Agreement of Merger
& Plan of Reorganization
BY AND AMONG
AMERINET ▇▇▇▇▇.▇▇▇, INC., A DELAWARE CORPORATION
TRILOGY ACQUISITION CORPORATION, A FLORIDA CORPORATION; AND,
TRILOGY INTERNATIONAL, INC., A FLORIDA CORPORATION
TABLE OF CONTENTS
ARTICLE I: PLAN OF REORGANIZATION
1.1 The Merger; Definitions
1.2 Effective Date & Time
1.3 Effect of the Merger
1.4 Articles of Incorporation; Bylaws
1.5 Directors and Officers
1.6 Maximum Shares to Be Issued; Effect on Capital Stock
1.7 Dissenting Shares
1.8 Surrender of Certificates
1.9 No Further Ownership Rights in Trilogy's Securities
1.10 Lost, Stolen or Destroyed Certificates
1.11 Tax Consequences and Accounting Treatment
1.12 Taking of Necessary Action; Further Action
ARTICLE II: REPRESENTATIONS AND WARRANTIES OF
TRILOGY
2.1 Organization of Trilogy
2.2 Trilogy's Capital Structure
2.3 Subsidiaries
2.4 Authority
2.5 Trilogy'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 Current Report on Form 8-K
2.26 FIRPTA
2.27 Employee Benefit Plans
2.28 Distribution Agreements
2.29 Representations Complete
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ARTICLE III REPRESENTATIONS AND WARRANTIES OF
AMERINET AND TRILOGY ACQUISITION
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 Trilogy'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 EFFECTIVE TIME
4.1 Conduct of Business of Trilogy
4.2 No Solicitation
4.3 Conduct of Business of AmeriNet
ARTICLE V ADDITIONAL AGREEMENTS
5.1 Report on Form 8-K
5.2 Meeting of Trilogy's Stockholders
5.3 Access to Information
5.4 Confidentiality
5.5 Expenses
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 Surviving Corporation
5.14 The Surviving Corporation's Board of Directors
5.15 Credit for Time Employed
ARTICLE VI CONDITIONS TO THE MERGER
6.1 Conditions to Obligations of Each Party to Effect the Merger
6.2 Additional Conditions to Obligations of Trilogy
6.3 Additional Conditions to the Obligations of AmeriNet and Trilogy
Acquisition
ARTICLE VII SURVIVAL OF REPRESENTATIONS AND
WARRANTIES; ESCROW
7.1 Survival of Condition Subsequent; Representations and Warranties
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
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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 The Surviving Corporation's Constituent Documents
Schedule 1.6(B)(3) Trilogy's Options and Warrants
Schedule 2.2(B) Trilogy's Capital Structure
Schedule 2.4(D) Conflicts with Obligations
Schedule 2.5(A) Trilogy Financial Statements
Schedule 2.7 Changes Since Trilogy's Financial Statements
Schedule 2.8(A) Tax Disclosure Schedule
Schedule 2.10(A) Leased Real Property
Schedule 2.10(C) Equipment
Schedule 2.11 Intellectual Property
Schedule 2.12 Contracts and Agreements
Schedule 2.12(A)(12)Debt & Guarantee Instruments
Schedule 2.13 Related Party Transactions
Schedule 2.14 Governmental Authorization
Schedule 2.15 Litigation
Schedule 2.19 Brokers' and Finders' Fee
Schedule 2.20 List of Employees
Schedule 2.21 Insurance
Schedule 2.27 Employee Benefit Plans
Schedule 2.28 Distribution Agreements
Schedule 3.4(I) Outstanding Comment Letter
Schedule 4.1 Permitted Pre-Merger Actions
Schedule 5.7 Third Party Consents
Schedule 5.8 Affiliates
Schedule 5.12 List and Summary of Employment Agreements
Schedule 5.13 Use of Proceeds
Schedule 5.14 Projections
Schedule 6.3(M) Non-accredited investors
EXHIBITS
Exhibit 2.25 The Form 8-K Information
Exhibit 5.8 Affiliate Agreements
Exhibit 5.12 Copies of Employment Agreements
Exhibit 6.2(D) AmeriNet & Trilogy Acquisition Legal Opinion
Exhibit 6.3(E) Trilogy Legal Opinion
Exhibit 6.3(L) Confidentiality Agreements
Exhibit 7.2(A) Escrow Information
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AGREEMENT OF MERGER & PLAN OF REORGANIZATION
This Agreement of Merger & Plan of Reorganization (the "Agreement") is
made and entered into by and among Amerinet ▇▇▇▇▇.▇▇▇, 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), Trilogy Acquisition Corporation, a Florida corporation and
a recently organized wholly-owned subsidiary of Amerinet ("Trilogy Acquisition")
and Trilogy International, Inc., a Florida corporation ("Trilogy;" AmeriNet,
Trilogy Acquisition and Trilogy being sometimes hereinafter collectively
referred to as the "Parties" or generically as a "Party").
PREAMBLE:
WHEREAS, the board of directors of AmeriNet, Trilogy Acquisition and
Trilogy believe it is in the best interests of each corporation and their
respective stockholders that Trilogy and Trilogy Acquisition combine into a
single company through the statutory merger of Trilogy with and into Trilogy
Acquisition (the "Merger") and, in furtherance thereof, have approved the
Merger; and
WHEREAS, pursuant to the terms of the Merger, as hereinafter set forth,
among other things, all of the outstanding and reserved securities of Trilogy
("Trilogy's Securities") shall be converted into shares of AmeriNet's common
stock, $0.01 par value ("AmeriNet's Common Stock") as hereinafter described; and
WHEREAS, the Parties intend that AmeriNet invest up to $900,000 within
180 days after completion of the Merger and the filing of required reports with
the United States Securities and Exchange Commission (the "Commission"); and
WHEREAS, Trilogy, AmeriNet and Trilogy Acquisition desire to make
certain representations and warranties and other agreements in connection with
the Merger 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 of the Internal Revenue
Code of 1986, as amended (the "Code") in a manner qualifying for accounting on a
pooling of interest basis:
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 THE MERGER; DEFINITIONS.
(A) The Merger.
At the Effective Time (as defined in Section 1.2) and subject to and
upon the terms and conditions of this Agreement and Sections 607.1101,
607.1103, 607.1105, 607.1106, 607.1301, 607.1302 and 607.1320, Florida
Statutes (the "Florida Corporate Merger Laws"), Trilogy shall be merged
with and into Trilogy Acquisition, the separate corporate existence
of Trilogy shall cease and Trilogy Acquisition shall continue as the
surviving corporation.
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(B) Definitions.
The following terms, whether or not initially capitalized, will have the
meanings set forth below:
(1) Aggregate Common Stock Number:
The "Aggregate Common Stock Number" shall mean the aggregate
number of shares of Trilogy's Common Stock outstanding
immediately prior to the Effective Time.
(2) Aggregate Option Number:
The "Aggregate Option Number" shall mean the aggregate number of
shares of Trilogy's Common Stock issuable upon the exercise of
all outstanding options, warrants and other convertible
securities (if any) to acquire shares of Trilogy's Common Stock
(whether vested or unvested) immediately prior to the Effective
Time.
(3) Aggregate Share Number:
The "Aggregate Share Number" shall be 1,817,273.
(4) Affiliate:
An entity or person that controls, is controlled by or is under
common control with another person.
(5) Capital Stock:
The generic term used for equity securities, whether common,
preferred or otherwise.
(6) The Commission:
The United States Securities and Exchange Commission.
(7) Code:
The Internal Revenue Code of 1986, as amended.
(8) Escrow Number:
The "Escrow Number" shall be that number of shares of AmeriNet
Common Stock equal to the Aggregate Share Number multiplied by
twenty percent.
(9) Escrow Stock:
The shares of AmeriNet common stock issuable to Trilogy's
stockholders retained for the purpose described in Article VII.
(10) Exchange Act: The Securities Exchange Act of 1934, as amended.
(11) Exchange Act Reports:
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All reports filed by AmeriNet with the Commission pursuant to
Sections 12(g), 13 and 15(d) of the Exchange Act.
(12) Exchange Ratio:
The "Exchange Ratio" shall mean the quotient obtained by dividing
(x) the Aggregate Share Number by (y) the Aggregate Common Stock
Number.
(13) Florida Corporate Merger Laws:
Sections 607.1101, 607.1103, 607.1105, 607.1106, 607.1301,
607.1302 and 607.1320, Florida Statutes.
(14) 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, shall mean knowledge after
reasonable inquiry by an 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.
(15) 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, shall 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 shall be measured both on the occasion in which
such term is referenced as well as on an aggregate basis with
other similar matters.
(16) NASD:
The National Association of Securities Dealers, Inc., a Delaware
corporation and self regulatory organization registered with the
Commission.
(17) Options or Warrants:
The terms "Option[s]" and "Warrant[s]," as used in connection
with Trilogy, shall be deemed to include Trilogy's currently
outstanding ten year options, its currently outstanding five year
warrants and any other rights to receipt of securities of
Trilogy, unless the context clearly requires a different
interpretation.
(18) OTC Bulletin Board:
The over the counter electronic securities market operated by the
NASD.
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(19) Securities Act:
The Securities Act of 1933, as amended.
(20) 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.
(21) Surviving Corporation:
Trilogy Acquisition, as the surviving corporation after the
Merger, but operating under the name "Trilogy International,
Inc.".
(22) 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.
(23) Additional defined terms are specified in certain sections and
subsections below and are characterized by the use of initial
letter capitalization.
1.2 EFFECTIVE DATE & TIME.
(A) As promptly as practicable after the satisfaction or waiver of the
conditions set forth in Article VI, the Parties shall cause the Merger
to be consummated by filing articles of merger (the "Articles of
Merger") with the Secretary of State of the State of Florida, in such
form as required by, and executed in accordance with the relevant
provisions of the Florida Corporate Merger Laws.
(B) The effective date and time of the Merger shall be the time on which
the Articles of Merger are recorded as having been filed by the
Secretary of State of the State of Florida on Monday, November 29,1999
(the "Effective Date" and the "Effective Time," respectively).
(C) (1) This Agreement is being executed on November 27, 1999 and the
Parties hereby acknowledge that:
(a) AmeriNet has caused $250,000 to be deposited in an
attorneys' trust account maintained by ▇▇▇▇▇▇▇
▇▇▇▇▇▇, P.A., a Florida professional corporation
which is acting as legal counsel to Trilogy in
conjunction with the Merger (the "Closing Deposit"
and the "▇▇▇▇▇▇ Firm");
(b) The Closing Deposit is intended to meet AmeriNet's
obligation to invest at least $250,000 in Trilogy
Acquisition, as called for by Section 5.13(A) of this
Agreement.
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(2) In the event that on the Effective Date the Parties have
completed execution of this Agreement and have thereafter
confirmed in writing to each other and to the ▇▇▇▇▇▇ Firm that
they are satisfied that all conditions precedent to the Merger
have been met or are being waived, deferred or converted to
conditions subsequent, the ▇▇▇▇▇▇ Firm will cause the Merger
to be effected by filing the articles of merger provided to it
by AmeriNet's legal counsel with the Department of State of
the State of Florida in the manner required by the laws of the
State of Florida to effectuate the Merger, and, upon receipt
of confirmation that the filing is effective, shall release
the proceeds of the Closing Deposit to the Successor
Corporation (the "Closing").
(3) In the event that the Merger does not take place on the
Effective Date, the ▇▇▇▇▇▇ Firm will immediately return the
proceeds of the Closing Deposit to the order of AmeriNet.
1.3 EFFECT OF THE MERGER.
(A) At the Effective Time, the effect of the Merger shall be as provided
under the Florida Corporate Merger Laws.
(B) Without limiting the generality of the foregoing, and subject thereto,
at the Effective Time all the property, rights, privileges, powers and
franchises of Trilogy and Trilogy Acquisition shall vest in the
Surviving Corporation and all debts, liabilities and duties of Trilogy
and Trilogy Acquisition shall become the debts, liabilities and duties
of the Surviving Corporation.
1.4 ARTICLES OF INCORPORATION: BYLAWS.
Unless otherwise determined by AmeriNet prior to the Effective Date,
provided that they are materially similar to the forms of articles of
incorporation and bylaws included in Schedule 1.4, at the Effective Time:
(A) The articles of incorporation of Trilogy Acquisition, as in effect
immediately prior to the Effective Time, shall be the articles of
incorporation of the Surviving Corporation until thereafter amended as
provided by LAW AND SUCH ARTICLES OF INCORPORATION; PROVIDED, HOWEVER,
that Article I of the articles of incorporation of the Surviving
Corporation, shall be amended to read as follows: "The name of the
corporation is Trilogy International, Inc."
(B) The bylaws of Trilogy Acquisition, as in effect immediately prior to
the Effective Time, shall be the bylaws of the Surviving Corporation
until thereafter amended.
1.5 DIRECTORS AND OFFICERS.
Subject to the requirements of Section 5.14, the directors of Trilogy
Acquisition immediately prior to the Effective Time shall be the initial
directors of the Surviving Corporation, each to hold office in accordance with
the articles of incorporation and bylaws of the Surviving Corporation, and the
officers of Trilogy Acquisition immediately prior to the Effective Time shall be
the initial officers of the Surviving Corporation, in each case until their
respective successors are duly elected or appointed and qualified.
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1.6 MAXIMUM SHARES TO BE ISSUED: EFFECT ON CAPITAL STOCK.
(A) (1) The number of shares of AmeriNet Common Stock to be issued
(excluding the shares of AmeriNet Common Stock to be reserved for
issuance upon exercise of Trilogy's Options and Warrants assumed
by AmeriNet) in exchange for the cancellation of all of Trilogy's
Common Stock (the only Trilogy securities to be outstanding or
reserved at the Effective Time); shall be determined immediately
prior to the Effective Date and shall be equal to the Aggregate
Share Number [as defined, along with other capitalized terms used
herein, in Section 1.1(b)]; provided, however, that such
Aggregate Share Number shall be adjusted as provided in Section
1.6(B)(5) below and to reflect the exercise of any Dissenters'
Rights which will result in a pro rata adjustment to the
Aggregate Share Number, as provided for in Section 1.7 below.
(2) No adjustment shall be made in the number of shares of AmeriNet
Common Stock issued in the Merger as a result of any cash
proceeds received by Trilogy from the date hereof to the
Effective Date pursuant to the exercise of currently outstanding
Options or Warrants to acquire Trilogy's common stock; provided
that:
(a) The proceeds therefrom are retained in a segregated
escrow account by Trilogy's legal counsel and are not
directly or indirectly (through the incurrence of
debt or otherwise) expended prior to the conclusion
of the Merger;
(b) Such funds are credited against the $250,000 in
funding to be provided by AmeriNet to the Surviving
Corporation pursuant to Section 5.13 of this
Agreement; and
(c) The securities issuable upon exercise of the Options
and Warrants are held in abeyance until the Effective
Time, whereupon AmeriNet common stock shall be issued
as provided in Section 1.6 below.
(B) Subject to the terms and conditions of this Agreement, as of the
Effective Time, by virtue of the Merger and without any action on the
part of Trilogy Acquisition, Trilogy or the holder of any of the
following securities:
(1) Conversion of Trilogy's Securities.
Each share of Trilogy's common stock, par value $0.001 per
share [ ("Trilogy's Common Stock") including all of Trilogy's
formerly outstanding preferred stock par value $0.001 per
share which will have been converted to or exchanged for
Trilogy's Common Stock prior to the Effective Time ("Trilogy's
Preferred Stock,")] outstanding immediately prior to the
Effective Time [other than any shares of Trilogy's Capital
Stock to be canceled pursuant to Section 1.6 and any
Dissenting Shares, as defined and to the extent provided in
Section 1.7] will be canceled and extinguished and be
converted automatically into the right to receive that number
of shares of AmeriNet Common Stock equal to the Exchange Ratio
upon surrender of the certificate representing such shares of
Trilogy's Common Stock in the manner provided in Section 1.8.
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(2) Cancellation of AmeriNet Owned and Trilogy Owned Stock.
Each share of Trilogy's Common Stock owned by Trilogy
Acquisition, AmeriNet, Trilogy or any direct or indirect
wholly owned subsidiary of AmeriNet, Trilogy Acquisition or of
Trilogy immediately prior to the Effective Time shall be
canceled and extinguished without any conversion thereof.
(3) Stock Options & Warrants.
(a) All of Trilogy's Common Stock purchase Options and
Warrants are disclosed in Schedule 1.6(B)(3) and no
additional rights to purchase any Trilogy securities
will be granted without the prior written consent of
AmeriNet.
(b) At the Effective Time, all Options and Warrants to
purchase Trilogy's Common Stock shall be assumed by
AmeriNet and entitle the holder to purchase one share
of unregistered AmeriNet Common Stock for every three
shares of Trilogy's Common Stock that was issuable
pursuant to such Option or Warrant prior to the
Merger, at $0.75 per share; PROVIDED, THAT:
(i) The shares of AmeriNet Common Stock issuable
upon exercise of the Option or Warrant will
be issued in reliance on the exemptive
provisions of Section 4(2) of the Securities
Act of 1933, as amended (the "Securities
Act") and that at the time of exercise the
AmeriNet Common Stock may be legally issued
in reliance of Section 4(2) of the
Securities Act;
(ii) The Warrants will be exercisable for a
period of five years following the Effective
Time; and
(iii) The terms of the Options or Warrants after
their conversion to AmeriNet options and
warrants, other than as specifically set
forth in this Agreement, shall be identical
to the terms at the time of their issuance.
(c) In the event that AmeriNet files a registration
statement on Commission Form S-8 registering
securities to be issued or held by employees of
AmeriNet or of AmeriNet's subsidiaries, the AmeriNet
common stock purchase Options received by and held by
employees and consultants of the Surviving
Corporation and former employees and consultants of
Trilogy, shall be included therein, to the extent
that they are legally eligible for inclusion therein.
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(4) Capital Stock of Trilogy Acquisition.
Each stock certificate of Trilogy Acquisition evidencing
ownership of any such shares shall continue to evidence
ownership of such shares of Common Stock of the Surviving
Corporation, all of which will be held by AmeriNet.
(5) Adjustments to Exchange Ratio.
The Exchange Ratio shall 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 Common Stock or Trilogy's Common
Stock), reorganization, recapitalization or other like change
with respect to AmeriNet Common Stock or Trilogy's Common
Stock occurring after the date hereof and prior to the
Effective Time, and the exercise of any Dissenters' Rights.
(6) Fractional Shares.
No fraction of a share of AmeriNet Common Stock will be
issued, but in lieu thereof each holder of shares of Trilogy's
Common Stock who will otherwise be entitled to a fraction of a
share of AmeriNet Common Stock (after aggregating all
fractional shares of AmeriNet Common Stock to be received by
such holder) shall be entitled to receive from AmeriNet a
whole share of AmeriNet Common Stock.
1.7 DISSENTING SHARES.
(A) Notwithstanding any provision of this Agreement to the contrary, any
shares of Trilogy's Capital Stock held by a holder who has demanded and
perfected appraisal rights for such shares in accordance with the
Florida Corporate Merger Laws and who, as of the Effective Time, has
not effectively withdrawn such appraisal rights ("Dissenting Shares"),
shall not be converted into or represent a right to receive AmeriNet
Common Stock pursuant to Section 1.6, but the holder thereof shall only
be entitled to such rights as are granted by the Florida Corporate
Merger Laws.
(B) Notwithstanding the provisions of subsection (A), if any holder of
shares of Common Stock of Trilogy who demands appraisal of such shares
under the Florida Corporate Merger Laws shall effectively withdraw the
right to appraisal, then, as of the later of the Effective Time and the
occurrence of such event, such holder's shares shall automatically be
converted into and represent only the right to receive AmeriNet Common
Stock, without interest thereon, upon surrender of the certificate
representing such shares.
(C) (1) Trilogy shall give AmeriNet:
(a) Prompt notice of any written demands for appraisal of
any shares of Capital Stock of Trilogy, withdrawals
of such demands, and any other instruments served
pursuant to the Florida Corporate Merger Laws and
received by Trilogy; and
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(b) The opportunity to participate in all negotiations
and proceedings which take place prior to the
Effective Time with respect to demands for appraisal
under the Florida Corporate Merger Laws.
(2) Trilogy shall not, except with the prior written consent of
AmeriNet, voluntarily make any payment before the Effective
Time with respect to any demands for appraisal of Capital
Stock of Trilogy or offer to settle or settle any such
demands.
(D) The Aggregate Share Number shall be reduced to reflect the quantity of
AmeriNet Common Stock that would have been issued to person's electing
to exercise Dissenters's Rights.
(E) All payments to Trilogy Capital Stockholders that exercise Dissenters'
Rights shall be made by Trilogy.
1.8 SURRENDER OF CERTIFICATES.
(A) Exchange Agent.
Unless modified by AmeriNet, Liberty Transfer Co., Inc., of Huntington,
New York, AmeriNet's current transfer agent, shall serve as exchange
agent (the "Exchange Agent") in the Merger.
(B) AmeriNet to Provide Common Stock.
Promptly after the Effective Time, AmeriNet shall make available to the
Exchange Agent for exchange in accordance with this Article I the
shares of AmeriNet Common Stock issuable pursuant to Section 1.6 in
exchange for outstanding shares of Trilogy's Common Stock.
(C) Exchange Procedures.
(1) Promptly after the Effective Time, the Surviving Corporation,
shall cause to be mailed to each holder of record of a
certificate or certificates (the "Certificates") which
immediately prior to the Effective Time represented
outstanding shares of Trilogy's Common Stock whose shares were
converted into the right to receive shares of AmeriNet Common
Stock pursuant to Section 1.6:
(a) A letter of transmittal (which shall specify that
delivery shall be effected, and risk of loss and
title to the Certificates shall pass, only upon
delivery of the Certificates to the Exchange Agent
and shall be in such form and have such other
provisions as AmeriNet may reasonably specify); and
(b) Instructions for use in effecting the surrender of
the Certificates in exchange for certificates
representing shares of AmeriNet Common Stock.
(2) Upon surrender of a Certificate for cancellation to the
Exchange Agent or to such other agent or agents as may be
appointed by AmeriNet, together with such letter of
transmittal, duly completed and validly executed in accordance
with the instructions thereto, the holder of such Certificate
shall be entitled to receive in exchange therefor a
certificate representing the number of whole shares of
AmeriNet Common Stock (less the number of shares of AmeriNet
Common Stock to be deposited in the Escrow Fund on such
holder's behalf pursuant to Article VII hereof) to which such
holder is entitled pursuant to Section 1.6, and the
Certificate so surrendered shall forthwith be canceled.
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(3) As soon as practicable after the Effective Time, and subject
to and in accordance with the provisions of Article VII
hereof, AmeriNet shall cause to be distributed to the Escrow
Agent (as defined in Article VII) a certificate or
certificates representing that number of shares of AmeriNet
Common Stock equal to the Escrow Number which shall be
registered in the name of the Escrow Agent.
(4) Such shares shall be beneficially owned by the holders on
whose behalf such shares were deposited in the Escrow Fund but
shall be available to compensate AmeriNet for certain damages
as provided in Article VII.
(5) Until so surrendered, each outstanding Certificate that, prior
to the Effective Time, represented shares of Trilogy's Common
Stock will be deemed from and after the Effective Time, for
all corporate purposes, other than the payment of dividends,
to evidence the ownership of the number of full shares of
AmeriNet Common Stock into which such shares of Trilogy's
Common Stock shall have been so converted in accordance with
Section 1.6.
(D) Distributions With Respect to Unexchanged Shares.
(1) No dividends or other distributions declared or made after the
Effective Time with respect to AmeriNet Common Stock with a
record date after the Effective Time will be paid to the
holder of any unsurrendered Certificate with respect to the
shares of AmeriNet Common Stock represented thereby until the
holder of record of such Certificate shall surrender such
Certificate.
(2) Subject to applicable law, following surrender of any such
Certificate, there shall be paid to the record holder of the
certificates representing whole shares of AmeriNet Common
Stock issued in exchange therefor, without interest, at the
time of such surrender, the amount of dividends or other
distributions with a record date after the Effective Time
theretofore paid with respect to such whole shares of AmeriNet
Common Stock.
(E) Transfers of Ownership.
If any certificate for shares of AmeriNet 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 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.
(F) No Liability.
Notwithstanding anything to the contrary in this Section 1.8, none of
the Exchange Agent, the Surviving Corporation, or any other Party shall
be liable to a holder of shares of AmeriNet Common Stock or Trilogy's
Capital Stock for any amount properly paid to a public official
pursuant to any applicable abandoned property, escheat or similar law.
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1.9 NO FURTHER OWNERSHIP RIGHTS IN TRILOGY'S SECURITIES.
(A) All shares of AmeriNet Common Stock issued upon the surrender for
exchange of shares of Trilogy's Common Stock in accordance with the
terms hereof (including any cash paid in respect thereof) shall be
deemed to have been issued in full satisfaction of all rights
pertaining to such shares of Trilogy's Common Stock, and there shall be
no further registration of transfers on the records of the Surviving
Corporation, of shares of Trilogy's Capital Stock which were
outstanding immediately prior to the Effective Time.
(B) If, after the Effective Time, Certificates are presented to the
Surviving Corporation, for any reason, they shall be canceled and
exchanged as provided in this Article I.
1.10 LOST, STOLEN OR DESTROYED CERTIFICATES.
In the event any certificates evidencing shares of Trilogy's Common
Stock shall have been lost, stolen or destroyed, the Exchange Agent
shall issue 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 AmeriNet Common Stock and cash FOR
FRACTIONAL SHARES, IF ANY, AS MAY BE REQUIRED PURSUANT TO SECTION 1.6;
PROVIDED, HOWEVER, that AmeriNet may, in its discretion and as a
condition precedent to the issuance thereof, 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.
1.11 TAX CONSEQUENCES AND ACCOUNTING TREATMENT.
(A) It is intended by the Parties that the Merger shall constitute a
reorganization within the meaning of Section 368 of the Internal
Revenue Code of 1986, as amended, 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.
(B) The Parties intend that this reorganization qualify for accounting
treatment as a pooling of interests rather than as a purchase and the
Parties agree that if modification of the terms of this Agreement is
necessary to attain such accounting treatment they will negotiate in
good faith to make such required modifications; however, the Parties
acknowledge that the exchange of the outstanding Trilogy Preferred
Stock for shares of Trilogy's Common Stock immediately prior to
execution of this Agreement may make pooling of interest accounting for
the Merger unavailable and such unavailability will not have any effect
on the rights or obligations of the Parties under this Agreement.
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1.12 TAKING OF NECESSARY ACTION: FURTHER ACTION.
If, at any time after the Effective Time, any further action is
necessary or desirable to carry out the purposes of this Agreement
including, without limitation: (i) the vesting in the Surviving
Corporation of full right, title and possession to all assets,
property, rights, privileges, powers and franchises of Trilogy and
Trilogy Acquisition; (ii) compliance with the requirements of Code
Section 368; and, (iii) use of the pooling of interest method to
account for the reorganization in the audited financial statement of
AmeriNet and the Surviving Corporation; the officers and directors of
AmeriNet, Trilogy and Trilogy Acquisition are fully authorized in the
name of their respective corporations or otherwise to take, and will
take, all such lawful and necessary action.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF TRILOGY
Trilogy hereby represents and warrants to AmeriNet and Trilogy
Acquisition, as a material inducement to their entry into this Agreement,
subject to the exceptions specifically disclosed in the schedules (referencing
the appropriate section number) supplied by Trilogy to AmeriNet and certified by
Trilogy (the "Trilogy's Schedules"), as follows:
2.1 ORGANIZATION OF TRILOGY.
(A) Trilogy is a corporation duly organized, validly existing and in good
standing under the laws of the State of Florida.
(B) Trilogy 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
Trilogy.
(C) Trilogy 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 Trilogy.
(D) Trilogy 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 TRILOGY'S CAPITAL STRUCTURE.
(A) (1) The authorized Capital Stock of Trilogy consists of
30,000,000 shares of Common Stock, par value $0.001 per
share and 2,500,000 shares of Preferred Stock, $0.001 par
value per share;
(2) Pursuant to Article V (c) of the second amendment to Trilogy's
articles of incorporation filed with the Florida Department of
State (the "Second Amendment"), 660,000 shares of the
Preferred Stock have been designated as Class A Preferred with
a stated value of $0.50 per share and with the attributes
described in Trilogy's articles of incorporation;
(3) Pursuant to rights granted to Trilogy's board of directors in
the Second Amendment, an additional 84,818 shares of the Class
A Preferred Stock have been authorized by Trilogy's board of
directors.
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(4) Prior to the Effective Time, all shares of Trilogy's Preferred
Stock shall have been converted to or exchanged for shares of
Trilogy's Common Stock, on a share per share basis.
(B) There are 4,707,001 shares of Trilogy's Common Stock and 744,818 shares
of Trilogy's Class A Preferred Stock issued and outstanding, held by
the persons, and in the amounts, set forth on Schedule 2.2(B).
(C) All outstanding shares of Trilogy Capital 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 Trilogy or any agreement to which Trilogy is a party or is
bound.
(D) (1) Trilogy has reserved 1,016,819 shares of Common Stock for
issuance subject to outstanding, unexercised five year
Warrants (744,818) and ten year incentive stock Options
(272,001), there being no other obligations directly or
indirectly obligating Trilogy to issue any of its securities
to any person for any purpose.
(2) (a) Schedule 1.6(B)(3) sets forth for each
outstanding option and warrant the name of the holder
of such option or warrant, the number of shares
subject to such option or warrant, the exercise price
of such option or warrant, the number of shares as to
which such option or warrant is exercisable and, if
the exercisability of such option or warrant will be
accelerated in any way by the transactions
contemplated by this Agreement, an indication of the
extent of such acceleration.
(b) Schedule 1.6(B)(3) also describes any repricing of
Trilogy's Options or Warrants which has taken place.
(3) Except as set forth in Schedule 1.6(B)(3), there are no other
options, warrants, calls, rights, commitments or agreements of
any character to which Trilogy is a party or by which it is
bound obligating Trilogy to issue, deliver, sell, repurchase
or redeem, or cause to be issued, delivered, sold, repurchased
or redeemed, any shares of the Trilogy Capital Stock or
obligating Trilogy to grant, extend or enter into any such
option, warrant, call, right, commitment or agreement.
2.3 SUBSIDIARIES.
Trilogy 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.
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2.4 AUTHORITY.
(A) Trilogy 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 Trilogy, subject only to the
approval of the Merger and the other transactions contemplated hereby,
by Trilogy's stockholders as contemplated by Section 6.1(A).
(C) This Agreement has been duly executed and delivered by Trilogy and
subject to the proper authorization of this Agreement by the respective
boards of directors of AmeriNet and Trilogy Acquisition and its due
execution and delivery by AmeriNet and Trilogy Acquisition to Trilogy,
constitutes the valid and binding obligation of Trilogy.
(D) Except as specifically disclosed in Schedule 2.4(D), the execution and
delivery of this Agreement by Trilogy 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 Trilogy
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 Trilogy 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 Trilogy in
connection with the execution and delivery of this Agreement or the
consummation of the transactions contemplated hereby, except for (i)
the filing of the Articles of Merger with the Florida Secretary of
State and (ii) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under
applicable state and federal securities laws (notification on Form D)
and the laws of any foreign country.
2.5 TRILOGY'S FINANCIAL STATEMENTS.
(A) Schedule 2.5(A) includes Trilogy's unaudited financial statements
(balance sheets, income statements and related schedules and footnotes)
as of and for the fiscal year ending June 30, 1999 and for the three
months ended September 30, 1999 (collectively, the "Trilogy Financial
Statements").
(B) The Trilogy Financial Statements are complete and correct in all
material respects and have been prepared in accordance with generally
accepted accounting principles ("GAAP") applied on a basis consistent
throughout the periods indicated.
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(C) The Trilogy Financial Statements present fairly the financial condition
and operating results of Trilogy 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 Trilogy as of September 30, 1999 is
hereinafter referred to as "Trilogy's Balance Sheet."
(E) (1) The Trilogy Financial Statements can and will be audited,
at Trilogy's expense, as required to comply with the
requirements for material acquisitions under Commission
Regulation S-B in a manner permitting AmeriNet to comply with
its obligation under the Exchange Act to provide information
concerning Trilogy in current reports on Commission Form 8-K.
(2) The compliance of the Trilogy Financial Statements on a timely
basis with the requirements of Commission Regulation S-B shall
constitute a condition subsequent to the obligations of
AmeriNet and Trilogy Acquisition under this Agreement and in
the event of the failure of such condition subsequent, then,
at AmeriNet's sole option:
(a) The Merger may be rescinded, and all funds advanced
by AmeriNet to the Surviving Corporation shall be
repaid, with interest at the annual rate of 8%, to
AmeriNet within 30 days after such rescission; or
(b) The Escrow Shares shall be deemed defaulted to
AmeriNet and the Merger shall be restructured in a
manner complying with AmeriNet's reporting and other
obligations under the Exchange Act, including the
sale by AmeriNet of the Surviving Corporation.
2.6 NO UNDISCLOSED LIABILITIES.
Trilogy 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 Trilogy Balance Sheet (including the notes thereto) or
(ii) have not been specifically described in this Agreement or in the Trilogy
Schedules.
2.7 NO CHANGES.
Except as specifically disclosed in Schedule 2.7, since the date of the
Trilogy Financial Statements there has not been, occurred or arisen any:
(A) Transaction by Trilogy except in the ordinary course of business as
conducted on that date;
(B) Capital expenditure by Trilogy, either individually or in the aggregate,
exceeding $5,000;
(C) Destruction, damage to, or loss of any assets (including without limitation
intangible assets) of Trilogy (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;
56
(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 Trilogy;
(F) Declaration, setting aside, or payment of a dividend or other distribution
in respect to the shares of Trilogy, or any direct or indirect redemption,
purchase or other acquisition by Trilogy of any of its shares;
(G) Increase in the salary or other compensation payable or to become payable
by Trilogy to any of its officers, directors or employees, or the
declaration, payment, or commitment or obligation of any kind for the
payment, by Trilogy, of a bonus or other additional salary or compensation
to any such person;
(H) Acquisition, sale or transfer of any asset of Trilogy 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 Trilogy is a party, other
than termination by Trilogy pursuant to the terms thereof;
(J) Loan by Trilogy to any person or entity, or guaranty by Trilogy 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 Trilogy, including any
write-off or other compromise of any material account receivable of
Trilogy;
(L) The notice or, to Trilogy's knowledge, commencement or threat of
commencement of any governmental proceeding against or investigation of
Trilogy or its affairs;
(M) Other event or condition of any character that has or would, in Trilogy's
reasonable judgment, be expected to have a Material Adverse Effect on
Trilogy;
(N) Issuance, sale or redemption by Trilogy 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;
(O) Change in pricing or royalties set or charged by Trilogy except for
discounts extended in the ordinary course of business consistent with past
practice; or
(P) Negotiation or agreement by Trilogy to do any of the things described in
the preceding clauses (A) through (O) (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) Trilogy 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 Trilogy or its
operations
57
(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) Trilogy 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 Trilogy are
sufficient to discharge the Taxes for all periods (or the
portion of any period) ending on or prior to the Effective
Date.
(5) Trilogy has not been delinquent in the payment of any Tax nor,
except as set forth in Schedule 2.8(A), is there any Tax
deficiency outstanding, proposed or assessed against Trilogy,
nor has Trilogy 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
Trilogy is presently in progress. Except as set forth
in Schedule 2.8(A), Trilogy does not have any
liabilities for unpaid federal, state, local and
foreign Taxes, whether asserted or unasserted, known
or unknown, contingent or otherwise and Trilogy has
no knowledge of any basis for the assertion of any
such liability attributable to Trilogy, or their
respective assets or operations.
(b) Trilogy 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) Trilogy is not a party to or bound by any Tax indemnity, Tax
sharing or Tax allocation agreement.
(8) Trilogy 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 Trilogy for all
periods since its date incorporation.
(9) There are (and as of immediately following the Effective Date
there will be) no liens on the assets of Trilogy relating to
or attributable to Taxes.
(10) Trilogy 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 Trilogy.
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(11) Trilogy 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 Trilogy 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 Trilogy 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.
Trilogy 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 Trilogy.
2.9 RESTRICTIONS ON BUSINESS ACTIVITIES.
There is no agreement (assuming the Parties thereto other than Trilogy
performed their respective obligations thereunder as required), judgment,
injunction, order or decree binding upon Trilogy which has or could reasonably
be expected to have the effect of materially prohibiting or materially impairing
any business practice of Trilogy, any acquisition of property by Trilogy or the
conduct of business by Trilogy 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) Trilogy owns no real property.
(2) Schedule 2.10(A) sets forth a true and complete list of all
real property leased by Trilogy and the aggregate annual
rental or other fee payable under any such lease.
