-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, EOsBZetjJnLt1QFMWMXuQ3h2oTvbbNeKrS0aDF9a3BtAexQIev/RtAbcYBGZkrEV Ys9qJIEKS38SpA7YIVU2eg== 0001015402-00-003079.txt : 20001201 0001015402-00-003079.hdr.sgml : 20001201 ACCESSION NUMBER: 0001015402-00-003079 CONFORMED SUBMISSION TYPE: 10SB12G PUBLIC DOCUMENT COUNT: 24 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: PACIFIC TELCOM INC CENTRAL INDEX KEY: 0001128078 STANDARD INDUSTRIAL CLASSIFICATION: IRS NUMBER: 364328683 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10SB12G SEC ACT: SEC FILE NUMBER: 000-31018 FILM NUMBER: 761698 BUSINESS ADDRESS: STREET 1: 4270 S DECATUR BLVD STREET 2: SUITE A-9 CITY: LAS VEGAS STATE: NM ZIP: 89103 MAIL ADDRESS: STREET 1: 4270 S DECATUR BLVD STREET 2: SUITE A-9 CITY: LAS VEGAS STATE: NM ZIP: 89103 10SB12B 1 0001.txt UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-SB GENERAL FORM FOR REGISTRATION OF SECURITIES OF SMALL BUSINESS ISSUERS UNDER SECTION 12(b) OR (g) OF THE SECURITIES EXCHANGE ACT OF 1934 PACIFIC TELCOM, INC. (Name of Small Business Issuer in its charter) Illinois 36-4328683 (State of Incorporation) (I.R.S., Employer Identification No.) 4270 S. Decatur Blvd., Suite A-9 Las Vegas, Nevada 89103 (Address of principal executive offices) (Zip Code) (415) 365-4500 (Issuer's telephone number) Securities to be registered under Section 12(g) of the Act: 25,000,000 Common Shares (Title of Class) PACIFIC TELCOM INC. FORM 10-SB TABLE OF CONTENTS Item 1 Description of Business. . . . . . . . . . . . . . . . . . 2 Item 2 Management's Discussion and Analysis. . . . . . . . . . . 7 Item 3 Description of Property. . . . . . . . . . . . . . . . . . 8 Item 4 Security Ownership of Certain Beneficial Owners and Management. . . . . . . . . . . . . . . . . . . . . . 9 Item 5 Directors, Executive Officers, Promotors and Control Persons . . . . . . . . . . . . . . . . . . . . . 11 Item 6 Executive Compensation. . . . . . . . . . . . . . . . . . . 16 Item 7 Certain Relationships and Related Transactions . . . . . 16 Item 8 Legal Proceedings . . . . . . . . . . . . . . . . . . . . . 17 Item 9 Market for Common Equity and Related Stockholder Matters . . . . . . . . . . . . . . . . . . . 17 Item 10 Recent Sales of Unregistered Securities. . . . . . . . . 18 Item 11 Description of Securities. . . . . . . . . . . . . . . . . 18 Item 12 Indemnification of Directors and Officers. . . . . . . . 19 Item 13 Financial Statements . . . . . . . . . . . . . . . . . . . 19 Item 14 Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . . . . . . 19 Item 15 Financial Statements and Exhibits . . . . . . . . . . . . 19 ITEM 1. DESCRIPTION OF BUSINESS. (A) BUSINESS DEVELOPMENT Pacific Telcom, Inc. [the "Company"] is a Re-Seller of Telecommunications Products and Services, called "Genie" or "Universal Office", owned or licensed by EasyTel, a Nevada Corporation ("EasyTel"). The Company was incorporated in Illinois on May 2, 1991 as Drayton Hall & Co. but was not active from its incorporation through 1997. On May 13, 1998, the Company changed its name to Pacific Telcom, Inc. (B) BUSINESS OF ISSUER. 1. The Company's principal product and service is a personal communication system for business, professional and individual users which integrates into a single telephone number voice mail, fax, pager, cellular and other telephone services as well as an e-mail notification service. 2. The Company's product and service create a low cost virtual office for its subscribers. Some of the commonly used functions the Company provides to its subscribers include: i. Direction of voice and fax traffic to the appropriate phone/fax (Mobile, LAN or wireless) while maintaining a single phone number for customers and other contacts (follow me service); ii. Call traffic distribution among sales, service and administrative staff regardless of location to maximize service to customers and trade partners; iii. Faxes on demand; iv. Prescreening and queuing of customers until the appropriate sales person is identified or placed into voice mail; v. Instruction on how to send or receive a fax or automatically leave a message with the system's virtual assistant; vi. Sending voice and fax mail electronically to a computing device to be received via e-mail; vii. Conferencing of caller with any number of individuals; viii. Fax and message broadcasting from any location; ix. Acceptance and processing of sales orders; and x. An on-line real-time credit card processing by Cardservice International for orders and payments. 2 3. The Company's system operates on a software program and hardware platform licensed by Universal Office Corporation, a wholly owned subsidiary of InfoUSA, to EasyTel, who sub-licenses them to the Company. The Company owns its switching equipment. 