employs approximately 22 persons and anticipates adding up to
ten additional staff in the near term, primarily in sales, marketing and support
functions. Lorilei leases field sales offices in Jacksonville and Orlando,
Florida, and intends to open additional offices in the Tampa Bay and Boca Raton,
Florida areas within the year 2000.
Currently Lorilei does not have any material portion of its assets, operations
or customers located outside of the United States. Substantially all of
Lorilei's revenues are from customers within the United States, where all of
Lorilei's services are provided.
Page 149
Industry Overview
Domestic advertising expenditures were estimated at $308.9 Billion in 1999. Of
this sum, 57.1% or $176.5 Billion is devoted to some form of direct marketing,
up 7.2% over 1998. The market for direct marketing overall is highly fragmented
across direct mail and telephone marketing which account for about half of the
total, however direct response television (DRTV), a $20.4 Billion market, is a
much less fragmented segment and is growing at a faster pace than
directmarketing overall. DRTV expenditures increased by 58% in the period
1994-1999 versus overall direct marketing which increased by 46%. DRTV predates
the Internet in empowering the consumer with the ability to purchase direct.
With $1.5 trillion in goods and services expected to be sold over the Internet
by 2003 (Bear Stearns E-volve report) DRTV is a natural means of not only
converting television viewers into website browsers, but adding the capacity to
demonstrate features and abilities of the website. The same Bear Stearns report
estimates spending on Internet infrastructure tools to expand to over $4 billion
by 2003, up from $600 million in 1999. One of the key issues is the pressure
from companies and consumers for increased bandwidth. As general bandwidth to
access the Internet expands, video via Internet, with utilization of interactive
application software already available, becomes more and more viable.
Strategic Plans
Operating Strategy
Lorilei's mission for The Firm Multimedia is to provide high-quality content
that creates demand for client's products and services; to offer candid, solid
consultative advice that results in increase sales; to provide avenues of
exposure such as CLA that are effective and that are not easily duplicated by
potential competitors; to embrace and anticipate opportunities made possible
byemerging technology and to rapidly focus on ways and means for our clients to
benefit.
Lorilei's mission for Ocala news tonight is to present content that is focused
on local news, weather, and sports in a style which both appeals to and reflects
the community, thus making ONT a staple choice in our viewing area and providing
results and value for our advertisers. By accomplishing these goals with ONT we
will be able to replicate our format and business approach in our planned
expansion markets.
Lorilei has formulated a strategy to meet these goals with the businesses we
have built under both of the above trade names, resulting in profitability and
dividends for our shareholders.
Lorilei's management believes that:
Increased sales volume will result in economies of scale which will enhance The
Firm Multimedia and Ocala news tonight's profitability. We intend to
aggressively recruit professional inside and outside salespeople and launch an
intensive advertising and marketing campaign for both trade names. A wealth of
potential business exists in B2B website promotion. We're finding many
relatively large companies with websites but without an Internet strategy. These
companies will eventually be compelled to rely on companies such as The Firm
Multimedia for assistance or go out of business. Our advantage is we can develop
the strategy, the message, and provide the media. Brick and mortar retailers
will be forced to seek non-traditional revenue streams in order to compete with
e-retailers. One of the best ways to accomplish this is through establishing a
strong e-commerce website and supporting it with DRTV; resulting in telephone
orders as well as orders from the website.
Comprehensive Brand Strategy
For The Firm Multimedia, we will launch a multi-pronged advertising/marketing
campaign utilizing:
-National DRTV print and directory ads
-Regional business publication print ads
-Keyword-driven Internet banner ads
-Business to business ("B2B") direct mail
-B2B telemarketing
Our goal is to develop top of mind awareness for The Firm Multimedia as a
company and to develop a lead generation system for our
inside and outside salespeople.
For Ocala news tonight, (and as a prototype for expansion markets) we will
launch an advertising/marketing campaign consisting of:
-100 showing of metro area poster outdoor over a 3 month period
-High frequency cable spot on the systems we service
-New creative for our existing bartered radio campaign
-Vinyl signs on ONT vehicles
-Direct mail revenue-generating promotion campaign with a four-color prize
mailer (we intend to include Vista and Trilogy in this
promotion)
-B2B direct mailer announcing the campaign as a lead generation source for our
outside salespeople.
-On-going revenue-generating co-promotions featuring ONT personalities
on-location at client locations.
Page 150
Growth Strategy
Lorilei's plan for growth is multifaceted. The company intends to grow through
recruiting additional professional salespeople in the specialized market
segments the company intends to service, and to open additional sales offices in
geographically targeted areas. The company also intends to establish additional
news operations similar in structure to Ocala News Tonight, in areas of the U.S.
which demonstrate an abundant advertiser base, community identity, and that are
either under-served by broadcast television news due to the large size of the
television ADI, due to geographic boundaries or terrain which segment the
market, or in some cases, markets with a substantial Spanish-speaking population
which is not served by Spanish Language television news. Lorilei also intends to
grow by acquisition of companies we feel are synergistic with its operations.
Investment in Technology
Lorilei has made an investment in emerging technology through its history as a
company and has, as an example, made the transition to digital, non linear video
editing versus the older tape-based linear tape editing. We expect to invest in
high definition video equipment as distribution facilities and HDTV sets-in-use
increases to critical mass. We intend to position ourselves as the company
offering advanced solutions to the latest Internet applications, including
Internet broadcasting. We also intend to produce content for the Internet which
may be offered to other Internet broadcasters for a fee.
Economies of Scale and Best Practices
Lorilei's management believes that it will achieve significant economies of
scale as gross sales levels increase. This is possible through performing most
of the work at the Ocala headquarters due to lower cost of living, beneficial
quality of life, and resultant moderate salaries, plus productivity gains made
possible through benchmarking employee compensation to productivity, revenue
management processes, increased vertical integration resulting maximizing
customer revenues by extending projects through multiple content platforms (i.e.
graphics clients become video clients), etc.
Expansion Through Acquisitions
Beginning in 2001, Lorilei will seek to acquire marketing and advertising
companies in order to gain market share, increase overall sales volume,
geographic reach and add complimentary services (i.e. direct response
fulfillment). These acquisitions could also include companies which have
developed a specific product or service which management feels has considerable
profit potential utilizing our marketing methods and capabilities.
Company Services
Lorilei currently offers its services primarily in the United States. The Firm
Multimedia clients may be located in any geographic area with the transaction
facilitated by Internet, fax, courier, or in some cases in-person sales calls to
the client location. In some cases the client travels to Lorilei's offices. Our
plan is to continue to extend our physical presence by adding additional sales
offices, first in Florida, then regionally and nationally. Ocala news tonight
clients are primarily located in Marion County, Florida. As additional news
markets are added the clients for each news operation will also primarily be
located in the community of service. Sales facilities for The Firm Multimedia
will be co-located with each news facility, including field content acquisition
support personnel where practical. Raw content will be shipped or transmitted to
the Ocala production facility for post-production.
E-Commerce
Lorilei provides clients with a turn-key e-commerce approach by both authoring
the website and providing marketing and advertising services to drive traffic.
The company provides clients with consultative advice across a wide range of
issues including domain names and registration, input on competitive content
items such as pricing, placement, inventory, target marketing, and demographic,
qualitative and perceptual customer research.
The company utilizes the latest state of the art software including "Flash"
"Shockwave" and Quicktime video to author client websites with rich content.
Each website is custom-authored according to the client's specifications and may
include specialized applications such as database access. Lorilei believes rich
content websites, including sites featuring video and audio, will become a
critical component in commercial website development as competition on the
Internet continues to drive more complex websites. The company envisions
becoming a leader in the e-commerce web development business.
DRTV
The company offers a comprehensive solution for direct response television
marketers including concept, scripting, infomercial and spot production, media
planning and placement, as well as an array of direct response-related graphics
services. The fact that Lorilei offers a wide breadth of services, with in-house
facilities and staff, sets it apart in the DRTV industry and is a significant
competitive advantage for those clients seeking a turn-key solution. Most of the
company's past and current clientele is direct, rather than agency business. The
company intends to continue on this course.
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Lorilei has contacts at major cable networks and broadcast stations, and has the
ability to buy airtime competitively on a supply and demand basis. Most
half-hour infomercial time is limited to non-productive spot revenue time for
the broadcaster or cablecaster. Typically these blocks of time are not
productive for spot revenue due to a low level of households using television
(i.e. overnights, early mornings).
Lorilei's ability to purchase half-hour airtime in prime-time viewing hours
through channel leasing, on a market-targetable basis gives it a primary niche
in the DRTV business. This is a highly profitable business due to government
regulation keeping the price fixed according to an FCC formula, rather than
floating with supply and demand. Our goal is to increase awareness of our
offerings in this segment at the agency and buying-service level and to increase
business with the DRTV trade, as well as from direct to client business.
Channel Leasing
Lorilei has pioneered the use of channel leasing options mandated by cable
deregulation and through petitions filed with the Federal Communications
Commission has played a major role in shaping the rules under which this
capacity is available (see "Lorilei" at xxx.xxx). The company has developed a
proprietary database of cable systems, enabling it to make channel leasing a
viable option for its clients with the ability to accurately quote rates,
household counts, and in some cases channel position in the individual system
lineup, all in a format which meets the criteria of the client. No other company
that we are aware of has the ability at this time. Lorilei intends to continue
development of the database to increase both the quantity and quality of the
available information.
Channel leasing is available on both part-time and full-time levels up to the
set-aside capacity of the cable system. Up to the present time Lorilei has
focused on part-time channel leasing, however management feels the timing is
right to begin marketing a full-time channel leasing service to larger
advertisers and marketers. Under the rules, a cable operator must open a channel
for use with as little as an eight-hour daily commitment for a one-year period.
With the advent of the Internet, large companies are beginning to alter their
strategies as they relate to reaching prospects and converting them into
customers. The Internet offers an interactive 24/7 portal to connect the
prospect or customer directly to the company, however it is somewhat limited in
content due to bandwidth limitations.
Lorilei management feels there are companies that are searching for a
competitive edge in reaching the consumer on a long-form basis in persuasive
ways the Internet cannot yet offer. Channel leasing is an option most large
companies are not aware of, therefore Lorilei intends to focus a portion of its
marketing effort to increase awareness and market channel leasing as a tool for
these companies. This effort could have a substantial impact on the projected
revenues for the company as landing even one full-time channel leasing client in
a moderate number of markets would easily quadruple or quintuple current
projections for both gross revenue and net profit.
Governmental Regulation
Lorilei's success is dependent in part on the existence of federal regulations
which require cable operations to lease cable access at low rates pursuant to
FCC rules promulgated under the 1992 Cable Act. A change in the Cable Act or the
regulations promulgated thereunder could significantly impair our ability to
successfully compete against larger advertising companies.
The statutory framework for commercial leased access was established by the 1984
Act and amended by the 1992 Cable Act. The 1984 Cable Act established leased
access to assure access to the channel capacity of cable systems by parties
unaffiliated with the cable operator who want to distribute video programming
free of the editorial control of the cable operator. Channel set-aside
requirements were established in proportion to a system's total activated
channel capacity, in order to "assure that the widest possible diversity of
information sources are made available to the public from cable systems in a
manner consistent with the growth and development of cable systems." A cable
system operator was permitted to use any unused leased access channel capacity
for its own purposes, until such time as a written agreement for a leased
channel use was obtained. Each system operator subject to this requirement was
to establish the "price, terms, and conditions of such use which are at least
sufficient to assure that such use will not adversely affect the operation,
financial condition, or market development of the cable system."
The only exception to the leased commercial access channel set-aside under the
1984 Cable Act that up to 33 percent of a system's designated leased commercial
access channel capacity may be used for qualified minority or educational
programming from sources that may or may not be affiliated with the cable
operator. The qualified minority or educational source may be affiliated with
the operator.
The 1992 Cable Act amendments broadened the statutory purpose to include "the
promotion of competition in the delivery of diverse sources of video
programming," and the Commission was provided with expanded authority: (1) to
determine the maximum reasonable rates that a cable operator may establish for
leased access use, including the rate charged for the billing of subscribers and
for the collection of revenue from subscribers by the cable operator for such
use; (2) to establish reasonable terms and conditions for leased access,
including those for billing and collection; and (3) to establish procedures for
the expedited resolution of leased access disputes. The legislative history of
the 1992 amendments expresses concern that some cable operators may have
established unreasonable terms or may have had financial incentives to refuse to
lease channel capacity to potential leased access users based on
anti-competitive motives, especially if the operator had a financial interest in
the programming services it carried.
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Any person aggrieved by the failure or the refusal of a cable operator to make
commercial channel capacity available or to charge rates as required by
Commission rules may file a petition for relief with the Commission within 60
days of the alleged violation. In order to enforce its rights under the 1992
Act, we have filed a number of such petitions with varied results. In order to
merit relief, the petition must show by clear and convincing evidence that the
operator violated the leased access statutory or regulatory provisions or
otherwise acted unreasonably or in bad faith. Relief may be in the form of
refunds, injunctive relief or forfeitures. The Commission encourages parties to
use alternative dispute resolution procedures such as settlement negotiation,
conciliation, facilitation, mediation, fact finding, mini-trials and
arbitration. The 1992 Cable Act provides for both judicial and Commission review
of leased commercial access disputes
Ocala News Tonight
This trade name is a program concept whereby the company produces a nightly
advertiser-supported news program dedicated to a targeted geographic area,
similar to the familiar news/weather/sports format utilized by most local
broadcast television stations. The prototype program is produced six days per
week and airs twice nightly, at 6:30 PM and 10:30 PM seven days per week. The
company chose Ocala/Marion County, Florida as the prototype for the concept due
to the fact that the area met certain criteria and that production operations
were already established at The Firm Multimedia.
The criteria utilized to determine whether an area is viable includes but is not
limited to, market composition, market geography, market identity, presence of
local television news coverage, available advertising revenues (estimated as a
percentage of total retail sales), and cable television penetration.
In Ocala news tonight's case, the Ocala/Marion County area met the guidelines
management has developed. While the area is part of the Orlando television
market it receives very little local news coverage from the Orlando stations,
and minimal coverage from Gainesville stations located 35 miles away. Due to its
distance from Orlando and Gainesville, and with the Gainesville market's strong
identity with the University of Florida, it is highly unlikely any television
station from either area would make a concentrated effort to compete with the
program. The area has a local identity apart from either Orlando or Gainesville,
sufficient retail sales exists to provide a local advertiser base, and cable
television penetration meets the company's minimums.
Economies realized through new technology including desktop video and high
quality prosumer cameras have lowered the cost of production to a level making
the concept feasible. Fewer crew members are required for production, and
inexpensive prosumer cameras offer acceptable quality for news gathering.
Lorilei's experience in channel leasing is utilized in order to acquire prime
airing times on cable television. In ONT's situation, a network of four cable
systems are utilized to reach over 73,000 households in the area.
Management has identified two expansion markets for the concept and expects to
launch the first additional operation in July, 2001, with the second additional
operation coming online in July, 2002. These cost of launching these additional
operations may be funded from Lorilei cash flow or from additional capital
investment.
Beginning in July, 2003, Lorilei intends to launch two additional operations per
year for the next three years.
Sales and Marketing
Lorilei has used a combination of inside and outside sales representatives in
the past for The Firm Multimedia and intends to expand the use of inside sales
representatives in two areas (1) to support outside sales with appointment
setting, and (2) to sell DRTV to dot com and e-commerce companies and the DRTV
trade.The company also intends to expand its field sales offices to include
locations in South Florida, Tampa Bay, and Atlanta in the near term. Field sales
offices will also be co-located with additional ONT-type news operations.
In the past, The Firm Multimedia has employed generalist-type sales
professionals, expending considerable time in training the person to represent
the company across its many services. Management feels this approach needs
specificity, therefore it anticipates altering the approach to employ sales
professionals proficient in four major specialty areas: Print graphics,
DRTV/Video, Internet/e-commerce, Agency services.
Under this plan, the company will generate specific leads in under one of its
specialty areas and utilizing a consultative selling approach will identify
other specialty areas where it might be of service, bringing in that particular
salesperson at the appropriate time. Management believes the result will be less
time in training and higher sales revenues.
The company utilizes a mix of marketing tools, including an infomercial produced
to generate business to business leads, as well as direct mail, telemarketing,
trade and business publication print, Internet advertising, as well as trade
show displays.
Ocala news tonight utilizes outside sales representatives who call on local
business. Direct mail and on-air ad solicitation, as well as telemarketing by
the outside reps is utilized to generate leads.
153
Competition
The advertising industry is highly fragmented with low barriers to entry to
establish an advertising agency. Advertising production is also competitive,
however capital investment is still a barrier to entry. Lorilei competes with
other advertising agencies, television and radio stations, other direct response
television companies, and directly with cable television providers and
television broadcast in advertising sales for Ocala news tonight. Lorilei
competes for customers based on service, price, quality, specialized in-depth
knowledge, and creativity. Most DRTV competitors are located in Western U.S.
states, making West coast-based business a challenging.
Employees
As of April 1, 2000, Lorilei had 20 full time employees and 3 part-time
employees. Lorilei requires that all full-time employees sign a non-competition
and confidentiality agreement as a condition of employment. No employee
contracts currently exist and all employment is at will. No employees are
currently represented by an labor unions. Lorilei believes its relations with
employees to be good, however additional employees will need to be recruited to
meet its growth projections. Management believes that required personnel can be
recruited on acceptable terms.
Item 102. Properties
Lorilei's principle place of business is located at 7325 Southwest 32nd Street,
Ocala, Florida, 34474. This is an industrial park type setting where the other
businesses are warehouse or light manufacturing businesses. The building is
approximately 5,000 square feet in total space, with 3,500 square feet devoted
to office/production space and 1,500 square feet devoted to studio space. All
space is air-conditioned and heated. The property is encumbered by a first
mortgage in the original principal amount of $194,000.00 in favor of Small
Business Loan Source. The loan bears interest at the rate of 11.75% per annum
and is payable over a term of 25 years. The property is in the opinion of
Lorilei's management adequately covered by insurance.
Management believes the current facility to be adequate for anticipated growth
through the 2003 fiscal year. Management cannot, however, guarantee that the
square footage will be sufficient for all production operations. Additional
construction or additional leased space could be required, either of which could
result in additional unanticipated expense.
As part of expansion, additional sales offices in targeted major cities are
contemplated. Rental costs of this additional space are expected to be minimal
"office suite" type space and will expand with sales volume. However, if sales
volume becomes substantial in a given metropolitan area it could result in the
requirement of considerably more square footage in leased office space than has
been projected.
Item 103. Legal Proceedings
Lorilei is not a party to any pending legal proceedings. However, Lorilei
presently owes real and personal property taxes to the state of Florida in the
amount of $10,272.20. Lorilei has also declined to pay $21,420.00 to Home and
Garden Television (HGTV) pending confirmation of sums due.
Item 201. Market for Common Equity and Related Stockholder Matters
No market exists for Lorilei's common stock. There are two holders of the common
stock. Lorilei has not paid dividends during 1998, 1999 or 2000.
Item 202. Description of Securities
Lorilei's Articles of Incorporation, as amended, authorize it to issue 2,000
shares of common stock, $0.01 par value per share and 1,000,000 shares of
preferred stock, par value $.01. As of the date of this reorganization
agreement, 111 shares of the common stock were outstanding and no Preferred
Shares were outstanding. This description of the capital stock of Lorilei is
qualified by and subject to the Florida Business Corporation Act and Lorilei's
Articles of Incorporation and By-laws, copies of which Articles and By-laws have
been provided as exhibits hereto and to which reference is made for the
provisions thereof which are summarized below.
Common Stock
The holders of common stock are entitled to one vote per share on all matters to
be voted upon by the shareholders and have no cumulative voting rights. Holders
of common stock are entitled to receive ratably such dividends, if any, as may
be declared from time to time by the Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution, or winding up of
Lorilei, the holders of common stock are entitled to share ratably in all assets
remaining after payment of liabilities. The common stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are fully paid and nonassessable, and the shares of common stock
offered hereby will also be fully paid and nonassessable. The Articles also
recognize the obligation of the Corporation's stockholder AmeriNet Xxxxx.xxx,
Inc. to elect members to the Corporation's Board of Directors in the manner
reflected in the Reorganization Agreement between Lorilei and AmeriNet.