(3) To the knowledge of Trilogy, all such leases are in good
standing, valid and effective in accordance with their
respective terms, and there is not with respect to Trilogy
under any of such leases, 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 Trilogy 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
Trilogy.
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(B) Trilogy 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 Trilogy
Financial Statements and except for such imperfections of title and
encumbrances, if any, which are not substantial in character, 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 (the "Equipment") owned or leased by Trilogy
is listed in Schedule 2.10(C), except individual pieces of
equipment owned by Trilogy with an individual value of less
than $100.
(2) To the knowledge of Trilogy, the Equipment is, taken as a
whole:
(a) Adequate for the conduct of the business of Trilogy
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) Trilogy 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 Trilogy as currently
conducted or as currently proposed to be conducted ("Trilogy'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 Trilogy Intellectual Property Rights, and
specifies the jurisdictions in which each such Trilogy'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 Trilogy's currently marketed
software products and an indication as to which, if any, of
such software products have been registered for copyright
protection with the United States Copyright Office and any
foreign offices and by whom such items have been registered.
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(3) (a) Schedule 2.11 also sets forth a complete list of (i) any
requests Trilogy 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 Trilogy is a
party and pursuant to which Trilogy or any other person is
authorized to use any Trilogy's Intellectual Property Right
or other trade secret material to Trilogy, 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) Trilogy 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.
(4) Trilogy 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), Trilogy 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 Trilogy Intellectual Property Rights are being used.
(5) To the knowledge of Trilogy, no claims with respect to Trilogy
Intellectual Property Rights have been asserted or are
threatened by any person, nor, to the knowledge of Trilogy, 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 Trilogy infringes on any copyright, patent,
trade ▇▇▇▇, service ▇▇▇▇ or trade secret, (ii) against the use
by Trilogy of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software
programs and applications used in Trilogy's business as
currently conducted or as proposed to be conducted, or (iii)
challenging the ownership, validity or effectiveness of any of
Trilogy Intellectual Property Rights.
(6) All trademarks, service marks and copyrights held by Trilogy
are valid and subsisting.
(7) To the knowledge of Trilogy, there is no material unauthorized
use, infringement or misappropriation of any of Trilogy
Intellectual Property Rights by any third party, including any
employee or former employee of Trilogy.
(8) Trilogy 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, Trilogy of any patent, trademark, service ▇▇▇▇,
copyright, trade secret or other proprietary right of another.
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(9) To Trilogy's knowledge, no Trilogy's Intellectual Property
Right or product of Trilogy is subject to any outstanding
order, judgment, decree, stipulation or agreement restricting
in any manner the licensing thereof by Trilogy.
(10) There is no outstanding order, judgment, decree or stipulation
on Trilogy, and Trilogy is not party to any agreement,
restricting in any manner the licensing of Trilogy's products
by Trilogy.
(11) Trilogy has not entered into any agreement to indemnify any
other person against any charge of infringement of any
Trilogy's Intellectual Property Right.
(12) Each current and former employee of and consultant to Trilogy
has signed a confidentiality agreement substantially in
Trilogy's standard form as certified by Trilogy, delivered to
AmeriNet and included in Schedule 2.12.
(B) (1) "Commercial Software Rights" means packaged commercially
available software programs generally available to the public
through retail dealers in computer software which have been
licensed to Trilogy pursuant to end-user licenses and which
are used in Trilogy's business but are in no way a component
of or incorporated in any of Trilogy's products and related
trademarks, technology and know-how.
(2) To the best of Trilogy's knowledge, Trilogy 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.
(3) Trilogy 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.
(4) No claims with respect to the Commercial Software Rights have
been asserted or, to the knowledge of Trilogy, are threatened
by any person against Trilogy, nor to the knowledge of Trilogy
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 Trilogy infringes on any copyright, patent,
trade ▇▇▇▇, service ▇▇▇▇ or trade secret, (ii) against the use
by Trilogy of any trademarks, trade names, trade secrets,
copyrights, patents, technology, know-how or computer software
programs and applications used in Trilogy's business as
currently conducted or as proposed to be conducted, or (iii)
challenging the validity or effectiveness of any of Trilogy's
rights to use Commercial Software Rights.
(5) To the knowledge of Trilogy, there is no material unauthorized
use, infringement or misappropriation of any of the Commercial
Software Rights by Trilogy or any employee or former employee
of Trilogy during the period of their employment.
(6) To the knowledge of Trilogy, no Commercial Software Right is
subject to any outstanding order, judgment, decree,
stipulation or agreement restricting in any manner the use
thereof by Trilogy.
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2.12 AGREEMENTS, CONTRACTS AND COMMITMENTS.
(A) Except as specifically disclosed in Schedule 2.12, Trilogy 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 Trilogy on thirty days
notice without liability, except to the extent general principles
of wrongful termination law may limit Trilogy's ability to
terminate employees at will;
(5) 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;
(9) Any agreement, contract or commitment containing any covenant
limiting the freedom of Trilogy 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
$10,000 in any single instance or $20,000 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 or extension of credit, including guaranties
referred to in Schedule 2.12(A)(12) hereof;
63
(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 $20,000 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 $2,000
or more in any single instance or more than $45,000 in the
aggregate and is not cancelable without penalty within thirty
(30) days other than standard end-user licenses of Trilogy's
products and services in the ordinary course of business
consistent with past practice, or
(17) Any agreement which is otherwise material to Trilogy's business.
(B) (1) Trilogy 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 Trilogy 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 Trilogy 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 Trilogy has knowledge by any party obligated to Trilogy
pursuant thereto.
2.13 INTERESTED PARTY TRANSACTIONS.
Except as specifically disclosed in Schedule 2.13, no officer, director
or stockholder of Trilogy (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 shall 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 Trilogy furnishes or sells, or proposes to
furnish or sell;
(B) Any interest in any entity which purchases from or sells or furnishes to,
Trilogy, any goods or services; or
(C) A beneficial interest in any contract or agreement required to be set forth
in Schedule 2.12.
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 Trilogy:
(1) Pursuant to which Trilogy 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 (herein collectively called "Trilogy
Authorizations").
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(B) Trilogy Authorizations are in full force and effect and constitute all the
material authorizations required to permit Trilogy 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 Trilogy's knowledge,
threatened or which Trilogy expects will ultimately be threatened or
commenced.
(B) None of such suits, actions, proceedings, investigations or claims seek to
prevent the consummation of the Merger.
(C) There is no judgment, decree or order enjoining Trilogy 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 Trilogy.
(D) Schedule 2.15 also lists all suits and legal actions initiated by Trilogy.
2.16 ACCOUNTS RECEIVABLE.
(A) All receivables of Trilogy arose in the ordinary course of business at the
aggregate amounts thereof, are to the best of Trilogy's knowledge
collectible (except to the extent reserved against as reflected in
Trilogy's Financial Statements) and are carried at values determined in
accordance with generally accepted accounting principles consistently
applied.
(B) To the knowledge of Trilogy, none of the receivables of Trilogy 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 Trilogy of any
obligation or contract except for Trilogy's maintenance obligations under
its maintenance agreements (although no customer has claimed that Trilogy
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 Trilogy 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 Trilogy, and reflect all transactions
referred to in such minutes accurately in all material respects.
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2.18 ENVIRONMENTAL AND OSHA.
(A) Hazardous Material.
(1) As of the Effective 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 Trilogy (excluding failure of Trilogy to remedy the
presence of a Hazardous Material resulting from the actions of
any previous owner or occupier of Trilogy's Property of which
presence Trilogy does not have knowledge) in violation of any
law in effect on or before the Effective Date, in, on or under
any property, including the land and the improvements, ground
water and surface water thereof, that Trilogy or any of its
past or present subsidiaries has at any time owned, operated,
occupied or leased (collectively, "Trilogy's Property").
(2) In any event, Trilogy does not know of the presence of any
Hazardous Material in, on or under any Trilogy's Property.
(B) Hazardous Materials Activities.
At no time prior to the Effective Date has Trilogy 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
Effective Date, nor has Trilogy 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 Effective Date.
(C) Permits.
Trilogy currently holds no environmental approvals, permits, licenses,
clearances and consents and none are necessary for the conduct of
Trilogy's Hazardous Material Activities and other businesses of Trilogy
as such activities and businesses are currently being conducted.
2.19 BROKERS' AND FINDERS' FEES.
Except as set forth in Schedule 2.19, Trilogy 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) Trilogy 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.
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(B) Trilogy has not received any notice from any Governmental Entity, and
to the knowledge of Trilogy, there has not been asserted before any
Governmental Entity, any claim, action or proceeding to which Trilogy
is a party or involving Trilogy, and there is neither pending nor, to
the knowledge of Trilogy, threatened, any investigation or hearing
concerning Trilogy arising out of or based upon any such laws,
regulations or practices.
(C) Trilogy has not received notice of and to the best of its knowledge,
there are no pending claims against Trilogy under any workers
compensation plan or policy or for long term disability.
(D) To the best of Trilogy'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 Trilogy 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 Trilogy as
well as all claims made under any insurance policy by Trilogy since its
incorporation.
(B) There is no claim by Trilogy 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 Trilogy 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 Trilogy.
(E) Trilogy does not know of any threatened termination of or material
premium increase with respect to any of such policies.
(F) Trilogy has never been denied insurance coverage nor has any insurance
policy of Trilogy ever been canceled for any reason.
2.22 COMPLIANCE WITH LAWS.
Trilogy 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.
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2.23 COMPLETE COPIES OF MATERIALS.
Trilogy 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 Trilogy is a party
is a legal, binding and enforceable obligation in favor of or against Trilogy
(assuming that such contracts, agreements and instruments are binding on all
other parties thereto, Trilogy having no reason to believe that they are not),
in accordance with its terms, and no party with whom Trilogy has an agreement or
contract is, to Trilogy'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).
2.25 CURRENT REPORT ON FORM 8-K
(A) The information supplied by Trilogy for inclusion in the current report
on Commission Form 8-K within 15 days after the Effective Date annexed
hereto as Exhibit 2.25 and in all other reports which AmeriNet will
file thereafter pursuant to Sections 12(g), 13 and 15(d) of the
Exchange Act, shall not contain any statement which, at such time and
in light of the circumstances under which it shall be made, is false or
misleading with respect to any material fact, or shall 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 Effective Date any event relating to
Trilogy or any of its affiliates, officers or directors should be
discovered by Trilogy which should be set forth in the Current Report
on Form 8-K, Trilogy shall promptly inform AmeriNet and Trilogy
Acquisition.
(C) Notwithstanding the foregoing, Trilogy makes no representation or
warranty with respect to any information supplied by AmeriNet or
Trilogy Acquisition which is contained in any of the foregoing
documents.
2.26 FIRPTA.
Trilogy 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
Trilogy, any trade or business (whether or not incorporated) which is a
member or which is under common control with Trilogy (an "ERISA Affiliate")
within the meaning of Section 414 of the Code, or any subsidiary of Trilogy
(together, the "Employee Plans"), and a copy of each such Employee Plan has
been provided to AmeriNet.
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(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 the best of Trilogy'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, Internal Revenue
Service (the "IRS") or Secretary of the Treasury), and Trilogy
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;
(c) No Employee Plan is or within the prior six years has been
subject to, and Trilogy 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 the best of Trilogy's knowledge, nothing in any Employee Plan
precludes or interferes with AmeriNet's ability to cause Trilogy
to terminate (or consolidate, at AmeriNet's option) any Employee
Plan after the Effective Date; provided that: (i) the Employee
Plans may be terminated prospectively only, subject to rights
accrued by Trilogy'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 Trilogy constituting a violation of
Section 402, 403, 404 or 405 of ERISA;
(b) Any act or omission by Trilogy 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 Trilogy constituting a violation of
Section 503, 510 or 511 of ERISA; or (IV) any act or omission by
Trilogy which could give rise to liability under Section 502 of
ERISA or under Sections 4972 or 4975 through 4980 of the Code.
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(4) (a) Each Employee Plan has been maintained in substantial compliance
with its terms, and all contributions, premiums or other payments
due from Trilogy or any of its subsidiaries to (or under) any
such Employee Plan have been fully paid or adequately provided
for on the audited Trilogy's Financial Statements for the most
recently-ended fiscal year.
(b) To the best of Trilogy'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 Trilogy 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) Trilogy has made available 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.
2.28 DISTRIBUTION AGREEMENTS.
No third party or parties have the right to distribute Trilogy's
products or to market its services except as disclosed in Schedule 2.28, which
discloses the names, addresses, telephone numbers, fax numbers, e-mail addresses
and federal Tax identification numbers of each such person, together with a
summary of the agreements pursuant to which Trilogy's products are distributed
or its services are marketed.
2.29 REPRESENTATIONS COMPLETE.
None of the representations or warranties made by Trilogy, nor any
statement made in any Schedule, Exhibit or certificate furnished by Trilogy
pursuant to this Agreement, when read in its entirety, contains or will contain
any untrue statement of a material fact at the Effective Time, 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 III
REPRESENTATIONS AND WARRANTIES OF AMERINET AND TRILOGY ACQUISITION
AmeriNet and Trilogy Acquisition represent and warrant to Trilogy as a
material inducement to its entry into this Agreement, subject to the exceptions
specifically disclosed in the schedules supplied and initialed by AmeriNet to
Trilogy (the "AmeriNet Schedules") and AmeriNet's Exchange Act Reports, as
follows:
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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) (1) Trilogy Acquisition is a corporation organized for purposes of
the Merger by the ▇▇▇▇▇▇ Firm, legal counsel to Trilogy, and
based on the representations of the ▇▇▇▇▇▇ Firm, Trilogy
Acquisition is duly organized, validly existing and in good
standing under the laws of the State of Florida organized solely
to effect the transactions contemplated by this Agreement
immediately prior to its execution.
(2) All representations concerning Trilogy Acquisition in this
Agreement, including the Exhibits and Schedules, are based on
information provided to AmeriNet by legal counsel to Trilogy.
(C) AmeriNet and Trilogy Acquisition have the corporate power to own their
properties and to carry on their business as now being conducted and
are duly qualified to do business and are in good standing in each
jurisdiction in which the failure to be so qualified would have a
material adverse effect on AmeriNet and Trilogy Acquisition taken as a
whole.
(D) AmeriNet has made available a true and correct copy of the articles of
incorporation and bylaws of AmeriNet and Trilogy Acquisition, as
amended to date, to counsel for Trilogy.
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 8,354,126 shares of Common Stock issued and
outstanding as of November 15, 1999 and no shares of Preferred
Stock have ever been issued.
(3) AmeriNet has reserved 4,368,980 shares of Common Stock (excluding
those issuable pursuant to the terms of this Agreement) for
issuance as described in AmeriNet's 10-KSB for the year ended
June 30, 1999 and 10-QSB for the calendar quarter ended September
30, 1999.
(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 and as disclosed in the Exchange
Act Reports.
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(5) Pursuant to AmeriNet's articles of incorporation, they may be
amended by action of the board of directors without stockholder
approval to increase the amount of authorized Capital Stock.
(B) (1) The authorized Capital Stock of Trilogy Acquisition consists of
7,500 shares of common stock, par value $1.00 per share;
(2) 100 shares of Trilogy Acquisition's common stock are currently
issued and outstanding, all of which and are held by AmeriNet;
and
(3) No shares of Trilogy Acquisition's common stock are reserved for
any purpose.
(C) All of AmeriNet's and Trilogy Acquisition'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.
(D) The shares of AmeriNet Common Stock to be issued pursuant to the Merger
will be duly authorized, validly issued, fully paid, and nonassessable.
3.3 AUTHORITY.
(A) AmeriNet and Trilogy Acquisition have 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 and Trilogy
Acquisition.
(C) This Agreement has been duly executed and delivered by AmeriNet and
Trilogy Acquisition and, subject to having also been approved by
Trilogy's board of directors and properly executed and delivered by
Trilogy, constitutes a valid and binding obligation of AmeriNet and
Trilogy Acquisition.
(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:
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(1) Any provision of the articles of incorporation or bylaws of
AmeriNet and Trilogy Acquisition; 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 and Trilogy Acquisition in connection with the
execution and delivery of this Agreement by AmeriNet and Trilogy
Acquisition or the consummation by AmeriNet and Trilogy Acquisition of
the transactions contemplated hereby, except for:
(1) The filing of the Articles of Merger with the Florida Secretary
of State;
(2) 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
(3) 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 ▇▇▇.▇▇▇.▇▇▇
in its ▇▇▇▇▇ 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, other
than in conjunction with filing deadlines, 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 were made, not
misleading, except to the extent corrected by a subsequently filed
document with the Commission or by information provided by AmeriNet to
Trilogy.
(C) The financial statements of AmeriNet (the "AmeriNet Financial
Statements"), including the notes thereto, included in the report on
Commission Form 10-KSB for the period ended June 30, 1999 (the "1999
10-KSB") 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.
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(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 Trilogy in writing.
(F) The information supplied by AmeriNet for inclusion in the Current
Report on Form 8-K pertaining to this merger will not contain any
statement which, at such time and in light of the circumstances under
which it shall be made, is false or misleading with respect to any
material fact, or shall 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 Effective Date any event relating to
AmeriNet, Trilogy Acquisition or any of their respective affiliates,
officers or directors should be discovered by AmeriNet or Trilogy
Acquisition which should be set forth in the Current Report on Form
8-K, AmeriNet or Trilogy Acquisition will promptly inform Trilogy.
(H) Notwithstanding the foregoing, AmeriNet and Trilogy Acquisition make no
representation or warranty with respect to any information supplied by
Trilogy which is contained in any of the foregoing documents.
(I) To the best of AmeriNet's knowledge, there are no currently outstanding
comment letters from the Commission that have not been responded to and
complied with, except for the comment letter annexed hereto and made a
part hereof as Schedule 3.4(I), which is expected to be complied with
prior to the Merger.
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 Merger or any transaction contemplated
hereby.
3.6 OWNERSHIP OF TRILOGY'S CAPITAL STOCK.
As of the date of execution of this Agreement, AmeriNet does not own
any shares of Trilogy's Capital Stock.
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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 Merger.
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 has one subsidiary, American Internet Technical Center, Inc.,
a Florida corporation, which it expects to merge with ▇▇▇▇▇▇▇.▇▇▇,
Inc., also a Florida corporation, as a result of which the surviving
entity will be a wholly owned subsidiary of AmeriNet.
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 the latest AmeriNet 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) The notice of or to AmeriNet or its subsidiaries's knowledge, commencement
or threat of commencement of any governmental proceeding against or
investigation of AmeriNet or its subsidiaries or their affairs;
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(F) Other event or condition of any character that has or would, in AmeriNet or
its subsidiaries's reasonable judgment, be expected to have a material
adverse effect on AmeriNet or its subsidiaries;
(G) 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 Effective 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.
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(7) AmeriNet and its subsidiaries have provided, or made available
to Trilogy 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, 1998.
(8) There are (and as of immediately following the Effective 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.
(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 Effective 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's property
of which presence AmeriNet or its subsidiaries do not have
knowledge) in violation of any law in effect on or before the
Effective 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 (collectively, "AmeriNet or its subsidiaries's
property").
(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.
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(B) Hazardous Materials Activities.
At no time prior to the Effective 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 Effective 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 Effective 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's Hazardous Material Activities and
other businesses of AmeriNet or its subsidiaries as such activities and
businesses are currently being conducted.
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 Effective 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 EFFECTIVE TIME
4.1 CONDUCT OF BUSINESS OF TRILOGY.
(A) During the period from the date of this Agreement and continuing until the
earlier of the termination of this Agreement or the Effective Time, Trilogy
agrees (except to the extent that AmeriNet shall otherwise consent in
writing), 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 Trilogy'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 Trilogy's goodwill and ongoing businesses
shall be unimpaired at the Effective Time.
(B) Trilogy shall promptly notify AmeriNet of any event or occurrence or
emergency not, in the reasonable judgment of Trilogy, in the ordinary
course of business of Trilogy, and any event which could, in the reasonable
judgment of Trilogy, have a material adverse effect on Trilogy.
(C) Except as expressly contemplated by this Agreement or set forth in Schedule
4.1, Trilogy shall not, without the prior written consent of AmeriNet:
(1) Except pursuant to existing contractual provisions of Options or
Warrants outstanding on the date hereof, accelerate, amend or change
the period of exercisability of Options, Warrants or restricted stock
granted under the employee stock plans of Trilogy or authorize cash
payments in exchange for any Options or Warrants granted under any of
such plans;)
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(2) 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 $5,000;
(3) 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 Trilogy's standard past
practices;
(4) Except for licenses granted to end-users pursuant to Trilogy's
standard license agreements, transfer to any person or entity any
rights to Trilogy's Intellectual Property;
(5) 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 Trilogy;
(6) Violate, amend or otherwise modify the terms of any of the contracts
or agreements required to be set forth in Trilogy Schedules;
(7) Commence any litigation;
(8) 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 Trilogy,
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
Trilogy;
(9) 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 except for the issuance of shares of
Capital Stock upon exercise of Options or Warrants outstanding on the
date hereof;
(10) Cause or permit any amendments to its articles of incorporation or
bylaws;
(11) 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 Trilogy;
(12) 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 Trilogy, except in the ordinary course of business;
(13) Incur any indebtedness for borrowed money or guarantee any such
indebtedness or issue or sell any debt securities of Trilogy or
guarantee any debt securities of others;
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(14) 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;
(15) 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;
(16) Pay, discharge or satisfy in an amount in excess of $5,000 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 Trilogy Financial
Statements (or the notes thereto);
(17) 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
(18) Take, or agree in writing or otherwise to take, any of the actions
described in Sections 4.1(C)(1) through 4.1(C)(17) above, or any
action which would make any of the representations or warranties or
covenants of Trilogy contained in this Agreement materially untrue or
incorrect.
4.2 NO SOLICITATION.
(A) Prior to the Effective Time, except as required by applicable fiduciary
duties and permitted by applicable law, Trilogy will not (nor will
Trilogy permit any of Trilogy's officers, directors, stockholders
affiliated with any officer or director or Trilogy's agents,
representatives or affiliates to) directly or indirectly, take any of
the following actions with any party other than AmeriNet and its
designees:
(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 Trilogy'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 Trilogy's business and properties or afford to any
person or entity access to its properties, books or records,
or
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(3) Assist or cooperate with any person to make any proposal to
purchase all or any part of Trilogy's Capital Stock or of its
assets (other in the ordinary course of business).
(B) In the event Trilogy shall receive 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, Trilogy shall immediately inform AmeriNet as to any such offer
or proposal 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 Effective Time, as the
case may be, AmeriNet agrees (except to the extent that Trilogy shall otherwise
consent in writing), that AmeriNet shall promptly notify Trilogy 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 Effective Date, AmeriNet, with the
assistance and cooperation of Trilogy's current officers, shall prepare
and file with the Commission a current report on Commission Form 8-K
(the "8-K Report") disclosing the Merger and containing information
concerning Trilogy required by Commission Regulation S-B, except for
audited financial statements that may be filed within 75 days after the
Effective Date.
(B) (1) AmeriNet, with the full cooperation and assistance of
Trilogy's current officers, attorney's and accountants, shall
make all necessary filings with respect to the Merger under
the Securities Act and the Exchange Act and the rules and
regulations thereunder, under applicable Blue Sky or similar
securities laws, rules and regulations and shall use all
reasonable efforts required approvals and clearances with
respect thereto.
(2) AmeriNet and Trilogy shall use their reasonable best efforts to
secure the Commission's acceptance of the audited Trilogy
Financial Statements as complying with the requirements of
Regulation S-B, and Trilogy will make any reasonable
modification's to the Trilogy Financial Statements which it can
make, at the request of 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.
(C) The provision of the audited Trilogy Financial Statements on a timely
basis in full compliance with the requirements of Commission Regulation
S-B shall constitute a condition subsequent to the obligations of
AmeriNet and Trilogy Acquisition under this Agreement and in the event
of the failure of such condition subsequent, then, at AmeriNet's sole
option:
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(1) The Merger may be rescinded, and all funds advanced by
AmeriNet to the Surviving Corporation shall be repaid, with
interest at the annual rate of 8%, to AmeriNet within 30 days
after such rescission; or
(2) The Escrow Shares shall be deemed defaulted to AmeriNet and
the Merger shall be restructured in a manner complying with
AmeriNet's reporting and other obligations under the Exchange
Act, including the sale by AmeriNet of the Surviving
Corporation.
5.2 MEETING OF TRILOGY'S STOCKHOLDERS.
(A) Trilogy either has or shall promptly after the date hereof take all
action necessary in accordance with the Florida Corporate Merger Laws
and its articles of incorporation and bylaws to convene a meeting of
its stockholders or obtain a written consent in-lieu of meeting
executed by the requisite majority of its stockholders, as permitted
under applicable law, for the purpose of ratifying this Agreement (the
Trilogy Stockholders' Meeting").
(B) Trilogy shall consult with AmeriNet and use all reasonable efforts to
hold the Trilogy Stockholders' Meeting on a day acceptable to AmeriNet.
(C) In connection with the Trilogy Stockholders' Meeting, Trilogy shall
prepare and deliver to its stockholders all information necessary for
them to vote at such meeting on the issue of ratification of this
Agreement under the laws of the United States, the State of Florida and
their respective states of domicile.
5.3 ACCESS TO INFORMATION.
(A) Trilogy shall afford AmeriNet and its accountants, counsel and other
representatives, reasonable access during normal business hours during
the period prior to the Effective Time to all:
(1) Of its properties, books, contracts, commitments and records; and
(2) Other information concerning the business, properties and
personnel of Trilogy as AmeriNet may reasonably request.
(B) Trilogy 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 shall affect or be deemed to modify any representation
or warranty contained herein or the conditions to the obligations of
the Parties to consummate the Merger.
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5.4 CONFIDENTIALITY.
(A) From the date hereof to and including the Effective Date, the Parties
shall 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 shall
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 shall not be
consummated, all such information which shall be in writing shall 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 Merger is consummated, all expenses incurred in
connection with the Merger and this Agreement ("Expenses") shall be the
obligation of the Party incurring such expenses.
5.6 PUBLIC DISCLOSURE.
Unless otherwise required by law, prior to the Effective Date no
disclosure (whether or not in response to an inquiry) of the subject matter of
this Agreement shall be made by any Party unless approved by AmeriNet and
TRILOGY PRIOR TO RELEASE, PROVIDED THAT such approval shall 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 Trilogy shall 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 Merger, and Trilogy shall use its
best efforts to obtain all consents, waivers and approvals under any of
Trilogy's agreements, contracts, licenses or leases in order to preserve the
benefits thereunder for the Surviving Corporation, and otherwise in connection
with the Merger; 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 Trilogy's reasonable
judgment, "affiliates" of Trilogy within the meaning of Commission Rule
145 (the "Affiliate[s]").
(B) Trilogy shall provide AmeriNet such information and documents as
AmeriNet shall reasonably request for purposes of reviewing such list.
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(C) Trilogy shall 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 Effective Date) from each of the Affiliates of
Trilogy, an executed Affiliate Agreement in the form annexed hereto as
Exhibit 5.8.
(D) AmeriNet and Trilogy Acquisition shall be entitled to place appropriate
legends on the certificates evidencing any AmeriNet 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 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
Trilogy's stockholders in conjunction with the Merger based on the
Parties reliance on Section 4(2) of the Securities Act
5.9 LEGAL REQUIREMENTS.
(A) AmeriNet, Trilogy Acquisition and Trilogy 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.
(B) The foregoing obligations shall not be construed to require Trilogy to
pay money or other consideration to stockholders of Trilogy to undue
influence such stockholders to vote in favor of the Merger and the
transactions contemplated hereby.
5.10 BLUE SKY LAWS.
Legal counsel to Trilogy, with the cooperation of legal counsel to
AmeriNet and Trilogy Acquisition, shall take 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 Common Stock pursuant hereto.
5.11 BEST EFFORTS: ADDITIONAL DOCUMENTS AND FURTHER ASSURANCES.
(A) Each of the Parties to this Agreement shall use its best efforts to
effectuate the transactions contemplated hereby and to fulfill and
cause to be fulfilled the conditions to the Merger and the condition
subsequent under this Agreement.
(B) Each Party, at the request of another Party, shall 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.
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5.12 EMPLOYMENT AGREEMENTS.
The individuals set forth on Schedule 5.12 will as of the Effective
Date be parties to the employment agreements included in composite Exhibit 5.12
hereto (the "Employment Agreements"), which shall supersede all prior employment
agreements or arrangements with any such persons.
5.13 INVESTMENT BY AMERINET IN SURVIVING CORPORATION.
Subject to Trilogy's substantial compliance with its material
obligations under this Agreement, including 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 the Merger, AmeriNet
hereby covenants and agrees to provide the following funds, to be expended
solely for the purposes set forth in Schedule 5.13, to the Surviving
Corporation:
(A) As provided in Section 1.2(C), the sum of $250,000;
(B) Within 90 days after the Effective Date, provided that audited
financial statements for Trilogy required pursuant to Commission
Regulation S-B (the "Audited Trilogy Statements") have been provided to
AmeriNet, filed with the Commission and not found deficient by the
Commission, the sum of $325,000, and
(C) Within 180 days after the Effective Date, provided that the Audited
Trilogy Statements have been provided to AmeriNet, filed with the
Commission and not found deficient by the Commission, the sum of
$325,000.
5.14 THE SURVIVING CORPORATION'S BOARD OF DIRECTORS.
(A) Subject to (i) compliance with all of obligations under this Agreement
by the Former Trilogy Stockholders, Trilogy and the Surviving
Corporation, including, without limitation, those involving provision
of audited financial statements for Trilogy's operations for the time
period and in the form required by Commission Regulation S-B for
purposes of the Merger, (ii) compliance by the members of the board of
directors of the Surviving Corporation with their fiduciary
obligations to AmeriNet as the Surviving Corporation's stockholder and
with applicable laws and (iii) the attainment by the Surviving
Corporation, on a quarterly basis of at least 80% of the financial
projections established in Schedule 5.14 (the "Projections"), AmeriNet
hereby covenants and agrees that it will maintain membership on the
board of directors of the Surviving Corporation in the following
ratio: two thirds of the members will be designees of ▇▇. ▇▇▇▇▇▇ ▇.
▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and one third will be designees of
AmeriNet, provided, however, that:
(1) A quorum for meetings of the board of directors of the
Surviving Corporation and action by such board of directors
will require the participation of Amerinet's designees;
provided further, 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 designees,
then, upon receipt of written notice from the Surviving
Corporation's board of directors, AmeriNet must assure that
its designees 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.
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(2) The board of directors of the Surviving Corporation will not,
without AmeriNet's prior written consent specifying the action
authorized, be authorized to engage in any material change in
the Surviving Corporation's business not contemplated by the
Projections, to sell a material portion of the Surviving
Corporation's assets outside the normal course of business, to
issue any securities, to authorize the borrowing of any funds
or pledge of any assets, for so long as the Surviving
Corporation remains a subsidiary of AmeriNet; and
(3) (a) The initial determination by AmeriNet as to the
attainment of the Projections shall not be made until
two complete fiscal quarters have passed since the
Effective Date;
(b) After the first year following the Effective Date,
the Projections may be modified periodically by
unanimous action (including the affirmative votes of
all AmeriNet designees) of the board of directors of
the Surviving Corporation.
(c) In the event that the right of Mr. & ▇▇▇. ▇▇▇▇▇▇▇ to
designate two thirds of the membership on the board
of directors of the Surviving Corporation is
suspended due to failure to meet the Projections,
such right shall be reinstated at such time as the
deficiency in meeting the Projections, on a
cumulative basis, has been cured.
5.15 CREDIT FOR TIME EMPLOYED.
For purposes of determining the eligibility of any Trilogy employee to
receive benefits under any employee benefit plan, or for determining the amount
or scope of any such benefit for which a Trilogy employee is eligible, the time
such employee was employed by Trilogy shall be credited to such employee as if
such employee had been EMPLOYED BY THE SURVIVING CORPORATION FOR SUCH PERIOD;
AND, in addition, the Surviving Corporation shall credit Trilogy employees with
all vacation accrued as of the Effective Date.
ARTICLE VI
CONDITIONS TO THE MERGER
6.1 CONDITIONS TO OBLIGATIONS OF EACH PARTY TO EFFECT THE MERGER.
The respective obligations of each party to this Agreement to effect
the Merger shall be subject to the satisfaction at or prior to the Effective
Date of the following conditions:
(A) Stockholder Approval.
This Agreement and the Merger and other transactions contemplated
hereby (including without limitation the Employment Agreements) shall have been
approved and adopted by the requisite vote of the stockholders of Trilogy at the
Trilogy Stockholders' Meeting or through the written consent in lieu of meeting.
(B) 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 Merger shall be in
effect, nor shall 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 shall there be any action
taken, or any statute, rule, regulation or order enacted, entered, enforced or
deemed applicable to the Merger, which makes the consummation of the Merger
illegal.
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(C) Trilogy Information Required by Commission Regulation S-B
The provision by Trilogy on a timely basis in full compliance with the
requirements of Commission Regulation S-B of all information concerning its past
operations, including audited Trilogy Financial Statements, shall constitute a
condition subsequent to the obligations of AmeriNet and Trilogy Acquisition
under this Agreement and in the event of the failure of such condition
subsequent, then, at AmeriNet's sole option:
(1) The Merger may be rescinded, and all funds advanced by
AmeriNet to the Surviving Corporation shall be repaid, with
interest at the annual rate of 8%, to AmeriNet within 30 days
after such rescission; or
(2) The Escrow Shares shall be deemed defaulted to AmeriNet and
the Merger shall be restructured in a manner complying with
AmeriNet's reporting and other obligations under the Exchange
Act, including the sale by AmeriNet of the Surviving
Corporation.
6.2 ADDITIONAL CONDITIONS TO OBLIGATIONS OF TRILOGY.
The obligations of Trilogy to consummate and effect this Agreement and
the transactions contemplated hereby shall be subject to the satisfaction at or
prior to the Effective Date of each of the following conditions, any of which
may be waived, in writing, exclusively by Trilogy:
(A) Representations, Warranties and Covenants.
The representations and warranties of AmeriNet in this Agreement shall
be true and correct in all material respects on and as of the Effective
Date as though such representations and warranties were made on and as
of such time and AmeriNet shall 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 Effective Date.
(B) Certificate of AmeriNet.
Trilogy shall 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
Effective Date:
(1) All representations and warranties made by AmeriNet and
Trilogy Acquisition 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 and Trilogy Acquisition 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 Effective Date shall be reasonably
acceptable to counsel to Trilogy.
(D) Legal Opinion.
Trilogy shall have received a legal opinion from legal counsel to
Trilogy Acquisition and AmeriNet, substantially in the form of Exhibit
6.2(D) hereto.
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(E) No Material Adverse Changes.
There shall 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) Trilogy shall have received a written opinion from Trilogy
Acquisition's Counsel to the effect that the Merger will
constitute a reorganization within the meaning of Section 368
of the Code.
(2) In rendering such opinion counsel may rely on (and to the
extent reasonably required, the Parties and Trilogy's
stockholders shall make) reasonable representations related
thereto.
6.3 ADDITIONAL CONDITIONS TO THE OBLIGATIONS OF AMERINET AND TRILOGY
ACQUISITION.
The obligations of AmeriNet and Trilogy Acquisition to consummate and
effect this Agreement and the transactions contemplated hereby shall be subject
to the satisfaction at or prior to the Effective 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 Trilogy in this
Agreement shall be true and correct in all material respects
on and as of the Effective Date as though such representations
and warranties were made on and as of such time and Trilogy
shall 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 Effective Date.
(2) AmeriNet shall have no remedy against the Escrow Fund in
respect of an untrue representation or warranty if prior to
the Effective Date Trilogy 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 Trilogy in this Agreement untrue
if such representation or warranty were made as of
the Effective Time; 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.
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(B) Certificate of Trilogy.
AmeriNet shall have been provided with a certificate executed on behalf
of Trilogy by its President and Chief Financial Officer to the effect
that, as of the Effective Date, all:
(1) Representations and warranties made by Trilogy under this
Agreement are true and complete in all material respects; and
(2) Covenants, obligations and conditions of this Agreement to be
performed by Trilogy 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 Trilogy so that the Merger
and other transactions contemplated hereby do not adversely affect the
rights of, and benefits to, Trilogy thereunder shall 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 Effective Date shall be reasonably
acceptable to AmeriNet's counsel (provided that the condition
subsequent concerning the compliance of information provided by Trilogy
with the requirements of Commission Regulation S-B, on a timely basis,
shall survive the Merger).
(E) Legal Opinion.
AmeriNet shall have received a legal opinion from legal counsel to
Trilogy, in substantially the form of Exhibit 6.3(E) hereto.
(F) No Material Adverse Changes.
There shall not have occurred any event, fact or condition which has
had or reasonably would be expected to have a material adverse effect
on Trilogy.