4. The Company buys it's communication time from WorldCom. The Company's switching equipment is co-located with the switching centers of MCI WorldCom. This arrangement is on a non-exclusive rental basis. The Company can, even while co-located with MCI, contract with other telephone service providers for required services such as long distance. The Company's switching equipment is covered under MCI's security and disaster plans and includes their on-site service and maintenance. With equipment located in the same facility as MCI, the Company incurs no cost for the installation of T-1 telephone lines and pays a monthly service cost per line at a very competitive rate. MCI has agreed to let the Company co-locate in any city in which MCI has a co-location site available. If no site is available, in the past MCI has agreed to build one or to pay any costs in excess of the amount the Company paid MCI under its co-location agreement. The Company uses other third party providers where MCI does not have a presence. MCI's agreement with EasyTel specifically provides for the connection of the re-sellers switches to telephone lines of other telephone service providers. 5. The Company's present market is the continental United States and Canada. It offers service in Northern and Southern California through its switches in Encino, Los Angeles, San Francisco, San Diego and through other switches located in Chicago, Seattle, Portland, Sacramento, Toronto, Minneapolis-St. Paul, Denver and Dallas. Nationwide toll free service is also offered. 6. The Company plans to provide service in the following markets by the end of 2001: North America -------------- Boise, Idaho Miami, Florida Phoenix, Arizona Atlanta, Georgia New York City, New York Houston, Texas Orlando, Florida Reno, Nevada Las Vegas, Nevada Montreal, Quebec 3 Vancouver, British Columbia Calgary, Alberta Edmonton, Alberta Boston, Massachusetts Charlotte, North Carolina Grand Rapids, Michigan Philadelphia, Pennsylvania Washington, D. C. Spokane, Washington Honolulu, Hawaii San Antonio, Texas Indianapolis, Indiana Other Countries ---------------- Australia New Zealand Japan France Germany England Argentina South Africa Mexico Switzerland Sweden Denmark 7. The Company distributes its products and services by using Independent marketing entities, individuals, and retail vendors of such products as cell phones, pagers, computers and other Internet appliances. The Company's largest outlet is comprised of six groups of independent distribution networks within the Quixtar Network Marketing Company, which have about 300,000 independent Quixtar/Amway distributors (the "Alliance"). Quixtar is a global marketing and distribution network of more than 3,000,000 individuals distributing Quixtar/ Amway products. Senior members of the Alliance are responsible for a significant portion of the Company's current subscribers and many of its recent investors. 8. No new products or services have been publicly announced. 9. Competition in the Company's products and services is intense. Voice Mail is the service closest to that offered by EasyTel and is available throughout the United States from firms ranging in size from Lucent Technologies, AT&T, MCI and Ameritech to small firms that operate out of a single office. The Company's competitive position in the industry is negligible. The Company has eliminated the development costs of a fully developed and proven product and competes through its licensing arrangement with EasyTel by minimizing long distance line and other costs through the volume purchases of EasyTel and by aggressive marketing. The Company operates through an integrated network of switches located in each of the markets it services which gives it a competitive cost advantage because many of it's competitors offer their service through a centralized location which requires their customers to access the system by the use of toll-free numbers or by "back-hauling" traffic to a centralized location. 4 10. The raw materials of the Company consist of providing switched and switchless value added telecommunication services. The Company offers the Universal Telephone Number service enabling customers to receive and make telephone calls, messages, faxes and paging on a single telephone number. The Company also provides long distance calling cards and line services from EasyTel, all of which are readily available. 