154
Undesignated Preferred Stock
The authorized but unissued preferred stock (1,000,000 shares) may be issued in
series, and shares of each series will have such rights and preferences as are
fixed by the Board of Directors in the resolutions authorizing the issuance of
that particular series. In designating any series of preferred stock, the Board
of Directors may, without further action by the holders of common stock:
-fix the number of shares constituting that series, and -fix the dividend
-rights, dividend rates, conversion rights, voting rights (which may be greater
or lesser than the voting rights of the common stock), and -fix the rights and
terms of redemption (including any sinking fund provisions), and the liquidation
preferences of the series of Undesignated Preferred Stock.
The holders of any series of preferred stock, when and if issued, are expected
to have priority claims to dividends and to any distribution upon liquidation of
Lorilei, and they may have other preferences over the holders of the common
stock.
The Board of Directors may issue series of preferred stock without action by the
shareholders of Lorilei. Accordingly, the issuance of preferred stock may
adversely affect the rights of the holders of the common stock. In addition, the
issuance of preferred stock may be used as an anti-takeover device without
further action on the part of the shareholders. Issuance of preferred stock may
dilute the voting power of holders of common stock One example of this dilution
would be the issuance of preferred stock with super-voting rights. The issuance
of preferred stock may render more difficult the removal of current management,
even if such removal may be in the shareholders' best interest. Lorilei has no
current plans to issue any additional preferred stock.
Lorilei has issued one promissory note for $46,143.00 to John B. LaTorraca which
bears interest at the rate of 8.5% per annum for which a total of $51,084.16 is
presently owed.
Item 303. Management's Discussion and Analysis or Plan of Operation
General
We provide businesses with advertising and marketing services. Our services
include creative production and placement in both new and old media. We believe
that our ability to place half-hour infomercials on cable television in
prime-time through commercial leased access will enable us to offer direct
response television services to a majority of companies striving to drive
e-commerce business. In 1998, Direct Response Magazine reported that $844
million ($844M) was spent on television infomercials which contributed to
generating over $759 billion ($759B) in consumer spending. By way of comparison,
industry authority International Data Corporation (IDC) estimates that consumers
will purchase only $16 billion ($16B) in goods from the Internet in 2000. The
e-commerce market is projected to hit $3.2 Trillion ($3.2T) by 2004 in North
America (Forrester Research).
Revenues
We classify revenues into the following major categories: Commission/retainer,
Video production, Graphics, Web, and Commercial Leased Access/Spot Airtime. The
following discussion does not include revenues for a new 2000 category, News.
Revenue Drivers
The principal factors that propel our revenues are detailed below.
Commission/retainer: Income from traditional commissioned ad agency time and
space business as well as ad agency monthly retainers, promotions and public
relations.
Video production: Includes income from both video and audio projects, including
brokered duplication.
Graphics: Income from all graphics projects including traditional layout and
design, brokered printing, pre-press as well as new
media-related projects such as animation.
Web: Includes income from web design, maintenance, hosting, and interactive
projects.
Commercial Leased Access/Spot and program airtime: Income from brokered time
sales (as contrasted with traditional ad agency 15% commission on time/space
purchases).
News will generate revenues from advertising sales beginning in 2000 and will
increase as new market operations are incrementally rolled out. The initial
operation is based at our Ocala, Florida headquarters.
We expect Commission/retainer income to decrease as business looks for a broader
solution to advertising and marketing challenges. Our goal is to replace this
income with project income in the other revenue driver categories.
Video production will increase due to our expanding direct response television
business and increased demand fueled by web-based video applications.
Graphics income will vary by the client mix of the company during a given fiscal
period with printing as the major variable.Print-intensive clients can have a
large impact on this revenue driver. Our goal is to seek this type of client and
enhance their usage of print with electronic media opportunities while servicing
their core advertising media.
155
Web-based revenue will increase dramatically as we increase our Internet hosting
capacity and implement new business plans for the Internet, including
development of a 15C2-11 website, as well as webcasting capacity.
Commercial Leased Access/spot and program airtime revenues will dramatically
increase in the coming years as more business discovers direct response
television and as the trend toward tightening of Infomercial availabilities
increases. For example, Turner Broadcasting recently ceased making half-hour
timeslots available.
Cost of Goods and Services
Costs are classified with the revenue stream to which they are related. The
major factors (exclusive of labor) associated with our costs are listed below:
-Printing costs associated with graphic print jobs
-Capitalized media
-Commercial Leased access and brokered spot airtime
-Videotape and videotape duplication
-Shipping costs
Results of Operations
Revenues from our business categories are as follows:
Year Ended December 31, 1999 Compared to Year Ended December 31, 1998
Revenue
Total revenues increased $109,468, or 11% to $1,102,329 for the year ended
December 31, 1999 from $992,861 for the year ended December 31, 1998. This
increase was attributable to the growth of Commercial leased access and
spot/program airtime sales.
Commission/retainer revenue decreased by $185,794 or 67.1% to $90,897 for the
year ended December 31, 1999 from $276,691 for the year ended December 31, 1998.
This is due mainly to client churn, however management believes this follows the
trend in the advertising industry. Middle market companies are now turning away
from traditional ad agencies toward project-based companies such as ours.
Video production revenue increased by $29,616 or 11.3% to $291,156 for the year
ended December 31, 1999 from $261,540 for the year ended December 31, 1998. This
increase is due in part to an on-going agreement with Advent Product development
for spot production.
Graphics revenue decreased by $105,599 or 31.7% for the year ended December 31,
1999 from $332,903 for the year ended December 31, 1998. This decrease is
partially due to client churn and partially due to a decrease in brokered
printing projects. This is a revenue category that is especially sensitive to
our client mix and will vary accordingly.
Web revenues increased by $10,055 or 60% for the year ended December 31, 1999
from $16,743 for the year ended December 31, 1998. This is due to increase
demand for web design, hosting, maintenance and interactive services. Management
expects this trend to continue into the foresable future.
Commercial leased access/spot and program airtime increased by $404,614 or 879%
to $450,610 in the year ended December 31, 1999 from $45,996 in the year ended
December 31, 1998. This increase is due to increased demand for prime-time
infomercial airings and in part due to capitalized Television and Radio spot
media. Management expects this category to continue to increase substantially in
2000.
Cost of Goods and Services
Costs of goods and services increased by $77,574 or 32% to $320,029 for the year
ended December 31, 1999, from $242,455 for the year ended December 31, 1998. As
a percentage of revenues, cost of goods and services for the year ended December
31, 1999 was 29%, compared with 24% for the year ended December 31, 1998. The
increase was due to an increase in capitalized agency billings resulting from a
shift in our agency client mix.
Payroll Expense
Payroll expense, including officer's salaries, increased by $28,136 or 6.8% to
$439,938 for the year ended December 31, 1999 from $411,802 for the year ended
December 31, 1998. As a percentage of revenues, payroll expense declined from
41% in the year ended December 31, 1998 to 39.9% for the year ended December 31,
1999. While overall payroll expense is expected to increase in 2000 due to new
hires in sales and for the news operation, management believes payroll will
remain close to 1999 levels as a percentage of revenues.
Depreciation Expense
Depreciation expense increased by $14,979 or 21% to $86,319 for the year ended
December 31, 1999 from $71,340 for the year ended December 31, 1998. This is due
to new equipment going into service in 1999.
156
Item 304. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
During Lorilei's two most recent fiscal years and during the year 2000, no
principal independent accountant or accountant for a significant subsidiary of
Lorilei on whom the principal accountant expressed reliance in its report has
resigned , declined to stand for reelection, or was dismissed. Lorilei's
financial statements during this period were not audited.
Item 306. Audit Committee Report
This item is not applicable inasmuch as no audit report has been received and an
audit committee has not been appointed.
Item 310. Financial Statements
Financial statements will be supplied following closing as required by Form 8-K.
Item 401. Directors, Executive Officers, Promoters and Control Persons
(a) Officers
Gerald R. Cunningham, age 48, has served as president, chief executive officer
and a member of the board of directors of Lorilei since its incorporation in
July of 1994, and as a partner in its predecessor, a Florida general partnership
operating under the fictitious name "The Firm," organized by Mr. Cunningham and
his wife during 1993. In 1991 Mr. Cunningham obtained a bachelor of science
degree in business administration from Pacific Western University located in Los
Angeles, California. In 1968 he received a third class radiotelephone operator's
permit from the United States Federal Communications Commission and began an
on-air radio broadcasting career with major market stations through 1982, when
he entered radio advertising sales and sales management, specializing in
improving sales at newly established stations or stations whose sales had
declined. Mr. Cunningham is not currently a director in any other company.
Leigh A. Cunningham, age 32, is Vice president, Secretary, and has been a member
of the board of directors of Lorilei since its incorporation in July of 1994,
and was a partner in its predecessor, a Florida general partnership operating
under the fictitious name "The Firm," organized by Ms. Cunningham and her
husband during 1993. Ms. Cunningham attended San Diego State University, San
Diego, California during 1986 and became a marketing coordinator for Pacific
Southwest Airlines' Executive Flyer Club in 1987. In 1988 Ms. Cunningham began a
career in radio broadcasting as a traffic manager, later moving into sales and
sales management. She was first elected Vice president, Secretary/Treasurer on
July 1, 1994. Mr. Cunningham is not currently a director in any other company.
(b) Significant Employees
Mary Lee, age 32, has served as business manager of Lorilei since October ,
1998. From April, 1994 to September 1998 she was Office Manager with Simmons,
Hart and Sheehe, an Ocala, Florida law firm.
Brian Trahan, age 37, has served as production manager since December, 1998.
From July, 1998 to December 1998 he was employed by Zebra Publishing,
Gainesville, Florida, as Production manager. From June 1995 to July 1997 Brian
was Creative Director for Belk's Florida and the South Georgia group office, and
from March 1994 to June 1995 Brian was Graphics coordinator at Bear Archery.
(c) Family relationships
Gerald and Leigh Cunningham are husband and wife.
(d) Not applicable.
None of the following events have occurred with regard to the directors,
executive officers, promoters or control persons of Lorilei during the last five
years:
1. Any bankruptcy petition filed by or against any business of which such person
was a general partner or executive officer either at the time of the bankruptcy
or within two years prior to that time;
2. Any conviction in a criminal proceeding or being subject to a pendingcriminal
proceeding (excluding traffic violations and
other minor offenses);
3. Being subject to any order, judgment, or decree, not subsequently reversed,
suspended or vacated, of any court of competent jurisdiction, permanently or
temporarily enjoining, barring, suspending or otherwise limiting his involvement
in any type of business, securities or banking activities; and
4. Being found by a court of competent jurisdiction (in a civil action), the
Commission or the Commodity Futures Trading Commission to have violated a
federal or state securities or commodities law, and the judgment has not been
reversed, suspended, or vacated.
157
Item 402 Executive Compensation
Lorilei's Articles of Incorporation, as amended, authorize it to issue 2,000
shares of common stock, $0.01 par value per share and 1,000,000 shares of
preferred stock, par value $.01. As of the date of this prospectus, 111 shares
of the common stock were outstanding and no Preferred Shares were outstanding.
This description of the capital stock of Lorilei is qualified by and subject to
the Florida Business Corporation Act and Lorilei's Articles of Incorporation and
By-laws, copies of which Articles and By-laws have been provided as exhibits
hereto and to which reference is made for the provisions thereof which are
summarized below.
Common Stock
The holders of common stock are entitled to one vote per share on all matters to
be voted upon by the shareholders and have no cumulative voting rights. Holders
of common stock are entitled to receive ratably such dividends, if any, as may
be declared from time to time by the Board of Directors out of funds legally
available therefor. In the event of liquidation, dissolution, or winding up of
Lorilei, the holders of common stock are entitled to share ratably in all assets
remaining after payment of liabilities. The common stock has no preemptive or
conversion rights or other subscription rights. There are no redemption or
sinking fund provisions applicable to the common stock. All outstanding shares
of common stock are fully paid and nonassessable, and the shares of common stock
offered hereby will also be fully paid and nonassessable. The Articles also
recognize the obligation of the Corporation's stockholder AmeriNet Xxxxx.xxx,
Inc. to elect members to the Corporation's Board of Directors in the manner
reflected in the Reorganization Agreement between Lorilei and AmeriNet.
Undesignated Preferred Stock
The authorized but unissued preferred stock (1,000,000 shares) may be issued in
series, and shares of each series will have such rights and preferences as are
fixed by the Board of Directors in the resolutions authorizing the issuance of
that particular series. In designating any series of preferred stock, the Board
of Directors may, without further action by the holders of common stock:
-fix the number of shares constituting that series, and -fix the dividend
rights, dividend rates, conversion rights, voting rights (which may be greater
or lesser than the voting rights of the common stock), and -fix the rights and
terms of redemption (including any sinking fund provisions), and the liquidation
preferences of the series of Undesignated Preferred Stock.
The holders of any series of preferred stock, when and if issued, are expected
to have priority claims to dividends and to any distribution upon liquidation of
Lorilei, and they may have other preferences over the holders of the common
stock.
The Board of Directors may issue series of preferred stock without action by the
shareholders of Lorilei. Accordingly, the issuance of preferred stock may
adversely affect the rights of the holders of the common stock. In addition, the
issuance of preferred stock may be used as an anti-takeover device without
further action on the part of the shareholders. Issuance of preferred stock may
dilute the voting power of holders of common stock One example of this dilution
would be the issuance of preferred stock with super-voting rights. The issuance
of preferred stock may render more difficult the removal of current management,
even if such removal may be in the shareholders' best interest. Lorilei has no
current plans to issue any additional preferred stock.
Item 403 Security Ownership of Certain Beneficial Owners and Management
Prior to May 11, 2000, none of the officers , directors or key employees of
Lorilei worked purusant to written employment agreements. During the previous
three fiscal years, the officers and directors of Lorilei have received the
following compensation:
158
SUMMARY COMPENSATION TABLE
==========================================================================================================
Name and
principal Year
position
(a) (b) Annual compensation Long-term compensation
==========================================================================================================
==========================================================================================================
All other
ther annual compen-
Salary Bonus ompensation sation
($) ($) O ($) ($)
c
(c) (d) (e) Awards Payouts (i)
==========================================================================================================
==========================================================================================================
Securities
under-
Restricted lying
stock options/ LTIP
award(s) SARs payouts
($) (#) ($)
==========================================================================================================
==========================================================================================================
G. Cunningham 1999 37375 15000 NA NA NA NA
==========================================================================================================
==========================================================================================================
L. Cunningham 1999 31146 15000 NA NA NA NA
==========================================================================================================
==========================================================================================================
G. Cunningham 1998 38625 12000
==========================================================================================================
==========================================================================================================
L. Cunningham 1998 32188 12000
==========================================================================================================
==========================================================================================================
G. Cunningham 1997 38475 8000
==========================================================================================================
==========================================================================================================
L. Cunningham 1997 30663 8000
==========================================================================================================
No dividends have been paid to any shareholder since inception. Since December
31, 1999, Gerald Cunningham has received total cash compensation or $13,383.72
and Leigh Cunningham has received total cash compensation of $10,764.18. No long
term compensation was awarded to either during that period. Since the inception
of Lorilei a total of $57,677.72 loans has been repaid to Mr. And Ms.
Cunningham. Lorilei provides child care for the children of Mr. And Ms.
Cunningham.
Item 403 Security Ownership of Certain Beneficial Owners and Management
The following tables set forth certain information regarding the beneficial
ownership of Lorilei's common stock as of May 3, 2000, for each person (or group
or affiliated persons) known to Lorilei to be the
-beneficial owners of more than 5% of its common stock,
-each director of Lorilei,
-each of Lorilei's executive officers, and
-all of the directors and officers as a group.
159
Common Stock Owned by Principal Shareholders, Officers and Directors
of Lorilei
Common Shares Common Shares
Beneficially Owned Prior Beneficially Owned After
to Reorganization Reorganization
Shareholder Name,
Corporate Office,
and Address Number Percent Percent
=============================================================================================
Gerald Cunningham. 111* 100% 0%
Director, Chairman of the
Board, President, Chief
Executive Officer
7325 S.W. 32nd Street
Ocala, Florida 34474
Leigh Cunningham . 111** 100% 0%
Director, Vice-President
Secretary
7325 S.W. 32nd Street
Ocala, Florida 34474
All Directors as a Group. 111 100% 0%
1) Owned as tenants by the entireties with Leigh Cunningham
2) Owned as tenants by the entireties with Gerald Cunningham
Item 404. Certain Relationships and Related Transactions
Lorilei provides child care for Mr. and Ms. Cunningham.
Item 405. Compliance with Section 16(a) of the Exchange Act
Lorilei does not have a class of equity securities registered pursuant to the
Exchange Act..
Item 503. Summary Information and Risk Factors
(a) Summary
Lorilei Communications, Inc. operates under two trade names, The Firm
Multimedia, a full-service advertising agency, and Ocala News Tonight, a nightly
half-hour newscast.
Lorilei was founded in 1993 and incorporated as a Florida subchapter S
corporation in July, 1994. Gross sales in 1999 surpassed $1.5 million, with 1999
billings of approximately $1.1 million and EBITDA of approximately $162,000.
The company projects substantial sales increases, with an adjusted to AmeriNet
fiscal year billing target of $2.5 million and an EBITDA target of $500,000 for
the fiscal year ending June 30, 2001. The company projects billings to exceed $5
million with EBITDA of $1.5 million in the fiscal year ending June 30, 2003.
The Firm Multimedia is an advertising agency, which offers business services
including:
-full advertising agency services including consulting on marketing and
advertising issues
-graphic layout, design, and printing
-video and audio production
-media planning and placement
-internet web design and web site promotion
-interactive CD-rom design
-long and short-form direct response television production
-long and short-form direct response placement
-placement of long-form television programming under commercial leased access
FCC rules
Lorilei management believes it can accomplish its goals through expanding its
marketing and advertising efforts, establishing a solid sales organization with
regional sales offices in major Florida and Southeastern U.S. cities, through
development of its commercial leased access abilities, and through acquisitions
of synergistic companies.
Commercial leased access (CLA) is a segment of communications law mandated by
Congress in cable television deregulation. Enforced by the Federal
Communications Commission (FCC) rules, CLA affords programmers not affiliated
with the cable operator the opportunity of purchasing minimum half-hour time
increments in substantially better time periods than offered through traditional
commercial venues. The amount paid by the programmer is also regulated by the
FCC, making CLA a unique entity.
Lorilei intends to continue and expand its proprietary database of cable systems
nationwide, enabling the company to easily offer CLA as a alternate for direct
response television (DRTV) marketers, as well as other types of programming.
160
One example of other types of television programming that can be established
under CLA is Ocala News Tonight (ONT). ONT debuted in January 2000 and is
produced by The Firm Multimedia with its own news staff and producers. ONT is a
traditional news, weather, and sports half-hour newscast available to
approximately 73,000 television households targeting Marion County, Florida.
This advertiser-supported program fills a local news niche left open by Orlando,
Florida broadcasters. These broadcasters cover a very wide geographic area and
are unable to devote either airtime or personnel to cover their service area
market by market. Viewers of ONT receive information not available elsewhere,
including the local newspaper.
The company expects to use ONT as a prototype for additional news operations in
additional markets. The Firm Multimedia will co-locate a sales office with the
ONT-type operation in each market.
(b) Address and telephone number
Lorilei Communications, Inc. (352) 861-1350
P.O. Box 770787 fax (352) 861-1339
Ocala, Florida 34477 General email: thefirm@callthefirm.com
Officer email: gerry@callthefirm.com
(Courier only)
7325 S.W. 32nd St.
Ocala, Florida 34474
xxxx://xxx.xxxxxxxxxxx.xxx
xxxx://xxx.xxxxxxxxxxxxxxxx.xxx
(c) Risk Factors
The statements contained in this Report that are not purely historical are
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, including
without limitation statements regarding Lorilei's expectations, beliefs,
intentions or strategies regarding the future. All forward-looking statements
included in this document are based on information available to Lorilei on the
date hereof, and Lorilei assumes no obligation to update any such
forward-looking statements. The forward-looking statements involve known and
unknown risks, uncertainties and other factors which may cause actual results,
experience and the performance or achievements of Lorilei to be materially
different from those anticipated, expressed or implied by the forward-looking
statements. In evaluating Lorilei's business, the following factors, in addition
to the Risk Factors set forth below and other information set forth herein,
should be carefully considered: successful deployment and integration of
systems; factors affecting internal growth and management of growth; success of
marketing, integration and operational initiatives, including Internet marketing
initiatives; dependence on technology; labor and technology costs; cost and
availability of advertising and promotional efforts; success of the acquisition
strategy and availability of acquisition financing; success in entering new
segments of the advertising industry and new geographic areas; dependence on
commercial leased access rules; risks associated with the advertising industry
generally; seasonal and quarterly fluctuations; competition; and general
economic conditions. In addition, Lorilei's operating strategy and growth
strategy involve a number of risks and challenges, and there can be no assurance
that these risks and other factors will not have a material adverse effect on
Lorilei.