(G) Affiliate Agreements.
AmeriNet shall have received from each of the Affiliates of Trilogy an
executed Affiliate Agreement which shall be in full force and effect.
(H) Dissenters.
The number of shares of Trilogy's Common Stock held by holders who
either (i) have exercised appraisal rights or (ii) retain the ability
to exercise such appraisal rights shall not exceed nineteen percent of
Trilogy's outstanding Common Stock, by class and series, in the
aggregate.
(I) Employment Agreements.
The Employment Agreements shall have been duly executed and delivered
and shall be in full force and effect.
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(J) Minimum Net Worth.
Trilogy shall on the Effective Date have net tangible assets of at
least $300,000 and will have received at least $800,000 in proceeds
form the sale of its securities or capital contributions from its
founders
(K) Tax Opinion.
(1) AmeriNet shall have received a written opinion of Trilogy
Counsel, to the effect that the Merger will constitute a
reorganization within the meaning of Section 368 of the Code.
(2) In rendering such opinion, counsel may rely on (and to the
extent reasonably required, the Parties and Trilogy's
stockholders shall make) reasonable representations related
thereto.
(L) Confidentiality Agreements.
Each current employee, consultant or other person having access to
trilogy's confidential information shall have executed a
confidentiality agreement in the form annexed hereto as Exhibit 6.3(L).
(M) Accredited Investors.
Except as specifically disclosed in Schedule 6.3(M), immediately prior
to the Effective Time, there shall be no stockholders of Trilogy who
are not "accredited investors," as that term is defined in Rule 501 of
Regulation D promulgated under the Securities Act.
ARTICLE VII
SURVIVAL OF REPRESENTATIONS AND WARRANTIES; ESCROW
7.1 SURVIVAL OF CONDITION SUBSEQUENT; REPRESENTATIONS AND WARRANTIES.
(A) All conditions subsequent to the Merger and covenants to be performed
prior to the Effective Time, and all representations and warranties in
this Agreement or in any instrument delivered pursuant to this
Agreement shall survive the Merger and continue until the date the
audit of AmeriNet's financial statements for the year ending June 30,
2000 has been completed and AmeriNet has received a signed opinion from
its independent auditors certifying such financial statements (the
"2000 Audit Date").
(B) All covenants to be performed after the Effective Time shall continue
indefinitely.
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7.2 ESCROW ARRANGEMENTS.
(A) Escrow Fund.
(1) As soon as practicable after the Effective Date, a portion of
the shares of AmeriNet's Common Stock to be issued in the
Merger equal to the Escrow Number [as defined in paragraph
1.1(B)] (plus any additional New Shares (as defined below) as
may be issued in respect thereof after the Effective Date)
(collectively, the "Escrow Shares"), without any act of any
stockholder, will be registered in the name of a person or
legal entity selected by AmeriNet prior to the Effective Time
as escrow agent (the "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 "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 Common Stock in the Escrow Fund
contributed on behalf of each stockholder of Trilogy is
listed opposite such stockholders' name on Exhibit 7.2(A).
(b) The Escrow Fund shall be available to compensate AmeriNet
and its affiliates for any claim, loss, expense, liability
or other damage, including reasonable attorneys' fees that
AmeriNet or any of its affiliates has incurred or reasonably
anticipates incurring by reason of the breach by Trilogy of
any representation, warranty, covenant or agreement of
Trilogy contained herein, (collectively, "Losses"), but only
to the extent that such Losses exceed $40,000 in the
aggregate.
(c) AmeriNet and Trilogy each acknowledge that such Losses, if
any, would relate to unresolved contingencies existing at
the Effective Time, which if resolved at the Effective Time
would have led to a reduction in the total number of shares
of AmeriNet Common Stock AmeriNet would have agreed to issue
in connection with the Merger.
(3) Nothing herein shall limit the liability of Trilogy for any
breach of any representation, warranty or covenant if the
Merger does not close. Resort to the Escrow Fund shall be the
exclusive contractual remedy of AmeriNet and its affiliates
for any such breaches and misrepresentations if the Merger
DOES CLOSE; PROVIDED, HOWEVER, that nothing herein shall limit
any noncontractual remedy for fraud.
(B) Escrow Period; Distribution upon Termination of Escrow Periods.
(1) Subject to the following requirements, the Escrow Fund shall
remain in existence until the 2000 Audit Date (the "Escrow
Period").
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(2) Upon the expiration of such Escrow Period, the Escrow Fund
shall terminate with respect to all ESCROW SHARES; PROVIDED,
HOWEVER, that the number of 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 Escrow Agent prior to the
expiration of such Escrow Period with respect to facts and
circumstances existing on or prior to the 2000 Audit Date
shall remain in the Escrow Fund (and the Escrow Fund shall
remain in existence) until such claims have been resolved.
(3) As soon as all such claims have been resolved, the Escrow
Agent shall deliver to the Former Trilogy Stockholders all
AmeriNet Common Stock and other property remaining in the
Escrow Fund and not required to satisfy such claims.
(4) Deliveries of AmeriNet Common Stock and other property to the
Former Trilogy Stockholders pursuant to this Section 7.2(B)
shall be made in proportion to their respective original
contributions to the Escrow Fund.
(C) Protection of Escrow Fund.
The Escrow Agent shall hold and safeguard the Escrow Fund during the
Escrow Period, shall treat such fund as a trust fund in accordance with
the terms of this Agreement and not as the property of AmeriNet and
shall hold and dispose of the Escrow Fund only in accordance with the
terms hereof.
(D) Distributions; Voting.
(1) (a) Any shares of AmeriNet Common Stock or other
equity securities issued or distributed by AmeriNet
(including shares issued upon a stock split) ("New
Shares") in respect of AmeriNet Common Stock in the
Escrow Fund which have not been released from the
Escrow Fund shall be added to the Escrow Fund and
become a part thereof.
(b) New Shares issued in respect of AmeriNet Common Stock
which have been released from the Escrow Fund shall
not be added to the Escrow Fund, but shall be
distributed to the holders thereof.
(c) When and if cash dividends on AmeriNet Common Stock
in the Escrow Fund shall be declared and paid, they
shall not be added to the Escrow Fund but shall be
paid to those on whose behalf such AmeriNet Common
Stock is held who, prior to the Merger, held
Trilogy's Common Stock.
(2) Each stockholder of Trilogy shall have voting rights with
respect to the shares of AmeriNet Common Stock contributed to
the Escrow Fund on behalf of such stockholder (and on any
voting securities added to the Escrow Fund in respect of such
shares of AmeriNet Common Stock) so long as such shares of
AmeriNet Common Stock or other voting securities are held in
the Escrow Fund.
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(E) Claims Upon Escrow Fund.
Subject to the objection procedure established in Section 7.2(F) below,
the Escrow Agent shall deliver to AmeriNet out of the Escrow Fund, as
promptly as practicable, shares of AmeriNet Common Stock or other
assets held in the escrow fund in an amount equal to losses by
Amerinet, provided that
(1) A written claim of loss has been provided by AmeriNet to the
Escrow Agent at any time on or before the last day of the
Escrow Period in the form of a certificate signed by any
officer of AmeriNet (an "Officer's Certificate"), with a copy
to the Surviving Corporation:
(a) Stating that AmeriNet has paid or properly accrued or
reasonably anticipates that it will have to pay or
accrue Losses, and
(b) Specifying in reasonable detail the individual items
of Losses 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, the Escrow Agent
shall, subject to the provisions of Section 7.2(F)
hereof.
(2) For the purposes of determining the number of shares of
AmeriNet Common Stock to be delivered to AmeriNet out of the
Escrow Fund pursuant to Section 7.2(E)(1), the shares of
AmeriNet Common Stock shall be valued at the price actually
received therefor upon their disposition, which shall be
effected as follows:
(a) First the shares will be offered, pro rata, to the Former
Trilogy Stockholders, based on their respective ownership of
shares then comprising the Escrow Fund, at a price equal to
the closing transaction price for AmeriNet's Common Stock as
reported on the OTC Bulletin Board or if the shares are not
quoted on the OTC Bulletin Board, on such public quotation
medium, other stock market or stock exchange on which
AmeriNet's Common Stock is publicly traded, on the day
following the day on which written notice of such offer is
sent by AmeriNet (the "Notice of Sale");
(b) On the close of business on the tenth day after the Notice
of Sale has been sent the offer included in the Notice of
Sale shall lapse and AmeriNet may thereafter sell all shares
of the Escrow Stock required to discharge the obligation
involved that have not been subscribed and paid for by the
Former Trilogy Stockholders, on such terms as AmeriNet deems
appropriate under the circumstances, including volume
discounts, discounts based on the absence of registration
under applicable securities laws and discounts based on
factors designed to avoid negative impact on the price of
AmeriNet's publicly trading Common Stock.
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(F) Objections to Claims.
(1) At the time of delivery of any Officer's Certificate to the
Escrow Agent, a duplicate copy of such certificate shall be
delivered to the Agent [as defined in Section 7.2(H)] and for
a period of thirty (30) days after such delivery, the Escrow
Agent shall make no delivery to AmeriNet of shares of AmeriNet
Common Stock, pursuant to Section 7.2(E) hereof unless the
Escrow Agent shall have received written authorization from
the Agent to make such delivery.
(2) After the expiration of such thirty (30) day period, the
Escrow Agent shall make delivery of the shares of AmeriNet
Common Stock or other property in the Escrow Fund in
accordance with Section 7.2(E) hereof, provided that no such
payment or delivery may be made if the Agent shall object in a
written statement to the claim made in the Officer's
Certificate, and such statement shall have been delivered to
the Escrow Agent prior to the expiration of such thirty (30)
day period.
(G) Resolution of Conflicts; Arbitration.
(1) (a) In case the Agent shall so object in writing to
any claim or claims made in any Officer's
Certificate, the Agent and AmeriNet shall 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 shall be
prepared and signed by both Parties and shall be
furnished to the Escrow Agent.
(c) The Escrow Agent shall be entitled to rely on any
such memorandum and distribute shares of AmeriNet
Common Stock or other property from the 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 shall
not be commenced until such amount is ascertained or
both Parties agree to arbitration; and in either such
event the matter shall be settled by arbitration
conducted by three arbitrators.
(b) AmeriNet and the Agent shall each select one
arbitrator, and the two arbitrators so selected shall
select a third arbitrator.
(c) The arbitrators shall 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.
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(d) The arbitrators shall rule upon motions to compel or
limit discovery and shall 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 shall be binding and conclusive
upon the Parties to this Agreement, and
notwithstanding anything in Section 7.2(F) hereof,
the Escrow Agent shall be entitled to act in
accordance with such decision and make or withhold
payments out of the Escrow Fund in accordance
therewith.
(f) Such decision shall be written and shall be supported
by written findings of fact and conclusions which
shall 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 shall be held in Broward
County, Florida, under the rules then in effect of
the American Arbitration Association.
(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 shall 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 Trilogy Stockholders
as represented by the Agent shall be deemed to be
the Non-Prevailing Party.
(c) The Non-Prevailing Party to an arbitration shall 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.
(H) Agent of the Stockholders: Power of Attorney.
(1) (a) (i) In the event that the Merger is approved, effective upon
such vote, and without further act of any stockholder, ▇▇▇▇▇
▇. ▇▇▇▇▇▇▇ (or in her absence, ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇) shall be
appointed as agent and attorney-in-fact (the "Agent") for
each stockholder of Trilogy (except such stockholders, if
any, as shall have perfected their appraisal rights under
the Florida Corporate Merger Laws, for and on behalf of the
Former Trilogy Stockholders, to give and receive notices and
communications, to authorize delivery to AmeriNet of
AmeriNet Common Stock or other property from the Escrow Fund
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.
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(ii) Such agency may be changed by the Former Trilogy
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 Escrow Fund
agree to such removal and to the identity of the substituted
agent.
(iii) No bond shall be required of the Agent, and the Agent shall
not receive compensation for his or her services. Notices or
communications to or from the Agent shall constitute notice
to or from each of the Former Trilogy Stockholders.
(b) The Agent shall be entitled to submit a claim and receive
reimbursement from the Escrow Fund 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 shall be subordinate to AmeriNet's claims on the
Escrow, if any, and shall be paid only after all such claims have
been satisfied.
(c) Any such reimbursement shall be paid in shares of AmeriNet Common
Stock out of the Escrow Fund.
(d) For purposes of such reimbursement of the Agent only, such shares
shall be valued at the average of the closing prices of AmeriNet
Common Stock for the fifteen trading days ending on the day prior
to the date the Escrow Agent pays such reimbursement amount.
(2) (a) The Agent shall 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 Trilogy Stockholders on whose behalf shares of
AmeriNet Common Stock were contributed to the Escrow Fund shall
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.
(I) Actions of the Agent.
(1) A decision, act, consent or instruction of the Agent shall constitute
a decision of all the stockholders for whom shares of AmeriNet Common
Stock otherwise issuable to them are deposited in the Escrow Fund and
shall be final, binding and conclusive upon each of such stockholders,
and the Escrow Agent 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 Agent 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.
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(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 Escrow Fund,
AmeriNet shall notify the Agent of such claim, and the Agent and the
Former Trilogy Stockholders shall be entitled, at their expense, to
participate in any defense of such claim.
(2) Amerinet shall 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
shall alone be determinative of the validity of any claim against the
Escrow Fund.
(3) In the event that the Agent has consented to any such settlement, the
Agent shall have no power or authority to object under any provision
of this Article VII to the amount of any claim by AmeriNet against the
Escrow Fund with respect to such settlement.
(k) Escrow Agent's Duties.
(1) (a) The Escrow Agent shall 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 Agent may receive after the date of this Agreement which
are signed by an officer of AmeriNet and the Agent, and may rely
and shall 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 Agent shall not be liable for any act done or omitted
hereunder as Escrow Agent while acting in good faith and in the
exercise of reasonable judgment, and any act done or omitted
pursuant to the advice of counsel shall be conclusive evidence of
such good faith.
(2) The Escrow Agent is 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. In case the Escrow Agent obeys or complies with
any such order, judgment or decree of any court, the Escrow Agent
shall 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.
(3) The Escrow Agent shall 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 Agent shall 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 Agent.
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(5) The Escrow Agent 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 shall become effective
until the appointment of a successor escrow agent which shall be
accomplished as follows:
(a) AmeriNet and the Agent shall 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 shall 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 shall
execute and deliver an instrument accepting such appointment and
it shall thereupon be deemed the Escrow Agent hereunder and it
shall 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 shall 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 Merger abandoned at any time
prior to the Effective Date, as follows:
(A) By mutual consent of Trilogy 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 Trilogy and such breach has not been cured
within fifteen days after notice to Trilogy.
(C) By Trilogy 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 or Trilogy Acquisition and such
breach has not been cured within 15 days after notice to AmeriNet;
(D) By any Party if:
(1) The Merger has not occurred by November 30, 1999;
(2) There shall be a final nonappealable order of a federal or
state court in effect preventing consummation of the Merger;
(3) There shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity which
would make consummation of the Merger illegal; or
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(4) There shall be any action taken, or any statute, rule,
regulation or order enacted, promulgated or issued or deemed
applicable to the Merger by any Governmental Entity, which
would:
(a) Prohibit AmeriNet's or Trilogy's ownership or
operation of all or a material portion of the
business of Trilogy, or compel AmeriNet or Trilogy to
dispose of or hold separate all or a material portion
of the business or assets of Trilogy or AmeriNet as a
result of the Merger; or
(b) Render AmeriNet, Trilogy Acquisition or Trilogy
unable to consummate the Merger, except for any
waiting period provisions.
(E) Where action is taken to terminate this Agreement pursuant to this
Section 8.1, it shall 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 shall forthwith become void and there shall be no liability
or obligation on the part of AmeriNet, Trilogy Acquisition or Trilogy 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 Trilogy to satisfy the
condition set forth in Section 6.3(A) as a result of the occurrence of a
Post-Execution Event shall 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 Merger by
the stockholders of those Parties required by applicable law to so
approve but, after any such stockholder approval, no amendment shall 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 Effective Time 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.
99
(B) Any agreement on the part of a Party to any such extension or waiver
shall be valid only if set forth in an instrument in writing signed on
behalf of such Party.
ARTICLE IV
GENERAL PROVISIONS
9.1 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.
(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 table of contents and 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.
9.2 NOTICE.
(A) All notices, demands or other communications given hereunder shall be
in writing and shall be deemed to have been duly given on the first
business day after mailing by United States registered or certified
mail, return receipt requested, postage prepaid, addressed as follows:
(1) To AmeriNet:
AMERINET ▇▇▇▇▇.▇▇▇, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇-▇; ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, PRESIDENT
Telephone (▇▇▇) ▇▇▇-▇▇▇▇, Fax (▇▇▇) ▇▇▇-▇▇▇▇; and, e-mail
▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇; with a copy to
G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ESQUIRE; GENERAL COUNSEL
AMERINET ▇▇▇▇▇.▇▇▇, INC.
▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇; ▇▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
TELEPHONE (▇▇▇) ▇▇▇-▇▇▇▇, FAX (▇▇▇) ▇▇▇-▇▇▇▇; AND, E-MAIL,
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇.
100
(2) To Trilogy:
TRILOGY INTERNATIONAL, INC.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇; ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT
Telephone (▇▇▇) ▇▇▇-▇▇▇▇; Fax (▇▇▇) ▇▇▇-▇▇▇▇; web site ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇;
with a copy to
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ESQUIRE; ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇; ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇; Fax (▇▇▇) ▇▇▇-▇▇▇▇; and, e-mail ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
(3) To Agent:
▇▇. ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇; ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇; Fax (▇▇▇) ▇▇▇-▇▇▇▇; web site ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇;
with a copy to
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, ESQUIRE; ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇; ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
TELEPHONE (▇▇▇) ▇▇▇-▇▇▇▇; FAX (▇▇▇) ▇▇▇-▇▇▇▇; AND, E-MAIL ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
(4) To the Escrow Agent:
To the person and at the contact information provided for such
purpose by AmeriNet.
(5) To Yankees:
THE YANKEE COMPANIES, INC.
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇; ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
ATTENTION: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, PRESIDENT
TELEPHONE (▇▇▇) ▇▇▇-▇▇▇▇, FAX (▇▇▇) ▇▇▇-▇▇▇▇;
AND, E-MAIL ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇;
or such other address or to such other person as any Party shall
designate to the other for such purpose in the manner hereinafter set
forth.
(B) 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 shall 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.
101
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
shall be of no force or effect.
9.4 SURVIVAL.
The several representations, warranties and covenants of the Parties
contained herein shall survive the execution hereof and the Merger and shall 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 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.
9.6 GOVERNING LAW.
This Agreement shall be construed in accordance with the substantive
and procedural laws of the State of Delaware (other than those regulating
Taxation and choice of law).
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 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.
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 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:
102
(1) (a) First, the issue shall be submitted to mediation before a
mediation service in Broward County, Florida to be selected
by lot from six alternatives to be provided, three by
AmeriNet and Three by the Surviving Corporation.
(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, three by AmeriNet and Three
by the Surviving Corporation.
(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.
(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.
9.9 BENEFIT OF AGREEMENT.
The terms and provisions of this Agreement shall be binding upon and
inure to the benefit of the Parties, their successors, assigns, personal
representatives, estate, heirs and legatees 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 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.
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 G.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esquire.
(B) The use of this form of agreement by the Parties is authorized hereby
solely for purposes of this transaction.
103
(C) The use of this form of agreement or of any derivation thereof without
Yankees' prior written permission is prohibited.
In Witness Whereof, AmeriNet, Trilogy Acquisition and Trilogy have caused
this Agreement to be executed by their duly authorized respective officers, all
as of the last date set forth below:
SIGNED, SEALED AND DELIVERED
IN OUR PRESENCE:
AMERINET ▇▇▇▇▇.▇▇▇, INC.
_________________________________ (A Delaware corporation)
_________________________________ By: ______________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, PRESIDENT
(CORPORATE SEAL)
Attest: ______________________________
G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esquire
Dated: November 26, 1999
STATE OF FLORIDA }
COUNTY OF ▇▇▇▇▇▇ } SS.:
On this 26th day of November, 1999, before me, a notary public in and
for the county and state aforesaid, personally appeared ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ and G.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esquire, to me known, and known to me to be the president
and general counsel, respectively, of AmeriNet ▇▇▇▇▇.▇▇▇, 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 ▇▇▇▇▇.▇▇▇, 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}
--------------------------------
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Notary Public
104
TRILOGY ACQUISITION CORPORATION
_________________________________ (a Florida corporation)
_________________________________ By: ______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT
(CORPORATE SEAL)
Attest: ______________________________
Dated: November 27, 1999
STATE OF FLORIDA }
COUNTY OF PALM BEACH } SS.:
On this 27th day of November, 1999, before me, a notary public in and
for the county and state aforesaid, personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇, to me known, and known to me to be the president and secretary of
Trilogy Acquisition Corporation, 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 Trilogy Acquisition Corporation, 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)
-----------------------------
Notary Public
TRILOGY INTERNATIONAL, INC.
________________________________ (a Florida corporation)
_________________________________ By: _____________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, PRESIDENT
(CORPORATE SEAL)
Attest: _____________________________
▇▇▇▇ ▇▇▇▇▇▇, SECRETARY
Dated: November 27, 1999
STATE OF FLORIDA }
COUNTY OF PALM BEACH } SS.:
On this 27th day of November, 1999, before me, a notary public in and
for the county and state aforesaid, personally appeared ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇ and
▇▇▇▇ ▇▇▇▇▇▇, to me known, and known to me to be the president and secretary of
Trilogy International, 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
Trilogy International, 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)
-----------------------------
Notary Public
105
Schedules and Exhibits to Agreement of Merger and Plan of Reorganization
Agreement dated December 1, 1999.
ARTICLES OF INCORPORATION
OF
TRILOGY ACQUISITION CORPORATION
Article I - Name
The name of this corporation is Trilogy Acquisition Corporation.
Article II - Principal Address
The principal address of the corporation shall be ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
Article III - Commencement
This corporation shall commence on the date of execution and
acknowledgement of these Articles.
Article IV - Purpose
This corporation is organized for the purpose of transacting any or all
lawful business.
Article V - Capital Stock
This corporation is authorized to issue 7,500 shares of $1.00, par value,
common stock.
Article VI - Initial Registered Office and Agent
The street address of the initial registered office of this corporation is
1645 Palm Beach ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ and the
name and address of the initial registered agent is ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, 1645 Palm
Beach ▇▇▇▇▇ ▇▇▇▇., ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇.
Article VII - Initial Board of Directors
This corporation shall have between one and nine directors. There shall be
initially one director and the name and address of the initial director is:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Jordan, ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇, ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇.
The initial director shall serve until the next annual meting of shareholders or
until his successor is duly elected and seated. The number of directors may be
increased or decreased from time to time in the manner provided in the Bylaws.
Article VIII - Incorporator
The name and address of the person signing these articles is:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
1645 Palm Beach ▇▇▇▇▇ ▇▇▇▇. ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Article IX - Bylaws
The power to adopt, alter, amend or repeal bylaws shall be vested in the
shareholders.
Article X - Indemnification
Subject to the qualifications contained in Section 607.0850, Florida
Statutes, the Company shall indemnify its officers and directors and former
officers and directors (the "Indemnitee") to the fullest extent against expenses
(including attorneys fees), judgments, fines and amounts paid in settlement
arising out of his or her services as an officer or director of the Company.
106
Article XI - Amendment
The corporation reserves the right to amend or repeal any provisions
contained in these Articles of Incorporation or any amendment hereto, and any
right conferred upon the shareholders is subject to this reservation.
IN WITNESS WHEREOF, the undersigned incorporator has executed these
articles of incorporation this 19th day of November, 1999.
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Incorporator
/S/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
STATE OF FLORIDA )
COUNTY OF PALM BEACH ) SS.:
Before me, a notary public authorized to take acknowledgments in the state
and county set forth above, personally appeared ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, known to me
and known by me to be the person who executed the foregoing articles of
incorporation, and he acknowledged before me that he executed those articles of
incorporation.
In witness whereof, I have hereunto set my hand and affixed my official
seal this 19th day of November, 1999.
Notary Public
My commission expires:
107
Certificate designating place of business or domicile for the service
of process within Florida, naming agent upon whom process may be
served.
In compliance with Section 48.091, Florida Statutes, The following is
submitted:
First-that Trilogy Acquisition Corporation
(Name of Corporation)
desiring to organize or qualify under the laws of the state of Florida, with its
principal place of business at the City of , State of Florida , has named
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ located at ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇, City of
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇, State of Florida, as its agent to accept service
of process within Florida.
SIGNATURE:___________________________
TITLE: Incorporator .
DATE: November 19, 1999
Having been named to accept service of process for the above stated
corporation, at the place designated in this certificate, I hereby agree to act
in this capacity, and I further agree to comply with the provisions of all
statutes relative to the proper and complete performance of my duties.
SIGNATURE:
Registered Agent
DATE: _______________________________
108
Schedule 1.6(B)(3) Trilogy's Options and Warrants Outstanding
Name $.25 $.25
Warrants Options
Investors
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 20,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 10,000
Antares Capital Management 141,818
▇▇▇▇▇▇ ▇▇▇▇▇▇ 30,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 15,000
▇▇▇▇▇▇ ▇▇▇▇▇ 38,000
▇▇▇▇▇ Glint 40,000
▇▇▇▇ ▇▇▇▇▇▇▇ 60,000
▇▇▇ ▇▇▇▇▇▇▇▇▇ 15,000
▇▇▇▇ ▇▇▇▇▇▇ 60,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 60,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 15,000
SOG Investments 60,000
▇▇▇▇▇▇ ▇▇▇▇▇ 60,000
▇▇▇▇ ▇▇▇▇▇ 10,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 60,000
▇▇▇▇▇▇▇ ▇▇▇▇ 30,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 20,000
Sub Total 744,818
Employees & Consultants
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 50,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 15,000
▇▇▇▇ ▇▇▇▇▇ 50,000
Mi Pro Inc 80,000
Rock n ▇▇▇▇ 8,667
Business Design & Development 3,334 See Note
▇▇▇ ▇▇▇▇▇▇▇ 20,000
▇▇▇▇ ▇▇▇▇▇▇▇ 20,000
▇▇▇▇ ▇▇▇▇ 20,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 5,000
744,818 272,001 1,016,819
Note: ▇▇▇▇▇▇ ▇▇▇▇▇▇ of Business Design & Development was granted 20,000 Options
on December 31, 1998. 3,334 options vested upon grant with 3,333 to vest each 6
months if consultant was still retained by the Company. Consultant was no longer
associated with Company after April 1999 so balance of options were canceled.
Consultant is contesting cancelation but Company believes there is no merit to
her claim.
109
Schedule 2.2(B) Trilogy's Capital Structure as of October 26, 1999
Name Common Series A
Shares Preferred
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 40,000 20,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 20,000 10,000
Antares Capital Management 283,636 141,818
▇▇▇▇▇▇ ▇▇▇▇▇▇ 60,000 30,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 30,000 15,000
▇▇▇▇▇▇ ▇▇▇▇▇ 76,000 38,000
▇▇▇▇▇ Glint 80,000 40,000
▇▇▇▇ ▇▇▇▇▇▇▇ 120,000 60,000
▇▇▇ ▇▇▇▇▇▇▇▇▇ 30,000 15,000
▇▇▇▇ ▇▇▇▇▇▇ 120,000 60,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 120,000 60,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 30,000 15,000
SOG Investments 120,000 60,000
▇▇▇▇▇▇ ▇▇▇▇▇ 120,000 60,000
▇▇▇▇ ▇▇▇▇▇ 20,000 10,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 120,000 60,000
▇▇▇▇▇▇▇ ▇▇▇▇ 60,000 30,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 40,000 20,000
Sub Total 1,489,636 744,818
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 1,577,591
▇▇▇▇▇ ▇▇▇▇▇▇▇ 1,577,590
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 3,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 3,000
▇▇▇▇▇▇ ▇▇▇▇▇ 2,160
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 2,160
▇▇▇▇ ▇▇▇▇▇ 2,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ 26,000
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 1,159
▇▇▇▇▇ ▇▇▇▇▇ 1,159
▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,546
▇▇▇▇▇▇ ▇▇▇▇▇ 20,000
3,217,365
Total 4,707,001 744,818
110
Schedule 2.4(D) - Conflicts with Obligations
Equipment and Property leases currently held by Trilogy International, Inc.
state that any assignment must be approved by Lessor. Trilogy does not believe
that the proposed Merger & Reorganization Plan constitutes an assignment of
obligations in as much as surviving entity will still have the same name and
business address.
Schedule 2.5 (a) Financials
Balance Sheet & Income Statement Year Ending December 31, 1998 (Unaudited)
Balance Sheet for 6 Months Ending June 30, 1999 (Unaudited)
Profit and Loss for 6 Months Ending June 30, 1999 (Unaudited)
Statement of Cash Flows January 1 through June 30, 1999 (Unaudited)
Balance Sheet for 9 Months Ending September 30, 1999 (Unaudited) (Revised as of
November 4, 1999)
Profit and Loss for 3 Months Ending September 30, 1999 (Unaudited)
Statement of Cash Flow July 1, 1999 through September 30, 1999 (Unaudited)
Profit and Loss for 9 Months Ending September 30, 1999 (Unaudited).
(Revised as of November 4, 1999)
Statement of Cash Flows January 1 through September 30, 1999 (Unaudited).
Undisclosed Liabilities
111
TRILOGY INTERNATIONAL, INC.
Balance Sheet As of June 30, 1999
ASSETS
Current Assets
Checking/Savings
1015o Fleet Bank 1,000.00
1010o Riverside National 1142 228,339.03
Total Checking/Savings 229,339.03
Other Current Assets
1100o Product inventory 22,271.49
1105o Sales materials 11,143.37
Total Other Current Assets 33,414.86
Total Current Assets 262,753.89
Fixed Assets
1310o Computer software 35,012.34
1320o Computer hardware 64,158.28
1330o Office equipment 1,152.52
1350o Office furniture 1,859.49
1360o Telephone equipment 13,310.00
Total Fixed Assets 115,492.63
Other Assets
1050o S.H. Loans receivable 3,240.00
1040o Start-up expenses 85,617.94
1005o Organizational costs 575.00
1020o Deposits 18,648.06
Total Other Assets 108,081.00
TOTAL ASSETS 486,327.52
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Other Current Liabilities
2300o Accrued salaries payable 270,747.08
2400o Officer loans payable 2,043.30
2405o Other loans payable 7,668.86
2100 o Payroll liabilities
2125o Medicare 757.17
2140o Fla unemployment 1,109.07
2130o Ffuta 328.63
2120o Fica 3,237.31
2110o Fed witholding 4,145.88
2100o Payroll Liabilities - Other 10,004.19
Total 2100o Payroll Liabilities 19,582.25
Total Other Current Liabilities 300,041.49
Total Current Liabilities 300,041.49
Total Liabilities 300,041.49
Equity
3006 o Series a preferred 330,000.00
3005 o Common stock 4,560.00
3010 o Paid in capital 420,737.10
3900 o Retained Earnings -3,513.19
Net Income -565,497.88
Total Equity 186,286.03
TOTAL LIABILITIES & EQUITY 486,327.52
112
TRILOGY INTERNATIONAL, INC.
Balance Sheet as of September 30, 1999
ASSETS
Current Assets
Checking/Savings
1025o Nations Bank 1,086.58
1010o Riverside National 1142 1,160.12
Total Checking/Savings 2,246.70
Accounts Receivable
1200 o Accounts Receivable 2,132.12
Total Accounts Receivable 2,132.12
Other Current Assets
1111o ▇▇▇.▇▇ transit/ (inc. clearing) 3,531.15
1100o Product inventory 109,910.61
1105o Sales materials 33,428.50
Total Other Current Assets 146,870.26
Total Current Assets 151,249.08
Fixed Assets
1310o Computer software 53,134.84
1320o Computer hardware 68,910.24
1330o Office equipment 1,152.52
1350o Office furniture 2,995.83
1360o Telephone equipment 15,115.99
1370o Leasehold improvements 5,757.65
1400o Less Depreciation -8,646.67
Total Fixed Assets 138,420.40
Other Assets
1005o Organizational costs 575.00
1020o Deposits 15,674.62
Total Other Assets 16,249.62
TOTAL ASSETS 305,919.10
LIABILITIES & EQUITY
Liabilities
Current Liabilities
Accounts Payable
2000 o Accounts Payable 138,815.40
Total Accounts Payable 138,815.40
Other Current Liabilities
2410o Commissions payable 1,553.38
2300o Accrued salaries payable 349,582.64
2400o Officer loans payable 3,000.00
2405o Other loans payable 28,617.58
2406o Accrued interest payable 675.05
2100o Payroll liabilities
2140o Fla unemployment -0.01
2130o Futa -220.04
2100o Payroll Liabilities - Other 476.81
Total 2100o Payroll Liabilities 256.76
2200 o Sales Tax Payable 2,708.66
Total Other Current Liabilities 386,394.07
Total Current Liabilities 525,209.47
Total Liabilities 525,209.47
Equity
3006 o Series a preferred 346,500.00
3005 o Common stock 4,626.00
3010 o Paid in capital 437,525.68
3900 o Retained earnings -3,513.19
Net Income -1,004,428.86
Total Equity -219,290.37
TOTAL LIABILITIES & EQUITY 305,919.10
113
TRILOGY INTERNATIONAL, INC.
Statement of Cash Flows January through June 1999
Jan - Jun '99
OPERATING ACTIVITIES
Net Income -565,497.88
Adjustments to reconcile Net Income
to net cash provided by operations:
1100o product inventory -22,271.49
1105o Sales materials -11,143.37
2300o Accrued salaries payable 270,747.08
2400o Officer loans payable 2,043.30
2405o Other loans payable 7,668.86
2100o Payroll Liabilities 10,004.19
▇▇▇▇▇ ▇▇▇▇▇▇▇ Liabilities:2125o Medicare 757.17
2100o Payroll Liabilities:2140o Fla unemployment 1,109.07
2100o Payroll Liabilities:2130o Futa 328.63
2100o Payroll Liabilities:2120o Fica 3,237.31
2100o Payroll Liabilities:2110o Fed Witholding 4,145.88
Net cash provided by Operating Activities -298,871.25
INVESTING ACTIVITIES
1310o Computer software -35,012.34
1320o Computer hardware -64,158.28
1330o Office equipment -1,152.52
1350o Office furniture -1,859.49
1360o Telephone equipment -13,310.00
▇▇▇▇▇ ▇.▇. loans receivable -3,240.00
1040o Start-up expenses -85,617.94
1005o Organizational costs -575.00
1020o Deposits -18,648.06
Net cash provided by Investing Activities -223,573.63
FINANCING ACTIVITIES
3006o Series a preferred 330,000.00
3005o Common stock 4,560.00
3010o Paid in capital 420,737.10
3900o Retained Earnings -3,513.19
Net cash provided by Financing Activities 751,783.91
Net cash increase for period 229,339.03
Cash at end of period 229,339.03
114
TRILOGY INTERNATIONAL, INC.
12/10/99 Statement of Cash Flows January through September 1999
Jan - Sep '99
OPERATING ACTIVITIES
Net Income -1,004,428.86
Adjustments to reconcile Net Income
to net cash provided by operations:
1200o Accounts Receivable -2,132.12
1111o ▇▇▇.▇▇ transit/ (inc. clearing) -3,531.15
1100o Product inventory -109,910.61
1105o Sales materials -33,428.50
2000o Accounts payable 138,815.40
2410o Commissions payable 1,553.38
2300o Accrued salaries payable 349,582.64
2400o Officer loans payable 3,000.00
2405o Other loans payable 28,617.58
2406o Accrued interest payable 675.05
2100o Payroll Liabilities 476.81
2100o Payroll Liabilities:2140o Fla Unemployment -0.01
2100o Payroll Liabilities:2130o Futa -220.04
2200o Sales Tax Payable 2,708.66
Net cash provided by Operating Activities -628,221.77
INVESTING ACTIVITIES
1310o Computer software -53,134.84
1320o Computer hardware -68,910.24
1330o Office equipment -1,152.52
1350o Office furniture -2,995.83
1360o Telephone equipment -15,115.99
1370o Leasehold improvements -5,757.65
1400o Less depreciation 8,646.67
1005o Organizational costs -575.00
1020o Deposits -15,674.62
Net cash provided by Investing Activities -154,670.02
FINANCING ACTIVITIES
3006o Series a preferred 346,500.00
3005o Common stock 4,626.00
3010o Paid in capital 437,525.68
3900o Retained Earnings -3,513.19
Net cash provided by Financing Activities 785,138.49
Net cash increase for period 2,246.70
Cash at end of period 2,246.70
115
TRILOGY INTERNATIONAL, INC.