11. The Company's customers range from large firms to residential telephone users. There currently is a dependence on Quixtar Network Marketing Company, which has about 300,000 independent Quixtar/Amway distributors, and is responsible for a significant portion of the Company's current subscribers. The Company has approximately 11,000 active subscribers. 12. The Company does not own any of the patents or trademarks on the products or services it re-sells. 13. The Company entered into an April 23, 1998 agreement with EasyTel by which the Company acquired the right to open new geographic markets to re-sell the EasyTel products and services for ten years (which is renewable for successive five year terms). Once the Company opens a new geographic market, it has the exclusive right to sell in that market for a period of two years. The Company is currently negotiating with EasyTel to significantly increase this period. For the Canadian market, the right to re-sell is exclusive for a period of twenty years. If the agreement with EasyTel is not extended beyond its initial 10-year term, the Company and EasyTel will continue to have joint ownership of the switches and they will continue to share equally in all revenues generated by the Company during the term of the agreement. 14. The Company is responsible for all start-up costs in opening a new re-selling market. EasyTel and the Company each share one-half of the adjusted gross revenues (net of certain defined expenses such as telephone DIAL-tone charges, easy tips, customer service, charge backs credit card discounts, account activation fees and monthly sales commissions) and share one-half of costs of equipment and installation. 5 15. EasyTel provides some of the products and services as a licensee from the Universal Office Corporation, a Nevada corporation. EasyTel is financially dependent on its share of the Company's revenues to fulfill its obligations to the Company such as developing and maintaining software. EasyTel is responsible for providing technical support, remote operation of telecommunications platforms, software maintenance, software development, long distance access maintenance, maintenance of customer account information, billing, payment processing, and credit card charge processing. 16. On February 11, 2000, the Company acquired all the stock and stock rights of EasyTel Canada Corporation for $250,000 US dollars, 1,000,000 common shares of the Company, and assumption of an EasyTel Canada bank loan secured by a portion of the cash proceeds ($32,500) paid to the seller. Monthly payments are $2,187 plus interest. On November 3, 2000, the Company incorporated a wholly-owned subsidiary in Canada, Pacific TelCom (Canada) Inc. On November 6, 2000, the Company entered into an Agreement to Terminate the acquisition of EasyTel Canada Corporation. Also on November 6, 2000, the Company and its wholly-owned subsidiary Pacific TelCom (Canada) Inc. acquired all the stock and stock rights of EasyTel Canada Corporation for $250,000 US Dollars and 1,125,000 Class A Special Shares of Pacific TelCom (Canada) Inc. convertible to 1,125,000 common shares of the Company, and assumed the same loan of EasyTel Canada Corporation, on the same terms as on February 11, 2000. 17. On September 16, 2000, the Company purchased 45.05% of M&M Communications, which owns a 144 port telecommunications switch in Encino, California and is a party to agreements among EasyTel and the Alliance of entities, which refer customers to EasyTel services. The Company paid $5,000 cash and has executed a non-interest bearing promissory note due December 1, 2000 for $129,232 as well as issuing 53,693 shares of the Company's stock to Asher Milgrom, the seller. As additional consideration, the Company will pay a 3 year earn-out on 45.05% of the revenues generated by the Alliance under the M&M Re-Seller's Representative Agreements, fixed at $8,000 per month for the term of the earn-out, provided that the Re-Seller's Representative Agreements remain in effect. 6 18. On October 2, 2000, the Company entered into a Sale of Assets Agreements with Axon Connectivity Technology, Inc., a Nevada corporation, in which the Company purchased assets consisting of a 144 port telecommunications switch in San Diego, California, a 144 port telecommunications switch located in Minneapolis, Minnesota, the rights to the completion of the purchase and installation of a 144 port switch in New York City, New York, the rights to the completion of the purchase and installation of a 144 port switch in Miami, Florida and the rights to all proceeds from all accounts hosted on these telecommunication switches. The Company has executed a non-interest bearing installment promissory note due December 1, 2000 for $428,040 as well as issuing 192,816 shares of the Company's stock to Axon Connectivity Technology, Inc., the Seller. 