Management of Growth; Factors Affecting Internal Growth.
Lorilei expects to grow internally, through increase in number of sales offices,
news operations, and national sales. Lorilei expects to spend significant time
and effort exploring this endeavor. There can be no assurance that Lorilei's
systems; procedures or controls will be adequate to support Lorilei's operations
as they expand. Any future growth also will impose significant added
responsibilities on members of senior management, including the need to
identify, recruit and integrate new senior level managers and executives. There
can be no assurance that such additional management will be identified or
retained by Lorilei. To the extent that Lorilei is unable to manage its growth
efficiently and effectively, or is unable to attract and retain qualified
management, Lorilei's business, financial condition and results of operations
could be materially adversely affected. While Lorilei has experienced revenue
and earnings growth thus far in its' history, there can be no assurance that
Lorilei will continue to experience internal growth comparable to these levels,
if at all. Factors affecting the ability of Lorilei to continue to experience
internal growth included, but are not limited to, business acceptance of
Lorilei's services, the ability to sell advertising time to support its' news
operations, the ability to recruit and retain qualified sales personnel and
continued access to capital.
Risks related to Lorilei's acquisition strategy.
Acquisitions involve a number of special risks, including possible adverse
effects on Lorilei's operating results, diversion of management's attention,
failure to retain key personnel, risks associated with unanticipated events or
liabilities and amortization of acquired intangible assets, some or all of which
could have a material adverse effect on Lorilei's business, financial condition,
and results of operations. Customer dissatisfaction or performance problems at a
single acquired company could also have an adverse effect on the reputation of
Lorilei. Further, there can be no assurance that businesses acquired will
achieve anticipated revenues and earnings. In addition, to the extent that
Lorilei intends to increase its revenues, expand the markets it serves and
increase its service offerings through the acquisition of additional companies,
there can be no assurance that Lorilei will be able to identify, acquire, or
profitably manage additional businesses or successfully integrate acquired
businesses into Lorilei without substantial costs, delays or other operational
or financial problems. Increased competition for acquisition candidates may also
develop, in which event there may be fewer acquisition opportunities available
to Lorilei, as well as higher acquisition prices. As of the date of this report,
Lorilei is not party to a binding agreement with respect to any acquisition.
Risks Related to Acquisition Financing and Possible Need for Additional Capital
Lorilei plans to finance future acquisitions by using shares of the Registrant's
common stock ("AmeriNet Stock") for all of the consideration to be paid. In some
cases, however it is probable that Lorilei would be required to make cash
investments in the acquired businesses, as AmeriNet is making in Lorilei.
Lorilei would be charged against earnings for any AmeriNet Stock used to effect
acquisitions, consequently, it must take care to assure that the benefits of the
acquisitions exceed the costs of the AmeriNet Stock used as consideration and
the cash investment required, if any. In the event that the AmeriNet Stock does
not maintain a sufficient market value, or potential acquisition candidates are
otherwise unwilling to accept AmeriNet Stock as consideration for the sale of
their businesses, Lorilei may be required to utilize more of its cash resources,
if available, in order to maintain its acquisition program. If Lorilei has
insufficient cash resources, its growth could be limited unless it is able to
obtain additional capital through debt or equity financing. There can be no
assurance that AmeriNet will make required capital available or that other
financing will be available on terms Lorilei deems acceptable. If Lorilei is
unable to obtain financing sufficient for all of its desired acquisitions, it
may be unable to fully implement its acquisition strategy. In addition, to
maintain historical levels of growth, Lorilei may need to seek additional
funding. Adequate funds for these purposes may not be available when needed or
may not be available on terms acceptable to Lorilei. If funding is insufficient,
Lorilei may be required to delay, reduce the scope of or eliminate some or all
of its expansion programs.
Dependence Upon Technology
Lorilei's business is currently dependent upon computer-based technology in
order to produce the majority of its services. Because technological change has
161
been extremely dynamic, technological obsolescence has become an increasingly
important decision when making capital expenditures. No assurances can be
provided that the state of the arts systems utilized by Lorilei will remain
state of the art for a period sufficient to amortize their expenditure.
Lorilei's strategy is to incrementally add equipment piece by piece to its
operations as prices for new technology decrease and as production demand
increases, so as to consistently add new, better, faster computers, cameras,
scanners, etc. to its available equipment inventory.
There can be no assurance, however, that new advances in technology will not
hasten the obsolescence of Lorilei's equipment, resulting in additional
necessary capital expense which could be substantial. In this event Lorilei's
management envisions the utilization of leases, financing, or an additional
capital investment in order to satisfy these requirements.
Additional equipment expense of approximately $200,000 will also be necessary to
establish anticipated news operations in each additional market.
Risks Associated with the Advertising Industry; General Economic Conditions
Lorilei's results of operations are dependent upon factors generally affecting
the advertising industry. Lorilei's revenues and earnings are especially
sensitive to events that affects businesses plans to expand into new markets,
develop marketing plans for new products or services, or seek new streams or
revenue. A number of factors could result in the overall decline in demand for
advertising including a decline in general economic conditions, extreme weather
conditions, armed hostilities, or excessive inflation. These type of events
could have a material adverse effect on Lorilei's business, financial condition
and results of operations.
Reliance on Key Personnel.
Lorilei's operations are dependent on the efforts, experience and relationships
of Gerald R. Cunningham, Leigh A. Cunningham and Lorilei's other essential
staff. Furthermore, Lorilei will likely be dependent on the senior management of
any businesses acquired in the future. If any of these individuals become unable
to continue in their role Lorilei's business or prospects could be adversely
affected. Although Lorilei has entered into an employment agreement with each of
Lorilei's executive officers, there can be no assurance that such individuals
will continue in their present capacity for any particular period of time.
Reliance on FCC Rules.
Lorilei utilizes FCC rules mandated by Section 612 of the Communications Act in
order to gain access to cable systems. If these rules are repealed or modified
by Congress, or in the event the FCC drastically alters its rules on leased
access, these events could have a material adverse effect on Lorilei's business,
financial condition and results of operations.
Control of Existing Management
Pursuant to the terms of the reorganization agreement between Lorilei and the
Registrant, Lorilei's current management will have the right to elect a majority
of the members of its board of directors for the foreseeable future, unless
Lorilei fails to attain at least 70% of its EBITDA projections. Such requirement
may prevent or delay AmeriNet from taking actions to correct problems with
Lorilei's management and such inability may materially impair Lorilei's
operations.
Item 504. Use of Proceeds
Set forth below is Lorilei's anticipated use of the cash available to Lorilei
after deduction of estimated remaining offering expenses of $12,500.
Pursuant to the Reorganization Agreement, Lorilei would receive $487,500 of net
proceeds from this reorganization after deduction of the expenses of the
reorganization. The net proceeds of this offering will be used:
To pay existing accounts receivable and personal property and real estate
taxes.;
To repair existing equipment and purchase new equipment
To employ additional support staff
To pay advertising and marketing costs, and
To provide working capital.
The amounts and timing of expenditures for each purpose is subject to the broad
discretion of the management and will depend on factors such as the amount of
net proceeds available to Lorilei and the effects of competition, many of which
are beyond Lorilei's control.
Accounts Payable and Taxes $198,854.00
Equipment 8,000.00
Salaries 30,646.00
Advertising/Marketing 100,000.00
Working Capital 150,000.00
Total $487,500.00
The initial $100,000 payment made to Lorilei will be used to pay approximately
$42,000 of the accounts payable and taxes with the balance being use to pay
equipment, salaries and working capital. The remaining four (4) payments of
$100,000 will be applied pro rata among the balance of the accounts receivable,
advertising/marketing and working capital.
162
Item 505. Determination of Offering Price
The reorganization price for Lorilei's common shares was established through
arms-length negotiations between AmeriNet and Lorilei, taking into account the
market value of similar publicly held companies and the effect of the increased
resources available to Lorilei following the reorganization.
Item 507. Selling Security Shareholders
This information is combined with disclosure in response to Item 403.
Item 508. Plan of Distribution
No securities are being offered (except to the two existing shareholders of
Lorilei) in connection with the Reorganization.
Item 509. Interest of Named Experts and Counsel
No experts or counsel have been hired on a contingent basis or will receive a
direct or indirect interest in Lorilei or was a promoter, underwriter, voting
trustee, director, officer or employee of Lorilei.
Item 510. Disclosure of Commission Position on Indemnification for Securities
Act Liabilities
The right of the shareholders to sue any director for misconduct in conducting
the affairs of Lorilei is limited by its Articles of Incorporation which limit
Director's liability to the extent allowed by law.d Section 607.0850 FLA. STAT.
(1999), permits indemnification against expenses actually and reasonably
incurred by a director, officer, employee or agent to the extent that such
person has been successful in the defense of a matter eligible for
indemnification under the statute. Under certain circumstances, expenses may be
paid by a corporation in advance, subject to repayment, unless the defendant
ultimately is determined to be ineligible for indemnification. In addition, the
statute permits a corporation to indemnify directors and officers against
certain liabilities and to purchase and maintain director and officer liability
and reimbursement insurance against liabilities, whether or not the corporation
would have the power of indemnification against such liabilities.
Insofar as indemnification for liabilities arising under the Securities Act of
1933, may be permitted to directors, officers or persons controlling Lorilei
pursuant to the foregoing provisions, Lorilei has been informed that in the
opinion of the Securities and Exchange Commission such indemnification is
against public policy as expressed in such Act and is therefore unenforceable.
Item 511. Other Expenses of Issuance and Distribution
Lorilei has estimated the legal, accounting and filing fees associated with the
Reorganization to be approximately $12,500.
Item 601. Exhibits
(1) Underwriting agreement
(2) Plan of acquisition, reorganization, arrangement, liquidation, or succession
(3) (i)Articles of Incorporation
3.1 Articles of Incorporation
3.2 Articles of Amendment Dated May 11, 2000 and Restated Articles.
(ii) By-laws
3.3 By-Laws
(4) Instruments defining the rights of holders, incl. Indentures
(5) Opinion re: legality
5.1 Opinion of Brashear & Associates, P.L. dated May 11, 2000.
5.2 Opinion of George Franjola dated May 11, 2000.
(8) Opinion re: tax matters
(9) Voting trust agreement
(10) Material contracts
10.1 Mortgage and Promissory Note dated September 18, 1996 to Small
Business Loan Source.
10.2 Employment Agreement with Gerald Cunningham dated May 11, 2000.
10.3 Employment Agreement with Leigh Cunningham dated May 11, 2000.
(11) Statement re: computation of per share earnings
(13) Annual or quarterly reports, Form 10-Q
(15) Letter on unaudited interim financial information
(16) Letter on changes in certifying accountant
(18) Letter on change in accounting principles
(21) Subsidiaries of the registrant
(22) Published report regarding matters submitted to vote
(23) Consents of experts and counsel
(24) Power of attorney
(25) Statement of eligibility of trustee
(26) Invitations for competitive bids
(27) Financial Data Schedule
(99) Additional Exhibits
Item 701. Recent Sales of Unregistered Securities; Use of Proceeds from
Registered Securities
Eleven shares were sold On May 16, 1998 Lorilei sold 11 shares to John B.
LaTorraca for $25,000. The issuance of the shares was exempt from registration
pursuant to Section 4(2) of the Securities Act of 1933.
163
Item 702. Indemnification of Directors and Officers.
The right of the shareholders to sue any director for misconduct in conducting
the affairs of Lorilei is limited by its Articles of Incorporation which limit
Director's liability to the extent allowed by law. Section 607.0850 FLA. STAT.
(1999), permits indemnification against expenses actually and reasonably
incurred by a director, officer, employee or agent to the extent that such
person has been successful in the defense of a matter eligible for
indemnification under the statute. Under certain circumstances, expenses may be
paid by a corporation in advance, subject to repayment, unless the defendant
ultimately is determined to beineligible for indemnification. In addition, the
statute permits a corporation to indemnify directors and officers against
certain liabilities and to purchase and maintain director and officer liability
and reimbursement insurance against liabilities, whether or not the corporation
would have the power of indemnification against such liabilities.
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 164
Exhibit to Reorganization Agreement
by and among
AmeriNet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
EXHIBIT 3.4 AMERINET DRAFT ANNUAL REPORT
Attached to this exhibit is the supporting document for the above
referenced.
The AmeriNet Annual Report will be filed with the Commission as soon as it is
completed.
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Exhibit to Reorganization Agreement
by and among
AmeriNet Xxxxx.xxx, Inc., a Delaware Corporation
and
Lorilei Communications, Inc., a Florida Corporation
EXHIBIT 5.8 AFFILIATE AGREEMENTS
Attached to this exhibit is the supporting document for the above
referenced for:
1. Gerald R. Cunningham
2. Leigh A. Cunningham
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Gerald R. Cunningham
----------------------------------
Gerald R. Cunningham, President
Lorilei Communications, Inc.
/s/ Leigh A. Cunningham
----------------------------------
Leigh A. Cunningham, Vice President Sales
Lorilei Communications, Inc.
Page 165
Affiliate Agreement
This Affiliate Agreement (this "Agreement") is made and entered into by and
between Lorilei Communications, Inc., Inc., a Florida corporation ("Lorilei"),
AmeriNet Xxxxx.xxx, Inc., a publicly held Delaware corporation with a class of
securities registered under Section 12(g) of the Securities Act of 1934, as
amended ("AmeriNet" and the "Exchange Act," respectively), and person identified
in the signature page of this Agreement as the Affiliate (the "Affiliate").
Preamble:
WHEREAS, concurrently with the execution of this Agreement, Lorilei and
AmeriNet have entered into a Reorganization Agreement dated May 11, 2000, (the
"Reorganization Agreement") which contemplates that Lorilei will become a wholly
owned subsidiary of AmeriNet and all outstanding capital stock of Lorilei will
be converted into AmeriNet common stock (the "Merger"); and
WHEREAS, the Affiliate is either an officer or director of Lorilei or is
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such
quantity of common stock in Lorieli as requires that the Affiliate to be deemed
an "affiliate" of Lorilei (within the meaning of Rule 405 promulgated by the
Securities and Exchange Commission (the "Commission") under the Securities Act
of 1933, as amended (the "Securities Act"), as a result of which the Affiliate
will be subject to restrictions on disposition of the shares of AmeriNet's
common stock received as a result of the Reorganization; and
WHEREAS, the determination of the accounting and tax treatment of the
Reorganization will depend, in part, upon the accuracy of certain of the
representations and warranties made by the Affiliate in this Agreement, as well
as upon the Affiliate's compliance with certain of the agreements set forth
herein; and
WHEREAS, Affiliate and AmeriNet further desire to provide for an
arrangement under which Affiliate will grant to AmeriNet an irrevocable proxy to
vote all of the Affiliate's shares of Lorilei's common stock in favor of the
Reorganization at a special meeting of the stockholders of Lorilei to be held
for the purpose of voting on the Reorganization.
NOW, THEREFORE, the Parties agree as follows:
Page 166
Article I
Agreement to Retain Shares.
1.1 Transfer and Encumbrance.
(A) As used herein, the term "Determination Date" shall mean the earlier of:
(1) The date AmeriNet shall have publicly released a report including the
combined financial results of AmeriNet and Lorilei for a period of at
least thirty (30) days of combined operations of AmeriNet and Lorilei;
or
(2) The date the Reorganization Agreement shall be terminated pursuant to
Article VIII thereof.
(B) The Affiliate agrees not to transfer, sell, exchange, pledge or otherwise
dispose of or encumber the Affiliates Lorilei common stock or the shares of
AmeriNet common stock received in exchange therefor as a result of the
Reorganization (collectively or generically hereinafter referred to as the
"Shares") or any New Shares (as defined in Section 1.2) acquired or to make
any offer or agreement relating thereto:
(1) At any time prior to the Determination Date;
(2) Except in full compliance with the requirements of Rule 144
promulgated by the Commission under authority granted by the
Securities Act;
(3) Except in full compliance with the requirements of Sections 13 and 16
of the Exchange Act, including requirements pertaining to timely
filing of Commission Forms 3, 4 and 5 or Schedule 13-D; and
(4) In full compliance with the procedures established by AmeriNet
(including requirements imposed upon its transfer agent) to assure
compliance with the foregoing.
1.2 New Shares.
The Affiliate agrees that any shares of capital stock of Lorilei or
AmeriNet that Affiliate purchases or with respect to which Affiliate otherwise
acquires beneficial ownership after the date of this Agreement ("New Shares")
shall be subject to the terms and conditions of this Agreement to the same
extent as if they constituted Shares.
Page 167
Article II
Agreement to Vote Shares.
2.1 Voting
At every meeting of the stockholders of Lorilei called with respect to any
of the following, and at every adjournment thereof, and on every action or
approval by written consent of the stockholders of Lorilei with respect to any
of the following, the Affiliate shall vote the Shares and any New Shares,
including, with respect to stock options held by Affiliate, only those stock
options immediately exercisable:
(A) In favor of approval of the Reorganization Agreement and any matter that
could reasonably be expected to facilitate the Reorganization; and
(B) Against approval of any proposal made in opposition to or competition with
consummation of the Reorganization and against any merger, consolidation,
sale of assets, reorganization or recapitalization, with any party other
than AmeriNet and its affiliates and against any liquidation or winding up
of Lorilei (each of the foregoing is hereinafter referred to as an
"Opposing Proposal").
2.2 Actions
In amplification of the obligations assumed by this Agreement, the
Affiliate agrees not to take any actions contrary to Lorilei's obligations under
the Reorganization Agreement or the Affiliate's obligations under this
Agreement.
Article III
Irrevocable Proxy.
Concurrently with the execution of this Agreement, the Affiliate agrees to
deliver to AmeriNet a proxy in the form attached hereto as Exhibit A (the
"Proxy"), which shall be irrevocable to the extent permissible under Florida
law, with the total number of Shares beneficially owned (as such term is defined
in Rule 13d-3 under the Exchange Act) by the Affiliate set forth therein.
Article IV
Tax Treatment.
The Affiliate understands and agrees that it is intended that the
Reorganization will be treated as a "reorganization" within the meaning of Code
Section 368(a)(1)(B) for federal income tax purposes.
Page 168
Article V
Reliance Upon Representations, Warranties and Covenants.
(A) The Affiliate has been informed that the treatment of the Reorganization
for federal income tax purposes requires that a sufficient number of former
stockholders of Lorilei maintain a meaningful continuing equity ownership
interest in AmeriNet after the Reorganization.
(B) The Affiliate understands that the representations, warranties and
covenants of the Affiliate set forth herein will be relied upon by
AmeriNet, Lorilei and their respective legal counsel and accounting firms.
Article VI
Representations, Warranties and Covenants of Affiliate.
The Affiliate represents, warrants and covenants to AmeriNet as follows:
6.1 Power and Authority.
The Affiliate has full power and authority to execute this Agreement, to
make the representations, warranties and covenants herein contained and to
perform Affiliate's obligations hereunder.
6.2 Shares Owned.
Set forth following the Affiliate's signature below is the number of Shares
owned by the Affiliate, including all Shares as to which the Affiliate has sole
or shared voting or investment power and all rights, options and warrants to
acquire Shares owned or held by the Affiliate.