Statement of Cash Flows July through September 1999
Jul - Sep '99
OPERATING ACTIVITIES
Net Income -438,930.98
Adjustments to reconcile Net Income
to net cash provided by operations:
1200o Accounts Receivable -2,132.12
1111o ▇▇▇.▇▇ transit/ (inc. clearing) -3,531.15
1100o Product inventory -87,639.12
1105o Sales materials -22,285.13
2000o Accounts payable 138,815.40
2410o Commissions payable 1,553.38
2300o Accrued salaries payable 78,835.56
2400o Officer loans payable 956.70
2405o Other loans payable 20,948.72
2406o Accrued interest payable 675.05
2100o Payroll Liabilities -9,527.38
2100o Payroll Liabilities:2125o Medicare -757.17
2100o Payroll Liabilities:2140o Fla Unemployment -1,109.08
2100o Payroll Liabilities:2130o Futa -548.67
2100o Payroll Liabilities:2120o Fica -3,237.31
2100o Payroll Liabilities:2110o Fed Witholding -4,145.88
2200o Sales Tax Payable 2,708.66
Net cash provided by Operating Activities -329,350.52
INVESTING ACTIVITIES
1310o Computer software -18,122.50
1320o Computer hardware -4,751.96
1350o Office furniture -1,136.34
1360o Telephone equipment -1,805.99
1370o Leasehold improvements -5,757.65
1400o Less Depreciation 8,646.67
▇▇▇▇▇ ▇.▇. Loans receivable 3,240.00
1040o Start-up expenses 85,617.94
1020o Deposits 2,973.44
Net cash provided by Investing Activities 68,903.61
FINANCING ACTIVITIES
3006o Series a preferred 16,500.00
3005o Common stock 66.00
3010o Paid in capital 16,788.58
Net cash provided by Financing Activities 33,354.58
Net cash increase for period -227,092.33
Cash at beginning of period 229,339.03
Cash at end of period 2,246.70
116
TRILOGY INTERNATIONAL, INC.
Profit and Loss January through June 1999
Jan - Jun '99
Ordinary Income/Expense
Expense
6000 o Finance Department
6005 o Outside Accountants 1,890.00
total 6000 o Finance Department 1,890.00
6100 o Call Center
6130 o Payroll
6131 o Salaries & wages 31,666.69
total 6130 o Payroll 31,666.69
6150o Consulting fees 18,527.13
6170o Telephone 2,914.37
6180 o Travel
6185o Car rental 682.81
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 2,268.00
6182o Lodging 563.27
Total 6180o Travel 3,514.08
Total 6100o Call Center 56,622.27
6300 o Corp. Headquarters
6330 o Payroll Expense
6335o Officers' salaries 110,833.34
6332o Payroll taxes 3,215.56
Total 6330o Payroll expense 114,048.90
6350o Consulting fees 35,079.96
6311o Bank charges 66.92
6361o Security 1,237.50
6388o Contributions 45.00
6379o Employment expense 1,088.43
6351o Training 750.01
6310o Promotion 94.60
6340o Legal fees 7,664.03
6345o Professional fees 500.00
6352o Dues and subscriptions 414.95
6355o equipment leasing 2,509.51
6360o Facilities maintenance 1,200.00
6370 o Insurance
6372 o Liability ins 1,640.00
Total 6370 o Insurance 1,640.00
▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇▇▇ expense 1,286.24
6381o Office supplies 6,972.48
6382o Postage & courier 2,851.92
6383o Rent 6,534.36
6385o Telephone 5,148.15
6387o Licenses & fees 1,601.50
6390 o Travel
117
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,645.00
6392o Lodging 1,201.32
6393o Meals & entertainment 3,872.80
6394o Mileage & auto 226.80
6390o Travel - other 2,737.79
total 6390o Travel 9,683.71
total 6300o Corp. Headquarters 200,418.17
6400 o Marketing
6410 o Payroll expense
6411o Salaries & wages 70,076.92
6412o Payroll taxes 1,458.11
total 6410o Payroll expense 71,535.03
6450o Consulting fees 42,800.58
6470o Collateral material 180.00
total 6400o Marketing 114,515.61
6500 o Mis department
6520o Consulting fees 8,178.04
6575o Repairs & maintenance 235.00
6550o Internet expense 295.75
6570o Supplies 155.66
total 6500o Mis Department 8,864.45
6600 o Operations dept
6610 o payroll expense
6611o Salaries & wages 113,750.03
6612o Payroll taxes 1,679.39
6613o Employee benefits 3,500.80
total 6610o Payroll expense 118,930.22
6620o Supplies 273.45
6630o Telephone 4,114.97
6640 o Travel
6645o Car rental 1,806.41
6644o Mleage & auto 1,731.76
6643o Meals & entertainment 875.20
6642o Lodging 274.40
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 3,137.00
Total 6640o Travel 7,824.77
6660 o Misc. 233.39
Total 6600 o Operations Dept 131,376.80
6700 o Product Development
6710 o Payroll Expense
6711o Salaries & wages 25,000.02
6712o Payroll taxes 1,679.39
Total 6710o Payroll expense 26,679.41
Total 6700o Product Development 26,679.41
Total Expense 540,366.71
Net Ordinary Income -540,366.71
Other Income/Expense
Other Expense
9600o Offering costs 24,739.08
9100o Interest expense 213.09
9800 o Taxes
9810o Fla intangible tax 179.00
Total 9800o Taxes 179.00
Total Other Expense 25,131.17
Net Other Income -25,131.17
Net Income -565,497.88
118
TRILOGY INTERNATIONAL, INC.
Profit and Loss January through September 1999
Jan - Sep '99
Ordinary Income/Expense
Income
4015o Sample packs 9,246.30
4010o Product sales 18,860.04
4020o Starter kits 3,584.00
4030o Sales aids 3,174.55
4040o Shipping & handling 3,706.41
Total Income 38,571.30
Cost of Goods Sold
5005o Product cost 5,754.34
5006o Sales aids cost 4,986.56
5020o Credit card fees 1,390.05
5030o Shipping charges 2,594.93
5035o Sales commisssions 2,512.93
5040o Royalty expense 108.79
5015o Quick start bonus 2,750.00
5010o Packaging 393.79
5050o Shrinkage/inv.write down 396.75
Total COGS 20,888.14
Gross Profit 17,683.16
Expense
6000 o Finance department
6030 o Payroll expense
6031o Salaries & wages 15,384.60
6032o Payroll taxes 1,127.70
total 6030o Payroll expense 16,512.30
6005o Outside accountants 2,361.00
6050o Supplies 81.41
total 6000o Finance department 18,954.71
6100 o Call center
6130 o Payroll
6131o Salaries & Wages 73,309.49
6132o Payroll Taxes 3,772.40
total 6130o Payroll 77,081.89
6150o Consulting fees 18,947.80
6160o Supplies 543.19
6170o Telephone 3,587.83
6180 o Travel
6185o Car Rental 859.94
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 3,261.58
6182o Lodging 663.71
6184o Mileage & auto 8.60
total 6180o Travel 4,793.83
119
total 6100o Call Center 104,954.54
6300 o Corp. Headquarters
6330 o Payroll expense
6336o Temporary labor 4,096.98
6335o Officers' salaries 158,698.72
6331o Salaries & wages 848.13
6332o Payroll taxes 4,777.69
total 6330o Payroll expense 168,421.52
6350o Consulting fees 78,004.81
6311o Bank charges 281.72
6361o Security 1,841.27
6388o Contributions 95.00
6379o Employment expense 1,529.43
6351o Training 975.01
6310o Promotion 2,816.22
6340o Legal fees 25,975.05
6345o Professional fees 812.50
6352o Dues and subscriptions 1,098.55
6355o Equipment leasing 12,385.84
6360o Facilities maintenance 2,612.20
6370 o Insurance
6372o Liability ins 3,368.81
6375o Workers comp ins 1,149.00
Total 6370o Insurance 4,517.81
6380o Miscellaneous expense 1,867.64
6381o Office supplies 11,447.41
6382o Postage & courier 7,339.04
6383o Rent 16,122.16
6384o Service contracts 98.45
6385o Telephone 28,364.07
6387o Licenses & fees 2,052.75
6390 o Travel
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 4,501.19
6392o Lodging 2,013.43
6393o Meals & entertainment 12,360.00
6394o Mileage & auto 1,786.45
6395o Rental car 678.99
6390o Travel - other 17,133.32
Total 6390o Travel 38,473.38
6386 o Utilities 2,056.11
Total 6300 o Corp. headquarters 409,187.94
6400 o Marketing
6410 o Payroll expense
6411o Salaries & wages 98,346.14
6412o Payroll taxes 3,564.82
Total 6410o Payroll expense 101,910.96
6450o Consulting fees 43,860.58
6425o Design services 2,125.00
6430o Supplies 72.87
6460o Printing 9,136.38
6470o Collateral material 1,980.00
Total 6400o Marketing 159,085.79
120
6500 o Mis department
6585o Telephone 140.13
6510 o Payroll expense
6511o Salaries & wages 20,192.34
6512o Payroll taxes 1,679.39
Total 6510o Payroll expense 21,871.73
6520o Consulting fees 9,088.04
6575o Repairs & maintenance 640.70
6550o Internet expense 5,093.70
6570o Supplies 674.19
Total 6500o Mis department 37,508.49
6600 o Operations dept
6610 o Payroll expense
6611o Salaries & wages 163,269.29
6612o Payroll taxes 3,010.80
6613o Employee benefits 4,647.88
Total 6610o Payroll expense 170,927.97
6620o Supplies 572.85
6630o Telephone 9,853.26
6640 o Travel
6645o Car rental 6,005.21
6644o Mileage & auto 2,622.76
6643o Meals & entertainment 1,287.39
▇▇▇▇▇ ▇▇▇▇▇▇▇ 765.74
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 10,458.87
Total 6640o Travel 21,139.97
6660 o Misc. 233.39
Total 6600 o Operations dept 202,727.44
6700 o Product Development
6740o Supplies 151.53
6735o Telephone 85.07
6730o Research aand development 9.50
6710 o Payroll expense
6711o Salaries & wages 50,769.27
6712o Payroll taxes 3,157.94
Total 6710o Payroll expense 53,927.21
6720 o Travel
6725o Meals & entertainment 171.00
6724o Auto 33.81
6723o Rental car 178.82
▇▇▇▇▇ ▇▇▇▇▇▇▇ 407.28
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 276.00
Total 6720o Travel 1,066.91
Total 6700o PRoduct development 55,240.22
Total Expense 987,659.13
Net Ordinary Income -969,975.97
Other Income/Expense
Other Expense
9500o Depreciation 8,646.67
9600o Offering costs 24,739.08
9100o Interest expense 888.14
9800 o Taxes
9810o Fla Iintangible Tax 179.00
Total 9800o Taxes 179.00
Total Other Expense 34,452.89
Net Other Income -34,452.89
Net Income -1,004,428.86
121
TRILOGY INTERNATIONAL, INC.
Profit and Loss July through September 1999
Jul - Sep '99
Ordinary Income/Expense
Income
4015o Sample packs 9,246.30
4010o Product sales 18,860.04
4020o Starter kits 3,584.00
4030o Sales aids 3,174.55
4040o Shipping & handling 3,706.41
Total Income 38,571.30
Cost of Goods Sold
5005o Product cost 5,754.34
5006o Sales aids cost 4,986.56
5020o Credit card fees 1,390.05
5030o Shipping charges 2,594.93
5035o Sales commisssions 2,512.93
5040o Royalty expense 108.79
5015o Quick start bonus 2,750.00
5010o Packaging 393.79
5050o Shrinkage/inv.write down 396.75
Total COGS 20,888.14
Gross Profit 17,683.16
Expense
6000 o Finance department
6030 o Payroll expense
6031o Salaries & wages 15,384.60
6032o Payroll taxes 1,127.70
total 6030o Payroll expense 16,512.30
6005o Outside accountants 471.00
6050o Supplies 81.41
total 6000o Finance department 17,064.71
6100 o Call center
6130 o Payroll
6131o Salaries & wages 41,642.80
6132o Payroll taxes 3,772.40
total 6130o Payroll 45,415.20
6150o Consulting fees 420.67
6160o Supplies 543.19
6170o Telephone 673.46
6180 o Travel
6185o Car rental 177.13
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 993.58
6182o Lodging 100.44
6184o Mileage & auto 8.60
total 6180o Travel 1,279.75
122
Total 6100o Call center 48,332.27
6300 o Corp. headquarters
6330 o Payroll expense
6336o Temporary labor 4,096.98
6335o Officers' salaries 47,865.38
6331o Salaries & wages 848.13
6332o Payroll taxes 1,562.13
total 6330o Payroll expense 54,372.62
6350o Consulting fees 42,924.85
6311o Bank charges 214.80
6361o Security 603.77
6388o Contributions 50.00
6379o Employment expense 441.00
6351o Training 225.00
6310o Promotion 2,721.62
6340o Legal fees 18,311.02
6345o Professional fees 312.50
6352o Dues and subscriptions 683.60
6355o Equipment leasing 9,876.33
6360o Facilities maintenance 1,412.20
6370 o Insurance
6372o Liability ins 1,728.81
6375o Workers comp ins 1,149.00
total 6370o Insurance 2,877.81
6380o Miscellaneous expense 581.40
6381o Office supplies 4,474.93
6382o Postage & courier 4,487.12
6383o Rent 9,587.80
6384o Service contracts 98.45
6385o Telephone 23,215.92
6387o Licenses & fees 451.25
6390 o Travel
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 2,856.19
6392o Lodging 812.11
6393o Meals & entertainment 8,487.20
6394o Mileage & auto 1,559.65
6395o Rental car 678.99
6390o Travel - Other 14,395.53
Total 6390o Travel 28,789.67
6386 o Utilities 2,056.11
Total 6300 o Corp. Headquarters 208,769.77
6400 o Marketing
6410 o Payroll expense
6411o Salaries & wages 28,269.22
6412o Payroll taxes 2,106.71
Total 6410o Payroll Expense 30,375.93
6450o COnsulting fees 1,060.00
6425o Design services 2,125.00
6430o Supplies 72.87
6460o Printing 9,136.38
6470o Collateral material 1,800.00
Total 6400o Marketing 44,570.18
123
6500 o Mis department
6585o Telephone 140.13
6510 o Payroll expense
6511o Salaries & wages 20,192.34
6512o Payroll taxes 1,679.39
Total 6510o Payroll expense 21,871.73
6520o Consulting fees 910.00
6575o Repairs & maintenance 405.70
6550o Internet expense 4,797.95
6570o Supplies 518.53
Total 6500o Mis department 28,644.04
6600 o Operations dept
6610 o Payroll expense
6611o Salaries & wages 49,519.26
6612o Payroll taxes 1,331.41
6613o Employee benefits 1,147.08
total 6610o Payroll expense 51,997.75
6620o Supplies 299.40
6630o Telephone 5,738.29
6640 o Travel
6645o Car rental 4,198.80
6644o Mileage & auto 891.00
6643o Meals & entertainment 412.19
6642o Lodging 491.34
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 7,321.87
total 6640o Travel 13,315.20
total 6600o Operations Dept 71,350.64
6700 o Product development
6740o Supplies 151.53
6735o Telephone 85.07
6730o Research aand development 9.50
6710 o Payroll expense
6711o Salaries & wages 25,769.25
6712o Payroll taxes 1,478.55
Total 6710o Payroll expense 27,247.80
6720 o Travel
6725o Meals & entertainment 171.00
6724o Auto 33.81
6723o Rental car 178.82
▇▇▇▇▇ ▇▇▇▇▇▇▇ 407.28
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 276.00
Total 6720o Travel 1,066.91
Total 6700o Product development 28,560.81
Total Expense 447,292.42
Net Ordinary Income -429,609.26
Other Income/Expense
Other Expense
9500o Depreciation 8,646.67
9100o Interest expense 675.05
Total Other Expense 9,321.72
Net Other Income -9,321.72
Net Income -438,930.98
124
TRILOGY INTERNATIONAL, INC.
ADJUSTMENTS TO SEPTEMBER 30, 1999 FINANCIALS SUBSEQUENT
TO OCTOBER 17 SUBMISSION TO AMERINET
Balanace Sheet Changes
AS OF AS OF CHANGE FOOTNOTE
OCT 17 NOV 2 NUMBER
ASSETS
1025 Nations Bank 1,086.58 1,086.58 -
1010 Riverside Bank (46.77) 555.37 602.14
1200 Accounts receivable 2,132.12 2,132.12 -
1111 Deposits in transit 5,155.30 4,377.27 (778.03)
1100 Product inventory 104,588.96 109,910.61 5,321.65 (1)
1105 Sales materials 32,695.81 33,428.50 732.69 (2)
1310 Computer software 53,134.84 53,134.84 -
1320 Computer hardware 67,425.59 68,910.21 1,484.62 (3)
1330 Office equipment 1,152.52 1,152.52 -
1350 Office furniture 2,995.83 2,995.83 -
1360 Telephone equipment 15,115.99 15,115.99 -
1370 Leasehold improvments 5,757.65 5,757.65 -
1400 Less: depreciation (8,646.67) (8,646.67) (4)
1005 Organizational costs 575.00 575.00 -
1020 Deposits 18,728.06 15,674.62 (3,053.44) (5)
--------------------------------------------
TOTAL ASSETS 310,497.48 306,160.44 (4,337.04)
LIABILITIES
2000 Accounts payable 133,597.30 138,907.21 5,309.91 (6)
2100 Payroll liabilities 256.76 256.76 -
2200 Sales tax payable 2,708.66 2,708.66 -
2300 Accrued salaries 349,582.64 349,582.64 -
2400 Officers loans payable 3,000.00 3,000.00 (7)
2405 Other loans payable 6,117.58 28,617.58 22,500.00 (8)
2406 Accrued interest 675.05 675.05 (9)
2410 Commissions payable 1,553.38 1,553.38 (10)
TOTAL LIABILITIES 492,262.94 525,301.28 33,038.34
(1) Adjusted to Physical+Add Dr ▇▇▇▇
(2) Adjusted for Promo items
(3) On Late April-Sept Expense Statement
(4) Schedules not previously completed
(5) Rent Expense not previously deducted
(6) $25,500 reclassified to Loan Payable
$9,879.23 add. Inventory purchase
$1,484.62 add. hardware purch
$19,202.25 add. Expense
(7) Reclassified from A/P
(8) Reclassified from A/P
(9) Not previously booked
(10) Not run until 10/20
125
TRILOGY INTERNATIONAL, INC.
ADJUSTMENTS TO SEPTEMBER 30, 1999 FINANCIALS SUBSEQUENT
TO OCTOBER 17 SUBMISSION TO AMERINET
PROFIT AND LOSS JANUARY THROUGH SEPTEMBER 1999
AS OF AS OF CHANGE FOOTNOTE
OCT 17 NOV 4 NUMBER
INCOME
38,571.30 38,571.30 -
-------------------------------------------
COST OF GOODS SOLD
5005 Product cost 5,012.05 5,754.34 742.29 (1)
5006 Sales aids cost 4,986.56 4,986.56 -
5020 Credit card fees 1,109.88 1,258.05 148.17 (2)
5030 Shipping charges 2,567.21 2,594.93 27.72 (3)
5035 Sales commissions 959.55 2,512.93 1,553.38 (4)
5040 Royalty expense - 108.79 108.79 (5)
5015 Quick start bonus 2,750.00 2,750.00 -
5010 Packaging 393.79 393.79 -
5050 Write down of inv. 396.75 396.75
TOTAL COGS 17,779.04 20,756.14 2,977.10
GROSS PROFIT 20,792.26 17,815.16 (2,977.10)
EXPENSE
6000 Finance dept 18,954.71 18,954.71 -
6100 Call center 104,954.54 104,954.54 -
6300 Corporate hdqts.
6310-Promotion 2,135.37 2,816.22 680.85
6382-Postage 7,247.24 7,339.04 91.80
6383-Rent 13,068.72 16,122.16 3,053.44 (6)
6385-Telephone 24,369.52 28,455.88 4,086.36 (7)
6386-Utilities 1,585.64 2,056.11 470.47 (8)
6400 Marketing
6425-Design 1,990.00 2,125.00 135.00
6460-Printing 7,131.38 9,136.38 2,005.00 (9)
6470-Collateral 880.00 1,980.00 1,100.00 (10)
6500 Mis dept 37,508.49 37,508.49 -
6600 Operations dept
6620-Supplies 463.02 572.85 109.83 (11)
6630-Telephone 5,636.88 9,853.26 4,216.38 (11)
6640-Travel 12,409.80 21,139.97 8,730.17 (11)
6700 Product development
6720-Travel 906.25 1,066.91 160.66 (12)
6735-Telephone 85.05 85.05 (12)
6740-Supplies 151.53 151.53 (12)
9500 Depreciation - 8,646.67 8,646.67 (13)
9100 Interest expense 213.09 888.14 675.05 (14)
TOTAL INCREASE IN EXPENSES 34,398.26
NET INCOME (966,903.95) (1,004,279.33) (37,375.38)
(1) Inc. in cost of Starter Pack
(2) Amex Charges Not Booked
(3) Missing UPS Invoice
(4) Missing UPS Invoice
(5) Not Previously booked
(6) Not Previously Deducted from Deposit
(7) Sept chgs on Oct invoice
(8) Invoice not received
(9) Dr. ▇▇▇▇ letters not deducted from inventory
(10) Old A/P not previously booked
(11) April-Sept Expense Account
(12) Late Expense Account
(13) Schedules Not Completed as of 10/17
(14) Int on Notes not previously booked
126
Undisclosed Liabilities
As of September 30, 1999, as disclosed on the Company's unaudited Financial
Statements, Trilogy has a liability for the payment of $349,582.64 in accrued
Salaries and Consulting Fees. These accrued obligations have been booked based
upon base salary or base fee only without provision for payroll taxes that may
be due at time of payment.
Of the $349,582.64 total, $141,791.70 is due to independent contractors who
worked for the Company as consultants for a period of time prior to the
Company's actually opening for business. When paid, these fees will not be
subject to any employer paid payroll taxes.
Of the $207,790.94 owed to Company employees as of September 30, 1999,
$169,816.59 is owed to employees whose base yearly salary substantially exceeds
the upper limit for FICA tax obligations. The Company believes, therefore that
at the time of payment of these deferred sums, the Company will not incur FICA
expense in excess of its obligations for FICA tax on the employees regular
annual salary. As there is no upper limit on Medicare tax payments, the Company
would incur additional expense in the amount of $2,462.34 (1.45% of deferred
salary payment) at the time of payment.
The remaining $37,974.35 is owed to employees at lower salaries that do not
exceed the FICA limitation. The Company, therefore, could incur payroll tax
expense on this amount, at the time paid in the amount of $2,905.04. (7.65% of
deferred salary payment.)
Total potential additional liability for employer paid payroll taxes, over and
above what would be paid on salaries in the normal course of business in the
year that the deferred compensation is paid, as of September 30, 1999 the
Company believes will not exceed $5,367.38
▇▇▇
▇▇▇▇ ▇. ▇▇▇▇▇▇, ▇▇▇, ▇▇
▇▇ ▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
Fax ▇▇▇-▇▇▇-▇▇▇▇
Member:
American Institute of Certified Public Accountants
Florida Institute of Certified Public Accounts
To the Board of Directors
Trilogy International, Inc.
Palm City, Florida
I have compiled the accompanying statement of assets, liabilities & equity -
income tax basis of Trilogy International, Inc. (a corporation) as of December
31, 1998, and the related statement of revenue & expenses - income tax basis
from the period of inception (August 7, 1998) through December 31, 1998, in
accordance with Statements on Standards for Accounting and Review Services
issued by the American Institute of Certified Public Accountants. The financial
statements have been prepared on the accounting basis used by the Company for
income tax purposes which is a comprehensive basis of accounting other than
generally accepted accounting principles.
A compilation is limited to presenting in the form of financial statements
information that is the representation of management. I have not audited or
reviewed the accompanying financial statements and, accordingly, do not express
an opinion or any other form of assurance on them.
Management has elected to omit substantially all of the disclosures ordinarily
included in financial statements. If the omitted disclosures were included in
the financial statements, they might influence the user's conclusions about the
Company's assets, liabilities, capital, revenue and expenses. Accordingly, these
financial statements are not designed for those who are not informed about such
matters.
▇▇▇▇ ▇. ▇▇▇▇▇▇, CPA, PA
March 5, 1999
128
Financial statements
Of
Trilogy Iinternational, Inc.
For the Period Ended December 31, 1998
See Accountant's Compilation Report
TRILOGY INTERNATIONAL, INC.
Statement of Assets, Liabilities & Equity
Income Tax Basis
December 31, 1998
Liabilities and Stockholder's Equity
Stockholder's Equity
Common Stock 3,240.00
Paid-In Capital 89,706.13
Current Income (Loss) (3,513.19)
Total Stockholder's Equity 89,432.94
Total Liabilities & Stockholder's Equity $89,432.94
See Accountant's Compilation Report
TRILOGY INTERNATIONAL, INC.
Statement of Revenue & Expenses
Income Tax Basis
For the Period Ended December 31, 1998
5 Months Ended
Dec. 31, 1998Pct
Other Income (Expense)
Loss-LHI Abandoned 3,513.190.00
Total Other Income (Expenses) (3,513.19)0.00
Net Income (Loss) (3,513.19)0.00
See Accountant's Compilation Report
TRILOGY INTERNATIONAL, INC.
Paid-in Capital Disbursement
Consulting Expenses $38,832.85
Dues & Subscription $ 131.70
Entertainment & Meals $ 5,741.42
Lease Equipment $ 2,239.99
Mileage Reimbursement $ 1,365.00
Office Expenses $ 1,691.87
Organizational Costs $ 575.00
Postage $ 1,681.49
Professional Fees $11,870.00
Promotional Expense $ 426.65
Repairs $ 615.24
Supplies & Expenses $ 146.66
Telephone $ 6,479.54
Travel $14,395.53
Lease Hold Improvements $ 3,513.19
Total $89,706.13
129
Schedule 2.7
Changes Since Trilogy's Financial Statements of September 30, 1999
(A) At a meeting held Friday November 5, 1999, Trilogy's Board of Directors
approved the granting of the following shares of the Company's Common Stock
for services previously rendered by Company Employees, Directors and
Consultants:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - Compensation for salary deferral 3,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - Compensation for salary deferral 3,000
▇▇▇▇▇▇ ▇▇▇▇▇ - Compensation for salary deferral 2,160
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - Compensation for salary deferral 2,160
▇▇▇▇ ▇▇▇▇▇ - Compensation for salary deferral 2,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ - Compensation for salary deferral 1,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ - Employment Incentive 25,000
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ - service beyond scope of employment 1,159
▇▇▇▇▇ ▇▇▇▇▇ -service beyond scope of employment 1,159
▇▇▇▇ ▇▇▇▇▇▇▇▇ - Consulting Services 1,546
▇▇▇▇▇▇ ▇▇▇▇▇▇ - Personal Guarantee of Equipment Lease 20,000
Total 62,184
All of the above shares of stock grants had been previously negotiated by
management to be granted subject to Board approval and the shares
underlying the grants were included in the original share count given to
AmeriNet as part of the Due Diligence materials supplied by the Company.
(M) On October 15, 1999 the Company borrowed $7,000 from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ and on
November 10, 1999 the Company borrowed $12,000 from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ (a
Director of the Company). Both loans were made on a demand basis to be paid
upon closing of the proposed Merger.
(N) Trilogy's Board of Directors approved a plan whereby former investors in
the Company would be offered participation in a 2nd round of financing on
the same terms as the Company's February 22, 1999 Participating Preferred
Offering. The offering as approved called for a maximum of $240,000 of
total subscriptions that could be accepted. Board's approval was also
contingent upon ▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ being willing to contribute 50% of the
Common Shares of Trilogy Common Stock to be issued as a result of
subscriptions received as a result of this offering.
As of November 3, 1999, subscriptions received by the Company totaled
$84,818.18 which resulted in the issuance of 84,818 additional shares of
Common stock, 84, 818 shares of Series A Preferred Stock and 84,818
Warrants to purchase Common Stock at $.25 per share.
The Subscribers to the Offering were:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 10,000.00
▇▇▇▇▇▇ ▇▇▇▇▇▇ 23,000.00
Antares Capital Management 21,818.18
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 10,000.00
▇▇▇▇▇▇ ▇▇▇▇▇▇ 20,000.00
(O) On October 26, 1999 Trilogy signed a Consulting Agreement with Dr. Komau
Kokayi wherein the Company will pay ▇▇. ▇▇▇▇▇▇ a royalty to 2% of the
Company's cost for all of the Company's product "Trilogy's Essence of Life"
colostrum for humans that is sold by the Company.
REVISED NOVEMBER 10, 1999
130
Schedule 2.8 (A) Tax Disclosure Schedule
(5) Trilogy has collected the appropriate sales tax for each state where
Company sales have been made. The sales tax liability as shown on the
Company's September 30, 1999 Balance Sheet represents the total liability
for payment of said taxes as shown on the attached schedule.
The tax as due to the State of Florida was paid on a timely basis prior to
the due date of October 20, 1999.
Certificate of Authority was received from the State of California November
3, 1999 and taxes due in the amount of $393.00 were paid on November 4,
1999, leaving a balance due to all other states through September 30, 1999
of $1777.45.
The Company is awaiting registration from New Jersey for which it has
applied. It is the intention of the Company to pay the amount due upon
receipt of said registration and believes that the initial return to New
Jersey will not be considered a late or delinquent filing.
The Company is in the process of obtaining license to collect and pay sales
tax in the other 37 states wherein it has made sales to date. The process
of obtaining such license is time consuming and expensive, so the Company
has chosen to prioritize its obtaining such licenses in those states
wherein there have been significant sales. The Company does not believe
that the collected but unpaid taxes in the 37 jurisdictions other than
Florida, California and New Jersey are material nor does it believe that it
has a material contingent liability for late filings over and above the
amount due as carried on the Company's books when those taxes are reported
and paid
In accordance with the terms of office premises lease, the Company is
responsible for two thirds of the common expenses including real estate
tax. The landlord has not yet received the tax assessment for 1999. The
Company has been accruing this unknown liability for its pro rata share of
real estate taxes since taking occupancy on September 17. This liability
has not been reflected on the financial statements of the Company as of
September 30, 1999.
REVISED NOVEMBER 10, 1999
131
Schedule 2.10A
Leased Real Property
Trilogy International leases offices a ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇,
▇▇▇▇▇▇▇ ▇▇▇▇▇
Annual Rent is $54,000.
Schedule 2.10(C)
Equipment
Panasonic Digital 816 Telephone System
Electronics for 8 Lines and 8 Stations
One (1) KX-TVS75 2-Port Voice Mail System
Two (2) KX-T7235 Display Speakerphones
Three (3) KX-T7220 Display Telephones
One (1) Battery Backup Unit
One (1) A/C Surge Protection Unit
One (1) C.O. Surge Protection Unit
Bankers Leasing Association - $207.00/month (36 months)
1st payment - 8/14/98
Executone Telephone System
One (1) IDS/Operator Terminal Kit
One (1) IDS/108 Cabinet Assembly Kit
One (1) ACPU w/Eclipse 2.0 4 Meg Ram
One (1) IDS/Expanded VCM Card
Two (2) ISD/Digital Station Card (LS1/11)
One (1) IDS/ISDN Pri Trunk Card Kit
One (1) I/O - MDF Package
Two (2) IDS/DIG Voice Announcer 120 Sec One (1) Custom ACD (5) One (1) EVX
4PT 100HR REL 7
JDR Capital- $975.84/month (36 months)
1st payment - 10/99
Toshiba Copy Machine
One (1) Model DP2570 wRADF, ADU, Finisher, LCT, embedded controller, 2 paper
pedestal
Copyco Inc. - $192.00/month (60 months)
1st payment - 11/99
Dell Laptop Computer
One (1) Model #Inspiron D266XT
Dell Financial Services Acceptance Co. - $182.66/month (24 months)
1st payment - 5/15/98
132
Computer Hardware
Two (2) Desktop Publishing Workstations w/Intel Pentium III 450Mhz processor
One (1) Jazz Drive Disks
Three (3) Field Rep. Workstations w/Intel Pentium II 400Mhz processor
One (1) Internet Server w/2 Intel Pentium III Xeon processors w/512 cache
One (1) Ascend Pipeline 130
One (1) DFE - 26216 Fast Ethernet Hub
One (1) HP Laserjet 1100X1 8ppm Printer
One (1) 3COM AF-200 Anti-Glare/Radiation
One (1) APC BackUPS 300
Furniture
One (1) Oversized Reception Counter Desk w/Keyboard Drawer
Three (3) Peninsula Desks w/Keyboard Drawer
Three (3) Oversized Computer Desks w/Keyboard Drawer
One (1) Oversized "U" Shape Workstation w/Keyboard Drawer
Four (4) Computer Workstations w/Keyboard Drawer
One (1) Access Table
Three(3) Field Support 24" x 60" Desks w/Keyboard Drawers
Five (5) High Back Executive Seats
Six (6) Side Chairs
Twelve(12)High-Back Conference Room Chairs
Eight(8) Task Seats
Four (4) Filing Units
All of above included on:
▇▇▇▇ ▇▇▇▇▇▇▇▇- $1144.84/month (60 months)
1st payment 9/7/99
One (1) HP Scanjet 6200C Scanner
Five (5) Encore Binaural Headsets w/modular adapters
Two (2) HP Deskjet Inkjet Printers
One (1) Brother All-In-One Machine Model #MFC 4350
One (1 Laser Scanner, Scale and Thermal Printer
One (1) CAT 5 48 Port Patch Panel
One (1 Relay Rack
Two (2) Toshiba Tecra Laptop Computers w/Zip Drive and Mouse
Two (2) 128 Meg Ram for Tecra 8000
Two (2) Network DockPortRep for Tecra 8000
Three (3) Executive Workstation
One (1) Dlink DFE2616IX 16 port hub
Three (3) US Robotics 56K External V90 56K modem
One (1) Omniview SE PS/2 AT 4PT w/ 4 cables
One (1) APCC Matrix 5000XR UPS Lineint
Three (3) SYNCMASTER 9000P 19IN
One (1) Workstation Computer P II 350MHZ System W/Intel Ethernet Card
One (1) Credit Card Server
One (1) Apaptec #2940UW PCI Ultra Wide SCSI
One (1) Webramp 3101 RTR 4PT HUB
One (1) EXABYTE EZ17SK 8900S EXT Autoldr Tape Library
One (1) EXABYTE EXAPAK For Mammouth EZ17
One (1) HP Color Laserjet 4500N One (1) Server for Backup, DNS and IMAL
One (1) Dual Xeon 500 MHZ Server w/15" Monitor
Six (6) APCC Backup 300VA
Two (2) Samsung Syncmaster 900P 19" Monitor
One (1) Viewsonic Optiquest 17" Monitor
One (1) Executive Workstation w/speakers
Two (2) 400MHZ Computer Workstation-Intel 400MHZ System
One (1) GE TV/VCR 13"
One (1) Storage Cabinet 72"
All equipment listed above owned by Trilogy International Inc.
133
Schedule 2.11 Intellectual Property
(A) (2,10) Trilogy will be a reseller of Internet "Replicator Sites" to be
used by Field Representatives. This software is copyrighted by
the original company Vanguard Technology Group. Trilogy has been
licensed to use various business and graphics software packages
by Microsoft, Corel and others. The agreement with ▇▇. ▇▇▇▇ ▇▇▇▇▇
gives Trilogy the rights through license and assignment to all of
Dr. ▇▇▇▇, Inc. formulas and any product, formulation, formula,
invention, procedure, know-how, concept or other invention or
proprietary information developed during the 5 year term of her
agreement. In the event Trilogy ceases operations for any reason
other than the sale of all or substantially all of the assets of
the Company or the merger of the Company into another entity
where the products will no longer be sold by the Company, all
formulas owned by Dr. ▇▇▇▇ prior to this agreement that were
licensed and assigned to the Company shall become the property of
Dr. ▇▇▇▇.
In addition Trilogy has applied for trademarks for the following:
Trilogy and Design in both Nutritional Supplements and Pet Food
and Supplies
(12) Confidentiality Agreements
Confidentiality Agreements have been signed by all employees
listed in schedule 2.20 (e). See sample of the agreement in
schedule 2.12. In addition, consultants and advisors have signed
similar confidentiality agreements.
(B) (2,3&5) Trilogy currently has six (6) computers that have Microsoft
Office 2000 that are not licensed. Some of these computers may
not require the full version of Microsoft Office 2000 but rather
a specific software like Microsoft Word. A complete review will
be conducted and unnecessary software will be removed. Those that
do require the full version of Microsoft Office 2000 will be
licensed.