19. The Company does not currently need any governmental approval for re-selling its products and services. If the government were to regulate the Company's re-selling business, costs and potential liability would increase and the Company's competitive position would be impacted by decreased profits and the pressure to increase prices. 20. In the last two fiscal years, there have been no expenditures for research and development activities. The Company does not own the technology it uses. A future sale of its business would involve an allocation of the total sale price between the value of the customer base owned by the Company and the value of the technology owned by EasyTel. 21. There are no costs or effects of compliance with Federal, state, and local environmental laws. 22. The Company has 12 full time employees. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS PLAN OF OPERATION 1. The Company has satisfied its past cash requirements from periodic payments on unsecured one-year promissory notes dated May 12, 1998 of $100,000 each at 8% interest per annum from related parties. Such notes have now been paid in full. In addition, there was a $100,000 promissory note payable in exchange for print media service from a related party, which is expected to be used in 2000. The Company's rapid expansion, and its ability to continue as a going concern, requires raising additional funds within the next 12 months. 7 2. In the first six months of 2000, the Company raised $1,600,000 and received commitments for $2,100,000 by the November 30, 2000 Placement closing date on an outstanding $5,000,000 Private Placement Offering. 3. The Company is making a Form 10-SB filing and intends to make a subsequent filing for trading as a small cap stock issue on NASDAQ. The Company may elect to do a smaller public offering pursuant to Regulation "A" for $5,000,000 to be followed with a larger secondary public offering. 4. On September 14, 2000, the Company's Board of Directors approved a resolution for the Company to issue up to $10,000,000 in Medium-Term, Convertible, 9% Capital Notes in increments of $500,000 per Capital Note. An underwriting firm has approved this offering. 5. The Company will continue to pursue leasing lines as an alternative to cash financing. 6. As a co-venturer of the products and services of others, the Company does not do any research; but, it does plan to develop its market within the next 12 months by making greater use of independent marketing entities and individuals. 7. Within the next 12 months, the Company expects to add 2 administrative and 12 additional customer service personnel. In addition, it plans to add over $10,000,000 to its switching equipment and software (the Universal Office Platform). 8. The Company is negotiating with various entities to offer the following services: - Dial 1 + long distance - A national activation agent for Nextel and Verizon Wireless - Re-Seller of ISP services in certain states ITEM 3. DESCRIPTION OF PROPERTY. The Company's primary office space is located at 4270 S. Decatur Blvd., Suite A-9, Las Vegas, Nevada 89103 under a one year triple net lease of 2,489 square feet for $44,802 per year, which has been pre-paid. The lease expires March 26, 2001 with an option to renew for one year at a fixed 4% annual rent increase. 8 Because the Company is co-locating its hardware and Universal Office platform with companies such as MCI WorldCom, it is not necessary to establish offices with their attendant costs. The Company plans to lease administrative offices of no more than 1,000 square feet per office as additional market areas are opened. ITEM 4. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT. (A) SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS. (1) (2) (3) (4) Name and Address Amount and Nature Percent Title of Class of Beneficial Owner of Beneficial Owner(1) of Class Common Shares Bill J. Angelos, Jr. 1,467,900 Shares 14.04 5604 Sligo Street Las Vegas, NV 89130 Common Shares Kenneth G. Mason 1,319,571 Shares 12.62 1618 Spence Avenue Wilmette, IL 60091 Common Shares Richard A Chase 1,247,500 Shares 11.93 6218 Ramirez Mesa Dr. Malibu, CA 90265 Common Shares EasyTel 756,459 Shares 7.23 320 E. Charleston Blvd. Suite 204-221 Las Vegas, NV 89104 _________________ (1) All shareholder information as of June 30, 2000 9 (B) SECURITY OWNERSHIP OF MANAGEMENT. (1) (2) (3) (4) Name and Address Amount and Nature Percent Title of Class of Beneficial Owner of Beneficial Owner of Class Common Shares Bill J. Angelos, Jr. 1,467,900 Shares 14.04 Director 5604 