6.3 Restrictions on Transfer.
The Affiliate will not sell, transfer, exchange, pledge or otherwise
dispose of, or make any offer or agreement relating to any of the foregoing with
respect to, any shares of common stock of AmeriNet (the "AmeriNet Common Stock")
that the Affiliate may acquire in connection with the Merger, or any securities
that may be paid as a dividend or otherwise distributed thereon or with respect
thereto or issued or delivered in exchange or substitution therefor (all such
shares and other securities of AmeriNet are sometimes collectively referred to
as "Restricted Securities"), or any option, right or other interest with respect
to any Restricted Securities, unless:
(A) Such transaction is permitted pursuant to Rule 145(c) and 145(d) under the
Securities Act;
(B) (1) Legal counsel representing the Affiliate (which legal counsel is
reasonably satisfactory to AmeriNet), shall have advised AmeriNet in a
written opinion letter satisfactory to AmeriNet and AmeriNet's legal
counsel, and upon which AmeriNet and its legal counsel may rely, that
no registration under the Securities Act would be required in
connection with the proposed sale, transfer or other disposition and
that all requirements under the Exchange Act, including Sections 13
and 16 thereof have been complied with; or
Page 169
(2) A registration statement under the Securities Act covering AmeriNet's
Stock proposed to be sold, transferred or otherwise disposed of,
describing the manner and terms of the proposed sale, transfer or
other disposition, and containing a current prospectus, shall have
been filed with the Securities and Exchange Commission (the
"Commission") and made effective under the Securities Act; or
(3) An authorized representative of the Commission shall have rendered
Lorilei written advice to the Affiliate (sought by Affiliate or
Affiliate's legal counsel, with a copy thereof and all other related
communications delivered to AmeriNet) to the effect that the
Commission would take no action, or that the staff of the Commission
would not recommend that the Commission take any action, with respect
to the proposed disposition if consummated.
6.4 No Present Plan of Disposition.
(A) The Affiliate has, and as of the Effective Time (as defined in the
Reorganization Agreement) will have, no present plan or intention (a
"Plan") to sell, transfer, exchange, pledge or otherwise dispose of,
including by means of a distribution by a partnership to its partners, or a
corporation to its stockholders, or any other transaction which results in
a reduction in the risk of ownership (any of the foregoing being
hereinafter referred to generically as a "Sale") of any of the shares of
AmeriNet common stock that the Affiliate may acquire in connection with the
Merger, or any securities that may be paid as a dividend or otherwise
distributed thereon with respect thereto or issued or delivered in exchange
or substitution therefor, which, when taking into account those Lorilei
stockholders who dissent from the Merger, will reduce the Lorilei
stockholders' ownership of AmeriNet Stock, in the aggregate, to less than
fifty (50%) of the number of shares of AmeriNet Common Stock issued in the
Merger.
(B) (1) The Affiliate is not aware of, or participating in, any Plan on the
part of Lorilei stockholders to engage in Sales of the shares of
AmeriNet Stock to be issued in the Reorganization.
(2) For purposes Section 6.4(B)(1), Shares with respect to which a
pre-Reorganization Sale occurs in a Related Transaction (as defined
below), shall be considered to be Shares that are exchanged for
AmeriNet Stock in the Merger and then disposed of pursuant to a Plan.
(3) A Sale of AmeriNet Stock shall be considered to have occurred pursuant
to a Plan if, among other things, such Sale occurs in a Related
Transaction.
(4) For purposes of this Section 6.4, a "Related Transaction" shall mean a
transaction that is in contemplation of, or related or pursuant to,
the reorganization or the Reorganization Agreements.
Page 170
(C) If any of the Affiliate's representations in this Section 6.4 cease to be
true at any time prior to the Effective Time, the Affiliate will deliver to
each of Lorilei and AmeriNet, prior to the Effective Time, a written
statement to that effect, signed by the Affiliate.
6.5 Consultation with Counsel.
(A) The Affiliate has carefully read this Agreement and discussed its
requirements and other applicable limitations upon the sale, transfer or
other disposition of AmeriNet Shares to be acquired by Affiliate in the
Reorganization, to the extent the Affiliate felt necessary, with legal
counsel for the Affiliate.
(B) The Affiliate has carefully read the Reorganization Agreement and discussed
its requirements and its impacts upon Affiliate's ability to sell,
transfer, encumber, pledge or otherwise dispose of the AmeriNet Shares to
be acquired by Affiliate in the Reorganization, to the extent Affiliate
felt necessary, with legal counsel for Affiliate.
6.6 Ownership of Shares.
The Affiliate is the record owner of the Shares shown on the signature page
hereto, which at the date hereof and at all times up until the Determination
Date will be free and clear of any liens, claims, options, charges or other
encumbrances; does not beneficially own any shares of capital stock of Lorilei
other than such Shares; and, has full power and authority to make, enter into
and carry out the terms of this Agreement and the Proxy.
6.7 No Proxy Solicitations.
The Affiliate will not, and will not permit any entity under Affiliate's
control to:
(A) Solicit proxies or become a "participant" in a "solicitation" (as such
terms are defined in Regulation 14A under the Exchange Act) with respect to
an Opposing Proposal or otherwise encourage or assist any party in taking
or planning any action that would compete with, restrain or otherwise serve
to interfere with or inhibit the timely consummation of the Merger in
accordance with the terms of the Merger Agreement;
(B) Initiate a stockholders' vote or action by consent of Lorilei stockholders
with respect to an Opposing Proposal; or
(C) Become a member of a "group" [as such term is used in Section 13(d) of the
Exchange Act] with respect to any voting securities of Lorilei with respect
to an Opposing Proposal.
Page 171
Article VII
No Limitation on Discretion as Director.
This Agreement is intended solely to apply to the exercise by the Affiliate
in his individual capacity of rights attaching to ownership of the Shares, and
nothing herein shall be deemed to apply to, or to limit in any manner the
discretion of the Affiliate with respect to, any action which may be taken or
omitted by him acting in his fiduciary capacity as a director of Lorilei.
Article VIII
Rules 144 and 145.
From and after the Effective Time and for so long as is necessary in order
to permit the Affiliate to sell AmeriNet's Stock held by Affiliate pursuant to
Rule 145 and, to the extent applicable, Rule 144 under the Securities Act,
AmeriNet will use its reasonable efforts to file on a timely basis all reports
required to be filed by it pursuant to Sections 13 or 15(d) of the Exchange Act
referred to in paragraph (c)(1) of Rule 144 under the Securities Act, in order
to permit the Affiliate to sell AmeriNet's Stock held by it pursuant to the
terms and conditions of Rule 145 and the applicable provisions of Rule 144.
Article IX
Limited Resales.
The Affiliate understands that, in addition to the restrictions imposed
under Section 6 of this Agreement, the provisions of Rule 145 limit Affiliate's
public resales of Restricted Securities, in the manner set forth in subsections
(a), (b) and (c) below:
9.1 Rule 145(d)(1).
(A) Unless and until the restriction "Cut-off" provisions of Rule 145(d)(2) or
Rule 145(d)(3) set forth below become available, public resales of
Restricted Securities may only be made by the Affiliate in compliance with
the requirements of Rule 145(d)(1).
(B) Rule 145(d)(1) permits such resales only:
(1) While AmeriNet meets the public information requirements of Rule
144(c); (iii) in brokers' transactions or in transactions with a
market maker; and
(2) Where the aggregate number of Restricted Securities sold at any time
together with all sales of restricted AmeriNet Stock sold for
Affiliate's account during the preceding three-month period does not
exceed the greater of
(a) One percent (1%) of AmeriNet's Common Stock outstanding; or
(b) The average weekly volume of trading in AmeriNet Common Stock on
all national securities exchanges, or reported through the
automated quotation system of a registered securities
association, during the four calendar weeks preceding the date of
receipt of the order to execute the sale.
Page 172
9.2 Rule 145(d)(2).
The Affiliate may make unrestricted sales of Restricted Securities pursuant
to Rule 145(d)(2) if:
(A) The Affiliate has beneficially owned (within the meaning of Rule 144(d)
under the Securities Act) the Restricted Securities for at least one year
after the Effective Time of the Merger;
(B) The Affiliate is not an affiliate of AmeriNet; and
(C) AmeriNet meets the public information requirements of Rule 144(c).
9.3 Rule 145(d)(3).
The Affiliate may make unrestricted sales of Restricted Securities pursuant
to Rule 145(d)(3) if the Affiliate has beneficially owned (within the meaning of
Rule 144(d) under the Securities Act) the Restricted Securities for at least two
years and is not, and has not been for the three months preceding the date of
sale, an affiliate of AmeriNet.
9.4 Acknowledgment.
AmeriNet acknowledges that the provisions of Section 6.3 of this Agreement
will be satisfied as to any sale by the holder of the Restricted Securities
pursuant to Rule 145(d), by a broker's letter and a letter from the undersigned
with respect to that sale stating that each of the above-described requirements
of Rule 145(d)(1) has been met or is inapplicable by virtue of Rule 145(d)(2) or
Rule 145(d)(3); provided, however, that AmeriNet has no reasonable basis to
believe that such sales were not made in compliance with such provisions of Rule
145(d).
Article X
Legends.
(A) The Affiliate also understands and agrees that stop transfer instructions
will be given to AmeriNet's transfer agent with respect to certificates
evidencing the Restricted Securities and that there will be placed on the
certificates evidencing the Restricted Securities legends stating in
substance:
Page 173
"The shares represented by this certificate were issued pursuant to a
business combination which was structured to comply with the tax free
reorganization provisions of Section 368(a) of the Internal revenue Code of
1986, as amended (the "Code") and was not registered under the Securities
Act of 1933, as amended (the "Securities Act") in reliance on applicable
exemptions therefrom and from comparable provisions of the securities laws
of the recipients state of domicile, and may not be sold, nor may the owner
thereof reduce his or her risks relative thereto in any way, until such
time as AmeriNet Xxxxx.xxx, Inc. ("AmeriNet"), has published the financial
results covering at least thirty (30) days of combined operations after the
effective date of the merger through which the business combination was
effected. In addition, the shares represented by this certificate may not
be sold, transferred or otherwise disposed of except or unless (1) covered
by an effective registration statement under the Securities Act, (2) in
accordance with Commission Rule 145(d) (in the case of shares issued to an
individual who is not an affiliate of AmeriNet) or Commission Rule 144 (in
the case of shares issued to an individual who is an affiliate of AmeriNet)
of the rules and regulations of such act, or (3) in accordance with a legal
opinion satisfactory to counsel for AmeriNet that such sale or transfer is
otherwise exempt from the registration requirements of such act."
(B) (1) Upon the request of the Affiliate, AmeriNet shall cause the
certificates resenting the Restricted Securities to be reissued free
of any legend relating to restrictions on transfer by virtue of ASR
130 and 135 as soon as practicable after the requirements of ASR 130
and 135 have been met.
(2) In addition, if the provisions of Rules 144 and 145 are amended to
eliminate restrictions applicable to the Restricted Securities
received by Affiliate pursuant to the Merger, or at the expiration of
the restrictive period set forth in Rule 145(d), or upon registration
of my such shares, AmeriNet, upon the request of Affiliate, will cause
the certificates representing the Restricted Securities to be reissued
free of any legend relating to the restrictions set forth in Rules 144
and 145(d).
Article XI
Miscellaneous Provisions.
11.1 Further Assurances.
The Parties agree to do, execute, acknowledge and deliver or cause to be
done, executed, acknowledged or delivered and to perform all such acts and
deliver all such deeds, assignments, transfers, conveyances, powers of attorney,
assurances, stock certificates and other documents, as may, from time to time,
be required herein to effect the intent and purpose of this Agreement.
11.2 Consent and Waiver.
The Affiliate hereby gives any consents or waivers that are reasonably
required for the consummation of the Merger under the terms of any agreements to
which Affiliate is a party or pursuant to any rights Affiliate may have.
Page 174
11.3 Binding Agreement.
This Agreement will inure to the benefit of and be binding upon and
enforceable against the Parties and their successors and assigns, including
administrators, executors, representatives, heirs, legatees and devisees of the
Affiliate and any pledgee holding Restricted Securities as collateral.
11.4 Waiver.
No waiver by any party hereto of any condition or of any breach of any
provision of this Agreement shall be effective unless in writing and signed by
each party hereto.
11.5 Governing Law.
This Agreement shall be governed by and construed, interpreted and enforced
in accordance with the laws of the State of Delaware, except for any choice of
law provisions that would result in the application of the law of another
jurisdiction, and except for laws involving the fiduciary obligations of
Lorilei's officers and directors, which shall be governed under Florida law.
11.6 Third Party Reliance.
Legal counsel to and accountants for the Parties shall be entitled to rely
upon this Agreement.
11.7 Amendments and Modification.
This Agreement may not be modified, amended, altered or supplemented except
upon the execution and delivery of a written agreement executed by the Parties.
11.8 Specific Performance: Injunctive Relief.
The Parties acknowledge that AmeriNet will be irreparably harmed and that
there will be no adequate remedy at law for a violation of any of the covenants
or agreement of Affiliate set forth herein; therefore, it is agreed that, in
addition to any other remedies that may be available to AmeriNet upon any such
violation, AmeriNet shall have the right to enforce such covenants and
agreements by specific performance, injunctive relief or by any other means
available to AmeriNet at law or in equity.
11.9 Notices.
All notices, requests, claims, demands and other communications hereunder
shall be in writing and sufficient if delivered in person, by cable, telegram or
telex, or sent by mail (registered or certified mail, postage prepaid, return
receipt requested) or overnight courier (prepaid) to the respective Parties as
follows:
Page 175
(1) To the Affiliate:
At the contact information provided to the registrar of Lorilei's shares of
common stock and, after the Reorganization, at the contact information provided
to and maintained by AmeriNet's transfer agent.
(2) To AmeriNet:
AmeriNet Xxxxx.xxx, Inc.
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000; Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxx Xxxxxx, President
Telephone (000) 000-0000, Fax (000) 000-0000; and, e-mail
xxxxxxxxx@xxxxxxxxxxxxx.xxx; with a copy to
Xxxxxx Xxxxxxxx, General Counsel
AmeriNet Xxxxx.xxx, Inc.
0000 Xxxxxxxxx 00xx Xxxxxxx; Xxxxx, Xxxxxxx 00000
Telephone (000) 000-0000, Fax (000) 000-0000; and,
e-mail, xxxxxxxx@xxxxxxxx.xxx
(3) To Xxxxxxx:
Xxxxxxx Communications, Inc.
0000 Xxxxxxxxx 00xx Xxxxxx, Xxxxx, Xx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, President
Telephone (000) 000-0000, Fax (000) 000-0000; and, e-mail,
thefirm@callthe xxxx.xxx; with copy to
Xxxxx Xxxxxxxx, Esquire
000 Xxxxxxxxx 0xx Xxxxxx, Xxxxx X; Xxxxxxxxxxx, XX 00000
Telephone (000) 000-0000, Fax (000) 000-0000; and,
e-mail, xxxxxxxxx@xxxxxxx.xxx
(4) To Yankees:
The Yankee Companies, Inc.
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000; Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxx Xxxxxx, President
Telephone (000) 000-0000, Fax (000) 000-0000; and,
e-mail xxxxxxxxxx@xxxxxx.xxx;
or such other address or to such other person as any Party shall
designate to the other for such purpose in the manner hereinafter set
forth, except that notices of change of address shall only be effective
upon receipt.
11.10 Interpretation.
(A) When a reference is made in this Agreement to Schedules or Exhibits, such
reference shall be to a Schedule or Exhibit to this Agreement unless
otherwise indicated.
Page 176
(B) The words "include," "includes" and "including" when used herein shall be
deemed in each case to be followed by the words "without limitation."
(C) The headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this
Agreement.
(D) The captions in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope of this Agreement or
the intent of any provisions hereof.
(E) All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the
Party or Parties, or their personal representatives, successors and assigns
may require.
(F) The Parties agree that they have been represented by counsel during the
negotiation and execution of this Agreement and, therefore, waive the
application of any law, regulation, holding or rule of construction
providing that ambiguities in an agreement or other document will be
construed against the party drafting such agreement or document.
11.11 Merger of All Prior Agreements Herein.
(A) This instrument, together with the instruments referred to herein, contains
all of the understandings and agreements of the Parties with respect to the
subject matter discussed herein.
(B) All prior agreements whether written or oral are merged herein and shall be
of no force or effect.
11.12 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and the Closing hereon and
shall be effective regardless of any investigation that may have been made or
may be made by or on behalf of any Party.
11.13 Severability.
If any provision or any portion of any provision of this Agreement, other
than one of the conditions precedent or subsequent, or the application of such
provision or any portion thereof to any person or circumstance shall be held
invalid or unenforceable, the remaining portions of such provision and the
remaining provisions of this Agreement or the application of such provision or
portion of such provision as is held invalid or unenforceable to persons or
circumstances other than those to which it is held invalid or unenforceable,
shall not be affected thereby.
Page 177
11.14 Indemnification.
(A) Each Party hereby irrevocably agrees to indemnify and hold the other
Parties harmless from any and all liabilities and damages (including legal
or other expenses incidental thereto), contingent, current, or inchoate to
which they or any one of them may become subject as a direct, indirect or
incidental consequence of any action by the indemnifying Party or as a
consequence of the failure of the indemnifying Party to act, whether
pursuant to requirements of this Agreement or otherwise.
(B) In the event it becomes necessary to enforce this indemnity through an
attorney, with or without litigation, the successful Party shall be
entitled to recover from the indemnifying Party, all costs incurred
including reasonable attorneys' fees throughout any negotiations, trials or
appeals, whether or not any suit is instituted.
11.15 Dispute Resolution.
(A) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement any proceedings
pertaining directly or indirectly to the rights or obligations of the
Parties hereunder shall, to the extent legally permitted, be held in
Broward County, Florida, and the prevailing Party shall be entitled to
recover its costs and expenses, including reasonable attorneys' fees up to
and including all negotiations, trials and appeals, whether or not any
formal proceedings are initiated.
(B) Except for the arbitration procedures outlined in paragraphs 7.2(G)(2) and
7.2(G)(3) which shall govern any arbitration proceeding described therein,
in the event of any dispute arising under this Agreement, or the
negotiation thereof or inducements to enter into the Agreement, the dispute
shall, at the request of any Party, be exclusively resolved through the
following procedures:
(1) (a) First, the issue shall be submitted to mediation before a
mediation service in Broward County, Florida to be selected by
lot from six alternatives to be provided, two by the Affiliate,
two by AmeriNet and two by Xxxxxxx.
(b) The mediation efforts shall be concluded within ten business days
after their initiation unless the Parties unanimously agree to an
extended mediation period;
(2) In the event that mediation does not lead to a resolution of the
dispute then at the request of any Party, the Parties shall submit the
dispute to binding arbitration before an arbitration service located
in Broward County, Florida to be selected by lot, from six
alternatives to be provided, two by the Affiliate, two by AmeriNet and
two by Xxxxxxx.
(3) (a) Expenses of mediation shall be borne equally by the Parties, if
successful.
(b) Expenses of mediation, if unsuccessful and of arbitration shall
be borne by the Party or Parties against whom the arbitration
decision is rendered.
Page 178
(c) If the terms of the arbitral award do not establish a prevailing
Party, then the expenses of unsuccessful mediation and
arbitration shall be borne equally by the Parties involved.
11.16 Benefit of Agreement.
The terms and provisions of this Agreement shall be binding upon and inure
to the benefit of the Parties, their successors, assigns, personal
representatives, estate, heirs and legatees but are not intended to confer upon
any other person any rights or remedies hereunder.
11.17 Counterparts.
(A) This Agreement may be executed in any number of counterparts.
(B) All executed counterparts shall constitute one Agreement notwithstanding
that all signatories are not signatories to the original or the same
counterpart.
(C) Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for aesthetic
purposes, prepare a fully executed original version of this Agreement which
shall be the document filed with the Commission.
11.18 License.
(A) This form of agreement is the property of Yankees and has been customized
for this transaction with the consent of Yankees by Xxxxxx Xxxxxxxx,
Esquire.
(B) The use of this form of agreement by the Parties is authorized hereby
solely for purposes of this transaction.
(C) The use of this form of agreement or of any derivation thereof without
Yankees' prior written permission is prohibited.
11.19 Information Concerning the Affiliate's Share Ownership.
(A) Shares beneficially owned:
(1) 111 shares of Xxxxxxx Common Stock; and
(2) 0 shares of Xxxxxxx Common Stock subject to options,
warrants or other rights.
Page 179
Execution Pages
In Witness Whereof, the Affiliate, AmeriNet, and Xxxxxxx have caused this
Agreement to be executed by themselves or their duly authorized respective
officers, all as of the last date set forth below:
Signed, sealed and delivered
In Our Presence:
The Affiliate
---------------------------- /s/ Xxxxxx X. Xxxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxxx
---------------------------- ------------------------
Signature
Dated: May 11, 2000
------------------------
Print name
AmeriNet Xxxxx.xxx, Inc.
----------------------------
____________________________ By: /s/ Xxxxxxx X. Xxxxxx
________________________
Xxxxxxx X. Xxxxxx, President
(Corporate Seal)
Attest: /s/ Xxxxxxx X. Xxxxxxx
________________________
Xxxxxxx X. Xxxxxxx, Secretary
Dated: May 11, 2000
Xxxxxxx Communications, Inc.