134
Schedule 2.12 Contracts and Agreements
(A) (2) The deferred compensation agreements with Rock n ▇▇▇▇ and Business
Design and Development, Inc. have not been signed. The Proceeds from
the agreement with Rock n ▇▇▇▇ is in the process of being assigned to
▇▇. ▇▇▇▇'▇ ex wife as part of a revision to alimony payments. ▇▇. ▇▇▇▇
does not contest the amount or terms of the agreement but has been
advised by his attorney that the agreement must be signed by his ex
wife after the order has been entered. The agreement with Business
Design and Development, Inc. is under dispute at this time. ▇▇▇▇▇▇
▇▇▇▇▇▇, the principle has made a claim that hours beyond her agreed
upon fee were expended. Management had a similar discussion with ▇▇.
▇▇▇▇▇▇ at the time she was paid for April and May and had resolved the
issue. ▇▇. ▇▇▇▇▇▇ reopened the issue within the last 10 days and
management is in the process of attempting to resolve her concerns.
The amount claimed by ▇▇. ▇▇▇▇▇▇ over the currently accounted for
accruals for Business Design and Development is $24,000.
(3) Trilogy has deferred employee compensation through October 1,1999 as
follows:
Name Amount
▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 51,943.53
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 51,943.53
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 47,948.74
▇▇. ▇▇▇▇ ▇▇▇▇▇ $ 12,692.33
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $ 36,820.51
▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 3,846.15
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $ 1,442.32
▇▇▇▇▇▇ ▇▇▇▇▇ $ 1,153.84
Total $207,790.94
(3) Trilogy has deferred advisor/consultant pay through October 1, 1999 as
follows:
Name Amount
Rock'N ▇▇▇▇ $ 50,625.00
Business Design $ 12,000.00
MiPro, Inc. $ 79.166.70
Total $141,791.70
(A) (4) A general commitment was made to the non-employee members of the Board
of Directors and the Pet Advisory Board that they would be compensated
for their time and commitment through a stock option grant. No
specific amount was mentioned or agreed to. This remains an open issue
to be addressed by management.
(4) The following are the current consulting, advisor and royalty
agreements:
▇▇▇▇▇▇▇ Video Marketing - Video Tape
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - Trilogy Theme Song
▇▇. ▇▇▇▇▇ Kokaui - Royalty for human colostrums
MiPro, Inc. - consulting/advisor agreement
▇▇▇▇ ▇▇▇▇▇ - Royalty for dog and cat colostrums
AVN Communications - Trilogy-by-phone Voicemail System
The following employees currently have employment agreements:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇. ▇▇▇▇ ▇▇▇▇▇
(7) The following leases have are valued at greater than $2,000:
COPYCO - Copier
Dell Financial Services - Computer
JDR Capital - Telephone System
Bankers Leasing Association - Original Telephone System
▇▇▇▇ ▇▇▇▇▇▇▇▇ - Computers and Furniture
(13) Outstanding purchase order for over $1,000:
Pharma Chemie- Colostrum $ 8,508.40
Capitol Printing- Colostrum Brochures $ 1,080.31
Trilogy's confidentiality agreement is attached.
135
TRILOGY INTERNATIONAL, INC.
SUMMARY OF ACCRUED SALARIES & CONSULTING FEES
AS OF SEPTEMBER 30, 1999
NAME Dec-98 Jan-99 Feb-99 Mar-99 Apr-99 May-99 Jun-99 Jul-99 Aug-99 Sep-99 9/30/99
Employees
▇▇▇▇▇ ▇▇▇▇▇▇▇ 7,916.67 7,916.67 7,916.67 7,916.67 1,978.67 1,978.67 1,978.67 1,978.67 7,916.67 4,445.51 51,943.53
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 7,916.67 7,916.67 7,916.67 7,916.67 1,978.67 1,978.67 1,978.67 1,978.67 7,916.67 4,445.51 51,943.53
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 8,333.33 8,333.33 8,333.33 8,333.33 2,083.34 2,083.34 2,083.34 1,634.61 1,923.08 4,807.70 47,948.74
▇▇▇▇ ▇▇▇▇▇ 2,083.34 2,083.34 2,083.34 1,634.61 1,923.08 2,884.62 12,692.33
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 6,666.67 6,666.67 6,666.67 6,666.67 1,666.67 1,666.67 1,666.67 1,307.69 1,538.46 2,307.69 36,820.51
▇▇▇▇▇ ▇▇▇▇▇▇▇ 1,538.46 2,307.69 3,846.15
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 1,442.32 1,442.32
▇▇▇▇▇▇ ▇▇▇▇▇ 1,153.84 1,153.84
Consultants
Rock N ▇▇▇▇ 11,250.00 11,250.00 11,250.00 11,250.00 2,812.50 2,812.50 50,625.00
Business Design 3,000.00 3,000.00 3,000.00 3,000.00 12,000.00
Mi Pro Inc 7,916.67 7,916.67 7,916.67 7,916.67 7,916.67 7,916.67 7,916.67 7,916.67 7,916.67 7,916.67 79,166.70
53,000.00 53,000.00 53,000.00 53,000.00 20,519.86 20,519.86 17,707.36 16,450.92 30,673.09 31,711.55 349,582.64
106,000.01 159,000.01 212,000.01 232,519.87 253,039.73 270,747.08 287,198.00 317,871.09 349,582.64
136
MUTUAL CONFIDENTIAL DISCLOSURE AND BUSINESS AGREEMENT
BETWEEN
TRILOGY INTERNATIONAL INC. (Trilogy) AND
----------------------------------------
1.0 PURPOSE:
Trilogy and ______________________________ wish to explore a business
relationship under which each may disclose certain business information, some of
which is confidential, to the other.
2.0 DEFINITION
"Confidential Information" means any information, technical data, or
know-how, including, but not limited to, that which relates to research, product
software, services, development, inventions, processes, designs, drawings, food
technology, marketing, or finances, which such Confidential Information is
designated as unique and individual to the business operation of Trilogy or
_______________________________ would be considered to be confidential or
proprietary. Confidential Information does not include information, technical
data or know-how which (i) was in the possession of the receiving party before
the beginning of a business relationship as shown by the receiving party's files
and records immediately prior to the time of disclosure; or (ii) prior or after
the time of disclosure becomes a part of the public knowledge or literature, not
as a result of any inaction or action of the receiving party, or (iii) approved
for release by the disclosing party.
3.0 NON-DISCLOSURE OF CONFIDENTIAL INFORMATION
The parties hereto agree not to use the Confidential Information disclosed
to each other for his own use or for any purpose except to carry out discussions
concerning the completion of any business relationship between the two. Neither
will disclose the Confidential Information of the other to third parties or to
its employees unless mutually agreed upon in writing. Each agrees that it will
take all reasonable steps to protect the secrecy of and avoid falling into the
public domain or the possession of unauthorized persons. Each agrees to notify
the other in writing of any misuse or misappropriation of such Confidential
Information of the other which may come to its attention.
137
4.0 RETURN OF MATERIALS
Any material or document of which have been furnished by one party to the
other will be promptly returned, accompanied by all copies of such documentation
after the business possibility has been rejected or concluded.
5.0 PATENT OR COPYRIGHT INFRINGEMENT
Nothing in this agreement is intended to grant any rights under any patent
or copyright of Trilogy .
6.0 TERM
The foregoing commitments in this Agreement shall terminate five (5) years
following the date of this Agreement but may be renewed at that time for any
additional period to be mutually determined by both parties.
7.0 MISCELLANEOUS
This Agreement shall be binding upon and for the benefits of the
undersigned parties, their successors and assigns, provided that Confidential
Information may not be assigned without consent of the disclosing party. Failure
to enforce any provision of this Agreement shall not constitute a waiver of any
term hereof.
The undersigned officer of Trilogy being a duly authorized company
representative, and the party who has a business relationship with Trilogy, both
agree to the conditions set forth herein.
Signature_______________________________ Date______________________
Signature_______________________________ Date______________________
138
Schedule 2.12 (A)(12) Debt and Guarantee Instruments
(12) Loans payable to Employees and Consultants in accordance with Deferred
Compensation Agreements in the amount of $349,582.64 as of September 30,
1999. (Per Attached Exhibit)
Demand Loans from Officers, Employees, Directors and Others payable from
proceeds of Merger closing:
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - September 3, 1999 $17,500.00
▇▇▇▇ ▇▇▇▇▇▇ - June 15, 1999 6,117.58
▇▇▇▇▇ ▇▇▇▇▇▇▇ - September 20, 1999 3,000.00
▇▇▇▇▇ Van De Velde -September 21, 1999 5,000.00
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇- October 15, 1999 7,000.00
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - November 12, 1999 12,000.00
Accounts Payable $142,450.62 as of October 31, 1999 per attached listing.
Additionally, attorney fees for this merger will be due to ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
and is footnoted in the use of proceeds schedule 5.13 (Exh).
▇▇▇▇▇▇ and/or ▇▇▇▇▇ ▇▇▇▇▇▇▇ have personally guaranteed the following:
Dell Computer - Laptop computer
Promise Printing - Printed materials and brochures Merchant Accounts from:
Bank of Oakland 4616773010000499
Superior Bankcard Services 4492600147059844
Riverside National bank 4301357800199346
First Bank of ▇▇▇▇▇▇▇ ▇▇▇▇ 4223693000076699
Cardservices International 5433420100704782
Building lease for ▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Bankers Leasing Association - Original phone system
Video Plus - Audio tape duplication
Office Depot - Trilogy Revolving Credit Card
JDR Capital - New office phone system
American Express Credit Card
▇▇▇▇▇ ▇▇▇▇▇▇▇ personally guaranteed the Copyco lease for the copy machine.
▇▇▇▇▇▇ ▇▇▇▇▇▇ personally guaranteed the ▇▇▇▇ ▇▇▇▇▇▇▇▇ lease for office
furniture and some computer equipment.
Post Merger the Surviving Company will use its best efforts to have the
personal guarantees listed above removed.
139
TRILOGY INTERNATIONAL, INC.
12/10/99 Unpaid Bills
Type Date Due Date Agi Open Balance
▇▇▇▇ SOUTH
▇▇▇▇ 11/7/1999 12/7/1999 3 544.76
▇▇▇▇ 11/14/1999 12/14/1999 35.81
▇▇▇▇ 11/22/1999 12/22/1999 219.75
Total ▇▇▇▇ SOUTH 800.32
BROWARD PAPER & PACKAGING
▇▇▇▇ 11/19/1999 12/4/1999 6 101.58
▇▇▇▇ 11/26/1999 12/11/1999 127.12
Total BROWARD PAPER & PACKAGING 228.70
▇▇▇▇▇ ▇▇▇▇▇▇▇*
Credit 9/23/1999 -8,000.00
▇▇▇▇ 9/23/1999 10/3/1999 68 8,000.00
Total ▇▇▇▇▇ ▇▇▇▇▇▇▇* 0.00
CIBERLYNX
▇▇▇▇ 12/1/1999 12/16/1999 295.75
Total CIBERLYNX 295.75
CONSOLIDATED LABEL
Credit 8/4/1999 -71.22
Total CONSOLIDATED LABEL -71.22
Copyco
▇▇▇▇ 11/5/1999 11/15/1999 25 7.00
Total Copyco 7.00
DELL FINANCIAL SERVICES
▇▇▇▇ 12/2/1999 12/2/1999 8 185.40
Total DELL FINANCIAL SERVICES 185.40
▇▇▇▇ ▇▇▇▇
▇▇▇▇ 8/8/1999 8/18/1999 114 52.90
▇▇▇▇ 10/4/1999 10/14/1999 57 65.26
Total ▇▇▇▇ ▇▇▇▇ 118.16
FEDERAL EXPRESS
▇▇▇▇ 10/12/1999 10/27/1999 44 296.20
▇▇▇▇ 11/16/1999 12/1/1999 9 461.87
▇▇▇▇ 11/23/1999 12/8/1999 2 134.50
Total FEDERAL EXPRESS 892.57
GENESIS
▇▇▇▇ 7/15/1999 8/14/1999 118 17,156.66
Total GENESIS 17,156.66
140
▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇▇ 7/21/1999 7/21/1999 142 180.00
Total ▇▇▇▇▇▇ & ▇▇▇▇▇ 180.00
HARBOR SPECIALTY INS CO
▇▇▇▇ 11/17/1999 12/17/1999 383.00
Total HARBOR SPECIALTY INS CO 383.00
▇▇▇▇ ▇▇▇▇▇ -
▇▇▇▇ 10/4/1999 10/4/1999 67 328.27
▇▇▇▇ 10/18/1999 10/18/1999 53 677.28
Total ▇▇▇▇ ▇▇▇▇▇ - 1,005.55
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ 9/30/1999 10/30/1999 41 14,541.00
Total ▇▇▇▇ ▇▇▇▇▇▇ 14,541.00
▇▇▇▇▇ ▇ ▇▇▇▇▇
▇▇▇▇ 11/30/1999 12/10/1999 50.00
Total ▇▇▇▇▇ ▇ ▇▇▇▇▇ 50.00
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - X
▇▇▇▇ 11/4/1999 11/14/1999 26 136.79
Total ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ - X 136.79
▇▇▇▇▇▇ & ▇▇▇▇▇▇
▇▇▇▇ 8/3/1999 8/13/1999 119 310.00
Total ▇▇▇▇▇▇ & ▇▇▇▇▇▇ 310.00
▇▇▇▇▇▇▇ ▇▇▇▇▇▇
General Journal 12/2/1999 -29681.16
▇▇▇▇ 7/27/1999 8/26/1999 106 2,563.38
▇▇▇▇ 7/27/1999 8/26/1999 106 3,387.64
▇▇▇▇ 10/15/1999 11/14/1999 26 85.96
▇▇▇▇ 10/15/1999 11/14/1999 26 1,946.17
▇▇▇▇ 11/19/1999 12/19/1999 123.25
▇▇▇▇ 11/19/1999 12/19/1999 16,113.01
▇▇▇▇ 11/30/1999 12/30/1999 5,461.75
Total ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 0.00
NEWCOURT FINANCIAL
▇▇▇▇ 11/16/1999 12/11/1999 205.44
Total NEWCOURT FINANCIAL 205.44
PENGUIN ▇▇▇▇▇▇ INC
▇▇▇▇ 10/12/1999 11/11/1999 29 705.83
▇▇▇▇ 10/22/1999 11/21/1999 19 1,003.80
▇▇▇▇ 10/22/1999 11/21/1999 19 368.40
Total PENGUIN ▇▇▇▇▇▇ INC 2,078.03
141
▇▇▇▇▇ GLINT
▇▇▇▇ 8/5/1999 8/5/1999 127 793.00
Total ▇▇▇▇▇ GLINT 793.00
PRUDENTIAL ▇▇▇▇▇▇▇▇▇ REALTY
General Journal 10/5/1999 -3,053.44
▇▇▇▇ 8/24/1999 9/3/1999 98 3,053.44
Total PRUDENTIAL ▇▇▇▇▇▇▇▇▇ REALTY 0.00
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ x
▇▇▇▇ 7/14/1999 7/24/1999 139 1,100.00
▇▇▇▇ 9/30/1999 10/10/1999 61 61.60
Total ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ x 1,161.60
SOURCE INFORMATION SERVICES
▇▇▇▇ 11/1/1999 11/1/1999 39 94.64
▇▇▇▇ 12/1/1999 12/1/1999 9 94.64
Total SOURCE INFORMATION SERVICES 189.28
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - X
Credit 9/23/1999 -17500.00
▇▇▇▇ 9/23/1999 10/3/1999 68 17,500.00
Total ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ - X 0.00
TABCO, INC
▇▇▇▇ 10/12/1999 11/11/1999 29 989.21
Total TABCO, INC 989.21
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ 9/30/1999 10/10/1999 61 47.19
Total ▇▇▇▇ ▇▇▇▇▇ 47.19
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇
▇▇▇▇ 9/7/1999 10/7/1999 64 312.50
Total ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇ 312.50
THE BUREAU
▇▇▇▇ 8/16/1999 8/26/1999 106 1,571.34
Total THE BUREAU 1,571.34
UPS
▇▇▇▇ 8/7/1999 8/17/1999 115 61.00
Total UPS 61.00
ZEPHYRHILLS
▇▇▇▇ 11/18/1999 12/3/1999 7 92.23
Total ZEPHYRHILLS 92.23
TOTAL 43,720.50
142
Schedule 2.13 Related Party Transactions
A member of Trilogy's Board of Directors, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, is an insurance
agent and has arranged for some of the insurance coverage for the Company.
An investor, ▇▇▇▇▇ ▇▇▇▇▇▇▇, through his company AVN provides the Trilogy
by-Phone service for Trilogy field representatives.
Schedule 2.14 Governmental Authorization
▇▇▇▇▇▇ County Occupational License #2000 275 017
City of Stuart Occupational License #1190
City of Stuart Alarm Users Permit #1494
Federal Tax ID #▇▇-▇▇▇▇▇▇▇
Florida Sales Tax Resale #53-07-026043-48-1
Florida Articles of Incorporation filed 8/7/98 - Doc.# P98000070358
Individual State Registrations as a Multilevel Marketing Company - See attached
document
143
▇▇▇▇▇▇ & ▇▇▇▇▇
A PROFESSIONAL COMPANY
ATTORNEYS AND COUNSELORS
I ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇-▇▇▇▇
TELEPHONE (▇▇▇) ▇▇▇-▇▇▇▇
INTERNET - ▇▇▇▇://▇▇▇.▇▇▇▇▇▇.▇▇▇
FACSIMILE (▇▇▇) ▇▇▇-▇▇▇▇
E-mail - ▇▇▇▇▇▇▇@▇▇▇▇▇.▇▇▇
October 27, 1999
Via E-Mail and Facsimile - (▇▇▇) ▇▇▇-▇▇▇▇
▇▇. ▇▇▇▇ ▇▇▇▇▇▇
Director of Compliance
Trilogy International, lnc.
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: MLM State Registration
Dear ▇▇▇▇,
This letter is in response to your inquiry regarding the status of Trilogy
International's ("Trilogy") registration as a multilevel marketing ("MLM")
company in the states that require such registration.
We prepared the MLM registration documents for the states of Georgia, Louisiana,
Massachusetts, and Wyoming, which we forwarded to Trilogy on May 17, 1999. On or
about June 17, 1999, we received a letter dated June 11, 1999 from Georgia's
Office of the Secretary of State indicating receipt of the registration
documents for Trilogy. On or about June 20, 1999, we received a letter dated
June 14, 1999 from Massachusetts's Office of the Attorney General indicating
receipt of the registration documents for Trilogy. We have never heard from
Wyoming, however, we have confirmed that its Office of the Attorney General has
received Trilogy's registration documents.
In early August, we received a letter dated July 26, 1999 from Louisiana's
Office of the Attorney General. The letter explained that the nature of
Trilogy's products were not clear from the information that was submitted with
the registration packet, and further claimed that Trilogy's contractual
documents did not comport with Louisiana's jurisdictional requirement. As you
are aware, every MLM registrant has had problems with Louisiana, because the
individuals in the office who process MLM registrations do not read the
submitted documents. In any event, we responded to Louisiana's letter on August
13 and showed the reviewer where Trilogy's document complied with Louisiana's
jurisdictional requirements. In early September, we received a letter dated
August 25, 1999 from Louisiana's Office of the Attorney General which indicated
that Trilogy's registration was effectives.
Earlier this year, Montana enacted an MLM registration requirement that became
effective October 1, 1999. I have forwarded the registration documents to you,
which I understand Trilogy will complete, execute, and submit to Montana.
▇▇▇▇, if you have any further questions or concerns, please do not hesitate to
call me.
Sincerely,
▇▇▇▇▇ ▇▇▇▇▇▇
144
Schedule 2.15(A) Litigation.
Trilogy has been notified of pending legal action by ▇▇▇▇▇▇ ▇▇▇▇▇▇. This
information and the documents received by Trilogy has been previously submitted
to AmeriNet.
Schedule 2.19
Brokers and Finders Fees
None
Schedule 2.20 List of Employees
(E) List of Current Employees
Name Annual Salary Remaining 1999 Vacation (*)
▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 95,000 3 weeks
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 95,000 3 weeks
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $100,000 2.8 weeks
▇▇. ▇▇▇▇ ▇▇▇▇▇ $100,000 3 weeks
▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 80,000 0 weeks
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $ 80,000 2.8 weeks
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ $ 75,000 2
▇▇▇▇▇▇ ▇▇▇▇▇ $ 60,000 0
▇▇▇▇▇ ▇▇▇▇▇ $ 45,000 0
▇▇▇ ▇▇▇▇▇▇ $ 35,000 0
▇▇▇▇▇ ▇▇▇▇▇▇ $ 11.50 per hour 0
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ $ 11.50 per hour 0
(*) No written vacation policy has been developed, however, Trilogy management
has discussed and in some cases communicated to employees the following:
1. Employees would be eligible for vacation after six months of
employment.
2. When employees, other than those listed above, are hired prior to July
1st of a year, that years vacation would be prorated for the number of
months of employment i.e. an employee working 8 months would be
eligible for 3/4th of their vacation time.
3. Recognizing that 1999 is a start up year for Trilogy management's
intent is that when employees are unable to take vacation because of
business necessity that unused vacation will be carried over to 2000.
At the end of 2000 all vacation will have been taken or employees will
be compensated.
4. The vacation eligibility is Officers 4 weeks; Heads of Departments 3
weeks; all other salary employees 2 weeks; hourly employees 1 week.
In addition, as part of the original agreement with ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, the Company
reimburses ▇▇. ▇▇▇▇▇▇▇ for $382.36 per month for family health care.
145
Schedule 2.21 Insurances
Nautilus Insurance Company - commercial general liability
General Star Indemnity Company - commercial property insurance
Harbor Specialty Insurance Company - ▇▇▇▇▇▇▇'▇ compensation
Keyman Life Insurance Policies - $ 1,000,000 policies for ▇▇▇▇▇ ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ have been issued.
Certificates of Liability Insurance from the following Manufacturers:
1. Professional Pet Products
2. Pharma Chemie
3. Innovative Chemical Corp.
4. Eco-Aromatic System, Inc.
Certificate of Liability Insurance from Seagull Industries (our Fulfillment
Center) for loss or damage of inventory
Schedule 2.27 Employee Benefit Plans
(A) The only formalized benefit plan that Trilogy has is the "1998 Stock Plan".
An incentive (bonus) plan was discussed with some employees but a formal
plan was never developed.
Schedule 2.28 Distribution Agreements
Omitted due to confidentiality and competition purposes.
Enclosed is Trilogy's Distributor Agreement.
146
TERMS OF AGREEMENT
I understand and agree to the following:
1. Trilogy's Commission Structure and Policies and Procedures, which I have
carefully read, are incorporated into and made a part of, and are
collectively referred to as the "Agreement," and constitute the entire
agreement between Trilogy International, Inc. and myself. Any promises,
representations, offers, or other communications not expressly set forth in
this Agreement are of no force or effect.
2. I understand that these Terms and Conditions, the Policies and Procedures,
or the Commission Structure may be amended from time to time, and I agree
that any such amendment will apply to me. Notification of amendments shall
be published in official Trilogy materials and sent to all Field
Representatives. The continuation of my Trilogy distributorship or my
acceptance of bonuses or commissions shall constitute my acceptance of any
and all amendments.
3. To the extent of any conflict or inconsistency between this Agreement and
any other agreement (other than the Policies and Procedures), this
Application/Agreement shall supersede and prevail over any term of any
other agreement as to the matters addressed herein. To the extent of any
conflict or inconsistency between this Agreement and the Policies and
Procedures (current form or as subsequently modified), the Policies and
Procedures shall in all instances supersede and prevail over any term of
this Agreement as to the matters addressed herein.
4. No other promises, representations, guarantees or agreements of any kind
shall be valid unless in writing and signed by Trilogy and myself.
5. I am of legal age in the state of my residency.
6. If applying as an entity (partnership, corporation or business trust), I
have the legal right to represent the entity in this Agreement, and I have
attached to this Application a Trilogy Entity Addendum form.
7. Upon acceptance of this Application by Trilogy International, Inc.
("company") at its offices in Stuart, Florida, I will become an Independent
Trilogy Field Representative ("Representative"), with the right to sell
Trilogy products and services, and benefit from the Trilogy Commission
Structure. Trilogy reserves the right to approve or decline any Application
at its discretion.
8. I may not assign any rights or delegate my duties under this Agreement
without the prior written consent of Trilogy. Any attempt to transfer or
assign this Agreement without the express written consent of Trilogy
renders this Agreement voidable at the option of Trilogy and may result in
termination of my Trilogy business.
9. Trilogy is not responsible for any Application and/or funds not delivered
directly to the company. Should an Applicant allow another person to
forward his or her Application/funds to Trilogy, it is at their own risk.
10. No purchase or investment is necessary to become a Trilogy Representative,
other than the purchase of a Trilogy Starter Kit, which is sold at cost and
contains Trilogy's Policies, Commission Structure, and marketing materials
not for resale.
147
11. Becoming a Trilogy Representative does not constitute the sale of a
franchise or security. As a Trilogy Representative I am an independent
contractor, and not an employee, agent, partner, legal representative, or
franchisee of Trilogy.
12. I am not authorized to and will not incur any debt, expense, obligation, or
open a checking account on behalf of, for, or in the name of Trilogy.
13. I shall control the manner and means by which I operate my Trilogy
business, subject to my compliance with this Agreement.
14. I will be solely responsible for paying all expenses incurred by myself,
including but not limited to travel, food, lodging, secretarial, office,
long distance phone and other expenses.
15. I shall not be treated as an employee of trilogy for federal or state tax
purposes. Trilogy is not responsible for withholding, and shall not
withhold or deduct from my bonuses and commissions, FICA, or taxes of any
kind, unless such withholding becomes legally required. I agree to be bound
by sales tax collection agreements between Trilogy, Inc. and all
appropriate taxing jurisdictions, and all related rules and procedures.
16. Neither Trilogy nor any Trilogy Field Representative has made any claims to
me of guaranteed earnings that might result from my efforts as a
Representative, nor will I make such claims to others.
17. This Agreement will be renewed upon the timely payment of an annual renewal
fee, which is due on each 12-month anniversary of the month my Application
is accepted by Trilogy. Failure to renew will result in termination of this
Agreement.
18. Before marketing Trilogy products or services and sponsoring others into
Trilogy, I will familiarize myself with the Policies and Procedures and the
Commission Structure.
19. I will only use materials produced by Trilogy when Trilogy's name or logo
is displayed, and will market Trilogy on the Internet only in conjunction
with Trilogy's corporate site.
20. I will represent the Trilogy Commission Structure fairly and completely,
emphasizing that retail sales are a requirement, and that no fee can be
derived from the mere act of sponsoring.
21. I do not hold, nor will hold, a beneficial interest in any other Field
Representative's Trilogy business, with the exception of my spouse, under
whom I may be directly sponsored on this Application, or whom I may
directly sponsor.
22. Violation of any terms of this Agreement may result in disciplinary action,
including monetary fines, suspension or termination of this Agreement. If
this Agreement is terminated for any reason, voluntarily or involuntarily,
I understand that I will permanently lose my rights as a Field
Representative, including rights to my downline organization, bonuses and
commissions pursuant to the Commission Structure.
23. In order to be eligible to receive bonuses and commissions, I must develop
and service customers. At least 70% of my Personal Volume must be sold to
an end consumer. I will not purchase products solely to qualify for
commissions or bonuses.
148
24. After six months, I must maintain five customers per month in order to
receive commissions or bonuses.
25. I must provide support to Trilogy Field Representatives whom I sponsor, and
who are in my commissionable downline.
26. If any provision of this Agreement is found to be invalid, illegal or
unenforceable, only the invalid portion(s) of the provision shall be
severed and the remaining terms and provisions shall remain in full force
and effect and shall be construed as if such invalid, illegal or
unenforceable provision(s) never comprised a part of the Agreement.
27. Field Representatives must attempt to resolve directly with Trilogy's
corporate office any claim, dispute, or other difference they may have with
the company. If found not to be resolvable to the satisfaction of either
party, all disputes and claims relating to Trilogy, the Representative
Agreement, the Commission Structure or its products and services, the
rights and obligations of an independent Field Representative and Trilogy,
or any other claims or causes of action relating to the performance of
either an independent Representative or Trilogy under the Agreement or the
Trilogy Policies and Procedures shall be settled totally and finally by
arbitration in Stuart, Florida, or such other location as Trilogy
prescribes, in accordance with the Federal Arbitration Act and the
Commercial Arbitration Rules of the American Arbitration Association,
except as set forth in the Trilogy Policies and Procedures, or unless the
laws of the state in which I reside expressly prohibit the consensual
jurisdiction and venue provisions of this Agreement, in which case its laws
shall govern. If a Representative files a claim or counterclaim against
Trilogy, a Representative shall do so on an individual basis and not with
any other Representative or as part of a class action. The decision of the
arbitrator shall be final and binding on the parties and may, if need be,
be reduced to a judgment in any court of competent jurisdiction. If any
legal action is brought to enforce the terms and conditions of the
Agreement, the prevailing party (as determined by the arbitrator or the
Court) shall be entitled to its costs and expenses (including reasonable
attorneys' fees) in addition to any other relief to which it may be
entitled. This agreement to arbitrate shall survive any termination or
expiration of the Agreement.
28. In the event that a provision of this Agreement is held to be invalid or
unenforceable, such provision shall be reformed only to the extent
necessary to make in enforceable, and the balance of the Agreement will
remain in full force and effect.
29. I understand that I have the right to terminate my distributorship at any
time, with or without reason. I agree that such termination must be in
writing.
149
Schedule 4.1 Permitted Pre-Merger Actions
(9) Trilogy's Board of Directors approved a plan whereby former investors in
the Company would be offered participation in a 2nd round of financing on
the same terms as the Company's February 22, 1999 Participating Preferred
Offering. The offering as approved called for a maximum of $240,000 of
total subscriptions that could be accepted. Board's approval was also
contingent upon ▇▇▇▇▇ ▇▇▇▇▇▇▇'▇ being willing to contribute 50% of the
Common Shares of Trilogy Common Stock to be issued as a result of
subscriptions received as a result of this offering.
As of October 27, 1999, subscriptions received by the Company totaled
$84,818.18 which resulted in the issuance of 84,818 additional shares of
Common stock, 84, 818 shares of Series A Preferred Stock and 84,818
Warrants to purchase Common Stock at $.25 per share.
(13) In connection with the deferred compensation agreements with Trilogy
employees, the Company continues to incur debt to such employees on a
regular bi-weekly basis. The compensation accrued and the corresponding
increase in the Company's debt since September 30, 1999 and through
November 12, 1999 will be $26,907.03
On October 15, 1999 the Company borrowed $7,000 from ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Demand Note was issued with a per annum interest rate of 12%. Loan to be
repaid from proceeds of closing of merger.
On November 10, 1999 the Company borrowed $12,000 from ▇▇▇▇▇▇ ▇▇▇▇▇▇▇.
Demand Note was issued with a per annum interest rate of 12%. Loan to be
repaid from proceeds of closing of merger.
In addition to deferring 25% of their salaries per agreement, ▇▇▇▇▇ and
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ drew no pay for the periods ending October 29, 1999 and
November 12, 1999. $5480.77 will be payable to each of them from the
proceeds of the Merger Funding upon closing. (75% of their salaries for the
four subject weeks.)
REVISED NOVEMBER 19, 1999
150
Schedule 3.4(I) Outstanding Comment Letter
OFFICER'S ACKNOWLEDGMENT
for
AMERINET ▇▇▇▇▇.▇▇▇, INC.
Before me, the undersigned authority, on this date personally appeared
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, ("▇▇. ▇▇▇▇▇▇") who first being duly sworn, deposes, and
says: that he is the duly elected President and Chief Financial Officer for
Amerinet ▇▇▇▇▇.▇▇▇, InC., and that he has read and reviewed the following
documents listed below:
A. Agreement of Merger & Plan of Reorganization;
B. Affiliate Agreement;
C. Article of Merger.
To the best of my knowledge after due inquiry, no representation,
warranty or statement by AmeriNet or Trilogy Acquisitions, in any of
the above documents contains any untrue statement of a material fact,
or omits or will omit to state a fact necessary in order to make such
representations, warranties or statements not materially misleading.
▇▇. ▇▇▇▇▇▇ further states that all representations and warranties made
by AmeriNet or Trilogy Acquisition under the Agreement of Merger &
Plan of Reorganization is true and complete in all material respects;
and
All covenants, obligations and conditions of the Agreement of Merger &
Plan of Reorganization; to be performed by AmeriNet and Trilogy
Acquisition on or before such date have been so performed in all
material respects.
Sworn to and subscribed before me this 30th day of November 1999.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
________________________________
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Jordan, President
Before me, the undersigned authority, on this date personally appeared
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ who first being duly sworn, deposes, and says: that he has
read the same, knows the contents thereof, and that the same is true and correct
to the best of her knowledge and belief.
Sworn to and subscribed before me this___ day of November, 1999
My commission expires:
----------------------
Notary Public
Personally Known or produced I.D. Type of I.D. Produced:
151
OFFICER'S CERTIFICATION
for
AMERINET ▇▇▇▇▇.▇▇▇, INC.
a publicly held Delaware corporation
EXHIBIT 2.1: WARRANTY EXCEPTIONS
I, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President, elected and currently serving
President of Amerinet ▇▇▇▇▇.▇▇▇, Inc., a publicly held Delaware corporation,
(hereinafter referred to as the "Corporation"), hereby certify, they reasonably
believe that the following is a true and correct listing of all Warranty
Exceptions as of November 29, 1999 for the Corporation:
General: We call your attention to the fact that any information filed
with the Securities and Exchange Commission to the extent that it is contrary to
the information provided in this Agreement of Merger and Plan of Reorganization,
the Affiliate Agreement, or the Articles of Merger, is a warranty exception to
Agreement of Merger and Plan of Reorganization, the Affiliate Agreement, or the
Articles of Merger signed and executed between the parties.
In witness whereof, we have hereunto set our hand and seal, effective
as of the 29th day of November, 1999.
AMERINET ▇▇▇▇▇.▇▇▇, INC.
/s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
___________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
President
Before me, the undersigned authority, on this date personally appeared
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇ who first being duly sworn, deposes, and says: that he is the
duly elected and currently serving President of AmeriNet ▇▇▇▇▇.▇▇▇, Inc., a
publicly held Delaware, corporation ; and he has read the same, know the
contents thereof, and that the same is true and correct to the best of his
knowledge and belief. Sworn to and subscribed before me this 29th day of
November 1999.
My commission expires:
---------------------------
Notary Public
Personally Known or produced I.D. Type of I.D. Produced:
152
Schedule 5.7 - Third Party Consents
Commercial Lease between H.N.S. Properties (Landlord) and Trilogy International
(Tenant) requires approval of Landlord for subletting of premises or assignment
of lease. Since merger does not entail either of these actions and the personal
guarantees of ▇▇▇▇▇▇ and ▇▇▇▇▇ ▇▇▇▇▇▇▇ remain in effect, Trilogy does not
believe approval is required from H.N.S Properties.
Schedule 5.8 Affiliates
Board of Directors:
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ Glint
▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇
Schedule 5.12 List and Summary of Employment Agreements
▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇ ▇▇▇▇▇ have Employment Agreements. See
Exhibit 5.12 for copies of each.
153
Schedule 5.13-Use of Proceeds
Initial $250,000:
As detailed on the attached schedule of Unpaid Bills as of October 31, 1999,
Trilogy has accounts payable in the amount of $142,450.62, a large portion of
which is overdue. It is the intention of the company to bring all accounts
payable current by use of a portion of the $250,000 proceeds of the Merger
closing.
Sales Tax liability in the amount of $2,189.03 would be satisfied.
As detailed on Schedule 2.12, during the period September 3, 1999 and November
15, 1999 the Company borrowed $44,500 from officers, family of officers and
employees on a demand basis. The company is committed to repaying these loans
from the proceeds of the Merger closing.
In addition to deferring 25% of their salaries per agreement, ▇▇▇▇▇ and ▇▇▇▇▇▇
▇▇▇▇▇▇▇ also deferred the other 75% of their salaries for the two week periods
ending October 29 and November 12, 1999 in order to conserve cash for the
Company until the closing of the Merger. The Company is obligated to pay each of
them $5480.77 (4 weeks @ 75%) from the proceeds of the closing.
The Company is committed to paying the legal fees incurred as a result of the
proposed merger at the time of closing. $7,500 has been allocated on the
attached Use of Proceeds for this purpose, but the fees incurred may exceed this
amount.
At the currently reduced salary structure negotiated in accordance with the
deferred compensation agreements in place between the Company and its officers
and employees, the Company will incur payroll expense in the amount of
approximately $26,500 every two weeks. Payroll is paid in arrears every two
weeks. The payroll for the period ending November 26 and all subsequent two week
periods through December 110, 1999 will be paid and all payroll taxes and
employee withholdings will be deposited as required.