Sligo Street Las Vegas, NV 89130 Common Shares Kenneth G. Mason 1,319,571 Shares 12.62 Director 1618 Spencer Avenue Wilmette, IL 60091 Common Shares Richard A. Chase 1,247,500 Shares 11.93 Director 6218 Ramirez Mesa Dr. Malibu, CA 90265 Common Shares Richard C. Goldstein 673,032 Shares 6.43 Director 53 Hetherington Crescent Thornhill, Ontario L4J 2M9 Common Shares James G. Floor 500,000 Shares 4.78 Director 7120 Summerwood Ct. Granite Bay, CA 95746 Common Shares Harry Brix 200,000 Shares 1.91 Director 541 Division Street Campbell, CA 95008 Common Shares Driggs Jessup 110,000 Shares 1.05 Director 305 Creekside Place Nampa, ID 83686 10 Common Shares Bob Blanchard 100,000 Shares .96 Director 5075 Cascade Rd., SE Suite K Grand Rapids, MI 49546 Common Shares Richard Wiggins 100,000 Shares .96 Director P. O. Box 88 Cambridge, ID 83610 Common Shares Randall L. Skala 6,730 Shares .06 Director 15760 Ventura Blvd., #A10 Encino, CA 91436 Common Shares All Directors and Officers 5,724,733 Shares 54.74 - - ------------------------------------------------------------------------------ (C) CHANGES IN CONTROL. There are no provisions in the charter or by-laws that would delay, defer or prevent a change in control of the Company. ITEM 5. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS. (A) DIRECTORS AND EXECUTIVE OFFICERS. Director in Term of Other Reporting Name Age Position Office Companies - - --------------------- --- --------------- ------- --------- Bill J. Angelos, Jr. 50 Chairman and 2 Years No Chief Executive Officer Director Mr. Angelos, as an independent financial consultant and investment banker for almost 20 years, has represented several companies in mergers with publicly traded corporations; formed two insurance companies; co-developed $30 million of real estate in Arizona, Oregon and new Mexico; managed an energy resource company with 42 oil and gas wells; has completed several Regulation D private placements; and founded a MESBIC (Minority Enterprise Small Business investment Company) which raised capital and managed a $6 million loan portfolio. 11 Paul H. Jachim 42 President and 1 Years No Chief Operating Officer Paul Jachim, President and COO of Pacific Telcom is a Senior Executive with demonstrated skills in the strategic development and successful implementation of businesses. Most recently as President and CEO, Mr. Jachim led the successful launch of Spectra Serve, Inc. a supply chain service business of Union Camp Corporation now International Paper. Mr. Jachim has over 20 years of General and Operations Management P&L experience, 10 of those years with Proctor & Gamble. His education consists of a Bachelors Degree in Engineering and an M.B.A. from Kellogg Graduate School of Management, Northwestern University. Kenneth G. Mason 49 Secretary and 2 Years No Director Mr. Mason has been a licensed attorney for more than 20 years. His practice concentrates in corporate formation, corporate transactions, corporate finance, capital structure reorganizations, mergers, acquisitions, asset management and protection, corporate and commercial litigation, and general civil litigation. He has assisted clients in the fields of finance, high tech, computer software engineering, construction and other areas of manufacturing and commercial finance. Mr. Mason has been on the faculty of De Paul University, College of Law and has served as a Special Deputy Prosecuting Attorney for the County of Pierce, State of Washington. Richard A. Chase 50 Vice President 2 Years No Chief of Media And Marketing Services and Director Since 1968, Mr. Chase has been involved in various entrepreneurial ventures, including Elan Associates, the largest retailer of fresh cut flowers in the United States. Mr. Chase was a founding partner of Bermudez & Associates, the largest independent Hispanic advertising agency in the United States. Mr. Chase was the co-founder and past CEO of Media Resources International, Ltd., a media barter company. Mr. Chase is also president of Chase Investments, Inc. Franklin D. 32 Vice President 2 Years No Wittman, Jr Sales and Training Mr. Wittman has over 15 years of computer related experience. Most recently, he was responsible for overall operations of Mirage Development, Inc., where he developed the company's corporate identity and was responsible for marketing of construction and corporate projects. Mr. Wittman also consults for many companies on the World Wide Web. 12 Brandi M. Wittman 30 Vice President 1 Year No Client Services Ms. Wittman manages Pacific TelCom's customer call center in Las Vegas and co-ordinates customer care issues with EasyTel. She has over 10-years of Customer