----------------------------
____________________________ By: /s/ Xxxxxx X. Xxxxxxxxxx
______________________________
Xxxxxx X. Xxxxxxxxxx, President
(Corporate Seal)
Attest: /s/ Xxxxx X. Xxxxxxxxxx
______________________________
Xxxxx X. Xxxxxxxxxx, Secretary
Dated: May 11, 2000
Page 180
Exhibit "A"
Irrevocable Proxy
The undersigned stockholder of Xxxxxxx International, Inc., a Florida
corporation ("Xxxxxxx"), hereby irrevocably to the extent provided by Florida
law) appoints the directors on the Board of Directors of AmeriNet, Xxxxx.xxx,
Inc., a Delaware corporation ("AmeriNet"), and each of them, as the sole and
exclusive attorneys and proxies of the undersigned, with full power of
substitution and resubstitution, to the full extent of the undersigned's rights
with respect to the shares of capital stock of Xxxxxxx beneficially owned by the
undersigned, which shares are listed on the final page of this Proxy (the
"Shares"), and any and all other shares or securities issued or issuable in
respect thereof on or after the date hereof, until such time as that certain
Reorganization dated February 28, 2000"), among AmeriNet, and Xxxxxxx, shall be
terminated in accordance with its terms or the Reorganization Agreement is
effective.
Terms:
1. Upon the execution hereof, all prior proxies given by the undersigned with
respect to the Shares and any and all other shares or securities issued or
issuable in respect thereof on or after the date hereof are hereby revoked
and no subsequent proxies will be given.
2. This proxy is irrevocable (to the extent provided by Florida law), is
granted pursuant to the Affiliate Agreement dated as of May 11, 2000,
between AmeriNet, Xxxxxxx, and the undersigned stockholder, (the "Affiliate
Agreement"), and is granted in consideration of AmeriNet entering into the
Reorganization Agreement.
3. The attorneys and proxies named above will be empowered at any time prior
to termination of the Reorganization Agreement in accordance with Article
VIII thereof to exercise all voting and other rights (including, without
limitation, the power to execute and deliver written consents with respect
to the Shares) of the undersigned at every annual, special or adjourned
meeting of Lorilei's stockholders, and in every written consent in lieu of
such a meeting, or otherwise, in favor of approval of the Reorganization
Agreement and any matter that could reasonably be expected to facilitate
the Reorganization, and against any proposal made in opposition to or
competition with the consummation of the Reorganization and against any
merger, consolidation, sale of assets, reorganization or recapitalization
of Xxxxxxx with any party other than AmeriNet and its affiliates and
against any liquidation or winding up of Xxxxxxx.
4. The attorneys and proxies named above may only exercise this proxy to vote
the Shares subject hereto at any time prior to termination of the
Reorganization Agreement in accordance with Article VIII thereof at every
annual, special or adjourned meeting of the stockholders of Xxxxxxx and in
every written consent in lieu of such meeting, in favor of approval of the
Reorganization Agreement and any matter that could reasonably be expected
to facilitate the Reorganization, and against any merger, consolidation,
sale of assets, reorganization or recapitalization of Xxxxxxx with any
party other than AmeriNet and its affiliates, and against any liquidation
or winding up of Xxxxxxx, and may not exercise this proxy on any other
matter.
Page 181
5. The undersigned stockholder may vote the Shares on all other matters.
6. Any obligation of the undersigned hereunder shall be binding upon the
successors and assigns of the undersigned.
7. This proxy is irrevocable and coupled with an interest.
8. Stockholder Data:
A. Full name:
Xxxxxx X. Xxxxxxxxxx
Xxxxx X. Xxxxxxxxxx
_________________ _______________ _____________
First Middle Last
B. Tax identification number: Social Security number is not listed
due to privacy issues.
C. Domicile Address: 00000 XX 00xx Xxx. Xxxxx, XX 00000
D. Telephone, fax and e-mail: (000) 000-0000 (000) 000-0000
xxxxx@xxxxxxxxxxx.xxx
E. Shares Information:
(1) Number of Xxxxxxx Shares owned or controlled as to voting matters:
11
Signed, sealed and delivered
In Our Presence:
Stockholder:
----------------------------
/s/ Xxxxxx X. Xxxxxxxxxx
/s/ Xxxxx X. Xxxxxxxxxx
____________________________ By: _________________________
Dated: May 11, 2000
Page 182
Exhibit to Reorganization Agreement
by and among
AmeriNet Xxxxx.xxx, Inc., a Delaware Corporation
and
Xxxxxxx Communications, Inc., a Florida Corporation
EXHIBIT 5.12 COPIES OF CONTRACTS, AGREEMENTS & COMMITMENTS
Attached to this exhibit are the supporting document for the above
referenced for.
1. Non Compete Agreements
2. Talent Releases
3. New Position Offer for Xxxxxx Xxxx
4. Employment Agreement for Xxxxxx X. Xxxxxxxxxx
5. Employment Agreement for Xxxxx X. Xxxxxxxxxx
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Xxxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxxxx, President
Xxxxxxx Communications, Inc.
/s/ Xxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxx X. Xxxxxxxxxx, Vice President Sales
Xxxxxxx Communications, Inc.
Page 183
NON-COMPETITION COVENANT
THIS AGREEMENT, dated this day of day of , 2000 by and between Xxxxxxx
Communications, Inc. d/b/a THE FIRM MULTIMEDIA d/b/a OCALA NEWS TONIGHT
(hereinafter referred to as "Employer") and (hereinafter referred to as
"Employee").
WITNESSETH:
WHEREAS, Employer desires to employ Employee; and WHEREAS, Employee has agreed
to be employed by Employer. NOW, THEREFORE, in consideration of the employment
by the Employer, and the sum of $10, the Employee agrees to the following
conditions:
1. DURING TERM OF AGREEMENT. Employee shall not conduct or operate, directly or
indirectly, or be employed by or be associated in any way with any advertising,
marketing, public relations, video production, or business other than that of
the Employer, furnish any information as to Employer's methods of operation,
trade practices, procedures, training, advertising, publicity or promotional
ideas, or any other information relative to the Employer's business. Employee
shall comply with the terms, conditions and procedures of employment as
determined by the Employer, and shall abide by all governmental laws or
regulations governing the Employer's business.
2. UPON TERMINATION. Employee consents and agrees that his employment is
terminable with or without cause and notice by Employer. Employee agrees that
upon termination Employee shall return to Employer all customer advertising
lists, equipment, tapes, manuals, materials and property belonging to Employer
which is in the Employee's possession. Employee also agrees not to divulge any
information regarding the Employer's use and trade practices, methods of
procedure, training, advertising, publicity or promotional ideas, or any other
information relative to the Employer's business.
3. AFTER TERMINATION OF AGREEMENT. The employee acknowledges the name "THE FIRM
MULTIMEDIA", the business reputation associated with it, the methods and
technique employed by employer, the training instruction to be provided under
the agreement, the knowledge of the services and methods of employer, and the
opportunities, associations, and experiences established and acquired by the
employee under the agreement and as an employee of the employer are of
considerable value. For a period of six (6) months following the termination of
this agreement, employee shall not perform in any capacity the same or similar
function or job which was performed for employer in a 75 mile radius of
employer's business location in Ocala, Florida, nor shall employee engage in
work on any project or contract for the purpose of business solicitation any
client in any market currently doing business with THE FIRM Multimedia. This
covenant not to compete is limited to the advertising, marketing, video
production (including television and cable broadcasting) and public relations
industries.
MISCELLANEOUS PROVISIONS.
A. The parties hereto recognize there is no adequate remedy at law if the
employee accepts other employment in violation of this agreement. The employee,
therefore, consents the employer shall be entitled to injunctive relief in any
court of competent jurisdiction if the employee violates the non-compete or
non-disclosure covenants in this agreement.
B. All the terms, conditions, and provisions of this agreement, including the
restrictive covenant, have been fully explained to employee, who fully
understands and agrees to them as evidenced by the execution of his signature
below.
C. The venue for any litigation to enforce the terms of employment of this
agreement, shall be Xxxxxx County, Florida.
D. In the event of litigation to enforce this agreement, the prevailing party
shall be entitled to an award of attorneys fees and costs from the
non-prevailing party.
E. This agreement may only be modified by writing signed by both parties. No
oral representations have been made by either party which would conflict with
this agreement.
EMPLOYER:
XXXXXX XXXXXXXXXX, PRESIDENT
Xxxxxxx Communications, Inc. d/b/a THE
FIRM MULTIMEDIA d/b/a OCALA NEWS TONIGHT
WITNESS:
EMPLOYEE:
Page 184
Talent Release
Date: _____________________
Production: ________________________________________________
I do hereby give, grant, assign, transfer, release and set over, forever, to
you, your successors and assigns.
a) All rights of every kind and character whatsoever in and to all work and
results thereof I have created and done for you in the production of the above
subjects, including all literary, dramatic, dramatic-musical and motion picture
creations, ideas, compositions, arrangements, drawings, paintings and devices
(whether copyrightable or otherwise);
b) All works, acts, plays, poses, translations, gags, continuities, synopses,
scenarios or appearances I have heretofore done or given to you concerning the
above production;
c) The right to use all or any part of the foregoing as, if and in the manner
you desire, as well as all copies, versions, reproductions, duplications,
recordings, interpretations and prints of the same, including (but not limited
to) the right to reproduce in any manner whatsoever any recordings made by you
of my voice and any musical, instrumental or other sound or sound effects
produced by me.
d) Without limiting the foregoing and in addition thereto, I hereby further
grant to you, your successors and assigns, the right to use my name and/or
photograph, still or moving, in any manner you desire and/or the right to
reproduce and record my voice and other sound effects made by me and I hereby
consent to the use of my name and/or said photographs, likeness and reproduction
thereof and/or the recordations and reproductions of my voice and other sound
effects in portraits, pictures, photographs, motion pictures, on television and
by any other means, method and device now or hereafter known, discovered or
invented and without limiting the generality of the foregoing, to record,
amplify and reproduce my voice and/or musical, instrumental or other sound
effects made by me, completely or in part, for any advertising, publication,
promotion or any commercial or informative purpose whatsoever. I further grant
to you the right to substitute a double in my place to simulate my voice.
I hereby represent that I am over the age of twenty-one years and attest that
all statements made by me are true and correct.
Signed:__________________________________________________________
Print Name
and Address:_________________________________________________________
_____________________________________________________________
_____________________________________________________________
Witness:_________________________________________________________
Print Name:___________________________________________________________
Xxxxxxx Communications, Inc. d/b/a The Firm Multimedia d/b/a Ocala News Tonight
Employee Executed Agreements
Employee Non-Compete Talent Release
1. Xxxxx Xxxxx X X
2. Xxxxxxx Xxxxxxx X X
3. Xxx Xxxxx X
4. Xxxxxxx Xxxxxxxx X X
5. Xxxxxxxx Xxxxxxxxxxxx X
6. ***Xxxxx Xxxxxxxxxx
7. ***Xxxxx Xxxxxxxxxx
8. Xxxxxx Xxxxxxx X X
9. Xxxxxxx Xxxxxx X X
10. Xxxxxxxx Xxxx X X
11. **Xxxxxx Xxxxxxx
12. Xxxxxx Xxxxxx X X
13. Xxxx Xxx X X
14. Xxxxxx XxXxxxxx X
15. Xxxxxx XxXxxxxx X X
16. Xxxx Xxxxxx X X
17. *Xxxxxx Xxxxxx
18. Xxxxx Xxxxxxxxx X X
19. Xxxxx Xxxxxx X X
20. Xxxxxxxx Xxxxxx X
21. Xxx Xxxxxx X X
22. Xxxxxx Xxxx X X
Note: An X indicates that the agreement is executed by the employee.
* Xxxxxx Xxxxxx is a child care provider to the son of officers. She works
from her home.
** Xxxxxx Xxxxxxx is a child care provider to son of officers. She works from
her home. She also cleans the office on Sundays.
*** Leigh and Xxxxx Xxxxxxxxxx are officers and shareholders of the company.
185
February 16, 2000
To: Xxxxxx Xxxx
Fr: Xxxxx Xxxxxxxxxx
Re: New position offer
Position: General Sales Manager--Ocala News Tonight
Xxxxxx:
We are pleased you have chosen to accept the position of General Sales Manager
for Ocala News Tonight, effective February 16, 2000. Below is an outline of what
the position entails and your compensation plan.
Market Trading Area:
Central Florida to include Xxxxxx County, Citrus County, Lake County, Sumter
County, Hernando County, Pasco County, etc.
Position/Duties:
General Sales Manager Responsible for recruiting, hiring, training and managing
all sales reps as well as personal sales. Responsible for achieving station
sales goals and personal sales goals as outlined in Projected Sales, Y2K. As
part of this agreement, you will be required to sign and honor a 6 month
"non-compete" agreement.
Office Goals by aver:
1 st quarter, 2000 (January-March): $ 80,000
2nd quarter, 2000 (April-June): $ 90,000
3rd quarter, 2000 (July-September): $ 90,000
4th quarter, 2000 (October-December: $ 120,000
Total sales goal, Year 2000: $380,000
Sales Duties
Prospecting for new business, including telemarketing and appointment setting,
need analysis, creating and presenting proposals, negotiating deals, closing
sales, servicing accounts, and communicating with project coordinator and
production staff in Ocala. Attending sales meeting in Ocala office. Assisting
with collections for all accounts.
186
Management duties:
Recruit, hire, train, and manage sales people. Includes reporting progress to
corporate on a weekly basis, reaching sales goals, creating packages,
negotiating promotional and trade relationships, assisting sales people on four
legged calls, setting individual goals and monitoring sales process.
We will provide you an office in Ocala and all required support staff. The way I
would like to structure additional sales people is as follows:
Once you are covering your monthly draw (which would require a monthly base of
$12,000 in sales). I would like you to add a sales person. When they cover their
draw, add another, and so on until you feel you have a good team to cover the
market. Each rep you hire would work directly for you.
Compensation Plan
$21,000 annual base draw against commission
15% commission on gross profit of personal collected sales (above draw amount)
2% override on all monthly collections up to $30,000 for Ocala News Tonight
sales reps based on gross profit (excluding your personal account collections).
4% override on all monthly collections over $30,000 for Ocala News Tonight based
on gross profit (excluding your personal account collections).
Bonus program:
1 st quarter, 2000:
Collected quarterly sales exceeding $ 96,000: $1000 bonus
Collected quarterly sales exceeding $108,000: $1500 bonus
2nd quarter, 2000:
Collected quarterly sales exceeding $108,000: $1000 bonus
Collected quarterly sales exceeding $120,000: $1500 bonus
3rd quarter, 2000:
Collected quarterly sales exceeding $108,000: $1000 bonus
Collected quarterly sales exceeding $120,000: $1500 bonus
4th quarter, 2000:
Collected quarterly sales exceeding $144,000: $1000 bonus
Collected quarterly sales exceeding $156,000: $1500 bonus
Incentive Program
If you achieve your office's quarterly goal for two quarters in a row, you will
be provided a company car (not to exceed a monthly payment of $400.). However,
if you fail to reach your quarterly goal two quarters in a row, the monthly
payment amount of the car (not to exceed $400. per month) will be deducted from
your compensation until such time as you achieve quarterly goals for two
consecutive quarters.
187
Gas card ($200.00 per month allowance)
Cell phone ($75.00 monthly allowance)
Notebook computer for presentations
Reasonable reimbursed expenses (receipt must be provided to business office)
Up to $85.00 per month paid toward health insurance
One week paid vacation after one year
Two weeks paid vacation after three years (and each year thereafter)
Five paid personal/sick days per year
/s/ Xxxxxx Xxxx
/s/ Xxxxx Xxxxxxxxxx:
Date: 2/18/00
Page 188
Executive's Employment Agreement
THIS EXECUTIVE'S EMPLOYMENT AGREEMENT (the "Agreement") is entered into by
and among Xxxxxx X. Xxxxxxxxxx, an individual residing in the State of Florida
(the "Executive"); Xxxxxxx Communications, Inc., a Florida corporation
("Xxxxxxx"; Xxxxxxx and the Executive being sometimes hereinafter collectively
to as the "Parties" or generically as a "Party".
Preamble:
WHEREAS, Lorilei's board of directors is of the opinion that in conjunction
with effectuation of Lorilei's future plans it must memorialize, confirm and
assure itself of the continuing the services of the Executive, who currently
serves as a member of Lorilei's board of directors and as its president and
chief executive officer; and
WHEREAS, the Executive is thoroughly knowledgeable with all aspects of
Lorilei's operations and plans; and
WHEREAS, the Executive is agreeable to serving as a member of Lorilei's
board of directors and as its president and chief executive officer, on the
terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
Witnesseth:
Article One
Term, Renewals, Earlier Termination
1.1 Term.
Subject to the provisions set forth herein, the term of the Executive's
employment hereunder shall be deemed to commence on the date of this Agreement's
execution by all of the Parties and shall continue until June 30, 2001.
1.2 Renewals.
(a) This Agreement shall be renewed automatically, after expiration of the
original term, on a continuing annual basis, unless the Party wishing
not to renew this Agreement provides the other Party with written
notice of its election not to renew ("Termination Election Notice") on
or before the 30th day prior to termination of the then current term.
(b) Notwithstanding the foregoing, the Executive may not elect not to renew
this Agreement until after June 30, 2005, unless Xxxxxxx has defaulted
in its obligations under this Agreement or termination is called for
pursuant to other specific provisions hereof.
Page 189
1.3 Earlier Termination.
(a) For Cause:
Xxxxxxx shall have the right to terminate this Agreement prior to the
expiration of its Term or of any renewals thereof, subject to the
provisions of Sections 1.4 and 1.5, for the following reasons:
(1) Xxxxxxx may terminate the Executive's employment under this
Agreement at any time for cause.
(2) Such termination shall be evidenced by written notice thereof to
the Executive, which notice shall specify the cause for
termination.
(3) For purposes hereof, the term "cause" shall mean:
(A) The inability of the Executive, through sickness or other
incapacity, to discharge his duties under this Agreement for
30 or more consecutive days or for a total of 60 or more
days in a period of twelve consecutive months;
(B) The failure of the Executive to follow the directions of
Lorilei's board of directors;
(C) Dishonesty; theft; or conviction of a crime involving moral
turpitude;
(D) Material default in the performance of the Executive's
obligations, services or duties required under this
Agreement (other than due to illness) or material breach of
any provision of this Agreement, which default or breach has
continued for ten days after written notice of such default
or breach.
(b) Deterioration or Discontinuance of Business:
(1) In the event that Xxxxxxx experiences material business
reversals or fails to meet the operational criteria reflected
in its projections or business plans, then, subject to the
provisions of Section 1.4, at the option of Xxxxxxx, this
Agreement shall terminate as of a date selected by Xxxxxxx
with the same force and effect as if such date was the date
originally set as the termination date hereof.
(2) In the event that Xxxxxxx discontinues operating its business,
this Agreement shall terminate as of the last day of the month
on which it ceases operation with the same force and effect as
if such last day of the month were originally set as the
termination date hereof; provided, however, that a
reorganization of Xxxxxxx shall not be deemed a termination of
its business.
(c) Death:
This Agreement shall terminate immediately on the death of the Executive;
however, all accrued compensation at such time shall be promptly paid to the
Executive's estate.
(d) Material Default by Xxxxxxx:
In the event of a material default by Xxxxxxx in its obligations to the
Executive pursuant to this Agreement that is not attributable to the actions or
inaction of the Executive, then, the Executive shall provide Xxxxxxx and its
principal stockholder of such default, in writing, specifying the nature of the
default and the curative action required, and if such default is not cured
within thirty days afer Lorilei's principal stockholder receives the subject
notice, then, during the ensuing ten day period, the Executive may terminate
this Agreement; provided, however, that if the Executive does not terminate this
Agreement, the default will be deemed waived.
Page 190
1.4 Severance Payments and Alternatives to Termination
In the event this Agreement is terminated by Xxxxxxx for reasons other than
for cause as described in Section 1.3(b) above, the Executive shall be entitled
to either thirty days prior written notice or to a severance payment in a sum
equal to the salary that would have been paid had 30 days prior written notice
been provided; provided, however, that in lieu of termination, Xxxxxxx may offer
to continue this Agreement under modified compensation arrangements, if such
arrangements are reflected in the written notice and accepted by the Executive
prior to the end of the 30 day notice period.