The Company will incur ongoing expenses, as detailed on the Pro Forma Income
statements attached to Schedule 5.15, for which no extended credit terms are
available. These expenses will be paid on a current basis and are not reflected
in the attached listing of unpaid bills as of October 28, 1999. These required
payments include rent and utility expense, telephone, postage and courier, lease
payments, insurance premiums and travel expense among others.
Out of pocket cost of sales including shipping, credit card expense and
commissions will be funded by revenues from sale of product. The company does
not expect to incur any expense for replacement of product inventory during the
next 60 to 90 days. This could change, however, if the future sales exceed
expectations or the sales mix of products varies materially from that projected.
As detailed on the attached Exhibit to Schedule 5.15, the company expects the
gross profit on sales and reduction of inventory through December 31, 1999 to
provide positive cash flow of approximately $31,886. This amount combined with
the $250,000 proceeds of the Merger closing will not be sufficient to fund
projected negative cash flow beyond mid-December 1999. The Company plans to
renew efforts to obtain lease-back financing on some of the equipment currently
owned to provide additional working capital. There is no assurance, however,
that this financing will become available.
Subsequent Investment by AmeriNet
The additional $650,000 to be invested in the Surviving Corporation by AmeriNet
will be used as working capital to fund the negative cash flow resulting from
expenses exceeding revenues as projected on Schedule 5.14 - Projections. In
addition, a portion of the funds provided will be used for acquisition of
additional computer hardware, computer software and office equipment and
furniture needed as the business expands and staffing increases. Use of funds
for purposes other than expenses projected on Schedule 5.14, replacement of
inventory and capital expenditures required in the normal course of business,
must be approved by the Board of Directors of the surviving Corporation.
154
Trilogy International, Inc.
Proposed Use of Proceeds
Proceeds of November 22, 1999 Closing 250,000
Use of Proceeds:
Accounts Payable as of Oct 31 142,451
Merger Legal Expense 7,500 149,951
Repayment of Short Term Loans 44,500 194,451
Unpaid Portion of 10/29 and 11/12 Payroll 17,000 211,451
Payroll at Reduced Rates November 26 26,500 237,951
November Lease Payments 2,510 240,461
November Rent and Utilities 2,534 242,995
November Phones 3,000 245,995
November Insurance 960 246,955
November Travel 2,000 248,955
November Postage, Courier, Supplies 500 249,455
Keyman Life Premium 2,114 251,569
Payroll at Reduced Rates December 10 26,500 278,069
December Rent and Utilities 5,117 283,186
December Lease Payments 2,510 285,696
December Phones 3,000 288,696
December Insurance 960 289,656
December Travel 2,000 291,656
December Postage, Courier, Supplies 500 292,156
Payroll at Reduced Rates December 24 26,500 318,656
Gross Profit on Sales and Reduction of Inventory 31,886
281,886
Shortage 36,770
155
Schedule 5.14 Trilogy Financial Projections
Trilogy Management has reassessed its business plan and analyzed its limited
operating history to date and as of November 4, 1999 has prepared revised
projections of income and expense for the three years beginning November 1, 1999
and ending October 31, 2002. Those projections are attached herewith.
The projections are based upon management's expectations for attainable future
levels of sales and profits. However, the Company has a limited operating
history and there is no assurance that the projections can be met.
TRILOGY INTERNATIONAL
PRO FORMA INCOME AND EXPENSE STATEMENT
NOVEMBER 1999 THROUGH OCTOBER 2000
REPS NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT
1 35 35 150 225 300 450 600 950 1150 1200 1000 600
2 143 35 35 150 225 300 450 600 950 1150 1200 1000
3 143 35 35 150 225 300 450 600 950 1150 1200
4 143 35 35 150 225 300 450 600 950 1150
5 or more 143 143 178 328 553 853 1303 1903 2853
GROWTH RATE 65% 20% 70% 62% 45% 53% 46% 50% 40% 30% 19% 10%
DISTRIBUTORS 178 213 363 588 853 1303 1903 2853 4003 5203 6203 6803
INCOME NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT 1st Year
SAMPLE PACKS 4375 2188 9375 14063 16563 28125 37500 59375 71875 75000 62500 37500 418438
PRODUCT SALES 6840 19850 15475 26750 48400 64475 98225 157725 234850 343350 484350 657600 2157890
SHIPPING 1122 2204 2485 4081 6496 9260 13573 21710 30673 41835 54685 69510 257633
INTRO KITS 2450 1225 5250 7875 9275 15750 21000 33250 40250 42000 35000 21000 234325
WEB SITE SIGN UP 1682 2243 3551 4298 4485 3738 2243 22238
WEB SITE MTH 994 1610 2335 3567 5209 7810 10958 14243 16981 18623 82330
SALES AIDS 1026 2978 2321 4013 7260 9671 14734 23659 35228 51503 72653 98640 323684
-------------------------------------------------------------------------------------------------------
TOTAL 15813 28444 35900 58391 90329 132530 192483 307079 428131 572416 729906 905116 3496537
COST OF SALES
PRODUCT COST 2057 3657 4539 7374 11388 16504 23966 38299 53389 71436 91246 113466 437319
SHIPPING COST 1009 1983 2237 3673 5847 8334 12215 19539 27605 37652 49217 62559 231869
KIT COST 1960 980 4200 6300 7420 12600 16800 26600 32200 33600 28000 16800 187460
WEB SITE COST 0 0 800 800 800 800 800 888 1075 1121 ▇▇▇ ▇▇▇ ▇▇▇▇
SALES AIDS COST 718 2084 1625 2809 5082 6770 10314 16561 24659 36052 50857 69048 226578
Q. START BONUS 1750 875 3750 5625 6625 11250 15000 23750 28750 30000 25000 15000 167375
SALES BONUS 1368 3970 3095 6688 14520 22566 39290 63090 93940 137340 193740 263040 842647
CREDIT CARD EXP. 474 853 1077 1752 2710 3976 5774 9212 12844 17172 21897 27153 104896
ROYALTIES 32 57 72 117 181 265 385 614 856 1145 1460 1810 6993
---------------------------------------------------------------------------------------------------------
TOTAL 9337 14403 21322 35020 54391 82800 124159 197939 274461 364373 460891 567627 206723 63%
---------------------------------------------------------------------------------------------------------
GROSS PROFIT 6476 14041 14578 23371 35938 49731 68324 109141 153670 208043 269015 337489 1289814 37%
PAYROLL EXPENSE
HEADQUARTERS 17045 17045 17045 17045 19191 19191 19191 19191 21337 21337 21337 21337 230292
OPERATIONS 17493 17493 8971 8971 8971 8971 8971 8971 8971 8971 8971 8971 124696
PRODUCT DEVEL. 8971 8971 8971 8971 8971 8971 8971 8971 8971 8971 8971 8971 107652
MARKETING 9419 9419 9419 9419 9419 9419 9419 9419 9419 9419 9419 9419 113028
MIS 6728 6728 6728 6728 6728 6728 6728 6728 6728 6728 6728 ▇▇▇▇ ▇▇▇▇▇
CALL CENTER 11648 11648 11648 11648 11648 13794 13794 15940 15940 18086 18086 20232 174112
FINANCE 7177 7177 7177 7177 7177 10317 10317 10317 10317 10317 10317 10317 108104
---------------------------------------------------------------------------------------------------------
78481 78481 69959 69959 72105 77391 77391 79537 81683 83829 83829 85975 938620 27%
156
TRILOGY INTERNATIONAL
PRO FORMA INCOME AND EXPENSE STATEMENT
NOVEMBER 1999 THROUGH OCTOBER 2000
NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT 1st Year
GENERAL & ADMIN. EXPENSE
TRAVEL 2000 2000 7000 7000 13000 13000 13000 13000 13000 13000 13000 13000 130600
RENT, UTILITIES & MAINT 5000 6500 6500 6500 6500 6500 6500 6500 6500 6500 6500 ▇▇▇▇ ▇▇▇▇▇
TELEPHONE 2974 3353 3577 4252 4126 4886 5965 8027 10206 12803 15638 18792 94600
INSURANCE 1775 1775 1775 1775 1775 1775 1775 1775 1265 1564 1879 2240 21148
EQUIPMENT LEASES 2700 2700 2700 2700 2700 2700 2700 2700 2700 2700 2700 2700 32400
POSTAGE & COURIER 428 463 613 838 1103 1553 2153 3103 4253 5453 6453 7053 33466
SUPPLIES 579 642 679 792 952 1163 1462 2035 2641 3362 4150 5026 23483
PRINTING 1000 1000 1363 1000 1000 2303 1000 1000 5003 1000 1000 1000 17669
CORP LEGAL 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
NETWORK MRKT LEGAL 500 500 500 500 500 500 500 500 500 500 500 500 6000
AUDIT 1500 1500 1500 1500 2500 2500 2500 2500 2500 2500 2500 2500 26000
PROMOTIONAL EXPENSE 1500 1500 179 292 452 663 962 1535 2141 2862 3650 4526 20261
INTERNET 99 161 234 262 373 568 763 936 1036 1043 5475
CONTINGENCY 1996 2193 2149 2231 2384 2680 2789 3224 4047 4218 4801 5388 38100
----------------------------------------------------------------------------------------------------------
23952 26127 30635 31541 39225 42485 43679 48469 57518 59399 65806 72269 541104 15%
EXPENSE SUB TOTAL 102433 104608 100594 101500 111330 119876 121070 128006 139201 143228 149635 158244 1479724 42%
----------------------------------------------------------------------------------------------------------
NET INCOME -95957 -90567 -86016 -78129 -75392 -70145 -52746 -18865 14469 64815 119380 179245 -189909 -5%
CASH FLOW
Investment by AmeriNet 250000 325000 325000
Beginning Cash 7769
October 31 A/P -146524
Short Term Loan Repayment -44500
Merger Legal Expense -15000
Unpaid Portion of 10/29 PR -5900
Net Income -95957 90567 -86016 -78129 -75392 -70145 -52746 -18865 14469 64815 119380
Deferred Salaries 19551 22460 -59690
Partial 11/12 Payroll Paid 13777
Inventory Reduction 4735 6722 10363
Increase in Month End A/P 23952 12713 4508 906 7684 3260 1194 4790 9050 1881 6407
Capital Expenditures -2500 -2500 -2500 -2500 -2500
Software -11000
MONTHLY CASH FLOW 11903 -48673 -71144 247777 -70208 -69385 262448 -16575 21018 64195 66097
WORKING CAPITAL BALANCE 11903 -36770 -107914 139863 69655 269 262718 246142 267160 331356 397453
NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP
ACCRUED SALARIES 390223 412684 412684 412684 412684 412684 412684 412684 412684 412684 352994
Investment by AmeriNet 900000
Beginning Cash 7769
October 31 A/P -146524
Short Term Loan Repayment
Merger Legal Expense
Unpaid Portion of 10/29 PR
Net Income 179245 -189909
Deferred Salaries -89622 -107302
Partial 11/12 Payroll Paid
Inventory Reduction 21820
Increase in Month End A/P 6463 82807
Capital Expenditures -2500 -15000
Software -11000
MONTHLY CASH FLOW 93585 491038
WORKING CAPITAL BALANCE 491038
OCT 1st Year
ACCRUED SALARIES 263371
157
TRILOGY INTERNATIONAL
PRO FORMA INCOME AND EXPENSE STATEMENT (DETAIL)
NOVEMBER 2000 THROUGH OCTOBER 2001
REPS NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT
1 680 720 566 383 753 776 801 825 852 884 916 475
2 600 680 720 566 383 753 776 801 825 852 884 916
3 1000 600 680 720 566 383 753 776 801 825 852 884
4 1200 1000 600 680 720 566 383 753 776 801 825 852
5 or more 3715 4544 5089 5180 5342 5527 5540 5369 5585 5803 6023 6246
GROWTH RATE 6% 5% 1% -2% 3% 3% 3% 3% 4% 4% 4% -1%
DISTRIBUTORS 7195 7543 7654 7528 7763 8005 8253 8524 8840 9165 9501 9374
INCOME NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT 2nd Year
SAMPLE PACKS 42500 44969 35358 23920 47051 48519 50032 51580 53275 55247 57281 29691 539422
PRODUCT SALES 865750 1011600 1127090 1191120 1210950 1235001 1258084 1267219 1282683 1332396 1382826 1434229 14598949
SHIPPING 90825 105657 116245 121504 125800 128352 130812 131880 133596 138764 144011 146392 1513837
INTRO KITS 23800 25183 19800 13395 26349 27170 28018 28885 29834 30938 32077 16627 302077
WEB SITE SIGN UP 2542 2689 2114 1430 2814 2901 2992 3084 3186 3304 3425 1776 32257
WEB SITE MTH 18615 19696 20649 20954 20608 21251 21914 22592 23335 24198 25089 26010 264911
SALES AIDS 129863 151740 169064 178668 181643 185250 188713 190083 92402 199859 207424 215134 2189842
--------------------------------------------------------------------------------------------------------------------
TOTAL 1173894 1361534 1490320 1550991 1615215 1648445 1680564 1695324 1718311 1784707 1852133 1869859 19441295
COST OF SALES
PRODUCT COST 156953 182315 199738 207992 216683 221110 225382 227291 230309 239214 248255 250648 2605888
SHIPPING COST 81743 95091 104620 109354 113220 115517 117730 118692 120236 124888 129610 131753 1362453
KIT COST 19040 20146 15840 10716 21079 21736 22414 23108 23867 24751 25662 13302 241661
WEB SITE COST 8717 9223 9317 9097 9650 9951 10261 0579 10927 11331 11748 11292 122093
SALES AIDS COST 90904 106218 118344 125068 127150 129675 132099 133058 134682 139902 145197 150594 1532890
Q. START BONUS 17000 17988 14143 9568 18820 19407 20013 20632 21310 22099 22912 11876 215769
SALES BONUS 346300 404640 450836 476448 484380 494001 503234 506888 513073 532958 553130 573692 5839579
CREDIT CARD EXP. 35217 40846 44710 46530 48456 49453 50417 50860 51549 53541 55564 56096 583239
ROYALTIES 4696 5446 5961 6204 6461 6594 6722 6781 6873 7139 7409 7479 77765
---------------------------------------------------------------------------------------------------------------------
TOTAL 755872 876467 957548 994771 1039439 1060850 1081550 1091107 1105954 1148684 1192078 1199252 12503573 64%
---------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 418022 485067 532772 556219 575775 587595 599014 604217 612357 636023 660055 670607 6937722 36%
PAYROLL EXPENSE
HEADQUARTERS 41147 43962 45894 46804 47767 48266 48747 48969 49314 50310 51321 51587 574087
OPERATIONS 14354 14354 14354 14354 14354 14354 14354 14354 14354 14354 14354 14354 172248
PRODUCT DEVEL. 9868 9868 9868 9868 9868 9868 9868 9868 9868 9868 9868 9868 118416
MARKETING 13456 13456 13456 13456 13456 13456 13456 13456 13456 13456 13456 13456 161472
MIS 11886 11886 11886 11886 16372 16372 16372 16372 16372 16372 16372 16372 178520
CALL CENTER 22378 24524 26670 26670 28816 30962 33108 35254 37400 39546 41692 41692 388712
FINANCE 17807 17807 17807 17807 17807 17807 17807 17807 17807 17807 17807 17807 213684
---------------------------------------------------------------------------------------------------------------------
130896 135857 139935 140845 148440 151085 153712 156080 158571 161713 164870 165136 1807139 9%
NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT 2nd Year
GENERAL & ADMIN EXPENSE
TRAVEL 7000 11000 9000 7000 13000 13000 13000 13000 13000 13000 13000 13000 138000
RENT, UTILIT & MAINT 5000 6500 6500 6500 6500 6500 6500 6500 6500 6500 6500 ▇▇▇▇ ▇▇▇▇▇
TELEPHONE 37717 43346 47210 49030 31574 32172 32750 33016 33430 34625 35838 36157 446864
INSURANCE 3002 3402 3680 3806 3973 4052 4130 4171 4229 4378 4529 4565 47918
EQUIPMENT LEASES 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 12000 144000
POSTAGE & COURIER 7445 7793 7904 7778 8013 8255 8503 8774 9090 9415 9751 9624 102345
SUPPLIES 6369 7308 7952 8255 8576 8742 8903 8977 9092 9424 9761 9849 103206
PRINT & ADVERTISE 11739 13615 14903 15510 16152 16484 16806 16953 17183 17847 18521 18699 194413
CORP LEGAL 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
NETWORK MRKT LEGAL 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 1000 12000
AUDIT 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 3000 36000
PROMOTIONAL EXPENSE 5869 6808 7452 7755 8076 8242 8403 8477 8592 8924 9261 9349 97206
INTERNET 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 1500 18000
CONTINGENCY 9764 10927 11610 11913 10336 10495 10649 10737 10861 11161 11466 11524 131445
------------------------------------------------------------------------------------------------------------------
114406 131199 136711 138047 126700 128443 130143 131104 132476 135773 139127 139769 1583900 8%
EXPENSE SUB TOTAL 245302 267056 276646 278892 275140 279528 283856 287184 291047 297486 303997 304905 3391039 17%
------------------------------------------------------------------------------------------------------------------
NET INCOME 172719 218011 256126 277327 300635 308067 315158 317033 321310 338537 356058 365702 3546683 18%
158
TRILOGY INTERNATIONAL
PRO FORMA INCOME AND EXPENSE STATEMENT (DETAIL)
NOVEMBER 2001 THROUGH OCTOBER 2002
REPS NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT
1 937 1000 799 555 1125 1198 1275 1357 1446 1543 1647 879
2 475 937 1000 799 555 1125 1198 1275 1357 1446 1543 1647
3 916 475 937 1000 799 555 1125 1198 1275 1357 1446 1543
4 884 916 475 937 1000 799 555 1125 1198 1275 1357 1446
5 or more 6786 7331 7881 7962 8501 9076 9422 9505 10155 10845 11579 12357
GROWTH RATE 7% 7% 4% 1% 6% 6% 6% 7% 7% 7% 7% 2%
DISTRIBUTORS 9999 10660 11093 11253 11980 12753 13575 14461 15432 16468 17572 17872
INCOME NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT 3rd Year
SAMPLE PACKS 58587 62494 49967 34664 70332 74877 79709 84843 90383 96451 102923 54913 860144
PRODUCT SALES 1477379 1578959 1683216 1771819 1835586 1935400 2036942 2123455 2222463 2373243 2533496 2703952 24275910
SHIPPING 153597 164145 173318 180648 190592 201028 211665 220830 231285 246969 263642 275886 2513605
INTRO KITS 32809 34997 27982 19412 39386 41931 44637 47512 50615 54013 57637 30751 481681
WEB SITE SIGN UP 3504 3737 2988 2073 4206 4478 4767 5074 5405 5768 6155 3284 51437
WEB SITE MTH 25661 27372 29181 30366 30806 32796 34912 37161 39588 42246 45080 48104 423273
SALES AIDS 221607 236844 252482 265773 275338 290310 305541 318518 333369 355986 380024 405593 3641386
-------------------------------------------------------------------------------------------------------------------
TOTAL 1973144 2108548 2219134 2304756 2446245 2580820 2718172 2837394 2973108 3174676 3388958 3522483 32247437
COST OF SALES
PRODUCT COST 264630 282797 297639 309182 328226 346240 364613 380501 398607 425635 454367 472302 4324738
SHIPPING COST 138237 147731 155986 162584 171533 180925 190499 198747 208156 222272 237278 248298 2262245
KIT COST 26247 27997 22385 15530 31509 33545 35709 38010 40492 43210 46109 24601 385345
WEB SITE COST 12016 12818 13166 13183 14425 15357 16348 17401 18538 19782 21109 20883 195028
SALES AIDS COST 155125 165791 176738 186041 192736 203217 213879 222963 233359 249191 266017 283915 2548971
Q. START BONUS 23435 24998 19987 13866 28133 29951 31883 33937 36153 38581 41169 21965 344058
SALES BONUS 590952 631584 673286 708728 734234 774160 814777 849382 888985 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 1081581 9710364
CREDIT CARD EXP. 59194 63256 66574 69143 73387 77425 81545 85122 89193 95240 101669 105674 967423
ROYALTIES 7893 8434 8877 9219 9785 10323 10873 11350 11892 12699 13556 14090 128990
----------------------------------------------------------------------------------------------------------------------
TOTAL 1269836 1356971 1425762 1478255 1574184 1660820 1749253 1826063 1913483 2043208 2181117 2259219 20738171 64%
-----------------------------------------------------------------------------------------------------------------------
GROSS PROFIT 703308 751578 793372 826501 872061 920001 968919 1011330 1059625 1131468 1207841 1263264 11509267 36%
PAYROLL EXPENSE
HEADQUARTERS 54597 56628 58287 59571 61694 63712 65773 67561 69597 72620 75834 77837 783712
OPERATIONS 18660 18660 18660 18660 18660 18660 18660 18660 18660 18660 18660 18660 223920
PRODUCT DEVEL. 12828 12828 12828 12828 12828 12828 12828 12828 12828 12828 12828 12828 153936
MARKETING 17493 17493 17493 17493 17493 17493 17493 17493 17493 17493 17493 17493 209916
MIS 21284 21284 21284 21284 21284 21284 21284 21284 21284 21284 21284 21284 255408
CALL CENTER 48146 50646 53146 55646 58146 60646 63146 65646 68146 70646 73146 75646 742752
FINANCE 23149 23149 23150 23151 23152 23153 23154 23155 23156 23157 23158 23159 277843
----------------------------------------------------------------------------------------------------------------------
196157 200688 204848 208633 213257 217776 222338 226627 231164 236688 242403 246907 2647487 8%
NOV DEC JAN FEB MAR APR MAY JUN JUL AUG SEP OCT 3rd Year
GENERAL & ADMIN EXPENSE
TRAVEL 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 180000
RENT,UTILI&MAINT 9750 9750 9750 9750 9750 9750 9750 9750 9750 9750 9750 ▇▇▇▇ ▇▇▇▇▇▇
TELEPHONE 61694 65756 69074 71643 46532 48955 51427 53573 56016 59644 63501 65905 713721
INSURANCE 4927 5221 5463 5653 5959 6251 6548 6808 7102 7533 7990 8280 77732
EQUIPMENT LEASES 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 15000 180000
POSTAGE &COURIER 10249 10910 11343 11503 12230 13003 13825 14711 15682 16718 17822 18122 166118
SUPPLIES 10366 11043 11596 12024 12731 13404 14091 14687 15366 16373 17445 18112 167237
PRINTING 19731 21085 22191 23048 24462 25808 27182 28374 29731 31747 33890 35225 322474
CORP LEGAL 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 5000 60000
NETWORK MRKT LEGAL 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
AUDIT 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 4000 48000
PROMOTION EXPENSE 9866 10543 11096 11524 12231 12904 13591 14187 14866 15873 16945 17612 161237
INTERNET 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 2000 24000
CONTINGENCY 15458 16231 16851 17314 15190 15808 16441 17009 17651 18564 19534 20101 206152
--------------------------------------------------------------------------------------------------------------------
185042 193538 200363 205458 182086 188883 195855 202099 209164 219202 229877 236106 2447672 8%
EXPENSE SUB
TOTAL 381199 394227 405211 414091 395343 406659 418192 428726 440327 455890 472280 483014 5095159 16%
----------------------------------------------------------------------------------------------------------------------
NET INCOME 322109 357351 388161 412409 476719 513342 550726 582604 619298 675578 735561 780250 6414108 20%
159
Schedule 6.3(M) Non-accredited investors
Trilogy International, Inc.
Common Stock held by other than Accredited Investors
Name Relationship Number of
to Company Shares
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Founder 1,577,591
▇▇▇▇▇ ▇▇▇▇▇▇▇ Founder 1,577,590
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ Employee 3,000
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Employee 3,000
▇▇▇▇▇▇ ▇▇▇▇▇ Employee 2,160
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ Employee 2,160
▇▇▇▇ ▇▇▇▇▇ Employee 2,000
▇▇▇▇▇ ▇▇▇▇▇▇▇ Employee 26,000
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Employee 1,159
▇▇▇▇▇ ▇▇▇▇▇ Employee 1,159
▇▇▇▇ ▇▇▇▇▇▇▇▇ Consultant 1,546
Exhibit 2.25 - The Form 8-K Information
Trilogy International, through its response to AmeriNet's requests for Due
Diligence, has provided to AmeriNet essentially all of the information relative
to its business that it believes will be required by AmeriNet as part of the
information required for filing of Form 8-K reporting the acquisition of Trilogy
by AmeriNet.
Some of the information provided to AmeriNet may not be in the format required.
Following the Effective Date, the information required by AmeriNet relative to
the business of Trilogy will be resubmitted as requested by AmeriNet if
necessary to conform to the format required for filing with the SEC. Unaudited
Financial Statements will be prepared as of the Effective Date by Trilogy's CFO
and submitted to AmeriNet for inclusion in their 8-K filing within 15 days of
the Effective Date. Audit procedure will be initiated as soon as practical after
the Effective Date to assure completion of audited financials within 75 days of
the Effective Date.
160
Exhibit 5.8 Affiliate Agreements
The form of the Affiliate Agreement is attached. All Trilogy International Board
of Directors members as shown in Schedule 5.8 have executed this agreement.
Affiliate Agreement
This Affiliate Agreement (this "Agreement") is made and entered into by and
between Trilogy International, Inc., a Florida corporation ("Trilogy "),
AmeriNet ▇▇▇▇▇.▇▇▇, 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), and person
identified in the signature page of this Agreement as the Affiliate (the
"Affiliate").
Preamble:
WHEREAS, concurrently with the execution of this Agreement, Trilogy and
AmeriNet have entered into an Agreement & Plan of Merger (the "Reorganization
Agreement") which contemplates that Trilogy will be merged into Trilogy
Acquisition Corporation, a Florida corporation ("Trilogy Acquisition") and all
outstanding capital stock of Trilogy will be converted into AmeriNet common
stock (the "Merger"); and
WHEREAS, the Affiliate is either an officer or director of Trilogy or is
the beneficial owner (as defined in Rule 13d-3 under the Exchange Act) of such
quantity of common stock in Trilogy as requires that the Affiliate to be deemed
an "affiliate" of Trilogy (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 Merger; and
WHEREAS, the determination of the accounting and tax treatment of the
Merger 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 Trilogy 's common stock in favor of the
Merger at a special meeting of the stockholders of Trilogy to be held for the
purpose of voting on the Merger.
NOW, THEREFORE, the Parties agree as follows:
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 Trilogy for a period of at
least thirty (30) days of combined operations of AmeriNet and Trilogy
; or
(2) The date the Reorganization Agreement shall be terminated pursuant to
Article VIII thereof.
161
(B) The Affiliate agrees not to transfer, sell, exchange, pledge or otherwise
dispose of or encumber the Affiliates Trilogy common stock or the shares of
AmeriNet common stock received in exchange therefor as a result of the
Merger (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 Trilogy 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.
Article II
Agreement to Vote Shares.
2.1 Voting
At every meeting of the stockholders of Trilogy 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 Trilogy 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 the Merger
and any matter that could reasonably be expected to facilitate the
Merger; and
(B) Against approval of any proposal made in opposition to or competition
with consummation of the Merger 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 Trilogy (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 Trilogy 's obligations
under the Reorganization Agreement or the Affiliate's obligations under this
Agreement.
162
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 Merger
will be treated as a "reorganization" within the meaning of Code Section 368(a)
for federal income tax purposes.
Article V
Reliance Upon Representations, Warranties and Covenants.
(A) The Affiliate has been informed that the treatment of the Merger as a
reorganization for federal income tax purposes requires that a
sufficient number of former stockholders of Trilogy maintain a
meaningful continuing equity ownership interest in AmeriNet after the
Merger.
(B) The Affiliate understands that the representations, warranties and
covenants of the Affiliate set forth herein will be relied upon by
AmeriNet, Trilogy 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:
163
(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
(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 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 Trilogy stockholders who dissent from the
Merger, will reduce the Trilogy 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 Trilogy stockholders to engage in Sales of the shares
of AmeriNet Stock to be issued in the Merger.
(2) For purposes Section 6.4(B)(1), Shares with respect to which a
pre-Merger 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 Merger or the Merger Agreements.
164
(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 Trilogy 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 Merger, 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 Merger, 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 Trilogy
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 Trilogy
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 Trilogy
with respect to an Opposing Proposal.
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 Trilogy .
165
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.
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).
166
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:
"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 ▇▇▇▇▇.▇▇▇, 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).
167
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.
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 Trilogy
'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.
168
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:
(1) To the Affiliate:
At the contact information provided to the registrar of Trilogy 's shares
of common stock and, after the Merger, at the contact information provided to
and maintained by AmeriNet's transfer agent.
(2) To AmeriNet:
AmeriNet ▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇-▇; ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ Attention: ▇▇▇▇▇▇▇
▇▇▇▇▇▇ Jordan, President Telephone (▇▇▇) ▇▇▇-▇▇▇▇, Fax (▇▇▇) ▇▇▇-▇▇▇▇; and,
e-mail ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇; with a copy to
General Counsel
AmeriNet ▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇; ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇, Fax (▇▇▇) ▇▇▇-▇▇▇▇; and, e-mail,
▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇.
(3) To Trilogy :
Trilogy International, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇; ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Telephone (▇▇▇) ▇▇▇-▇▇▇▇, Fax (▇▇▇) ▇▇▇-▇▇▇▇; and,
web site ▇▇▇.▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇;
(4) To Yankees:
The Yankee Companies, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇; ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, President
Telephone (▇▇▇) ▇▇▇-▇▇▇▇, Fax (▇▇▇) ▇▇▇-▇▇▇▇; and,
e-mail ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇;
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.
(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.
169
(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.
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.
170
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 Trilogy .
(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 Trilogy .
(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.
(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.
171
(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 G.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, 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) ___________ shares of Trilogy Common Stock; and
(2) ___________ shares of Trilogy Common Stock subject to options,
warrants or other rights.
* * *
Execution Pages
In Witness Whereof, the Affiliate, AmeriNet, and Trilogy 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
____________________________________ ----------------------------
Print name
____________________________________ ----------------------------
Signature
Dated: November 22, 1999
AmeriNet ▇▇▇▇▇.▇▇▇, Inc.
----------------------------
____________________________ By:________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, President
(Corporate Seal)
Attest:________________________
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary
Dated: November 22, 1999
172
Trilogy Acquisition Corporation
_________________________________ (A Florida corporation)
_________________________________ By:______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
(Corporate Seal)
Attest:______________________________
▇▇▇▇ ▇▇▇▇▇▇ , Secretary
Dated: November 22, 1999
Trilogy International, Inc.
----------------------------
____________________________ By:______________________________
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
(Corporate Seal)
Attest:______________________________
▇▇▇▇ ▇▇▇▇▇▇, Secretary
Dated: November 22, 1999
173
Exhibit "A"
Irrevocable Proxy
The undersigned stockholder of Trilogy International, Inc., a Florida
corporation ("Trilogy"), hereby irrevocably to the extent provided by Florida
law) appoints the directors on the Board of Directors of AmeriNet, 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 Trilogy 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 Agreement & Plan of
Merger dated as of November 27, 1999 (the "Reorganization Agreement"), among
AmeriNet, Trilogy Acquisition Corporation, Inc., a Florida corporation,
("Trilogy Acquisition"), and Trilogy , shall be terminated in accordance with
its terms or the Merger (as defined in 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 November 27, 1999,
between AmeriNet, Trilogy , 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 Trilogy 's stockholders, and in every written consent in lieu of
such a meeting, or otherwise, in favor of approval of the Merger and the
Reorganization Agreement and any matter that could reasonably be expected
to facilitate the Merger, and against any proposal made in opposition to or
competition with the consummation of the Merger and against any merger,
consolidation, sale of assets, reorganization or recapitalization of
Trilogy with any party other than AmeriNet and its affiliates and against
any liquidation or winding up of Trilogy .
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 Trilogy and in
every written consent in lieu of such meeting, in favor of approval of the
Merger and the Reorganization Agreement and any matter that could
reasonably be expected to facilitate the Merger, and against any merger,
consolidation, sale of assets, reorganization or recapitalization of
Trilogy with any party other than AmeriNet and its affiliates, and against
any liquidation or winding up of Trilogy , and may not exercise this proxy
on any other matter.
5. The undersigned stockholder may vote the Shares on all other matters.
174
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:
1. Full name:_____________________________________________
First Middle Last
2. Tax identification number:_____________________________________
3. Domicile Address:_____________________________________
4. Telephone, fax and e-mail:___________ _______________________
E. Shares Information:
(1) Number of Trilogy Shares owned or controlled as to voting matters:
-----------------
Signed, sealed and delivered
In Our Presence:
Stockholder:
----------------------------
____________________________ By:______________________________
Dated:________________
175
Exhibit 5.12
Copies of Employment Agreements
Employment Agreements for ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇▇ and ▇▇. ▇▇▇▇ ▇▇▇▇▇
are attached herewith.
Executive's Employment Agreement
This Executive's Employment Agreement (the "Agreement") is entered into by
and among ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual residing in the State of Florida (the
"President"); Trilogy International, Inc., a Florida corporation (collectively
and generically hereinafter referred to with its successors in interest, if any,
as "Trilogy"; Trilogy and the President being sometimes hereinafter collectively
to as the "Parties" or generically as a "Party".
Preamble:
WHEREAS, Trilogy's board of directors is of the opinion that in conjunction
with effectuation of Trilogy's future plans it must memorialize, confirm and
assure itself of the continuing the services of Trilogy's founder, who currently
serves as its president and director, on a long term basis; and
WHEREAS, the President is thoroughly knowledgeable with all aspects of
Trilogy's operations and plans; and
WHEREAS, the President is agreeable to serving as Trilogy's president, on
the terms and conditions hereinafter set forth:
NOW, THEREFORE, in consideration of the mutual promises, covenants and
agreements hereby exchanged, as well as of the sum of Ten ($10.00) Dollars and
other good and valuable consideration, the receipt and adequacy of which is
hereby acknowledged, the Parties, intending to be legally bound, hereby agree as
follows:
Witnesseth:
Article One
Term, Renewals, Earlier Termination
1.1 Term.
Subject to the provisions set forth herein, the term of the President's
employment hereunder shall be deemed to commence on the date of this Agreement's
execution by all of the Parties and shall continue until December 31, 2004.
1.2 Renewals.
This Agreement shall be renewed automatically, after expiration of the
original term, on a continuing annual basis, unless the Party wishing not to
renew this Agreement provides the other Party with Written notice of its
election not to renew ("Termination Election Notice") on or before the 30th day
prior to termination of the then current term.
1.3 Earlier Termination.
(a) Trilogy shall each have the right to terminate this Agreement prior to the
expiration of its Term, as it applies to them (without affecting the
Agreement as it applies to the other, except in conjunction with the
compensation aspects thereof), or of any renewals thereof, subject to the
provisions of Section 1.4, for the following reasons:
176
(1) For Cause:
(A) Trilogy may terminate the President's employment under this
Agreement at any time for cause.
(B) Such termination shall be evidenced by Written notice thereof to
the President, which notice shall specify the cause for
termination.
(C) For purposes hereof, the term "cause" shall mean:
(a) The inability of the President, through sickness or other
incapacity, to discharge the President's duties under this
Agreement for ninety or more consecutive days or for a total
of 120 or more days in a period of twelve consecutive
months;
(2) The refusal of the President to follow the directions of Trilogy's
board of directors;
(3) Dishonesty; theft; or conviction of a crime involving moral turpitude;
(4) Material default in the performance by the President of the
President's obligations, services or duties required under this
Agreement (other than for illness or incapacity) or materially breach
of any provision of this Agreement, which default or breach has
continued for twenty days after Written notice of such default or
breach and such material default or breach has resulted in material
damage to Trilogy.
(D) In the event of a dispute concerning termination due to breach or
default, the President's compensation shall be continued until
resolution of such dispute by a tribunal of competent
jurisdiction, it being understood that the President must repay
any amounts so paid upon final determination that the President
was not entitled to such compensation.
(2) Discontinuance of Business:
In the event that Trilogy 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 Trilogy shall not be
deemed a termination of its business.
(3) Death:
This Agreement shall terminate immediately on the death of the
President; however, all accrued compensation at such time shall be
promptly paid to the President's estate.
(b) The President shall have the right to terminate this Agreement if
Trilogy fails to obtain at least $900,000 in funding during the
period starting on November 15, 1999 and ending on June 30, 2000;
unless the failure to obtain such funding is based on a default
by Trilogy or its successors in interest in its obligations under
any agreement pursuant to which such funding was to have been
provided or the failure of Trilogy to meet the conditions
required for such funding.
177
1.4 Final Settlement.
Upon termination of this Agreement and payment to the President of all
amounts due to the President hereunder, the President or the President's
representative shall execute and deliver to the terminating entity on a form
prepared by Trilogy, 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 Trilogy 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.