Service experience and has been instrumental in developing the Company's policies and procedures in this area. Robert E. Gilbert 62 Vice President 2 Years No And Controller Mr. Gilbert has over 40 years experience in accounting and has provided accounting and financial consulting services to such firms as Mirage Development Corporation, InfoUSA, Concord Business Investments, Inc., Bankers Financial Corporation, Electronic Clearing House and Transamerica Financial Corporation. Harry G. Brix 53 Director 1 Year Yes Mr. Brix is Chairman of Paging Dimensions, Inc., a public corporation, which operates in an allied, but not competing, aspect of telecommunications with the Company. He is also the Chairman of Brix Group, Inc., Voice Systems Research and Tape Deck Corp. The Brix Group, Inc. operates American Wireless, a division which vends digital and other wireless cellular phones nationwide. The division also operates a group which is capable of activation new wireless communications subscribers for 90% of the nation. None of Mr. Brix's current positions are with competitors of the Company. Mr. Brix has had direct management experience in the telecommunications field since 1971. He has distributed wireless products and services for such companies as Motorola, Panasonic, Mitsubishi and Audiovox. Randall L. Skala 32 Director 1 Year No Mr. Skala is President and Chief Operating Officer of EasyTel, which he co-founded in March 1995. He is also a director of InfoUSA, the parent company of EasyTel and a director of Universal Office Corporation. Randall Skala was the technical and operational manager of Infotrust Telco, which developed a call processing platform for pre-paid calling cards and other telecommunication services. 13 J. Michael Brown 53 Director 1 year No Mr. Brown is the Chief Executive Officer and President of ProfileHealth.com. Mr. Brown is an attorney with an advanced management degree from the Harvard Business School. He recently retired as a Vice President in AT&T's Law & Government Affairs group where he was extensively involved with a broad variety of information technologies and Internet applications. Richard C. 40 Director 1-Year No Goldstein Mr. Goldstein founded EasyTel Canada Corporation and is its President. He is also President of First Republic Securities Corp., a licensed securities dealer in the Province of Ontario. Driggs M. Jessup 46 Director 1 Year No Mr. Jessup is President and owner of Jessup Enterprises, a national and international e-commerce company. He is also a consultant for Marketing Team Fitness.com, a corporate fitness company. Mr. Jessup is also a professional speaker and trainer for INA (InterNet Association). Richard Wiggins 43 Director 1 Year No Mr. Wiggins is an accountant. He is Vice President and General Manager of Cambridge Telephone (a local exchange carrier providing telephone and CATV service in Southwestern Idaho). He is President of Council Telephone Company (a local exchange carrier), CTC Telcom (a CLEC and ISP provider), CTC Construction (a utility contracting company), and Idaho Telephone Association. Bob Blanchard 45 Director 1 Year No Mr. Blanchard currently serves as the President/CEO of e-Alliance Holding, Inc., which is a multi-national strategic business alliance, and President/COO of ProNet Global, Inc. that is a leading provider of resources to independent business owners. Earlier, Mr. Blanchard was Vice President of Strategy & Business Development for Reliable Energy Inc., a management consulting firm. He also served as Corporate Director of US Xchange, L.L.C., a start up CLEC with a network in operation in the Midwest, and Director of North America for Amway Corporation one of the world's largest direct selling companies. Mr. Blanchard holds a M.B.A. from Northwestern University. James G. Floor 58 Director 1 Year No Mr. Floor is President and Director of International Networking Association, Inc. He owns Floor Enterprises, Inc., which provides training and support for thousands of independent business owners throughout the United States and Canada 14 and generates millions of dollars of revenue annually. Mr. Floor is also an elected member of the Independent Business Owners Association International of Quixtar Corporation and a member of the Board of E. Alliance, Inc. Mr. Floor has a B.S. in Architectural Engineering and an M.B.A. James E. Janz 59 Special 1 Year No Advisor to The Board Mr. Janz has been a businessman for over 37 years. He has developed an international marketing company that does over one billion dollars worth of business per year. He has been a leader in distribution technology for over 10 years assisting in the