1.5 Final Settlement.
Upon termination of this Agreement and payment of all amounts due to the
Executive hereunder, the Executive or his representative shall execute and
deliver to the terminating entity on a form prepared by Xxxxxxx, a receipt for
such sums and a release of all claims, except such claims as may have been
submitted pursuant to the terms of this Agreement and which remain unpaid, and,
shall forthwith tender to Xxxxxxx all records, manuals and written procedures,
as may be desired by it for the continued conduct of its business.
Article Two
Scope of Employment
2.1 Retention.
Xxxxxxx hereby hires the Executive and the Executive hereby accepts such
employment, in accordance with the terms, provisions and conditions of this
Agreement.
2.2 General Description of Duties.
(a) The Executive shall be employed as the president and chief executive
officer of Xxxxxxx and perform the duties generally associated with the
position of president and chief executive officer thereof.
(b) Without limiting the generality of the foregoing, the Executive shall
have exclusive control of all aspects of Lorilei's day to day
operations, subject only to compliance with the directions of Lorilei's
stockholder, its board of directors, applicable laws and fiduciary
obligations.
(c) The Executive covenants to perform the employment duties called for
hereby in good faith, devoting substantially all business time,
energies and abilities to the proper and efficient management of the
business of Xxxxxxx.
2.3 Status.
(a) Throughout the term of this Agreement, the Executive shall serve as a
member of the board of directors of Xxxxxxx and as its president and
chief executive officer.
(b) In the event that the Executive is not elected to such positions, then,
at the option of the Executive, this Agreement may be deemed terminated
effective as of the earliest time that it can be reasonably determined
that such election will not take place, provided that written notice of
such election is provided to Xxxxxxx within 30 days after it failed to
elect the Executive to the required office.
Page 191
2.4 Exclusivity.
All of the Executive's business time shall be devoted exclusively to the
affairs of Xxxxxxx.
Article Three
Compensation
3.1 Compensation.
As consideration for the Executive's services to Xxxxxxx the Executive
shall be entitled to:
(a) (1) An annual salary in the aggregate gross sum of $60,000 (the "Base
Salary"); plus
(2) An annual bonus equal to 2.5 of Lorilei's net pre tax profits,
payable within 30 days after an annual audit of Xxxxxxx (or of
Lorilei's parent corporation) is completed, permitting
determination thereof (the "Annual Bonus").
(b) Incentive stock options complying with the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended, or successor provisions
thereto (the "Options"), permitting the Executive to purchase up to 167,689
of the 335,378 shares of the common stock of AmeriNet Xxxxx.xxx, Inc., a
publicly held Delaware corporation with a class of securities registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which holds of all of Lorilei's capital stock and other
securities ("AmeriNet"), that AmeriNet reserved for issuance to Xxxxxxx
employees in conjunction with the Reorganization Agreement pursuant to
which AmeriNet acquired all of Lorilei's securities (the "Executive's
Option Shares"), on the following terms and subject to the following
conditions:
(1) The Executive's rights to the Options will vest on an annual
basis, subject to Lorilei's having complied with its
obligations under the Reorganization Agreement, the Executive
having complied with his obligations under this Agreements and
Lorilei's having attained the following EBITDA:
(a) If Xxxxxxx attains EBITDA of at least $500,000 during
the period starting on July 1, 2000 and ending on
June 30, 2001, then the first 33,988 shares of
AmeriNet's common stock reserved for issuance in the
event of exercise of the subject incentive stock
options will vest;
(b) If Xxxxxxx attains EBITDA of at least $1,400,000
during the period starting on July 1, 2000 and ending
on June 30, 2002, then all rights to 89,885
(including the 33,988 shares vested, if any, on June
30, 2001) of the shares of AmeriNet's Common stock
reserved for issuance in the event of exercise of the
subject incentive stock options will vest; and
(c) If Xxxxxxx attains EBITDA of at least $2,900,000
during the period starting on July 1, 2000 and ending
on June 30, 2003, then all rights to all of the
167,689 shares (including the shares vested, if any,
on June 30, 2001 and June 30, 2002) of AmeriNet's
Common stock reserved for issuance in the event of
exercise of the subject incentive stock options will
vest.
Page 192
(2) All rights to the incentive stock options that have not vested
as of July 1, 2003 will expire on such date, and no further
rights of any kind thereto or to the underlying shares of
AmeriNet's common stock reserved for such purpose will exist
thereafter, the reservation therefor terminating on such date.
(3) The vested Options will be exercisable during the three fiscal
year period after they vest at a price of $1.3125 per share,
provided that as required by Code Section 422, all rights to
or under the Options will expire within 90 days after
termination of the Executive's employment by Xxxxxxx.
(4) All other terms pertaining to the Options are hereby
incorporated by reference from those contained in AmeriNet's
Non-Qualified Stock Option & Stock Incentive Plan, Effective
as of January 1 , 2000 filed by AmeriNet with the United
States Securities and Exchange Commission (the "Commission"),
a copy of which is annexed hereto and made a part hereof as
exhibit 3.1(B)(2), except to the extent that they would be
inconsistent with the specific terms in this Section 3.1
unless such inconsistency is required by the provisions of
Code Section 422.
3.2 Benefits.
During the term of this Agreement, the Executive shall also be entitled to
the following benefits:
(a) Two weeks paid vacation per year.
(b) Automobile, insurance and child care benefits not to exceed $12,000 per
fiscal year; and
(c) All other benefits of employment generally available to all of
Lorilei's employees, provided that such benefits have been approved by
Lorilei's stockholders and are not duplicative of those otherwise
reflected in this Agreement.
3.3 Indemnification.
Xxxxxxx will defend, indemnify and hold the Executive harmless from all
liabilities, suits, judgments, fines, penalties or disabilities, including
expenses associated directly, therewith (e.g. legal fees, court costs,
investigative costs, witness fees, etc.) resulting from any reasonable actions
taken by him in good faith on behalf of Xxxxxxx, its affiliates or for other
persons or entities at the request of the board of directors of Xxxxxxx, to the
fullest extent legally permitted, and in conjunction therewith, shall assure
that all required expenditures are made in a manner making it unnecessary for
the Executive to incur any out of pocket expenses; provided, however, that the
Executive permits the majority stockholders of Xxxxxxx to select and supervise
all personnel involved in such defense and that the Executive waive any
conflicts of interest that such personnel may have as a result of also
representing Xxxxxxx, its stockholders or other personnel and agrees to hold
them harmless from any matters involving such representation, except such as
involve fraud or bad faith.
Page 193
Article Four
Special Covenants
4.1 Confidentiality, Non-Circumvention and Non-Competition.
During the term of this Agreement, all renewals thereof and for a period of
two years after its termination, the Executive hereby irrevocably agrees to be
bound by the following restrictions, which constitute a material inducement for
Lorilei's entry into this Agreement and for AmeriNet's agreement to provide
shares of its common stock as the securities underlying the Options:
(a) Because the Executive will be developing for Xxxxxxx, making use of,
acquiring and/or adding to, confidential information of special and unique
nature and value relating to such matters as Lorilei's trade secrets,
systems, procedures, manuals, confidential reports, personnel resources,
strategic and tactical plans, advisors, clients, investors and funders; as
material inducement to the entry into this Agreement by Xxxxxxx, the
Executive hereby covenants and agrees not to personally use, divulge or
disclose, for any purpose whatsoever, directly or indirectly, any of such
confidential information during the term of this Agreement, any renewals
thereof, and for a period of two years after its termination.
(b) The Executive hereby covenants and agrees to be bound as a fiduciary of
Xxxxxxx, as if the Executive were a partner in a partnership bound by the
partnership opportunities doctrine, as such concept has been judicially and
legislatively developed in the State of Florida, and consequently, without
the prior written consent of Xxxxxxx, on a specific, case by case basis,
the Executive shall not, among other things, directly or indirectly:
(1) Engage in any activities, whether or not for profit, competitive with
Lorilei's business.
(2) Solicit or accept any person providing services to Xxxxxxx, whether as
an employee, consultant or independent contractor, for employment or
provision of services.
(3) Induce any client or customer of Xxxxxxx to cease doing business with
Xxxxxxx or to engage in business with any person engaged in business
activities that compete with Lorilei's business.
(4) Divert any business opportunity within the general scope of Lorilei's
business and business capacity, to any other person or entity.
4.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly occur to
Xxxxxxx as a result of a breach by the Executive of the covenants or agreements
contained in this Article Four, and in view of the lack of an adequate remedy at
law to protect Lorilei's interests, the Executive hereby covenants and agrees
that Xxxxxxx shall have the following additional rights and remedies in the
event of a breach hereof:
(a) In addition to and not in limitation of any other rights, remedies or
damages available to Xxxxxxx, whether at law or in equity, it shall be
entitled to a permanent injunction in order to prevent or to restrain
any such breach by the Executive, or by the Executive's partners,
agents, representatives, servants, employers, employees, affiliates
and/or any and all persons directly or indirectly acting for or with
him and the Executive hereby consents to the issuance of such a
permanent injunction; and
Page 194
(b) Because it is impossible to ascertain or estimate the entire or exact
cost, damage or injury which Xxxxxxx may sustain prior to the effective
enforcement of such injunction, the Executive hereby covenants and
agrees to pay over to Xxxxxxx, in the event he violates the covenants
and agreements contained in Section 4.2 hereof, the greater of:
(1) Any payment or compensation of any kind received by the
Executive or by persons affiliated with or acting for or with
the Executive, because of such violation before the issuance
of such injunction, or
(2) The sum of One Thousand ($1,000.00) Dollars per violation,
which sum shall be liquidated damages, and not a penalty, for
the injuries suffered by Xxxxxxx as a result of such
violation, the Parties hereto agreeing that such liquidated
damages are not intended as the exclusive remedy available to
Xxxxxxx for any breach of the covenants and agreements
contained in this Article Four, prior to the issuance of such
injunction, the Parties recognizing that the only adequate
remedy to protect Xxxxxxx from the injury caused by such
breaches would be injunctive relief.
4.3 Cumulative Remedies.
The Executive hereby irrevocably agrees that the remedies described in
Section 4.2 shall be in addition to, and not in limitation of, any of the rights
or remedies to which Xxxxxxx is or may be entitled to, whether at law or in
equity, under or pursuant to this Agreement.
4.4 Acknowledgment of Reasonableness.
(a) The Executive hereby represents, warrants and acknowledges that having
carefully read and considered the provisions of this Article Four, the
restrictions set forth herein are fair and reasonable and are reasonably
required for the protection of the interests of Xxxxxxx, its officers,
directors and other employees; consequently, in the event that any of the
above-described restrictions shall be held unenforceable by any court of
competent jurisdiction, the Executive hereby covenants, agrees and directs
such court to substitute a reasonable judicially enforceable limitation in
place of any limitation deemed unenforceable and, the Executive hereby
covenants and agrees that if so modified, the covenants contained in this
Article Four shall be as fully enforceable as if they had been set forth
herein directly by the Parties.
(b) In determining the nature of this limitation, the Executive hereby
acknowledges, covenants and agrees that it is the intent of the Parties
that a court adjudicating a dispute arising hereunder recognize that the
Parties desire that these covenants not to circumvent, disclose or compete
be imposed and maintained to the greatest extent possible.
4.5 Unauthorized Acts.
The Executive hereby covenants and agrees not do any act or incur any
obligation on behalf of Xxxxxxx except as authorized by its board of directors
or by its stockholders pursuant to duly adopted stockholder action or reasonably
inferred therefrom.
Page 195
Article Five
Miscellaneous
5.1 Notices.
(a) (1) All notices, demands or other communications hereunder shall be in
writing, and unless otherwise provided, shall be deemed to have been
duly given on the first business day after mailing by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
To the Executive:
Xxxxxx X. Xxxxxxxxxx
00000 Xxxxxxxxx 00xx Xxxxxx; Xxxxx, Xxxxxxx 00000
Telephone (000) 000-0000; Fax (000) 000-0000; e-mail xxxxxx@xxxxxxxxxxx.xxx;
To Xxxxxxx:
Xxxxxxx Communications, Inc.
Post Office Box 77078; Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, President
Telephone (000) 000-0000; Fax (000) 000-0000; e-mail xxxxxxx@xxxxxxxxxxx.xxx;
with a copy to
Xxxxx Xxxxxxxx, Esquire
000 Xxxxxxxxx 0xx Xxxxxx, Xxxxx X; Xxxxxxxxxxx, Xxxxxxx 00000
Telephone (000) 000-0000; Fax (000) 000-0000; and,e-mail xxxxxxxxx@xxxxxxx.xxx;
In each case with copies to AmeriNet Xxxxx.xxx, Inc.
Crystal Corporate Center; 0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000-X;
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxx, President
Telephone (000) 000-0000, Fax (000) 000-0000;
and, e-mail xxx.xxxxxxx@xxxxxxxxxxxxx.xxx; and
Xxxxxx Xxxxxxxx, Esquire; General Counsel
AmeriNet Xxxxx.xxx, Inc.
0000 Xxxxxxxxx 00xx Xxxxxxx; Xxxxx, Xxxxxxx
00000 Telephone (000) 000-0000, Fax (000) 000-0000; and,
e-mail, xxxxxxxx@xxxxxxxx.xxx.
(2) Copies of notices will also be provided to such other address
or to such other person as any Party shall designate to the
other for such purpose in the manner hereinafter set forth.
(b) (1) The Parties acknowledge that The Yankee Companies, Inc., a
Florida corporation ("Yankees") has acted as scrivener for
the Parties in this transaction and that Yankees is neither
a law firm nor an agency subject to any professional
regulation or oversight.
(2) Yankees has advised all of the Parties to retain independent
legal and accounting counsel to review this Agreement on their
behalf since it cannot provide any Party with legal advice.
(3) This Agreement shall not be interpreted more or less strictly
against any Party based on its authorship.
Page 196
5.2 Amendment.
(a) No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is in writing and signed by
the Party against which the enforcement of said modification, waiver,
amendment, discharge or change is sought.
(b) This Agreement may not be modified without the consent of a majority in
interest of Lorilei's AmeriNet's stockholders.
5.3 Merger.
(a) This instrument contains all of the understandings and agreements of
the Parties with respect to the subject matter discussed herein.
(b) All prior agreements whether written or oral, are merged herein and
shall be of no force or effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and shall be effective
regardless of any investigation that may have been made or may be made by or on
behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Agreement, or the
application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining portions of
such provision and the remaining provisions of this Agreement or the application
of such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be effected thereby.
5.6 Governing Law and Venue.
This Agreement shall be construed in accordance with the laws of the State
of Florida but any proceeding arising between the Parties in any matter
pertaining or related to this Agreement shall, to the extent permitted by law,
be held in Broward County, Florida.
5.7 Litigation.
(a) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the
prevailing Party shall be entitled to recover its costs and expenses,
including reasonable attorneys' fees up to and including all
negotiations, trials and appeals, whether or not litigation is
initiated.
(b) In the event of any dispute arising under this Agreement, or the
negotiation thereof or inducements to enter into the Agreement, the
dispute shall, at the request of any Party, be exclusively resolved
through the following procedures:
(1) (A) First, the issue shall be submitted to mediation
before a mediation service in Broward County,
Florida, to be selected by lot from six alternatives
to be provided, two by Lorilei's majority
stockholder, two by Xxxxxxx and two by the Executive.
Page 197
(B) The mediation efforts shall be concluded within ten
business days after their in itiation unless the
Parties unanimously agree to an extended mediation
period;
(2) In the event that mediation does not lead to a resolution of
the dispute then at the request of any Party, the Parties
shall submit the dispute to binding arbitration before an
arbitration service located in Broward County, Florida to be
selected by lot, from six alternatives to be provided,, two by
Lorilei's majority stockholder, two by Xxxxxxx and two by the
Executive.
(3) (A) Expenses of mediation shall be borne by Xxxxxxx, if
successful.
(B) Expenses of mediation, if unsuccessful and of
arbitration shall be borne by the Party or Parties
against whom the arbitration decision is rendered.
(C) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration shall be borne equally by
the Parties.
5.8 Benefit of Agreement.
(a) This Agreement may not be assigned by the Executive without the prior
written consent of Xxxxxxx.
(b) Subject to the restrictions on transferability and assignment contained
herein, the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties, their successors,
assigns, personal representative, estate, heirs and legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope of this Agreement or the
intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or cause
to be done, executed or acknowledged or delivered and to perform all such acts
and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but, rather,
the relationship established hereby is that of employer-employee in Xxxxxxx.
Page 198
5.13 Counterparts.
(a) This Agreement may be executed in any number of counterparts.
(b) Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for
aesthetic purposes, prepare a fully executed original version of this
Agreement, which shall be the document filed with the Securities and
Exchange Commission.
5.14 License.
(a) This Agreement is the property of Yankees and the use hereof by the
Parties is authorized hereby solely for purposes of this transaction.
(b) The use of this form of agreement or of any derivation thereof without
Yankees' prior written permission is prohibited.
In Witness Whereof, the Parties have executed this Agreement, effective as
of the last date set forth below.
Signed, Sealed & Delivered
In Our Presence
The Executive
--------------------------
/s/ Xxxxxx X. Xxxxxxxxxx
-------------------------- --------------------------
Xxxxxx X. Xxxxxxxxxx
Dated: May 11, 2000
Xxxxxxx Communications, Inc.
a Florida corporation.
--------------------------
__________________________ By: /s/ Xxxxxx X. Xxxxxxxxxx
___________________________
Xxxxxx X. Xxxxxxxxxx, President
(CORPORATE SEAL)
Attest: /s/ Xxxxx X. Xxxxxxxxxx
__________________________
Xxxxx X. Xxxxxxxxxx,
Vice President & Secretary
Dated: May 11, 2000
Page 199
Executive's Employment Agreement
THIS EXECUTIVE'S EMPLOYMENT AGREEMENT (the "Agreement") is entered into by
and among Xxxxx X. Xxxxxxxxxx, an individual residing in the State of Florida
(the "Executive"); Xxxxxxx Communications, Inc., a Florida corporation
("Xxxxxxx"; Xxxxxxx and the Executive being sometimes hereinafter collectively
to as the "Parties" or generically as a "Party".
Preamble:
WHEREAS, Lorilei's board of directors is of the opinion that in conjunction
with effectuation of Lorilei's future plans it must memorialize, confirm and
assure itself of the continuing the services of the Executive, who currently
serves as a member of Lorilei's board of directors and as its president and
chief executive officer; and
WHEREAS, the Executive is thoroughly knowledgeable with all aspects of
Lorilei's operations and plans; and
WHEREAS, the Executive is agreeable to serving as a member of Lorilei's
board of directors and as its president and chief executive officer, on the
terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
Witnesseth:
Article One
Term, Renewals, Earlier Termination
1.1 Term.
Subject to the provisions set forth herein, the term of the Executive's
employment hereunder shall be deemed to commence on the date of this Agreement's
execution by all of the Parties and shall continue until June 30, 2001.
1.2 Renewals.
(a) This Agreement shall be renewed automatically, after expiration of the
original term, on a continuing annual basis, unless the Party wishing
not to renew this Agreement provides the other Party with written
notice of its election not to renew ("Termination Election Notice") on
or before the 30th day prior to termination of the then current term.
(b) Notwithstanding the foregoing, the Executive may not elect not to renew
this Agreement until after June 30, 2005, unless Xxxxxxx has defaulted
in its obligations under this Agreement or termination is called for
pursuant to other specific provisions hereof.
Page 200
1.3 Earlier Termination.
(a) For Cause:
Xxxxxxx shall have the right to terminate this Agreement prior to the
expiration of its Term or of any renewals thereof, subject to the
provisions of Sections 1.4 and 1.5, for the following reasons:
(1) Xxxxxxx may terminate the Executive's employment under this
Agreement at any time for cause.
(2) Such termination shall be evidenced by written notice thereof to
the Executive, which notice shall specify the cause for
termination.
(3) For purposes hereof, the term "cause" shall mean:
(A) The inability of the Executive, through sickness or other
incapacity, to discharge his duties under this Agreement for
30 or more consecutive days or for a total of 60 or more
days in a period of twelve consecutive months;
(B) The failure of the Executive to follow the directions of
Lorilei's board of directors;
(C) Dishonesty; theft; or conviction of a crime involving moral
turpitude;
(D) Material default in the performance of the Executive's
obligations, services or duties required under this
Agreement (other than due to illness) or material breach of
any provision of this Agreement, which default or breach has
continued for ten days after written notice of such default
or breach.