Trilogy hereby hires the President and the President hereby accepts such
employment, in accordance with the terms, provisions and conditions of this
Agreement.
2.2 General Description of Duties.
(a) The President shall be employed as the president of Trilogy and
perform the duties generally associated with the position of president
thereof.
(b) Without limiting the generality of the foregoing, the President shall:
(1) Have control of all aspects of Trilogy's day to day operations,
subject only to compliance with the directions of Trilogy's board
of directors, applicable laws and fiduciary obligations to
Trilogy's stockholders;
(2) Supervise all inferior officers;
(3) Assure Trilogy's compliance with applicable laws and with its
obligations under binding agreements unless otherwise directed by
Trilogy's board of directors.
(4) Coordinate the activities of Trilogy with the activities of
Trilogy's parent corporation, if any, and of its sibling
corporations, if any, especially with reference to timely
collection and transmittal of information required to comply with
legal obligations, including, without limitation, reporting
obligations under federal securities and income tax laws.
(c) The President covenants to perform the President's employment duties
in good faith, devoting substantially all of the President's business
time, energies and abilities to the proper and efficient management of
the business of Trilogy.
2.3 Status.
(a) Throughout the term of this Agreement, the President shall serve as a
member of the board of directors of Trilogy and as its president.
(b) In the event that the President is not elected to such positions,
then, at the option of the President, 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 Trilogy within 30 days
after it failed to elect the President to the required office.
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2.4 Exclusivity.
The President shall, unless specifically otherwise authorized by Trilogy's
board of directors, on a case by case basis, devote all of the President's
business time exclusively to the affairs of Trilogy.
Article Three
Compensation
3.1 Compensation.
As consideration for the President's services to Trilogy the President
shall be entitled to:
(a) A salary in an aggregate gross sum equal to $80,000 per year (the
"Base Salary"); provided that, with the consent of Trilogy's
stockholders, who will be deemed third party beneficiaries of
Trilogy's rights under this Agreement, such compensation may be
adjusted at six month intervals to reflect the performance of the
President during such period, as reflected in the performance of
Trilogy during such period.
(b) Provided that Trilogy earned a net, pre tax profit for the subject
year, an annual bonus payable within 15 days after preparation and
delivery of final audited annual financial statements for Trilogy to
Trilogy's stockholders:
(1) In a cash sum equal to 2.5% of the net, pre tax profits of
Trilogy and
(2) In the event that Trilogy or its successors interest are publicly
held corporations (or if Trilogy is a subsidiary of a publicly
held corporation), a bonus payable in the common stock of the
closest level publicly held corporation, equal to the number of
shares obtained by dividing 20% of the President's salary for the
subject year by the closing transaction price for the issuer's
securities involved on the last trading day of the subject year.
3.2 Benefits.
During the term of this Agreement, the President shall also be entitled to
the following benefits:
(a) Two weeks paid vacation per year subject to adjustment after annually
after the first year with the consent of the stockholders of Trilogy.
(b) Health insurance, provided that when aggregated with health insurance
provided to any other member of the President's immediate family, the
monthly cost of such aggregate insurance does not exceed $500.
(c) An automobile allowance, provided that when aggregated with any
automobile allowance provided to any other member of the President's
immediate family, the monthly cost of such aggregate automobile
allowance does not exceed $1,500.
(d) During the period of the President's employment, the President shall
be reimbursed for reasonable traveling, telephone and other direct
business expenses required in connection with the performance of the
President's duties hereunder, subject to verification required by
Trilogy for audit purposes, for tax deduction purposes and in order to
assure compliance with applicable laws and regulations.
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(e) The President shall be entitled to receive all benefits of employment
generally available to all of Trilogy's employees.
3.3 Indemnification.
Trilogy will defend, indemnify and hold the President harmless from all
liabilities, suits, judgments, fines, penalties or disabilities, including
expenses associated directly, therewith (e.g. legal fees, court costs,
investigative costs, witness fees, etc.) resulting from any reasonable actions
taken by the President in good faith on behalf of Trilogy, its affiliates or for
other persons or entities at the request of the board of directors of Trilogy,
to the fullest extent legally permitted, and in conjunction therewith, shall
assure that all required expenditures are made in a manner making it unnecessary
for the President to incur any out of pocket expenses; provided, however, that
the President permits the majority stockholders of Trilogy to select and
supervise all personnel involved in such defense and that the President waive
any conflicts of interest that such personnel may have as a result of also
representing Trilogy, 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.
Article Four
Special Covenants
4.1 Confidentiality.
(1) The President acknowledges that, in and as a result of the President's
employment hereunder, the President will be developing for Trilogy,
making use of, acquiring and/or adding to, confidential information of
special and unique nature and value relating to such matters as
Trilogy's trade secrets, systems, procedures, manuals, confidential
reports, personnel resources, strategic and tactical plans, advisors,
clients, investors and funders; consequently, as material inducement
to the entry into this Agreement by Trilogy, the President hereby
covenants and agrees that the President shall not, at anytime during
or following the terms of the President's employment hereunder,
directly or indirectly, personally use, divulge or disclose, for any
purpose whatsoever, any of such confidential information which has
been obtained by or disclosed to the President as a result of the
President's employment by Trilogy, or Trilogy's affiliates.
(2) In the event of a breach or threatened breach by the President of any
of the provisions of this Section 4.1, Trilogy, in addition to and not
in limitation of any other rights, remedies or damages available to
Trilogy, whether at law or in equity, shall be entitled to a permanent
injunction in order to prevent or to restrain any such breach by the
President, or by the President's partners, agents, representatives,
servants, employers, employees, affiliates and/or any and all persons
directly or indirectly acting for or with the President.
4.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly occur to
Trilogy as a result of a breach by the President of the covenants or agreements
contained in this Article Four, and in view of the lack of an adequate remedy at
law to protect Trilogy's interests, the President hereby covenants and agrees
that Trilogy shall have the following additional rights and remedies in the
event of a breach hereof:
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(a) The President hereby consents to the issuance of a permanent
injunction enjoining the President from any violations of the
covenants set forth in Section 4.1 hereof; and
(b) Because it is impossible to ascertain or estimate the entire or exact
cost, damage or injury which Trilogy may sustain prior to the
effective enforcement of such injunction, the President hereby
covenants and agrees to pay over to Trilogy, in the event the
President violates the covenants and agreements contained in Section
4.2 hereof, the greater of:
(i) Any payment or compensation of any kind received by the President
because of such violation before the issuance of such injunction,
or
(ii) The sum of One Thousand ($1,000.00) Dollars per violation, which
sum shall be liquidated damages, and not a penalty, for the
injuries suffered by Trilogy as a result of such violation, the
Parties hereto agreeing that such liquidated damages are not
intended as the exclusive remedy available to Trilogy 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 Trilogy from
the injury caused by such breaches would be injunctive relief.
4.3 Cumulative Remedies.
The President hereby irrevocably agrees that the remedies described in
Section 4.3 hereof shall be in addition to, and not in limitation of, any of the
rights or remedies to which Trilogy is or may be entitled to, whether at law or
in equity, under or pursuant to this Agreement.
4.4 Acknowledgment of Reasonableness.
The President hereby represents, warrants and acknowledges that the
President has carefully read and considered the provisions of this Article Four
and, having done so, agrees that the restrictions set forth herein are fair and
reasonable and are reasonably required for the protection of the interests of
Trilogy, its officers, directors and other employees; consequently, in the event
that any of the above-described restrictions shall be held unenforceable by any
court of competent jurisdiction, the President hereby covenants, agrees and
directs such court to substitute a reasonable judicially enforceable limitation
in place of any limitation deemed unenforceable and, the President hereby
covenants and agrees that if so modified, the covenants contained in this
Article Four shall be as fully enforceable as if they had been set forth herein
directly by the Parties. In determining the nature of this limitation, the
President hereby acknowledges, covenants and agrees that it is the intent of the
Parties that a court adjudicating a dispute arising hereunder recognize that the
Parties desire that this covenant not to compete be imposed and maintained to
the greatest extent possible.
4.5 Unauthorized Acts.
The President hereby covenants and agrees that the President will not do
any act or incur any obligation on behalf of Trilogy of any kind whatsoever,
except as authorized by its board of directors or by its stockholders pursuant
to duly adopted stockholder action.
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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 President:
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇; ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇; Fax (▇▇▇) ▇▇▇-▇▇▇▇
To Trilogy:
Trilogy International, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇; ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
Telephone (▇▇▇) ▇▇▇-▇▇▇▇; Fax (▇▇▇) ▇▇▇-▇▇▇▇;
web site ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇; with a copy to
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire; ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇; ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇; Fax (▇▇▇) ▇▇▇-▇▇▇▇; and,
e-mail ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
(2) In each case, copies of notices will also be provided to:
AmeriNet ▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇-▇; ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇, Fax (▇▇▇) ▇▇▇-▇▇▇▇; and,
e-mail ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, President; and
AmeriNet ▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇; ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇; Fax (▇▇▇) ▇▇▇-▇▇▇▇; and e-mail ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary;
(3) 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.
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5.2 Amendment.
(1) No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is in writing and signed by
the Party against which the enforcement of said modification, waiver,
amendment, discharge or change is sought.
(2) This Agreement may not be modified without the consent of a majority
in interest of Trilogy'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, three by
Trilogy's majority stockholder, one by Trilogy and two by
the President.
183
(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,, three by Trilogy's
majority stockholder, one by Trilogy and two by the President.
(3) (A) Expenses of mediation shall be borne by Trilogy, if
successful.
(B) Expenses of mediation, if unsuccessful and of arbitration
shall be borne by the Party or Parties against whom the
arbitration decision is rendered.
(C) If the terms of the arbitral award do not establish a
prevailing Party, then the expenses of unsuccessful
mediation and arbitration shall be borne equally by the
Parties.
5.8 Benefit of Agreement.
(1) This Agreement may not be assigned by the President without the prior
Written consent of Trilogy and Trilogy's stockholders.
(2) Subject to the restrictions on transferability and assignment
contained herein, the terms and provisions of this Agreement shall be
binding upon and inure to the benefit of the Parties, their
successors, assigns, personal representative, estate, heirs and
legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope of this Agreement or the
intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or cause
to be done, executed or acknowledged or delivered and to perform all such acts
and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but, rather,
the relationship established hereby is that of employer-employee in Trilogy.
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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.
(c) The interpretation of this Agreement shall not be directly or
indirectly affected in any manner as a result of its authorship.
In Witness Whereof, the Parties have executed this Agreement, effective as
of the last date set forth below.
Signed, Sealed & Delivered
In Our Presence
President
--------------------------
-------------------------- ------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Dated: November ___, 1999
Trilogy Internationals, Inc.
a Florida corporation.
--------------------------
__________________________ By: --------------------------
▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, President
(CORPORATE SEAL)
Attest:__________________________
▇▇▇▇ ▇▇▇▇▇▇
Secretary
Dated: November ___, 1999
185
Executive's Employment Agreement
This Executive's Employment Agreement (the "Agreement") is entered into by
and among ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, an individual residing in the State of Florida (the
"Chief Executive Officer"); Trilogy International, Inc., a Florida corporation
(collectively and generically hereinafter referred to with its successors in
interest, if any, as "Trilogy"; Trilogy and the Chief Executive Officer being
sometimes hereinafter collectively to as the "Parties" or generically as a
"Party".
Preamble:
WHEREAS, Trilogy's board of directors is of the opinion that in conjunction
with effectuation of Trilogy's future plans it must memorialize, confirm and
assure itself of the continuing the services of Trilogy's founder, who currently
serves as its Chief Executive Officer and director, on a long term basis; and
WHEREAS, the Chief Executive Officer is thoroughly knowledgeable with all
aspects of Trilogy's operations and plans; and
WHEREAS, the Chief Executive Officer is agreeable to serving as Trilogy's
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 Chief Executive
Officer'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 December
31, 2004.
1.2 Renewals.
This Agreement shall be renewed automatically, after expiration of the
original term, on a continuing annual basis, unless the Party wishing not to
renew this Agreement provides the other Party with Written notice of its
election not to renew ("Termination Election Notice") on or before the 30th day
prior to termination of the then current term.
1.3 Earlier Termination.
(a) Trilogy shall each have the right to terminate this Agreement prior to the
expiration of its Term, as it applies to them (without affecting the
Agreement as it applies to the other, except in conjunction with the
compensation aspects thereof), or of any renewals thereof, subject to the
provisions of Section 1.4, for the following reasons:
186
(1) For Cause:
(A) Trilogy may terminate the Chief Executive Officer's employment
under this Agreement at any time for cause.
(B) Such termination shall be evidenced by written notice thereof to
the Chief Executive Officer, which notice shall specify the cause
for termination.
(C) For purposes hereof, the term "cause" shall mean:
(a) The inability of the Chief Executive Officer, through
sickness or other incapacity, to discharge the Chief
Executive Officer's duties under this Agreement for ninety
or more consecutive days or for a total of 120 or more days
in a period of twelve consecutive months;
(2) The refusal of the Chief Executive Officer to follow the directions of
Trilogy's board of directors;
(3) Dishonesty; theft; or conviction of a crime involving moral turpitude;
(4) Material default in the performance by the Chief Executive Officer of
the Chief Executive Officer's obligations, services or duties required
under this Agreement (other than for illness or incapacity) or
materially breach of any provision of this Agreement, which default or
breach has continued for twenty days after Written notice of such
default or breach and such material default or breach has resulted in
material damage to Trilogy.
(D) In the event of a dispute concerning termination due to breach or default,
the Chief Executive Officer's compensation shall be continued until
resolution of such dispute by a tribunal of competent jurisdiction, it
being understood that the Chief Executive Officer must repay any amounts so
paid upon final determination that the Chief Executive Officer was not
entitled to such compensation.
(2) Discontinuance of Business:
In the event that Trilogy 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 Trilogy shall not be deemed a termination
of its business.
(3) Death:
This Agreement shall terminate immediately on the death of the Chief
Executive Officer; however, all accrued compensation at such time shall be
promptly paid to the Chief Executive Officer's estate.
(b) The Chief Executive Officer shall have the right to terminate
this Agreement if Trilogy fails to obtain at least $900,000 in
funding during the period starting on November 15, 1999 and
ending on June 30, 2000; unless the failure to obtain such
funding is based on a default by Trilogy or its successors in
interest in its obligations under any agreement pursuant to which
such funding was to have been provided or the failure of Trilogy
to meet the conditions required for such funding.
187
1.4 Final Settlement.
Upon termination of this Agreement and payment to the Chief Executive
Officer of all amounts due to the Chief Executive Officer hereunder, the Chief
Executive Officer or the Chief Executive Officer's representative shall execute
and deliver to the terminating entity on a form prepared by Trilogy, 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 Trilogy 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.
Trilogy hereby hires the Chief Executive Officer and the Chief Executive
Officer hereby accepts such employment, in accordance with the terms, provisions
and conditions of this Agreement.
2.2 General Description of Duties.
(a) The Chief Executive Officer shall be employed as the Chief Executive
Officer of Trilogy and perform the duties generally associated with
the position of Chief Executive Officer thereof.
(b) Without limiting the generality of the foregoing, the Chief Executive
Officer shall:
(1) Help direct Trilogy to ensure the realization of its mission,
philosophy and goals
(2) Provide the leadership to ensure that Trilogy remains focused on
providing Field Representatives with the necessary tools,
products, operational support, compensation and commitment
necessary for success. This is a cornerstone of Trilogy and will
always be of the utmost importance
(3) Oversee all Trilogy financial decisions
(4) Develop long term strategic planning and goals
(5) Provide overall support to all Team Leaders
(6) Work with the Trilogy Board of Directors to ensure the stability
of the company
(7) Approve compensation and benefit programs
(8) Develop a minimum of eight frontline Field Representatives. Guide
the front line in building a sales force to meet or exceed the
annual sales projections
(9) Train and motivate the Field Representatives by being in the
field supporting their efforts
(10) Ensure that Trilogy is profitable and all shareholders can
realize the maximum return on their investment.
188
2.4 Exclusivity.
The Chief Executive Officer shall, unless specifically otherwise authorized
by Trilogy's board of directors, on a case by case basis, devote all of the
Chief Executive Officer's business time exclusively to the affairs of Trilogy.
Article Three
Compensation
3.1 Compensation.
As consideration for the Chief Executive Officer's services to Trilogy the
Chief Executive Officer shall be entitled to:
(a) A salary in an aggregate gross sum equal to $80,000 per year (the
"Base Salary"); provided that, with the consent of Trilogy's
stockholders, who will be deemed third party beneficiaries of
Trilogy's rights under this Agreement, such compensation may be
adjusted at six month intervals to reflect the performance of the
Chief Executive Officer during such period, as reflected in the
performance of Trilogy during such period.
(b) Provided that Trilogy earned a net, pre tax profit for the subject
year, an annual bonus payable within 15 days after preparation and
delivery of final audited annual financial statements for Trilogy to
Trilogy's stockholders:
(1) In a cash sum equal to 2.5% of the net, pre tax profits of
Trilogy and
(2) In the event that Trilogy or its successors interest are publicly
held corporations (or if Trilogy is a subsidiary of a publicly
held corporation), a bonus payable in the common stock of the
closest level publicly held corporation, equal to the number of
shares obtained by dividing 20% of the Chief Executive Officer's
salary for the subject year by the closing transaction price for
the issuer's securities involved on the last trading day of the
subject year.
3.2 Benefits.
During the term of this Agreement, the Chief Executive Officer shall also
be entitled to the following benefits:
(a) Two weeks paid vacation per year subject to adjustment after annually
after the first year with the consent of the stockholders of Trilogy.
(b) Health insurance, provided that when aggregated with health insurance
provided to any other member of the Chief Executive Officer's
immediate family, the monthly cost of such aggregate insurance does
not exceed $500.
(c) An automobile allowance, provided that when aggregated with any
automobile allowance provided to any other member of the Chief
Executive Officer's immediate family, the monthly cost of such
aggregate automobile allowance does not exceed $1,500.
(d) During the period of the Chief Executive Officer's employment, the
Chief Executive Officer shall be reimbursed for reasonable traveling,
telephone and other direct business expenses required in connection
with the performance of the Chief Executive Officer's duties
hereunder, subject to verification required by Trilogy for audit
purposes, for tax deduction purposes and in order to assure compliance
with applicable laws and regulations.
189
(e) The Chief Executive Officer shall be entitled to receive all benefits
of employment generally available to all of Trilogy's employees.
3.3 Indemnification.
Trilogy will defend, indemnify and hold the Chief Executive Officer
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 the Chief Executive Officer in good faith on behalf
of Trilogy, its affiliates or for other persons or entities at the request of
the board of directors of Trilogy, 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 Chief Executive Officer to incur any
out of pocket expenses; provided, however, that the Chief Executive Officer
permits the majority stockholders of Trilogy to select and supervise all
personnel involved in such defense and that the Chief Executive Officer waive
any conflicts of interest that such personnel may have as a result of also
representing Trilogy, 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.
Article Four
Special Covenants
4.1 Confidentiality.
(1) The Chief Executive Officer acknowledges that, in and as a result of the
Chief Executive Officer's employment hereunder, the Chief Executive Officer
will be developing for Trilogy, making use of, acquiring and/or adding to,
confidential information of special and unique nature and value relating to
such matters as Trilogy's trade secrets, systems, procedures, manuals,
confidential reports, personnel resources, strategic and tactical plans,
advisors, clients, investors and funders; consequently, as material
inducement to the entry into this Agreement by Trilogy, the Chief Executive
Officer hereby covenants and agrees that the Chief Executive Officer shall
not, at anytime during or following the terms of the Chief Executive
Officer's employment hereunder, directly or indirectly, personally use,
divulge or disclose, for any purpose whatsoever, any of such confidential
information which has been obtained by or disclosed to the Chief Executive
Officer as a result of the Chief Executive Officer's employment by Trilogy,
or Trilogy's affiliates.
(2) In the event of a breach or threatened breach by the Chief Executive
Officer of any of the provisions of this Section 4.1, Trilogy, in addition
to and not in limitation of any other rights, remedies or damages available
to Trilogy, whether at law or in equity, shall be entitled to a permanent
injunction in order to prevent or to restrain any such breach by the Chief
Executive Officer, or by the Chief Executive Officer's partners, agents,
representatives, servants, employers, employees, affiliates and/or any and
all persons directly or indirectly acting for or with the Chief Executive
Officer.
4.2 Special Remedies.
In view of the irreparable harm and damage which would undoubtedly occur to
Trilogy as a result of a breach by the Chief Executive Officer of the covenants
or agreements contained in this Article Four, and in view of the lack of an
adequate remedy at law to protect Trilogy's interests, the Chief Executive
Officer hereby covenants and agrees that Trilogy shall have the following
additional rights and remedies in the event of a breach hereof:
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(a) The Chief Executive Officer hereby consents to the issuance of a
permanent injunction enjoining the Chief Executive Officer from any
violations of the covenants set forth in Section 4.1 hereof; and
(b) Because it is impossible to ascertain or estimate the entire or exact
cost, damage or injury which Trilogy may sustain prior to the
effective enforcement of such injunction, the Chief Executive Officer
hereby covenants and agrees to pay over to Trilogy, in the event the
Chief Executive Officer violates the covenants and agreements
contained in Section 4.2 hereof, the greater of:
(i) Any payment or compensation of any kind received by the Chief
Executive Officer because of such violation before the issuance
of such injunction, or
(ii) The sum of One Thousand ($1,000.00) Dollars per violation, which
sum shall be liquidated damages, and not a penalty, for the
injuries suffered by Trilogy as a result of such violation, the
Parties hereto agreeing that such liquidated damages are not
intended as the exclusive remedy available to Trilogy 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 Trilogy from
the injury caused by such breaches would be injunctive relief.
4.3 Cumulative Remedies.
The Chief Executive Officer hereby irrevocably agrees that the remedies
described in Section 4.3 hereof shall be in addition to, and not in limitation
of, any of the rights or remedies to which Trilogy is or may be entitled to,
whether at law or in equity, under or pursuant to this Agreement.
4.4 Acknowledgment of Reasonableness.
The Chief Executive Officer hereby represents, warrants and acknowledges
that the Chief Executive Officer has carefully read and considered the
provisions of this Article Four and, having done so, agrees that the
restrictions set forth herein are fair and reasonable and are reasonably
required for the protection of the interests of Trilogy, 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 Chief Executive Officer hereby covenants, agrees and directs such court to
substitute a reasonable judicially enforceable limitation in place of any
limitation deemed unenforceable and, the Chief Executive Officer hereby
covenants and agrees that if so modified, the covenants contained in this
Article Four shall be as fully enforceable as if they had been set forth herein
directly by the Parties. In determining the nature of this limitation, the Chief
Executive Officer hereby acknowledges, covenants and agrees that it is the
intent of the Parties that a court adjudicating a dispute arising hereunder
recognize that the Parties desire that this covenant not to compete be imposed
and maintained to the greatest extent possible.
4.5 Unauthorized Acts.
The Chief Executive Officer hereby covenants and agrees that the Chief
Executive Officer will not do any act or incur any obligation on behalf of
Trilogy of any kind whatsoever, except as authorized by its board of directors
or by its stockholders pursuant to duly adopted stockholder action.
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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 Chief Executive Officer:
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇; ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇; Fax (▇▇▇) ▇▇▇-▇▇▇▇
To Trilogy:
Trilogy International, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇; ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Chief Executive Officer
Telephone (▇▇▇) ▇▇▇-▇▇▇▇; Fax (▇▇▇) ▇▇▇-▇▇▇▇;
web site ▇▇▇.▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇; with a copy to
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esquire; ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇; ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇; Fax (▇▇▇) ▇▇▇-▇▇▇▇; and, e-mail ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
(2) In each case, copies of notices will also be provided to:
AmeriNet ▇▇▇▇▇.▇▇▇, Inc.
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇-▇; ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇, Fax (▇▇▇) ▇▇▇-▇▇▇▇; and, e-mail ▇▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇.▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇, Chief Executive Officer; and
AmeriNet ▇▇▇▇▇.▇▇▇, Inc.
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇; ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇; Fax (▇▇▇) ▇▇▇-▇▇▇▇; and e-mail ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Secretary;
(3) 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.
5.2 Amendment.
(1) No modification, waiver, amendment, discharge or change of this
Agreement shall be valid unless the same is in writing and signed by
the Party against which the enforcement of said modification, waiver,
amendment, discharge or change is sought.
192
(2) This Agreement may not be modified without the consent of a majority
in interest of Trilogy'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, three by
Trilogy's majority stockholder, one by Trilogy and two by
the Chief Executive Officer.
(B) The mediation efforts shall be concluded within ten business
days after their initiation unless the Parties unanimously
agree to an extended mediation period;
193
(2) In the event that mediation does not lead to a resolution of the
dispute then at the request of any Party, the Parties shall
submit the dispute to binding arbitration before an arbitration
service located in Broward County, Florida to be selected by lot,
from six alternatives to be provided,, three by Trilogy's
majority stockholder, one by Trilogy and two by the Chief
Executive Officer.
(3) (A) Expenses of mediation shall be borne by Trilogy, if
successful.
(2) Expenses of mediation, if unsuccessful and of arbitration shall be borne by
the Party or Parties against whom the arbitration decision is rendered.
(3) If the terms of the arbitral award do not establish a prevailing Party,
then the expenses of unsuccessful mediation and arbitration shall be borne
equally by the Parties.
5.8 Benefit of Agreement.
(1) This Agreement may not be assigned by the Chief Executive Officer without
the prior Written consent of Trilogy and Trilogy's stockholders.
(2) Subject to the restrictions on transferability and assignment contained
herein, the terms and provisions of this Agreement shall be binding upon
and inure to the benefit of the Parties, their successors, assigns,
personal representative, estate, heirs and legatees.
5.9 Captions.
The captions in this Agreement are for convenience and reference only and
in no way define, describe, extend or limit the scope of this Agreement or the
intent of any provisions hereof.
5.10 Number and Gender.
All pronouns and any variations thereof shall be deemed to refer to the
masculine, feminine, neuter, singular or plural, as the identity of the Party or
Parties, or their personal representatives, successors and assigns may require.
5.11 Further Assurances.
The Parties hereby agree to do, execute, acknowledge and deliver or cause
to be done, executed or acknowledged or delivered and to perform all such acts
and deliver all such deeds, assignments, transfers, conveyances, powers of
attorney, assurances, recipes, records and other documents, as may, from time to
time, be required herein to effect the intent and purposes of this Agreement.
5.12 Status.
Nothing in this Agreement shall be construed or shall constitute a
partnership, joint venture, agency, or lessor-lessee relationship; but, rather,
the relationship established hereby is that of employer-employee in Trilogy.
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.
194
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.
(c) The interpretation of this Agreement shall not be directly or
indirectly affected in any manner as a result of its authorship.
In Witness Whereof, the Parties have executed this Agreement, effective as
of the last date set forth below.
Signed, Sealed & Delivered
In Our Presence
Chief Executive Officer
--------------------------
------------------------- -------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇
Dated: November ___, 1999
Trilogy Internationals, Inc.
a Florida corporation.
--------------------------
__________________________ By: -------------------------
▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇,
Chief executive officer
(CORPORATE SEAL)
Attest:__________________________
▇▇▇▇ ▇▇▇▇▇▇
Secretary
Dated: November ___, 1999
195
EMPLOYMENT AGREEMENT
THIS EMPLOYMENT AGREEMENT (the "Agreement") entered into as of this 1st day
of April, 1999, between Trilogy International Inc., (the "Company"), and ▇▇▇▇
▇▇▇▇▇ (the "Executive").
WHEREAS, the Company desires to employ the Executive and to ensure the
continued availability to the Company of the Executive's services, and the
Executive is willing to accept such employment and render such services, all
upon and subject to the terms and conditions contained in this Agreement; and
WHEREAS, the Company acknowledges that the Executive is currently running
advertisements and otherwise marketing pet products under the name of "Dr. ▇▇▇▇"
through Dr.▇▇▇▇, Inc.;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
set forth in this Agreement, and intending to be legally bound, the Company and
the Executive agree as follows:
1. Term of Employment.
(a)Term. The Company hereby employs the Executive, and the Executive
hereby accepts employment with the Company for a period of five years commencing
on the date of this Agreement.
(b)Continuing Effect. Notwithstanding any termination of this Agreement at
the end of the Term or otherwise, the provisions of Sections 6 and 7 shall
remain in full force and effect and the provisions of Section 7 shall be binding
upon the legal representatives, successors and assigns of the Executive.
2. Duties.
(a) General Duties. The Executive shall serve as the Executive Director of
New Products for the Company with duties and responsibilities which include the
active management of the day-to-day product development and marketing, subject
to the directions of the President. The Executive shall use her best efforts to
perform her duties and discharge her responsibilities pursuant to this Agreement
competently, carefully and faithfully.
(b)Specific Duties with Regard to Dr. ▇▇▇▇, Inc. This Agreement is
specifically contingent upon and subject to the Executive taking the actions
listed below:
(i)Upon execution of this Agreement, the Executive shall immediately
communicate her plans to join the Company as its Executive Director of New
Products in all her appearances, whether in person or via audio, visual or other
media and in all articles, advertisements, interviews, marketing materials and
other promotional material she writes and/or distributes. Additionally the
Executive shall immediately communicate her role with the Company to any company
or organization in which she sits on the board of directors or advisors or as
for which she provides services.
(ii)Two weeks prior to the Company commences marketing of its products,
(which date may be communicated to the Executive in writing), all customers of
the Executive shall be contacted or on behalf of by the Executive in writing,
informing them that she has joined the Company as its Executive Director of New
Products and advising the customers of the Company's expanded product line. The
Company shall be responsible for preparing the written materials that the
Executive shall send to her customers. Additionally all those customers shall be
placed in ▇▇▇▇▇ ▇▇▇▇ "downline" organization and that term as defined in the
Company's commission structure.
196
(iii)Once the Company commences marketing its products, the Executive shall
individually (and shall cause Dr. ▇▇▇▇, Inc. to) cease all marketing of "Dr.
▇▇▇▇" products. However, the Executive may retain the revenue from sales of Dr.
▇▇▇▇ products resulting from advertisements placed prior to such time.
(iv)On or before July 16, 1999 all "Dr. ▇▇▇▇" calls shall be routed to the
Company's call center.
(v)The Executive shall cause Dr. ▇▇▇▇, Inc. to license and assign to the
Company its entire customer list as shown on Schedule 2(a)(vi) and authorize the
Company to market its products to that customer list; and
(vi) The Executive shall cause Dr. ▇▇▇▇, Inc. to enter into an agreement
with the Company, in the form shown on Schedule 2(b)(iv) to assign and give it a
99 year royalty-free license to all formulas owned by Dr. ▇▇▇▇, Inc. In the
event that the Company ceases operations for any reason other than the sale all
or of (substantially all of the assets of the Company or the merger of the
Company into another entity where the products will no longer be sold the
Company, all formulas owned by Dr. ▇▇▇▇, Inc. and licensed and assigned to the
Company shall become the property of ▇▇▇▇▇ ▇▇▇▇ and all customers assigned to
the Company shall continue as customers of ▇▇▇▇▇ ▇▇▇▇.
(c)Devotion of Time. Subject to the last sentence of this Section 2(c), the
Executive shall devote all of her time, attention and energies during normal
business hours (exclusive of periods of sickness and disability and of such
normal holiday and vacation periods as have been established by the Company) to
the affairs of the Company. The Executive shall not enter the employ of or serve
as a consultant to, or in any way perform any services with or without
compensation to, any other persons, business or organization without the prior
consent of the President of the Company; provided, that the Executive shall be
permitted to devote a limited amount of her time, without compensation, to
professional, charitable or similar organizations.
(d) Travel. The Executive shall be required to travel as may be necessary
in order to carry out her duties.
3. Compensation and Expenses.
(a)Salary. For the services of the Executive to be rendered under this
Agreement, the Company shall pay the Executive an annual salary of $ (the "Base
Salary"). The Base Salary may be increased each year by an amount that will be
determined by the Company based on an annual performance evaluation. The Company
shall also grant options to purchase shares of the Company's common stock
exercisable at $____ per share.
(b)Expenses. In addition to any compensation received pursuant to Sections
3(a) and (c), the Company will reimburse or advance funds to the Executive for
all reasonable travel, entertainment and miscellaneous expenses incurred in
connection with the performance of her duties under this Agreement, provided
that the Executive properly accounts for such expenses to the Company in
accordance with the Company's practices. Such reimbursement or advances will be
made in accordance with policies and procedures of the Company in effect from
time to time relating to reimbursement of or advances to the employees.
(c) Management Bonus. During the term of this Agreement, the Company shall
review the Executive's performance no less than annually and has the discretion
to grant the Executive a management bonus.
(i) Eligibility. In order for the Executive to be eligible for a bonus
under the Company's Management Bonus Plan, the Executive must be an employee of
the Company. Should the Executive cease to be employed by the Company, all
remaining payments or unvested stock option grants shall be forfeited.
197
4. Benefits.
(a)Vacation. For each 12-month period during the Term, the Executive shall
be entitled to three weeks of vacation without loss of compensation or other
benefits to which she is entitled under this Agreement, to be taken at such
times as the Executive may select and the affairs of the Company may permit.
(b)Employee Benefit Programs. The Executive is entitled to participate in
any pension, 401(k), insurance or other employee benefit plan that is maintained
by the Company for its executive officers, including programs of life, medical
and disability insurance and reimbursement of membership fees in civic, social
and professional organization.
5. Termination.
(a)Termination for Cause. For purposes of this Section 5(a), "cause" shall
mean: (i) the Executive is convicted of a felony or commits a felonious act
which is related to the Executive's employment or the business of the Company;
(ii) the Executive, in carrying out her duties hereunder, has acted with
negligence or intentional misconduct resulting, in either case, in harm to the
Company; (iii) the Executive misappropriates Company property or funds or
defrauds the Company; (iv) the Executive breaches her fiduciary duty to the
Company resulting in profit to her, directly or indirectly; (v) the Executive
materially breaches any agreement with the Company; (vi) the Executive
materially fails to perform her duties under Section 2 (vi) the Executive fails
to perform her duties or performs such duties in a manner not customary for an
executive of similar status and compensation; (viii) the Executive suffers from
alcoholism or drug addiction or otherwise uses alcohol to excess or uses drugs
in any form except strictly in accordance with the recommendation of a physician
or dentist; or (ix) it is later determined that the Executive fraudulently
concealed facts or made misrepresentations concerning the formulations, trade
secrets, technical "know-how" and proprietary information assigned and licensed
by Dr. ▇▇▇▇, Inc. to the Company.
(b)Death or Disability. Except as otherwise provided in this Agreement, it
shall terminate upon the death, or disability of the Executive. For purposes of
this Section 5(b), "disability" shall mean that for a period of three
consecutive months in any 12-month period the Executive is incapable of
substantially fulfilling the duties set forth in Section 2 because of physical,
mental or emotional incapacity resulting from injury, sickness or disease. In
the event of death of the Executive, the Executive's estate shall receive the
Executive's compensation and benefits for the remainder of the term of this
Agreement or 24 months whichever is greater.
6. Non-Competition Agreement.
(a)Competition with the Company. The Company intends to engage in the sale
and marketing of its products throughout the United States or any other
countries. Except as outlined in Section 2(b)(vi)Until termination of her
employment and for a period of 12 months commencing on the date of termination,
the Executive, directly or indirectly, in association with or as a stockholder,
director, officer, consultant, employee, field representative, partner, joint
venturer, member or otherwise of or through any person, firm, corporation,
partnership, association or other entity, whether or not involved in direct
sales, network marketing or multi-level marketing, shall not compete with the
Company or its affiliates in the offer, sale or marketing of products or
services that are competitive with the products or services offered by the
Company, within any metropolitan area in the United States or any other
countries or elsewhere in which the Company is then engaged in the offer and
sale of competitive products or services.
198
(b)Solicitation of Customers or Field Representatives. Except as
specifically permitted by this Agreement, during the periods in which the
provisions of Section 6(a) shall be in effect, the Executive, directly or
indirectly, shall not seek Prohibited Business, as defined, from any Customer or
Field Representative, as defined, on behalf of any enterprise or business other
than the Company, refer Prohibited Business from any Customer or Field
Representative to any enterprise or business other than the Company or receive
commissions based on sales or otherwise relating to the Prohibited Business from
any Customer or Field Representative, or any enterprise or business other than
the Company. For purposes of this Section 6(b), the term "Customer" means any
person, firm, corporation, partnership, association or other entity to which the
Company or affiliates sold or provided goods or services during the 24-month
period prior to the time at which any determination is required to be made as to
whether any such person, firm, corporation, partnership, association or other
entity is a Customer or Field Representative. The term "Field Representative"
refers to any representative of the Company who sells or delivers products and
services or has otherwise completed an application to become a Company Field
Representative and includes a Field Representative's Genealogy. Genealogy is
defined as a Field Representative's downline organization which includes all
lines starting with their personally sponsored Field Representatives regardless
of their ranks. The term "Prohibited Business" includes any business whose
products, services, or marketing or distribution plans are the same as or
similar to the Company's.