(b) Deterioration or Discontinuance of Business:
(1) In the event that Xxxxxxx experiences material business
reversals or fails to meet the operational criteria reflected
in its projections or business plans, then, subject to the
provisions of Section 1.4, at the option of Xxxxxxx, this
Agreement shall terminate as of a date selected by Xxxxxxx
with the same force and effect as if such date was the date
originally set as the termination date hereof.
(2) In the event that Xxxxxxx discontinues operating its business,
this Agreement shall terminate as of the last day of the month
on which it ceases operation with the same force and effect as
if such last day of the month were originally set as the
termination date hereof; provided, however, that a
reorganization of Xxxxxxx shall not be deemed a termination of
its business.
(c) Death:
This Agreement shall terminate immediately on the death of the Executive;
however, all accrued compensation at such time shall be promptly paid to the
Executive's estate.
(d) Material Default by Xxxxxxx:
In the event of a material default by Xxxxxxx in its obligations to the
Executive pursuant to this Agreement that is not attributable to the actions or
inaction of the Executive, then, the Executive shall provide Xxxxxxx and its
principal stockholder of such default, in writing, specifying the nature of the
default and the curative action required, and if such default is not cured
within thirty days afer Lorilei's principal stockholder receives the subject
notice, then, during the ensuing ten day period, the Executive may terminate
this Agreement; provided, however, that if the Executive does not terminate this
Agreement, the default will be deemed waived.
Page 201
1.4 Severance Payments and Alternatives to Termination
In the event this Agreement is terminated by Xxxxxxx for reasons other than
for cause as described in Section 1.3(b) above, the Executive shall be entitled
to either thirty days prior written notice or to a severance payment in a sum
equal to the salary that would have been paid had 30 days prior written notice
been provided; provided, however, that in lieu of termination, Xxxxxxx may offer
to continue this Agreement under modified compensation arrangements, if such
arrangements are reflected in the written notice and accepted by the Executive
prior to the end of the 30 day notice period.
1.5 Final Settlement.
Upon termination of this Agreement and payment of all amounts due to the
Executive hereunder, the Executive or his representative shall execute and
deliver to the terminating entity on a form prepared by Xxxxxxx, a receipt for
such sums and a release of all claims, except such claims as may have been
submitted pursuant to the terms of this Agreement and which remain unpaid, and,
shall forthwith tender to Xxxxxxx all records, manuals and written procedures,
as may be desired by it for the continued conduct of its business.
Article Two
Scope of Employment
2.1 Retention.
Xxxxxxx hereby hires the Executive and the Executive hereby accepts such
employment, in accordance with the terms, provisions and conditions of this
Agreement.
2.2 General Description of Duties.
(a) The Executive shall be employed as the president and chief executive
officer of Xxxxxxx and perform the duties generally associated with the
position of president and chief executive officer thereof.
(b) Without limiting the generality of the foregoing, the Executive shall
have exclusive control of all aspects of Lorilei's day to day
operations, subject only to compliance with the directions of Lorilei's
stockholder, its board of directors, applicable laws and fiduciary
obligations.
(c) The Executive covenants to perform the employment duties called for
hereby in good faith, devoting substantially all business time,
energies and abilities to the proper and efficient management of the
business of Xxxxxxx.
2.3 Status.
(a) Throughout the term of this Agreement, the Executive shall serve as a
member of the board of directors of Xxxxxxx and as its president and
chief executive officer.
(b) In the event that the Executive is not elected to such positions, then,
at the option of the Executive, this Agreement may be deemed terminated
effective as of the earliest time that it can be reasonably determined
that such election will not take place, provided that written notice of
such election is provided to Xxxxxxx within 30 days after it failed to
elect the Executive to the required office.
Page 202
2.4 Exclusivity.
All of the Executive's business time shall be devoted exclusively to the
affairs of Xxxxxxx.
Article Three
Compensation
3.1 Compensation.
As consideration for the Executive's services to Xxxxxxx the Executive
shall be entitled to:
(a) (1) An annual salary in the aggregate gross sum of $60,000 (the "Base
Salary"); plus
(2) An annual bonus equal to 2.5 of Lorilei's net pre tax profits,
payable within 30 days after an annual audit of Xxxxxxx (or of
Lorilei's parent corporation) is completed, permitting
determination thereof (the "Annual Bonus").
(b) Incentive stock options complying with the requirements of Section 422 of
the Internal Revenue Code of 1986, as amended, or successor provisions
thereto (the "Options"), permitting the Executive to purchase up to 167,689
of the 335,378 shares of the common stock of AmeriNet Xxxxx.xxx, Inc., a
publicly held Delaware corporation with a class of securities registered
under Section 12(g) of the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), which holds of all of Lorilei's capital stock and other
securities ("AmeriNet"), that AmeriNet reserved for issuance to Xxxxxxx
employees in conjunction with the Reorganization Agreement pursuant to
which AmeriNet acquired all of Lorilei's securities (the "Executive's
Option Shares"), on the following terms and subject to the following
conditions:
(1) The Executive's rights to the Options will vest on an annual
basis, subject to Lorilei's having complied with its
obligations under the Reorganization Agreement, the Executive
having complied with his obligations under this Agreements and
Lorilei's having attained the following EBITDA:
(a) If Xxxxxxx attains EBITDA of at least $500,000 during
the period starting on July 1, 2000 and ending on
June 30, 2001, then the first 33,988 shares of
AmeriNet's common stock reserved for issuance in the
event of exercise of the subject incentive stock
options will vest;
(b) If Xxxxxxx attains EBITDA of at least $1,400,000
during the period starting on July 1, 2000 and ending
on June 30, 2002, then all rights to 89,885
(including the 33,988 shares vested, if any, on June
30, 2001) of the shares of AmeriNet's Common stock
reserved for issuance in the event of exercise of the
subject incentive stock options will vest; and
(c) If Xxxxxxx attains EBITDA of at least $2,900,000
during the period starting on July 1, 2000 and ending
on June 30, 2003, then all rights to all of the
167,689 shares (including the shares vested, if any,
on June 30, 2001 and June 30, 2002) of AmeriNet's
Common stock reserved for issuance in the event of
exercise of the subject incentive stock options will
vest.
Page 203
(2) All rights to the incentive stock options that have not vested
as of July 1, 2003 will expire on such date, and no further
rights of any kind thereto or to the underlying shares of
AmeriNet's common stock reserved for such purpose will exist
thereafter, the reservation therefor terminating on such date.
(3) The vested Options will be exercisable during the three fiscal
year period after they vest at a price of $1.3125 per share,
provided that as required by Code Section 422, all rights to
or under the Options will expire within 90 days after
termination of the Executive's employment by Xxxxxxx.
(4) All other terms pertaining to the Options are hereby
incorporated by reference from those contained in AmeriNet's
Non-Qualified Stock Option & Stock Incentive Plan, Effective
as of January 1 , 2000 filed by AmeriNet with the United
States Securities and Exchange Commission (the "Commission"),
a copy of which is annexed hereto and made a part hereof as
exhibit 3.1(B)(2), except to the extent that they would be
inconsistent with the specific terms in this Section 3.1
unless such inconsistency is required by the provisions of
Code Section 422.
3.2 Benefits.
During the term of this Agreement, the Executive shall also be entitled to
the following benefits:
(a) Two weeks paid vacation per year.
(b) Automobile, insurance and child care benefits not to exceed $12,000 per
fiscal year; and
(c) All other benefits of employment generally available to all of
Lorilei's employees, provided that such benefits have been approved by
Lorilei's stockholders and are not duplicative of those otherwise
reflected in this Agreement.
3.3 Indemnification.
Xxxxxxx will defend, indemnify and hold the Executive harmless from all
liabilities, suits, judgments, fines, penalties or disabilities, including
expenses associated directly, therewith (e.g. legal fees, court costs,
investigative costs, witness fees, etc.) resulting from any reasonable actions
taken by him in good faith on behalf of Xxxxxxx, its affiliates or for other
persons or entities at the request of the board of directors of Xxxxxxx, to the
fullest extent legally permitted, and in conjunction therewith, shall assure
that all required expenditures are made in a manner making it unnecessary for
the Executive to incur any out of pocket expenses; provided, however, that the
Executive permits the majority stockholders of Xxxxxxx to select and supervise
all personnel involved in such defense and that the Executive waive any
conflicts of interest that such personnel may have as a result of also
representing Xxxxxxx, its stockholders or other personnel and agrees to hold
them harmless from any matters involving such representation, except such as
involve fraud or bad faith.
Page 204
Article Four
Special Covenants
4.1 Confidentiality, Non-Circumvention and Non-Competition.
During the term of this Agreement, all renewals thereof and for a period of
two years after its termination, the Executive hereby irrevocably agrees to be
bound by the following restrictions, which constitute a material inducement for
Lorilei's entry into this Agreement and for AmeriNet's agreement to provide
shares of its common stock as the securities underlying the Options:
(a) Because the Executive will be developing for Xxxxxxx, making use of,
acquiring and/or adding to, confidential information of special and unique
nature and value relating to such matters as Lorilei's trade secrets,
systems, procedures, manuals, confidential reports, personnel resources,
strategic and tactical plans, advisors, clients, investors and funders; as
material inducement to the entry into this Agreement by Xxxxxxx, the
Executive hereby covenants and agrees not to personally use, divulge or
disclose, for any purpose whatsoever, directly or indirectly, any of such
confidential information during the term of this Agreement, any renewals
thereof, and for a period of two years after its termination.
(b) The Executive hereby covenants and agrees to be bound as a fiduciary of
Xxxxxxx, as if the Executive were a partner in a partnership bound by the
partnership opportunities doctrine, as such concept has been judicially and
legislatively developed in the State of Florida, and consequently, without
the prior written consent of Xxxxxxx, on a specific, case by case basis,
the Executive shall not, among other things, directly or indirectly:
(1) Engage in any activities, whether or not for profit, competitive with
Lorilei's business.
(2) Solicit or accept any person providing services to Xxxxxxx, whether as
an employee, consultant or independent contractor, for employment or
provision of services.
(3) Induce any client or customer of Xxxxxxx to cease doing business with
Xxxxxxx or to engage in business with any person engaged in business
activities that compete with Lorilei's business.
(4) Divert any business opportunity within the general scope of Lorilei's
business and business capacity, to any other person or entity.
4.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly occur to
Xxxxxxx as a result of a breach by the Executive of the covenants or agreements
contained in this Article Four, and in view of the lack of an adequate remedy at
law to protect Lorilei's interests, the Executive hereby covenants and agrees
that Xxxxxxx shall have the following additional rights and remedies in the
event of a breach hereof:
(a) In addition to and not in limitation of any other rights, remedies or
damages available to Xxxxxxx, whether at law or in equity, it shall be
entitled to a permanent injunction in order to prevent or to restrain
any such breach by the Executive, or by the Executive's partners,
agents, representatives, servants, employers, employees, affiliates
and/or any and all persons directly or indirectly acting for or with
him and the Executive hereby consents to the issuance of such a
permanent injunction; and
Page 205
(b) Because it is impossible to ascertain or estimate the entire or exact
cost, damage or injury which Xxxxxxx may sustain prior to the effective
enforcement of such injunction, the Executive hereby covenants and
agrees to pay over to Xxxxxxx, in the event he violates the covenants
and agreements contained in Section 4.2 hereof, the greater of:
(1) Any payment or compensation of any kind received by the
Executive or by persons affiliated with or acting for or with
the Executive, because of such violation before the issuance
of such injunction, or
(2) The sum of One Thousand ($1,000.00) Dollars per violation,
which sum shall be liquidated damages, and not a penalty, for
the injuries suffered by Xxxxxxx as a result of such
violation, the Parties hereto agreeing that such liquidated
damages are not intended as the exclusive remedy available to
Xxxxxxx for any breach of the covenants and agreements
contained in this Article Four, prior to the issuance of such
injunction, the Parties recognizing that the only adequate
remedy to protect Xxxxxxx from the injury caused by such
breaches would be injunctive relief.
4.3 Cumulative Remedies.
The Executive hereby irrevocably agrees that the remedies described in
Section 4.2 shall be in addition to, and not in limitation of, any of the rights
or remedies to which Xxxxxxx is or may be entitled to, whether at law or in
equity, under or pursuant to this Agreement.
4.4 Acknowledgment of Reasonableness.
(a) The Executive hereby represents, warrants and acknowledges that having
carefully read and considered the provisions of this Article Four, the
restrictions set forth herein are fair and reasonable and are reasonably
required for the protection of the interests of Xxxxxxx, its officers,
directors and other employees; consequently, in the event that any of the
above-described restrictions shall be held unenforceable by any court of
competent jurisdiction, the Executive hereby covenants, agrees and directs
such court to substitute a reasonable judicially enforceable limitation in
place of any limitation deemed unenforceable and, the Executive hereby
covenants and agrees that if so modified, the covenants contained in this
Article Four shall be as fully enforceable as if they had been set forth
herein directly by the Parties.
(b) In determining the nature of this limitation, the Executive hereby
acknowledges, covenants and agrees that it is the intent of the Parties
that a court adjudicating a dispute arising hereunder recognize that the
Parties desire that these covenants not to circumvent, disclose or compete
be imposed and maintained to the greatest extent possible.
4.5 Unauthorized Acts.
The Executive hereby covenants and agrees not do any act or incur any
obligation on behalf of Xxxxxxx except as authorized by its board of directors
or by its stockholders pursuant to duly adopted stockholder action or reasonably
inferred therefrom.
Page 206
Article Five
Miscellaneous
5.1 Notices.
(a) (1) All notices, demands or other communications hereunder shall be in
writing, and unless otherwise provided, shall be deemed to have been
duly given on the first business day after mailing by registered or
certified mail, return receipt requested, postage prepaid, addressed
as follows:
To the Executive:
Xxxxx X.Xxxxxxxxxx
00000 Xxxxxxxxx 00xx Xxxxxx; Xxxxx, Xxxxxxx 00000
Telephone (000) 000-0000; Fax (000) 000-0000; e-mail xxxxxx@xxxxxxxxxxx.xxx;
To Xxxxxxx:
Xxxxxxx Communications, Inc.
Post Office Box 77078; Xxxxx, Xxxxxxx 00000
Attention: Xxxxxx X. Xxxxxxxxxx, President
Telephone (000) 000-0000; Fax (000) 000-0000; e-mail xxxxxxx@xxxxxxxxxxx.xxx;
with a copy to
Xxxxx Xxxxxxxx, Esquire
000 Xxxxxxxxx 0xx Xxxxxx, Xxxxx X; Xxxxxxxxxxx, Xxxxxxx 00000
Telephone (000) 000-0000; Fax (000) 000-0000; and,e-mail xxxxxxxxx@xxxxxxx.xxx;
In each case with copies to AmeriNet Xxxxx.xxx, Inc.
Crystal Corporate Center; 0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000-X;
Xxxx Xxxxx, Xxxxxxx 00000
Attention: Xxxxxxx Xxxxxx, President
Telephone (000) 000-0000, Fax (000) 000-0000;
and, e-mail xxx.xxxxxxx@xxxxxxxxxxxxx.xxx; and
Xxxxxx Xxxxxxxx, Esquire; General Counsel
AmeriNet Xxxxx.xxx, Inc.
0000 Xxxxxxxxx 00xx Xxxxxxx; Xxxxx, Xxxxxxx
00000 Telephone (000) 000-0000, Fax (000) 000-0000; and,
e-mail, xxxxxxxx@xxxxxxxx.xxx.
(2) Copies of notices will also be provided to such other address
or to such other person as any Party shall designate to the
other for such purpose in the manner hereinafter set forth.
(b) (1) The Parties acknowledge that The Yankee Companies, Inc., a
Florida corporation ("Yankees") has acted as scrivener for
the Parties in this transaction and that Yankees is neither
a law firm nor an agency subject to any professional
regulation or oversight.
(2) Yankees has advised all of the Parties to retain independent
legal and accounting counsel to review this Agreement on their
behalf since it cannot provide any Party with legal advice.
(3) This Agreement shall not be interpreted more or less strictly
against any Party based on its authorship.
Page 207
5.2 Amendment.
(a) No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is in writing and signed by
the Party against which the enforcement of said modification, waiver,
amendment, discharge or change is sought.
(b) This Agreement may not be modified without the consent of a majority in
interest of Lorilei's AmeriNet's stockholders.
5.3 Merger.
(a) This instrument contains all of the understandings and agreements of
the Parties with respect to the subject matter discussed herein.
(b) All prior agreements whether written or oral, are merged herein and
shall be of no force or effect.
5.4 Survival.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and shall be effective
regardless of any investigation that may have been made or may be made by or on
behalf of any Party.
5.5 Severability.
If any provision or any portion of any provision of this Agreement, or the
application of such provision or any portion thereof to any person or
circumstance shall be held invalid or unenforceable, the remaining portions of
such provision and the remaining provisions of this Agreement or the application
of such provision or portion of such provision as is held invalid or
unenforceable to persons or circumstances other than those to which it is held
invalid or unenforceable, shall not be effected thereby.
5.6 Governing Law and Venue.
This Agreement shall be construed in accordance with the laws of the State
of Florida but any proceeding arising between the Parties in any matter
pertaining or related to this Agreement shall, to the extent permitted by law,
be held in Broward County, Florida.
5.7 Litigation.
(a) In any action between the Parties to enforce any of the terms of this
Agreement or any other matter arising from this Agreement, the
prevailing Party shall be entitled to recover its costs and expenses,
including reasonable attorneys' fees up to and including all
negotiations, trials and appeals, whether or not litigation is
initiated.
(b) In the event of any dispute arising under this Agreement, or the
negotiation thereof or inducements to enter into the Agreement, the
dispute shall, at the request of any Party, be exclusively resolved
through the following procedures:
(1) (A) First, the issue shall be submitted to mediation
before a mediation service in Broward County,
Florida, to be selected by lot from six alternatives
to be provided, two by Lorilei's majority
stockholder, two by Xxxxxxx and two by the Executive.
Page 208
(B) The mediation efforts shall be concluded within ten
business days after their in itiation unless the
Parties unanimously agree to an extended mediation
period;
(2) In the event that mediation does not lead to a resolution of
the dispute then at the request of any Party, the Parties
shall submit the dispute to binding arbitration before an
arbitration service located in Broward County, Florida to be
selected by lot, from six alternatives to be provided,, two by
Lorilei's majority stockholder, two by Xxxxxxx and two by the
Executive.
(3) (A) Expenses of mediation shall be borne by Xxxxxxx, if
successful.
(B) Expenses of mediation, if unsuccessful and of
arbitration shall be borne by the Party or Parties
against whom the arbitration decision is rendered.
(C) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration shall be borne equally by
the Parties.
5.8 Benefit of Agreement.
(a) This Agreement may not be assigned by the Executive without the prior
written consent of Xxxxxxx.
(b) Subject to the restrictions on transferability and assignment contained
herein, the terms and provisions of this Agreement shall be binding
upon and inure to the benefit of the Parties, their successors,
assigns, personal representative, estate, heirs and legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope of this Agreement or the
intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or cause
to be done, executed or acknowledged or delivered and to perform all such acts
and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but, rather,
the relationship established hereby is that of employer-employee in Xxxxxxx.
Page 209
5.13 Counterparts.
(a) This Agreement may be executed in any number of counterparts.
(b) Execution by exchange of facsimile transmission shall be deemed legally
sufficient to bind the signatory; however, the Parties shall, for
aesthetic purposes, prepare a fully executed original version of this
Agreement, which shall be the document filed with the Securities and
Exchange Commission.
5.14 License.
(a) This Agreement is the property of Yankees and the use hereof by the
Parties is authorized hereby solely for purposes of this transaction.
(b) The use of this form of agreement or of any derivation thereof without
Yankees' prior written permission is prohibited.
In Witness Whereof, the Parties have executed this Agreement, effective as
of the last date set forth below.
Signed, Sealed & Delivered
In Our Presence
The Executive
--------------------------
/s/ Xxxxx X.Xxxxxxxxxx
-------------------------- --------------------------
Xxxxx X. Xxxxxxxxxx
Dated: May 11, 2000
Xxxxxxx Communications, Inc.
a Florida corporation.
--------------------------
__________________________ By: /s/ Xxxxxx X. Xxxxxxxxxx
___________________________
Xxxxxx X. Xxxxxxxxxx, President
(CORPORATE SEAL)
Attest: /s/ Xxxxx X. Xxxxxxxxxx
__________________________
Xxxxx X. Xxxxxxxxxx,
Vice President & Secretary
Dated: May 11, 2000
Page 210
Exhibit to Reorganization Agreement
by and among
AmeriNet Xxxxx.xxx, Inc., a Delaware Corporation
and
Xxxxxxx Communications, Inc., a Florida Corporation
EXHIBIT 6.2(D) AMERINET'S LEGAL OPINION
AmeriNet Xxxxx.xxx, Inc.
A publicly held Delaware corporation
Xxxxxxx Xxxxxx Jordan 0000 Xxxxxxxxx 00xx Xxxxxxx
President & Chief Executive Officer Xxxxx, Xxxxxxx 00000
Telephone (000) 000-0000
Xxxxx X. Xxxxxxx Fax (000) 000-0000
Vice President, Treasurer e-mail, xxxxxxxx@xxxxxxxx.xxx
& Chief Financial Officer
Crystal Corporate Center
Xxxxxxx X. Xxxxxxx 2500 North Military Trail, Xxxxx 000-X
Xxxxxxxxx Xxxx Xxxxx, Xxxxxxx 00000
Telephone (000) 000-0000
Xxxxxx Xxxxxxxx, Esquire Fax (000) 000-0000
General Counsel e-mail xxxx@xxxxxxxxxxxxx.xxx
Respond to Boca Raton address
Xxxxxxx Xxxxxx Xxxxxx G. Xxxxxxx Xxxxxxxxxx
Xxxxxxx X. Xxxxx Xxxx X. Xxxxxx
Xxxxxx X. Xxxxxxx Xxxx Xxxxxx
J. Xxxxx Xxxxxxx Xxxxxxx X. Xxxxxx
Xxxxx X. Xxxxxxx Xxxxxx X. Xxxxxxx
Xxxxxxx X. Xxxxxxx Xxxxx X. Xxxxx
------
Board of Directors
Xxxxxxx.xxx, Inc.
000 Xxxxx Xxxxx Xxxxxxxxx, Xxxxx 000; Xxxxxxxxx Xxxxx, Xxxxxxx 00000
Telephone (000) 000-0000; Fax (000) 000-0000
Web site and e-mail xxx.xxxxxxx.xxx
---------------
Trilogy International, Inc.
000 Xxxxxxxxx Xxxxx Xxxxxxx; Xxxxxx, Xxxxxxx 00000
Telephone (000) 000-0000; Fax (000) 000-0000
Web site and e-mail xxx.xxxxxxxxxxxxx.xxx;
----------------------
Vista Vacations International, Inc.
0000 Xxxxxxxxx 00xx Xxxxxx; Xxxxxxx, Xxxxxxx 00000
Telephone (000) 000-0000; Fax (000) 000-0000
Web site and e-mail xxx.xxxxx_xxxxxxxxx.xxx
-----------------------
Operating Subsidiaries
May 11, 2000
Xx. Xxxxxx X. Xxxxxxxxxx, President
Xxxxxxx Communications, Inc.
0000 X.X. 00xx Xxxxxx
Xxxxx, Xx. 00000
Re: Legal Opinion of Counsel Regarding Proposed Reorganization
Between AmeriNet Group, Inc,, a publicly held Delaware
corporation with a class of securities registered under Section
12(g) of the Securities ("AmeriNet") and Xxxxxxx Communications,
Inc., a privately held Florida corporation ("Xxxxxxx")
Dear Xx. Xxxxxxxxxx:
This opinion is given pursuant to Section 6.2(D) of the Reorganization
Agreement between AmeriNet and Xxxxxxx. The proposed reorganization, as
reflected in the terms of the Agreement, contemplates that Xxxxxxx will exchange
all its common stock, its only authorized securities, for shares of AmeriNet
common stock, its only class of voting stock. This opinion will address the
stock being issued to Xxxxxxx and the applicability of federal and state
securities laws to the issuance of such stock. It will not address the tax
consequences, under either federal or state law arising from the proposed
reorganization.
This opinion has been prepared and is to be construed in accordance with
the Report on Standards for Florida Opinions dated April 8, 1991, as amended and
supplemented, issued by the Business Law Section of the Florida Bar, 46 The
Business Lawyer, No. 4, hereby incorporated by reference into this opinion; and,
is predicated on:
1. The actual information contained in the Reorganization Agreement,
including its exhibits and schedules, in which a draft form of this
opinion is included as an exhibit.
Page 211
2. My examination of the originals and copies of corporate instruments,
certificates, resolutions of the board of directors and other documents
of AmeriNet.
3. My communications with Xxxxxxx Xxxxxx, President of AmeriNet.
4. My communications with Xxxxx Xxxxxxxx, Esquire, attorney for Xxxxxxx.
5. My current legal understanding of the Delaware General Corporations Law
the Florida Securities and Investor Protection Act, and the
Securities Act of 1933, as amended (the "1933 Act").
The undefined terms of art used in this opinion which are characterized by
consistent use of initial capitals are defined in the Reorganization Agreement
and such definitions are incorporated by reference herein.
Factual premises
In forming my opinions, I have relied on all factual information contained
in the Reorganization Agreement and the Exhibits and Schedules attached to it,
and I have assumed the genuineness and accuracy of the information contained and
summarized therein. Likewise, I have relied on the following facts as conveyed
to me by Xxxxxxx Xxxxxx:
1. The AmeriNet shares being issued to the Xxxxxxx shareholders have not
been registered.
2. There have been sales of AmeriNet stock to less than 10 non-accredited
investors during the last year.
3. AmeriNet did not advertise or engage in any form of solicitation
concerning the subject transaction.
4. This transaction is not a scheme or device to avoid registration of
the stock.
5. A standard restrictive legend will be placed upon the shares issued to
the Xxxxxxx shareholders and the transfer agent will be given stop
transfer instructions.
In addition to the foregoing, I have relied on a representation by Xxxxx
Xxxxxxxx, Esquire, the attorney for Xxxxxxx, that you and your wife, Leigh, the
sole Xxxxxxx shareholders, are not "accredited investors" within the meaning of
federal securities laws and regulations.
Discussion
The capital stock
The Delaware General Corporations Law addresses the issuance of capital
stock in Section 152, Issuance of stock, lawful consideration; fully paid stock,
which states, in relevant part, as follows:
The consideration ..... for subscriptions to, or the purchase
of, the capital stock to be issued by a corporation shall be
paid in such form and in such manner as the board of directors
shall xxxxxxxxx.Xx the absence of fraud in the transaction,
the judgment of the directors as to the value of such
consideration shall be conclusive. The capital stock so issued
shall be deemed to be fully paid and nonassessable stock, if
(1) The entire amount of such consideration has been received
by the corporation in the form of cash, services rendered,
personal property, real property, leases of real property or a
combination thereof...........
The consideration supporting this transaction is stated in Section 1.2 of
the Reorganization Agreement:
Page 212
...[A]ll of the Xxxxxxx Shareholders will exchange all of
their Xxxxxxx securities being an aggregate of 111 shares of
common stock, $0.01 par value (the remaining 1,889 shares
being unreserved treasury shares or unauthorized but
heretofore unissued shares of common stock), for up to
1,145,037 shares of AmeriNet's common stock, as called for by
this Agreement.
The resolution adopted by the AmeriNet board of directors approved the
terms of the Reorganization Agreement, including the foregoing Section 1.2.
Furthermore, Section 3.2 (C) of the Reorganization Agreement provides that:
Subject to the Xxxxxxx Declarants' compliance with their
obligations under this Agreement, the shares of AmeriNet's
common stock to be issued pursuant to the Reorganization will
be duly authorized, validly issued , fully paid and
nonassessable.
As such, the shares of stock to be issued to the Xxxxxxx shareholdersif
issued in compliance with the requirements of the Reorganization Agreement, will
be fully paid and nonassessable capital stock of AmeriNet.
The securities laws: The 1933 Act
Section 4(2) of the Securities Act provides as follows:
.... The provisions of section 5 shall not apply to ....
transactions by an issuer not involving any public offering.
Section 4(2) provides a private offering exemption from registration and
prospectus requirements, applying to transactions by an issuer that do not
involve any public offering. The exemption was enacted to permit an issuer to
make a specific or isolated sale of its securities to particular persons without
incurring the expense of registration, and is used in a wide variety of
transactions, including here, the acquisition of a closely held corporation
where all of the consideration is securities of the acquiring corporation .
Whether the transaction is one not involving any public offering is
essentially a question of fact and necessitates a consideration of all the
surrounding circumstances, including such factors as the relationship between
the offerees and the issuer, as well as the nature, scope, size, type and manner
of the offering. An important factor to be considered is whether the securities
offered have come to rest in the hands of the initially informed group or
whether the purchasers are merely conduits for a wider distribution. It is
essential that the issuer of the securities take precautions to assure that the
purchasers do not acquire the securities with a view to distribution. In this
transaction, the share certificates being issued to the Xxxxxxx shareholders
will bear a restrictive legend indicating that the shares have not been
registered under the 1933 Act and may be offered and sold only if registered
pursuant to the provisions of that Act or if an exemption from registration is
available. Furthermore, AmeriNet will issue stop- transfer instructions to
prevent the transfer of the securities unless registered or unless an exemption
exists.
Except to the extent that objective standards for claiming the private
offering exemption are now provided under current Regulation D, Section 4(2) of
the 1933 Act has been delineated through administrative and judicial
interpretations. Factors considered in determining whether a transaction
involved a "public offering" were first discussed in detail in Release No.
33-285 (1935), which held that all surrounding circumstances had to be
considered. Noting that an offering of securities to an "insubstantial number"
of persons had previously been described as not involving a public offering, and
that though under ordinary circumstances, an offering to not more than 25
persons presumably did not involve a public offering, the question was never
determined exclusively by the
Page 213
number of offerees. Factors discussed in Release No. 33-285 included the number
of offerees and their relationship to each other and to the issuer, the number
of units offered, the size of the offering and the manner of the offering.
In addition to the four factors above, subsequent intrepretations
emphasized the importance of information available to make informed decisions,
even where the investors were financially sophisticated. Cases have held that
the private offering exemption afforded by Section 4(2) only applies if the
offerees are given access to the kind of information that registration would
disclose. In this transaction, the Xxxxxxx shareholders have represented that
they have had access to all of AmeriNet's periodic filings with the SEC, as well
as other information made available directly byofficers of AmeriNet and its
current subsidiaries.
Florida Law
A safe harbor for compliance with the requirements of Section
517.061(11)(a)3, Florida Statutes, is established by Florida Rule 3E-500.005.
Among other things, it provides the following guidelines:
The determination as to whether sales of securities are part of a larger
offering [(i.e., are deemed to be integrated)] depends on the particular facts
and circumstances. In determining whether sales should be regarded as part of a
larger offering and thus should be integrated, the facts described in Rule
3E-500.01 should be considered.
The requirements of Sections 517.061(11)(a)3, Florida Statutes, that each
purchaser or his representative be provided with or given reasonable access to
full and fair disclosure of all material information is deemed to be satisfied
if, a) all material books and records of the issuer; b) all material contracts
and documents relating to the proposed transaction; and c) an opportunity to
question the appropriate executive officers or partners are provided to each
investor. In addition, in the case of an issuer that is subject to the reporting
requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the
provisions of paragraph (5)(b) of the rule are deemed satisfied by providing the
following:
(a) The information contained in the annual report required to be...
any reports or documents required to be filed by the issuer
pursuant to Section 13(a) or 15(d) of the Securities Exchange Act
of 1934, since the filing of such annual report or registration
statement; and,
(b) A brief description of the securities being offered, the use of
the proceeds from the offering, and any material changes in the
issuer's affairs which are not disclosed in the documents
furnished.
Opinion
On the basis of the foregoing discussion, I am of the opinion that the
shares of stock being issued to the Xxxxxxx shareholders are fully paid and
non-assessable.
This opinion is limited by the facts cited above, and is for use by the
Parties solely in conjunction with closing contemplated by the Reorganization
Agreement. No other person is entitled to rely upon this opinion.
Very Truly Yours,
AmeriNet Xxxxx.xxx, Inc.
/s/ Xxxxxx Xxxxxxxx
Xxxxxx Xxxxxxxx, Esquire
General Counsel
Page 214
EXHIBIT 6.3(E) XXXXXXX LEGAL OPINION
Xxxxxxxx & Associates, P.L.
000 X.X. 00xx Xxxxxx
Xxxxxxxxxxx, Xxxxxxx 00000
May 11, 2000
Board of Directors
AmeriNet Group, Inc.
Crystal Corporate Center;
0000 Xxxxx Xxxxxxxx Xxxxx, Xxxxx 000
Xxxx Xxxxx, Xxxxxxx 00000
Dear Ladies and Gentlemen:
We have acted as special counsel to Xxxxxxx Communications, Inc., a Florida
corporation (the "Company"), in connection with reorganization contemplated by
that certain Reorganization Agreement, between AmeriNet Group, Inc. (AmeriNet)
and the Company dated May 11, 2000 (the "Agreement") pursuant to which the
outstanding shares of the Company have been transferred to AmeriNet in exchange
for ), for up to 1,145,037 Aminet common shares.. All capitalized terms used
herein and not otherwise defined shall have the respective meanings given to
those terms in the Reorganization Agreement. This opinion is being furnished to
you pursuant to Section 6.2(E) of the Reorganization Agreement.
In connection with this opinion, we have examined a copy of the
Reorganization Agreement, the Company's Certificate of Incorporation, as amended
to date, its By-laws, as amended to date, and such other certificates,
agreements and other documents as we have deemed necessary as a basis for the
opinions hereinafter expressed. As to certain matters of fact, we have relied
upon a certificate of officers of the Company. In our examination of the
aforesaid documents, we have assumed, without independent investigation, the
genuineness of all signatures, the legal capacity of all individuals who have
executed any documents, the authenticity of all documents submitted to us as
originals, the conformity to the original documents of all documents submitted
to us as certified, photostatic, reproduced or conformed copies of validly
existing agreements or other documents and the authenticity of all such
documents.
In rendering the opinions expressed below, we have assumed that: (i) the
parties to each document related to or necessary to the transaction
("Transaction Documents") other than the Company have the power, corporate or
other, to enter into and perform all actions thereunder; (ii) that each such
party other than the Company has duly authorized by all requisite action,
corporate or other, the execution and delivery of such Transaction Document;
(iii) that such Transaction Document has been duly executed and delivered by
such party; (iv) and that each Transaction Document constitutes the legal, valid
and binding agreement of each of the parties to such Transaction Document other
than the Company, enforceable against such parties in accordance with its terms;
(v) the representations and warranties made in the Reorganization Agreement by
you are true and correct; (vi) any wire transfers, drafts or checks tendered by
you will be honored; (vii) there are no facts or circumstances relating to you
that might prevent you from enforcing any of the rights to which our opinion
relates; and (viii) there are no extrinsic agreements or understandings among
the parties to the Transaction Documents that would modify or interpret the
terms of the Transaction Documents or the respective rights or obligations of
the parties thereunder.
The qualification of a statement or opinion herein by the phrase "known to
us," or "to our knowledge," or any similar phrase means the actual knowledge of
the attorneys of this Firm with primary responsibility for the preparation,
review and negotiation of the Transaction Documents. We have not undertaken or
conducted any independent factual investigation to determine the accuracy of
statements or opinions herein qualified as described in the preceding sentence,
and any limited inquiry undertaken by us during the preparation of this opinion
letter should not be regarded as such an investigation; no inference as to our
knowledge of any matters bearing on the accuracy of any such statement or
opinion should be drawn from the fact of our representation of the Company.
This opinion relates solely to the laws of the State of Florida, the
General Corporation Law of the State of Florida and the federal securities laws,
and we express no opinion with respect to the effect or application of any other
laws. We express no opinion whatsoever as to the compliance or noncompliance by
the Company or any person involved in the subject transactions with the
antifraud or information delivery provisions of state and federal laws, rules
and regulations concerning the offer, sale or issuance of securities.
Based upon our examination of and reliance upon the foregoing and subject
to the limitations, exceptions, qualifications and assumptions set forth herein,
we are of the opinion that as of the date hereof:
1. The Company is a corporation validly existing and in good standing under
the laws of the State of Florida, with the requisite corporate power and
authority to own its properties and to conduct its business as presently
conducted.
2. The Company has the requisite corporate power and authority to execute,
deliver and perform its obligations under the Transactions Documents. The
execution, delivery and performance of the Transaction Documents have been duly
authorized by all necessary corporate action of the Company and the Transaction
Documents have been duly executed and delivered by the Company. Each Transaction
Document constitutes a legally valid and binding obligation of the Company,
enforceable against the Company according to its terms, except as (i) such
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium, liquidation or similar laws relating to, or
affecting generally, the enforcement of creditors' rights and remedies, (ii)
rights of acceleration and the availability of equitable remedies may be limited
by equitable principles of general applicability and (iii) rights to
indemnification and contribution under the Investor's Rights Agreement may be
limited by public policy. The Certificate of Designation has been duly executed
and filed with the Florida Secretary of State.
3. The 111 shares of the Company"s common stock have been validly issued,
fully paid and are nonassessable.
4. The Company's Board of Directors has adopted a resolution adopting the
Reorganization Agreement.
5. Based in part upon the representations made by you in the Reorganization
Agreement, the exchange of shares contemplated by the Reorganization Agreement
is exempt from the registration requirements under Section 5 of the Securities
Act of 1933, as amended and the registration requirements of Chapter 517,
Florida Statutes.
6. The execution and delivery of the Transaction Documents does not (i)
violate any provision of any law, rule or regulation believed by us to be
generally applicable to transactions of the type contemplated by the Transaction
Documents or (ii) violate any provision of the Company's Certificate of
Incorporation or Bylaws.
7. The execution, delivery and performance of the obligations of the
Company under the Transaction Documents do not require any consent, approval,
permit, order or authorization of, or any qualification, registration,
designation, declaration or filing with, any federal or state governmental
authority on the part of the Company.
8. To our knowledge, there is no action, suit, proceeding or investigation
pending or threatened against the Company before any court or governmental
agency (i) that questions the validity of the Transaction Documents or the right
of the Company to enter into the Transaction Documents or (ii) that, if
determined adversely, would be likely to result in a material adverse change in
the financial condition or business of the Company.
The opinions expressed herein have been rendered solely for your benefit in
connection with the transactions contemplated by the Reorganization Agreement
and may not be relied upon by you in any other manner or by any other person or
entity in any manner or for any purpose, and may not be communicated or
published by you to any other person or entity for any purpose without our prior
written approval in each instance. We do not assume any continuing obligation or
responsibility to advise you of any changes in law, or any change of
circumstances of which we become aware, which may affect any of the opinions
contained herein or to update, revise or supplement any such opinion herein for
any reason whatsoever.
Very truly yours,
Xxxxxxxx & Associates, P.L.
/s/ Xxxxx Xxxxxxxx
---------------------
Xxxxx Xxxxxxxx
Page 215
Exhibit to Reorganization Agreement
by and among
AmeriNet Xxxxx.xxx, Inc., a Delaware Corporation
and
Xxxxxxx Communications, Inc., a Florida Corporation
EXHIBIT 6.3(K) CONFIDENTIALITY AGREEMENTS
Copies of Non Compete Agreements are attached to Exhibit 5.12
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Xxxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxxxx, President
Xxxxxxx Communications, Inc.
/s/ Xxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxx X. Xxxxxxxxxx, Vice President Sales
Xxxxxxx Communications, Inc.
Exhibit to Reorganization Agreement
by and among
AmeriNet Xxxxx.xxx, Inc., a Delaware Corporation
and
Xxxxxxx Communications, Inc., a Florida Corporation
EXHIBIT 7.2 ESCROW ALLOCATION
The portion of AmeriNet's common stock in the Undisclosed Liabilities
Escrow Fund contributed on behalf of each stockholder of Xxxxxxx is listed
opposite such stockholders name below:
Undisclosed
Liabilities
Stock Escrow
Stockholder Allocation
Xxxxxx X. Xxxxxxxxxx 57,252 Shares
Xxxxx X. Xxxxxxxxxx 57,252 Shares
I attest the information contained herein is true and accurate to the best of my
knowledge
/s/ Xxxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxxx X. Xxxxxxxxxx, President
Xxxxxxx Communications, Inc.
/s/ Xxxxx X. Xxxxxxxxxx
----------------------------------
Xxxxx X. Xxxxxxxxxx, Vice President Sales
Xxxxxxx Communications, Inc.
Page 216