(c)No Payment. The Executive acknowledges and agrees that no separate or
additional payment will be required to be made to her in consideration of her
undertakings in this Section 6.
7. Non-Disclosure of Confidential Information.
(a)Confidential Information. Confidential Information includes, but is not
limited to, trade secrets as defined by the common law of Florida, the Florida
Uniform Trade Secrets Act, as it may be amended, or any future Florida statute,
processes, policies, procedures, techniques, designs, drawings, know-how,
show-how, technical information, specifications, computer software (including,
but not limited to, computer programs developed, improved or modified by the
Company for or on behalf of the Company for use in the Company's business, and
source code), information and data relating to the development, research,
formulations and formulas, testing, manufacturing, costs, marketing and uses of
the Products (as defined herein), the Company's budgets and strategic plans, and
the identity and special needs of customers for the Products, databases, data,
all technology relating to the Company's marketing and Internet businesses,
systems, methods of operation, Genealogies or Genealogy Reports (as defined
below), employee lists, field representatives, customer lists, customer
information, solicitation leads, marketing and advertising materials, methods
and manuals and forms, all of which pertain to the activities or operations of
the Company, names, home addresses and all telephone numbers and e-mail
addresses of the Company's employees, field representatives and former field
representatives, and former employees. Confidential Information also includes,
without limitation, Confidential Information received from the Company's
subsidiaries and affiliates. For purposes of this Agreement, the following will
not constitute Confidential Information (i) information which is or subsequently
becomes generally available to the public through no act of the Executive, and
(ii) information which is lawfully obtained by the Executive in writing from a
third party (excluding any affiliates of the Executive) who did not acquire such
confidential information or trade secret, directly or indirectly, from Executive
or the Company. As used herein, the term "Products" shall include all computer
software, formulations and formulas, services and tangible goods researched,
developed, tested, manufactured, sold, licensed, leased or otherwise distributed
or put in to use by the Company, together with all services and tangible goods
in the planning stages, provided by the Company during the term of Executive's
employment. The term "Genealogy Reports" are reports containing a list or
description of a Field Representative's Genealogy or containing the business
activity of a Field Representative's downline organization.
(b)Legitimate Business Interests. The Executive recognizes that the Company
has legitimate business interests to protect and as a consequence, the Executive
agrees to the restrictions contained in this Agreement because they further the
Company's legitimate business interests. These legitimate business interests
include, but are not limited to (i) trade secrets as defined in Section 7(a),
(ii) valuable confidential business or professional information that otherwise
does not qualify as trade secrets including all Confidential Information; (iii)
substantial relationships with specific prospective or existing Customers or
Field Representatives or clients; (iv) Customer goodwill associated with the
Company's business; and (v) specialized training relating to the Company's
technology, methods and procedures.
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(c)Confidentiality. For a period of five years from the Executive's
termination of employment, the Confidential Information shall be held by the
Executive in the strictest confidence and shall not, without the prior written
consent of the Company, be disclosed to any person other than in connection with
Executive's employment by the Company. The Executive further acknowledges that
such Confidential Information as is acquired and used by the Company or its
affiliates is a special, valuable and unique asset. The Executive shall exercise
all due and diligence precautions to protect the integrity of the Company's
Confidential Information and to keep it confidential whether it is in written
form, on electronic media or oral. The Executive shall not copy any Confidential
Information except to the extent necessary to her employment nor remove any
Confidential Information or copies thereof from the Company's premises except to
the extent necessary to her employment and then only with the authorization of
the Company. All records, files, materials and other Confidential Information
obtained by the Executive in the course of her employment with the Company are
confidential and proprietary and shall remain the exclusive property of the
Company. The Executive shall not, except in connection with and as required by
her performance of her duties under this Agreement, for any reason use for her
own benefit or the benefit of any person or entity with which she may be
associated or disclose any such Confidential Information to any person, firm,
corporation, association or other entity for any reason or purpose whatsoever
without the prior written consent of the board of directors or the chief
executive officer of the Company.
8. Ownership of Inventions.
Any product, formulation, formula, invention, procedure, know-how, concept
or other invention or proprietary information developed by the Executive during
the term of this Agreement or subsequently conceived or developed based on
research or marketing conducted during the term of this Agreement shall be owned
exclusively worldwide by the Company and the Executive shall have no property
interest in any of the above tangible or intangible property.
9. Equitable Relief.
(a)The Company and the Executive recognize that the services to be rendered
under this Agreement by the Executive are special, unique and of extraordinary
character, and that in the event of the breach by the Executive of the terms and
conditions of this Agreement or if the Executive, without the prior consent of
the board of directors of the Company, shall leave her employment for any reason
and take any action in violation of Section 6 or Section 7, the Company will be
entitled to institute and prosecute proceedings in any court of competent
jurisdiction referred to in Section 9(b) below, to enjoin the Executive from
breaching the provisions of Section 6 or Section 7. In such action, the
Executive will not allege or argue and the Company will not be required to plead
or prove irreparable harm or lack of an adequate remedy at law and post a bond
or other security. Nothing contained in this Section 8 shall be construed to
prevent the Company from seeking such other remedy in arbitration in case of any
breach of this Agreement by the Executive, as the Company may elect.
(b)Any proceeding or action must be commenced in Florida and venue shall be
in the appropriate court for ▇▇▇▇▇▇ County. The Executive and the Company
irrevocably and unconditionally submit to the exclusive jurisdiction of such
courts and agree to take any and all future action necessary to submit to the
jurisdiction of such courts. The Executive and the Company irrevocably waive any
objection that they now have or hereafter irrevocably waive any objection that
they now have or hereafter may have to the laying of venue of any suit, action
or proceeding brought in any such court and further irrevocably waive any claim
that any such suit, action or proceeding brought in any such court has been
brought in an inconvenient forum. Final judgment against the Executive or the
Company in any such suit shall be conclusive and may be enforced in other
jurisdictions by suit on the judgment, a certified or true copy of which shall
be conclusive evidence of the fact and the amount of any liability of the
Executive or the Company therein described, or by appropriate proceedings under
any applicable treaty or otherwise.
200
10. Assignability.
The rights and obligations of the Company under this Agreement shall inure
to the benefit of and be binding upon the successors and assigns of the Company,
provided that such successor or assign shall acquire all or substantially all of
the securities or assets and business of the Company. The Executive's
obligations hereunder may not be assigned or alienated and any attempt to do so
by the Executive will be void.
11. Severability.
(a)The Executive expressly agrees that the character, duration and
geographical scope of the non-competition provisions set forth in this Agreement
are reasonable in light of the circumstances as they exist on the date hereof.
Should a decision, however, be made at a later date by a court of competent
jurisdiction that the character, duration or geographical scope of such
provisions is unreasonable, then it is the intention and the agreement of the
Executive and the Company that this Agreement shall be construed by the court in
such a manner as to impose only those restrictions on the Executive's conduct
that are reasonable in the light of the circumstances and as are necessary to
assure to the Company the benefits of this Agreement. If, in any judicial
proceeding, a court shall refuse to enforce all of the separate covenants deemed
included herein because taken together they are more extensive than necessary to
assure to the Company the intended benefits of this Agreement, it is expressly
understood and agreed by the parties hereto that the provisions of this
Agreement that, if eliminated, would permit the remaining separate provisions to
be enforced in such proceeding shall be deemed eliminated, for the purposes of
such proceeding, from this Agreement.
(b)If any provision of this Agreement otherwise is deemed to be invalid or
unenforceable or is prohibited by the laws of the state or jurisdiction where it
is to be performed, this Agreement shall be considered divisible as to such
provision and such provision shall be inoperative in such state or jurisdiction
and shall not be part of the consideration moving from either of the parties to
the other. The remaining provisions of this Agreement shall be valid and binding
and of like effect as though such provision were not included.
12. Notices and Addresses.
All notices, offers, acceptance and any other acts under this Agreement
(except payment) shall be in writing, and shall be sufficiently given if
delivered to the addressees in person, by Federal Express or similar receipted
delivery, by facsimile delivery or, if mailed, postage prepaid, by certified
mail, return receipt requested, as follows:
To the Company:
Trilogy International, Inc.
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
With a Copy to:
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇., ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile (▇▇▇) ▇▇▇-▇▇▇▇
201
To the Executive:
▇▇. ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
or to such other address as either of them, by notice to the other may designate
from time to time. The transmission confirmation receipt from the sender's
facsimile machine shall be conclusive evidence of successful facsimile delivery.
Time shall be counted to, or from, as the case may be, the delivery in person or
by mailing.
13. Counterparts.
This Agreement may be executed in one or more counterparts, each of which
shall be deemed an original but all of which together shall constitute one and
the same instrument. The execution of this Agreement may be by actual or
facsimile signature.
14. Arbitration.
Except for a claim for equitable relief, any controversy, dispute or claim
arising out of or relating to this Agreement, or its interpretation,
application, implementation, breach or enforcement which the parties are unable
to resolve by mutual agreement, shall be settled by submission by either party
of the controversy, claim or dispute to binding arbitration in ▇▇▇▇▇▇ County,
Florida the parties agree in writing to a different location, before three
arbitrators in accordance with the rules of the American Arbitration Association
then in effect. In any such arbitration proceeding, the parties agree to provide
all discovery deemed necessary by the arbitrators. The decision and award made
by the arbitrators shall be final, binding and conclusive on all parties hereto
for all purposes, and judgment may be entered thereon in any court having
jurisdiction thereof.
15. Attorney's Fees.
In the event that there is any controversy or claim arising out of or
relating to this Agreement, or to the interpretation, breach or enforcement
thereof, and any action or proceeding is commenced to enforce the provisions of
this Agreement, the prevailing party shall be entitled to a reasonable
attorney's fee, costs and expenses.
16. Governing Law.
This Agreement and any dispute, disagreement, or issue of construction or
interpretation arising hereunder whether relating to its execution, its
validity, the obligations provided therein or performance shall be governed or
interpreted according to the internal laws of the State of Florida without
regard to choice of law considerations.
17. Entire Agreement.
This Agreement constitutes the entire Agreement between the parties and
supersedes all prior oral and written agreements between the parties hereto with
respect to the subject matter hereof. Neither this Agreement nor any provision
hereof may be changed, waived, discharged or terminated orally, except by a
statement in writing signed by the party or parties against which enforcement or
the change, waiver discharge or termination is sought.
18. Additional Documents.
The parties hereto shall execute such additional instruments as may be
reasonably required by their counsel in order to carry out the purpose and
intent of this Agreement and to fulfill the obligations of the parties
hereunder.
202
19. Section and Paragraph Headings.
The section and paragraph headings in this Agreement are for reference
purposes only and shall not affect the meaning or interpretation of this
Agreement.
IN WITNESS WHEREOF, the Company and the Executive have executed this
Agreement as of the date and year first above written.
Witnesses:
Trilogy International, Inc.
By:_______________________
▇▇▇▇▇ ▇▇▇▇▇▇▇, President
Executive
By: _____________________
▇▇▇▇ ▇▇▇▇▇
Dr. ▇▇▇▇, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Trilogy International, Inc.
▇▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Dear Sirs:
Dr. ▇▇▇▇, Inc. is the owner of certain proprietary information and formulas
essential for the preparation for various pet products (the "Proprietary
Information"). All of the products marketed and sold by Dr. ▇▇▇▇, Inc. are owned
exclusively by Dr. ▇▇▇▇, Inc., and not by any individual or other entity. In
consideration of Trilogy International, Inc., (the "Company") entering into an
employment agreement with ▇▇▇▇ ▇▇▇▇▇, the President and owner of Dr. ▇▇▇▇, Inc.
we hereby grant the Company a worldwide, exclusive 99 year royalty-free license
and assignment to all rights to the Proprietary Information, including but not
limited to the right to manufacture, package, market and sell all products
currently developed or developed in the future from the Propriety Information.
This Agreement shall not terminate at any period prior to 99 years except in
accordance with Subsection 2(b)(vi) of the Employment Agreement to which this
License and Assignment Agreement is an Exhibit.
Dr. ▇▇▇▇, Inc.
By:_________________________________
▇▇▇▇ ▇▇▇▇▇, D.V.M., President
203
Exhibit 6.2(D) AmeriNet and Trilogy Acquisition Legal Opinion
The Opinion Letters are attached.
AmeriNet ▇▇▇▇▇.▇▇▇, Inc.
A publicly held Delaware corporation
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ Jordan
President & Chief Executive Officer G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇. ▇▇▇▇▇ Field
Secretary ▇. ▇▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇ Dymytrk
G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esquire ▇▇▇▇ ▇. ▇▇▇▇▇▇
General Counsel ------
Board of Directors
American Internet Technical Center, Inc.
-------
Operating Subsidiary
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇
Web site and e-mail ▇▇▇.▇▇▇▇.▇▇▇
Please respond to Ocala address
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Telephone (▇▇▇) ▇▇▇-▇▇▇▇ Telephone (▇▇▇) ▇▇▇-▇▇▇▇
Fax (▇▇▇) ▇▇▇-▇▇▇▇ Fax (▇▇▇) ▇▇▇-▇▇▇▇
e-mail, ▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇.▇▇▇ e-mail ▇▇▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
November 22, 1999
Trilogy International, Inc.
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
fax: ▇▇▇ ▇▇▇-▇▇▇▇
email: ▇▇▇▇▇▇▇@▇▇▇▇▇▇▇▇▇▇▇▇▇.▇▇▇
Re:Trilogy International, Inc./AmeriNet ▇▇▇▇▇.▇▇▇, Inc. Merger Closing
Ladies and Gentlemen:
We have acted as counsel to AmeriNet ▇▇▇▇▇.▇▇▇, Inc., a Delaware corporation
("AmeriNet") in connection with the Agreement and Plan of Merger among AmeriNet,
(the "Acquiror"), Trilogy Acquisition Corporation ("Trilogy Acquisition") and
Trilogy International , Inc. ("Trilogy International") dated November 22, 1999.
We are providing this opinion to you pursuant to Section 6.2(D) of the Merger
Agreement. Capitalized terms used but not otherwise defined herein shall have
the meanings given them in the Merger Agreement.
A.Basis of Opinion
In rendering the following options, we have reviewed copies of each of the
following documents:
1. The Merger Agreement, including the disclosure schedules and exhibits
thereto;
2. The Certificate of Incorporation, as amended, and the Bylaws of the
Company;
3. Certificates of Good Standing for AmeriNet issued by the Secretary of
State of the State of Delaware;
4. Minutes of proceedings of the Boards of Directors of AmeriNet with
respect to the Merger Agreement duly adopted at a meeting of the Board
of Directors of the AmeriNet held on November 12, 1999;
5. The Certificate of Merger dated as of the date hereof, between
AmeriNet and Trilogy
6. The Articles of Merger dated November 2_, 1999, between Trilogy
International and Trilogy Acquisition;
7. Certificate of Counsel dated as of the date of this letter;
204
8. Officers' Certificate delivered to Counsel as of the date of this
letter.
9. Such other agreements and documents and such matters of law as we have
considered necessary or appropriate for the expression of the opinions
contained herein.
The Merger Agreement and the other documents and information referred to in this
Section A are collectively referred to as the "Transaction Documents."
B.Assumptions
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 (the "Report"). The Report is incorporated by reference
into this opinion letter.
In rendering the following opinions, we have made no assumptions other than
those set forth in the Report, the assumption that the Company complies with all
laws and regulations relating to multi-level marketing, or those in the opinions
below.
C.Opinions
Based solely upon our examination and consideration of the foregoing Transaction
Documents, and in reliance thereon, and subject to the comments, assumptions,
exceptions, qualifications and limitations set forth in the Report, we are of
the opinion that:
1. AmeriNet is a corporation duly organized, validly existing, and in good
standing under the laws of the State of Delaware. AmeriNet is duly authorized to
conduct business and is in good standing under the laws of each jurisdiction
where such qualification is required, and where, to our knowledge, the lack of
such qualification would not have a material adverse effect on the financial
condition of AmeriNet and its subsidiaries taken as a whole (a "Material Adverse
Effect"). We do not pass upon qualification in any other state where the
Agreement is void or voidable due to lack of qualification.
2. AmeriNet has the corporate power and authority to carry on the business in
which it is engaged and to own and use the properties owned and used by it.
3. As of the date hereof, AmeriNet has one subsidiary, ▇▇▇▇▇▇▇.▇▇▇, Inc., f/k/a
American Internet Technical Center, Inc., a Florida corporation..
4.The authorized capital stock of AmeriNet consists of 20,000,000 shares of
Common Stock and 5,000,000 of Preferred Stock, of which there are outstanding
8,354,126 shares of Common Stock shares of Common Stock and 0 shares of
Preferred Stock. There are 4,368,980 shares of common stock reserved for future
issuances.
5. All of the issued and outstanding shares of Common Stock have been duly
authorized and are validly issued, fully paid, and nonassessable. Except as set
forth in the Merger Agreement, to our knowledge there are no outstanding
Options, Warrants, or other outstanding or authorized purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require AmeriNet to issue, sell, or otherwise cause to
become outstanding any shares of its capital stock. To our knowledge, there are
no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to AmeriNet.
6. The Merger Agreement and the transactions contemplated thereby have been
duly authorized by all necessary corporate action on the part of AmeriNet.
AmeriNet has the full power and authority, corporate and otherwise, to execute
and deliver the Merger Agreement and to assume and perform all of its
obligations thereunder. The Merger Agreement has been duly executed and
delivered by AmeriNet and constitutes a legal, valid, and binding obligation of
AmeriNet, enforceable against AmeriNet in accordance with its terms. .
205
7. Neither the execution and the delivery of the Merger Agreement, nor the
consummation of the transactions contemplated thereby, will (i) to our
knowledge, violate any material statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which AmeriNet is subject (ii) violate any
provision of the Certificate of Incorporation or Bylaws of AmeriNet or (iii) to
our knowledge, conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to accelerate,
terminate, modify, or cancel, or require any notice under any agreement,
contract, lease, license, instrument or other arrangement to which AmeriNet is a
party or by which it is bound or to which any of its assets is subject (or
result in the imposition of any security interest upon any of the assets),
except where the violation, conflict, breach, default, acceleration,
termination, modification, cancellation, or failure to give notice would not
have a Material Adverse Effect. Other than in connection with the provisions of
the Florida Business Corporation Act, or as otherwise contemplated by the Merger
Agreement, AmeriNet is not required to give any notice to, make any filing with,
or obtain any authorization, consent, or approval of any government or
governmental agency in order for AmeriNet to consummate the transactions
contemplated by the Merger Agreement.
8. To our knowledge, no judgment is presently filed of record against the
AmeriNet and there is no litigation, arbitration, investigation, inquiry or
other proceedings by or before any federal, state, county or other local
governmental agency or authority, or by any other person or entity pending, or
that would materially adversely affect AmeriNet's ability to perform its
obligations as set forth in the Transaction Documents and we have no knowledge
of any material basis for any such litigation, proceeding, arbitration, claim,
investigation, inquiry or proceeding that would materially adversely affect
AmeriNet; and
9. To the best of our knowledge after due inquiry, no representation, warranty
or statement by AmeriNet in the Transaction Documents contains any untrue
statement of a material fact, or omits or will omit to state a fact necessary in
order to make such representations, warranties or statements not materially
misleading.
Without our prior written consent, this opinion letter may not be quoted in
whole or in part or otherwise referred to in any document or report and may not
be furnished to any person or entity including any governmental agency.
Very truly yours
AmeriNet ▇▇▇▇▇.▇▇▇, Inc.
/s/ G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esquire
General Counsel
cc: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
206
Trilogy Acquisition Corporation
A Florida corporation
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
November 24, 1999
Trilogy International, Inc.
▇▇▇ ▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇,
▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
fax: ▇▇▇ ▇▇▇-▇▇▇▇
Re: Trilogy International, Inc./AmeriNet ▇▇▇▇▇.▇▇▇, Inc. Merger Closing
Ladies and Gentlemen:
We have acted as counsel to Trilogy Acquisition Corporation, a Florida
corporation ("Trilogy Acquisition") in connection with the Agreement and Plan of
Merger among AmeriNet ▇▇▇▇▇.▇▇▇, Inc., (the "Acquiror"), Trilogy Acquisition
Corporation ("Trilogy Acquisition") and Trilogy International , Inc. ("Trilogy
International") dated November 24, 1999. We are providing this opinion to you
pursuant to Section 6.2(D) of the Merger Agreement. Capitalized terms used but
not otherwise defined herein shall have the meanings given them in the Merger
Agreement.
A. Basis of Opinion
In rendering the following options, we have reviewed copies of each of the
following documents:
1.The Merger Agreement, including the disclosure schedules and exhibits
thereto;
2.The Certificate of Incorporation, as amended, and the Bylaws of Trilogy
Acquisition;
3.Minutes of proceedings of the Boards of Directors of Trilogy Acquisition
with respect to the Merger Agreement duly adopted at a meeting of the Board of
Directors of the Company held on November 24, 1999;
4.Minutes of proceedings of the stockholders of Trilogy Acquisition regarding
approval of the Merger Agreement at the Special Meeting of the Stockholders of
the Company held on November 24, 1999.
5.The Articles of Merger dated November 24, 1999, between Trilogy
International and Trilogy Acquisition;
6.Such other agreements and documents and such matters of law as we have
considered necessary or appropriate for the expression of the opinions contained
herein.
The Merger Agreement and the other documents and information referred to in this
Section A are collectively referred to as the "Transaction Documents."
B.Assumptions
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 (the "Report"). The Report is incorporated by reference
into this opinion letter.
In rendering the following opinions, we have made no assumptions other than
those set forth in the Report, the assumption that Trilogy Acquisition complies
with all laws and regulations relating to multi-level marketing, or those in the
opinions below.
207
C.Opinions
Based solely upon our examination and consideration of the foregoing Transaction
Documents, and in reliance thereon, and subject to the comments, assumptions,
exceptions, qualifications and limitations set forth in the Report, we are of
the opinion that:
1.Trilogy Acquisition is a corporation duly organized, validly existing,
and in good standing under the laws of the State of Florida. Trilogy Acquisition
is duly authorized to conduct business and is in good standing under the laws of
each jurisdiction where such qualification is required, and where, to our
knowledge, the lack of such qualification would not have a material adverse
effect on the financial condition of Trilogy Acquisition and its subsidiaries
taken as a whole (a "Material Adverse Effect"). We do not pass upon
qualification in any other state where the Agreement is void or voidable due to
lack of qualification.
2. Trilogy Acquisition has the corporate power and authority to carry on
the business in which it is engaged and to own and use the properties owned and
used by it.
▇.▇▇ of the date hereof, Trilogy Acquisition has no subsidiaries.
4. The authorized capital stock of Trilogy Acquisition consists of 7,500
shares of Common Stock of which there are issued and outstanding 100 shares of
Common Stock.
5.All of the issued and outstanding shares of Common Stock have been duly
authorized and are validly issued, fully paid, and nonassessable. Except as set
forth in the Merger Agreement, to our knowledge there are no outstanding
Options, Warrants, or other outstanding or authorized purchase rights,
subscription rights, conversion rights, exchange rights, or other contracts or
commitments that could require Trilogy Acquisition to issue, sell, or otherwise
cause to become outstanding any shares of its capital stock. To our knowledge,
there are no outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to Trilogy Acquisition.
6. The Merger Agreement and the transactions contemplated thereby have been
duly authorized by all necessary corporate action on the part of Trilogy
Acquisition. Trilogy Acquisition has the full power and authority, corporate and
otherwise, to execute and deliver the Merger Agreement and to assume and perform
all of its obligations thereunder. The Merger Agreement has been duly executed
and delivered by Trilogy Acquisition and constitutes a legal, valid, and binding
obligation of Trilogy Acquisition, enforceable against Trilogy Acquisition in
accordance with its terms. The Merger Agreement and the transactions
contemplated thereby were approved by the Company's stockholders at a duly
called and held meeting of the Company's stockholders. Assuming that the
necessary filings have been made under the Florida Business Corporation Act, the
Merger referred to in the Merger Agreement will be consummated and become
effective.
7.Neither the execution and the delivery of the Merger Agreement, nor the
consummation of the transactions contemplated thereby, will (i) to our
knowledge, violate any material statute, regulation, rule, injunction, judgment,
order, decree, ruling, charge, or other restriction of any government,
governmental agency, or court to which Trilogy Acquisition is subject (ii)
violate any provision of the Certificate of Incorporation or Bylaws of Trilogy
Acquisition or (iii) to our knowledge, conflict with, result in a breach of,
constitute a default under, result in the acceleration of, create in any party
the right to accelerate, terminate, modify, or cancel, or require any notice
under any agreement, contract, lease, license, instrument or other arrangement
to which Trilogy Acquisition is a party or by which it is bound or to which any
of its assets is subject (or result in the imposition of any security interest
upon any of the assets), except where the violation, conflict, breach, default,
acceleration, termination, modification, cancellation, or failure to give notice
would not have a Material Adverse Effect. Other than in connection with the
provisions of the Florida Business Corporation Act, or as otherwise contemplated
by the Merger Agreement, Trilogy Acquisition is not required to give any notice
to, make any filing with, or obtain any authorization, consent, or approval of
any government or governmental agency in order for Trilogy Acquisition to
consummate the transactions contemplated by the Merger Agreement.
208
8. To our knowledge, no judgment is presently filed of record against the
Trilogy Acquisition and there is no litigation, arbitration, investigation,
inquiry or other proceedings by or before any federal, state, county or other
local governmental agency or authority, or by any other person or entity
pending, or that would materially adversely affect Trilogy Acquisition's ability
to perform its obligations as set forth in the Transaction Documents and we have
no knowledge of any material basis for any such litigation, proceeding,
arbitration, claim, investigation, inquiry or proceeding that would materially
adversely affect Trilogy Acquisition; and
9. To the best of our knowledge the contemplated merger constitutes a
reorganization within the meaning of Section 368 of the Code.
▇▇.▇▇ the best of our knowledge after due inquiry, no representation,
warranty or statement by Trilogy Acquisition in the Transaction Documents
contains any untrue statement of a material fact, or omits or will omit to state
a fact necessary in order to make such representations, warranties or statements
not materially misleading.
Without our prior written consent, this opinion letter may not be quoted in
whole or in part or otherwise referred to in any document or report and may not
be furnished to any person or entity including any governmental agency.
Very truly yours
Trilogy Acquisition Corporation
/s/ G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
G. ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, Esquire
General Counsel
cc: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
209
Exhibit 6.3 (E) Trilogy Legal Opinion
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.A.
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇-▇▇▇-▇▇▇▇
November 30, 1999
AmeriNet ▇▇▇▇▇.▇▇▇, Inc. Trilogy Acquisition Corporation
▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇ 902 ▇▇▇▇▇ ▇▇▇▇▇ Road
▇▇▇▇▇ ▇▇▇-▇ ▇▇▇▇▇ ▇▇▇-▇
Boca Raton, Florida 33487 ▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
Re: Trilogy International, Inc./AmeriNet Merger Closing
Ladies and Gentlemen:
We have acted as counsel to Trilogy International, Inc., a Florida
corporation (the "Company") in connection with the Agreement and Plan of Merger
among AmeriNet ▇▇▇▇▇.▇▇▇, Inc., (the "Acquiror"), Trilogy Acquisition
Corporation ("Trilogy Acquisition") and the Company dated November 30, 1999. We
are providing this opinion to you pursuant to Section 6.2(D) of the Merger
Agreement. Capitalized terms used but not otherwise defined herein shall have
the meanings given them in the Merger Agreement.
A. Basis of Opinion
In rendering the following options, we have reviewed copies of each of the
following documents:
1. The Merger Agreement, including the disclosure schedules and exhibits
thereto;
2. The Articles of Incorporation, as amended, and the Bylaws of the
Company;
3. Secretary's certificate as to approvals of the Boards of Directors of
the Company with respect to the Merger Agreement duly adopted at a
meeting of the Board of Directors of the Company held on November 6,
1999 and November 23, 1999;
4. Certificate to Counsel dated as the date hereof;
5. Officers' Certificate delivered to the Acquiror dated as of the date
hereof;
6. Consents of the a majority of the outstanding shares of the common and
preferred stock of the Company approving the Merger Agreement;
7. The Articles of Merger dated November 30, 1999 between the Company and
Trilogy Acquisition; and
8. Such other agreements and documents and such matters of law as we have
considered necessary or appropriate for the expression of the opinions
contained herein.
The Merger Agreement and the other documents and information referred to in
this Section A are collectively referred to as the"Transaction Documents."
210
B. Assumptions
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 (the "Report"). The Report is incorporated by reference
into this opinion letter.
In rendering the following opinions, we have made no assumptions other than
those set forth in the Report, the assumption that the Company complies with all
laws and regulations relating to multi-level marketing, or those in the opinions
below.
C. Opinions
Based solely upon our examination and consideration of the foregoing
Transaction Documents, and in reliance thereon, and subject to the comments,
assumptions, exceptions, qualifications and limitations set forth in the Report,
we are of the opinion that:
1. The Company is a corporation duly organized, validly existing, and in
good standing under the laws of the State of Florida. The Company is
duly authorized to conduct business and is in good standing under the
laws of each jurisdiction where such qualification is required, and
where, to our knowledge, the lack of such qualification would not have
a material adverse effect on the financial condition of the Company
and its subsidiaries taken as a whole. We do not pass upon
qualification in Louisiana or any other state where the Agreement is
void or voidable due to lack of qualification.
2. The Company has the corporate power and authority to carry on the
business in which it is engaged and to own and use the properties
owned and used by it.
3. As of the date hereof, the Company has no subsidiaries.
4. The authorized capital stock of the Company consists of 30,000,000
shares of Common Stock of which there are outstanding 5,451,819 shares
of Common Stock.
5. All of the issued and outstanding shares of Common Stock have been
duly authorized and are validly issued, fully paid, and nonassessable.
Except as set forth in the Merger Agreement, to our knowledge there
are no outstanding Options, Warrants, or other outstanding or
authorized purchase rights, subscription rights, conversion rights,
exchange rights, or other contracts or commitments that could require
the Company to issue, sell, or otherwise cause to become outstanding
any shares of its capital stock. To our knowledge, there are no
outstanding or authorized stock appreciation, phantom stock, profit
participation, or similar rights with respect to the Company.
6. The Merger Agreement and the transactions contemplated thereby have
been duly authorized by all necessary corporate action on the part of
the Company. The Company has the full power and authority, corporate
and otherwise, to execute and deliver the Merger Agreement and to
assume and perform all of its obligations thereunder. The Merger
Agreement has been duly executed and delivered by the Company and
constitutes a legal, valid, and binding obligation of the Company,
enforceable against the Company in accordance with its terms. The
Merger Agreement and the transactions contemplated thereby were
approved by the written consent of a majority of the outstanding
shares of Common Stock and Preferred Stock. Assuming that the
necessary filings have been made under the Florida Business
Corporation Act, the Merger referred to in the Merger Agreement will
be consummated and become effective.
211
7. Neither the execution and the delivery of the Merger Agreement, nor
the consummation of the transactions contemplated thereby, will (i) to
our knowledge, violate any material statute, regulation, rule,
injunction, judgment, order, decree, ruling, charge, or other
restriction of any government, governmental agency, or court to which
the Company is subject (ii) violate any provision of the Articles of
Incorporation or Bylaws of the Company or (iii) to our knowledge,
conflict with, result in a breach of, constitute a default under,
result in the acceleration of, create in any party the right to
accelerate, terminate, modify, or cancel, or require any notice under
any agreement, contract, lease, license, instrument or other
arrangement to which the Company is a party or by which it is bound or
to which any of its assets is subject (or result in the imposition of
any security interest upon any of the assets), except where the
violation, conflict, breach, default, acceleration, termination,
modification, cancellation, or failure to give notice would not have a
Material Adverse Effect. Except that the consent of the lessors is or
may be required for real property and a certain personal property
leases. Other than in connection with the provisions of the Florida
Business Corporation Act, or as otherwise contemplated by the Merger
Agreement, the Company is not required to give any notice to, make any
filing with, or obtain any authorization, consent, or approval of any
government or governmental agency in order for the Company to
consummate the transactions contemplated by the Merger Agreement.
8. To our knowledge, no judgment is presently filed of record against the
Company and there is no litigation, except for an action filed on
November 29, 1999 by ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, arbitration, investigation,
inquiry or other proceedings by or before any federal, state, county
or other local governmental agency or authority, or by any other
person or entity pending, or that would materially adversely affect
the Company's ability to perform its obligations as set forth in the
Transaction Documents and we have no knowledge of any material basis
for any such litigation, proceeding, arbitration, claim,
investigation, inquiry or proceeding that would materially adversely
affect the Company; and
9. To the best of our knowledge after due inquiry, no representation,
warranty or statement by the Company in the Transaction Documents
contains any untrue statement of a material fact, or omits or will
omit to state a fact necessary in order to make such representations,
warranties or statements not materially misleading.
This opinion is furnished solely to the addresses by us as counsel for the
Company, is solely for your benefit and is rendered solely in connection with
the transaction as to which this opinion relates. Without our prior written
consent, this opinion letter may not be quoted in whole or in part or otherwise
referred to in any document or report and may not be furnished to any person or
entity including any governmental agency.
Very truly yours,
/s/ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇▇▇ ▇▇▇▇▇▇, P.A.
212
Exhibit 6.3(L) Confidentiality Agreements
Refer to Schedule 2.12.
Exhibit 7.2(A) Escrow Information
Trilogy International Capitalization
29-Oct-99
Investor Common Series A Total AmeriNet Escrow Direct
Shares Preferred Trilogy Shares Shares Issue
Shares @ 20%
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 40,000 20,000 60,000 20,000 4,000 16,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 20,000 10,000 30,000 10,000 2,000 8,000
Antares Capital Management 283,636 141,818 425,454 141,818 28,364 113,454
▇▇▇▇▇▇ ▇▇▇▇▇▇ 60,000 30,000 90,000 30,000 6,000 24,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 30,000 15,000 45,000 15,000 3,000 12,000
▇▇▇▇▇▇ ▇▇▇▇▇ 76,000 38,000 114,000 38,000 7,600 30,400
▇▇▇▇▇ Glint 80,000 40,000 120,000 40,000 8,000 32,000
▇▇▇▇ ▇▇▇▇▇▇▇ 120,000 60,000 180,000 60,000 12,000 48,000
▇▇▇ ▇▇▇▇▇▇▇▇▇ 30,000 15,000 45,000 15,000 3,000 12,000
▇▇▇▇ ▇▇▇▇▇▇ 120,000 60,000 180,000 60,000 12,000 48,000
▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 120,000 60,000 180,000 60,000 12,000 48,000
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 30,000 15,000 45,000 15,000 3,000 12,000
SOG Investments 120,000 60,000 180,000 60,000 12,000 48,000
▇▇▇▇▇▇ ▇▇▇▇▇ 120,000 60,000 180,000 60,000 12,000 48,000
▇▇▇▇ ▇▇▇▇▇ 20,000 10,000 30,000 10,000 2,000 8,000
▇▇▇▇▇▇ ▇▇▇▇▇▇ 120,000 60,000 180,000 60,000 12,000 48,000
▇▇▇▇▇▇▇ ▇▇▇▇ 60,000 30,000 90,000 30,000 6,000 24,000
▇▇▇▇▇ ▇▇▇▇▇▇▇▇ 40,000 20,000 60,000 20,000 4,000 16,000
1,489,636 744,818 2,234,454 744,818 148,964 595,854
▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 1,577,591 1,577,591 525,864 105,173 420,691
▇▇▇▇▇ ▇▇▇▇▇▇▇ 1,577,590 1,577,590 525,863 105,173 420,691
▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇ 3,000 3,000 1,000 200 800
▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 3,000 3,000 1,000 200 800
▇▇▇▇▇▇ ▇▇▇▇▇ 2,160 2,160 720 144 576
▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇ 2,160 2,160 720 144 576
▇▇▇▇ ▇▇▇▇▇ 2,000 2,000 667 133 533
▇▇▇▇▇ ▇▇▇▇▇▇▇ 26,000 26,000 8,667 1,733 6,933
▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇ 1,159 1,159 386 77 309
▇▇▇▇▇ ▇▇▇▇▇ 1,159 1,159 386 77 309
▇▇▇▇ ▇▇▇▇▇▇▇▇ 1,546 1,546 515 103 412
▇▇▇▇▇▇ ▇▇▇▇▇ 20,000 20,000 6,667 1,333 5,333
3,217,365 3,217,365 1,072,455 214,491 857,964
4,707,001 5,451,819 1,817,273 363,455 1,453,818
213