development of leading edge technology for the distribution of goods and services worldwide. Mr. Janz currently serves as Chairman of World Serve. He is on the Board of Internet Associates. He has served as the Chairman of the Foundation Board of Trinity University and as the Chairman of a task force on Small Business for the province of British Columbia. (B) SIGNIFICANT EMPLOYEES. There is no significant employee that is not an officer. (C) FAMILY RELATIONSHIPS. Franklin D. Wittman, Jr. and Brandi M. Wittman are husband and wife. There are no other family relationships among the present or contemplated directors and executive officers. (D) INVOLVEMENT IN CERTAIN LEGAL PROCEEDINGS. None of the directors, executive officers, promoters and control persons have been involved in certain legal proceedings during the past five years. 15 ITEM 6. EXECUTIVE COMPENSATION. SUMMARY COMPENSATION TABLE Annual Compensation ------------------- (a) (b) (c) (d) (e) Name and Principal Al Other Position Year Salary ($) Bonus ($) Compensation($) - - -------------------------------------------------------------------------------- Bill J. Angelos, Jr. $120,000 + $500 0.5% Chairman and for each new of Net After Chief Executive Officer Market opened Tax Profits $240,000 Cap Kenneth G. Mason $-0- $5,000 per month Secretary Legal Retainer Franklin D. Wittman, Jr. $54,000 Vice President Brandi M. Wittman $30,000 Vice President Robert E. Gilbert $36,000 Vice President ITEM 7. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS. The following Company shares were issued in 1991 for organizational services: Edward L. Daniel 1,168,000 Kenneth G. Mason 1,364,000 Sterling Capital Consultants 15,000 Bill J. Angelos, Jr. 1,317,900 Unsecured one year promissory notes dated May 12, 1998 of $100,000 each at 8% interest per annum were made to the Company from related parties, Edward L. Daniel, Sheldon I. Herman, Bill J. Angelos, Jr., and Kenneth G. Mason in exchange for shares of the Company. The Notes receivable from related parties were paid in 1999. 16 On May 5, 1998, Richard A. Chase made a $100,000 promissory note at 8% interest per annum, payable in print media advertising, to the Company in exchange for 1,200,000 Company shares. The Note from Richard A. Chase, payable in prepaid advertising expense, is expected to be used in 2000. In consideration of EasyTel entering into a Strategic Alliance Agreement with the Company on April 23, 1998, the Company issued 756,459 shares of its common shares to EasyTel. Two Notes Payable by the Company were paid in full subsequent to December 31, 1999 to XXXLLC ($112,000 dated 12/31/98 at 6% interest) and to Cascade Partners ($25,929), an affiliate of the Company's Chairman and Chief Executive Officer, Bill J. Angelos, Jr. On April 1, 1998, the Company entered into a 5-year employment agreement with Bill J. Angelos, Jr., the Chairman, Chief Executive Officer and a Director of the Company. He is to receive $120,000 per year plus $500 for each new geographic market opened. There is a base cap of $20,000 per month and a bonus compensation of of 1% (0.5%) of the net after tax profits. Kenneth G. Mason, the Secretary and a Director of the Company receives a legal retainer of $5,000 per month. The Company has a 5 year Agency Agreement with Driggs Jessup, a Director of the Company, for the promotion of subscriptions for the Company's services. During the second quarter of 2000, the Company received $108,959 nonrecurring, non-cash, consulting income from EasyTel for the sale and exchange of telecommunication equipment. ITEM 8. LEGAL PROCEEDINGS. The Company is not a party to any pending legal proceedings and is not aware of any proceeding that any governmental authority may be contemplating. ITEM 9. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS. There is no public trading market for the Company's common equity shares. As of June 30, 2000, there were 365 shareholders of record of 10,458,540 outstanding common equity shares (including 1,686,600 shares in the name of Drayton Hall & Co. shareholders not yet exchanged for Pacific Telcom, Inc. certificates). 17 The Company has never declared any cash dividends on its common equity shares. The only restriction limiting its ability to pay any cash dividends is the availability of sufficient funds and a decision of the Board of Directors to make such payments.
ITEM 10. RECENT SALES OF UNREGISTERED SECURITIES. Date Title Amount Sold Purchaser Consideration - - ---------------------------------------------------------------------------------------------------------------- 04/23/98 Common 756,459 EasyTel Right to re-sell EasyTel products 05/05/98 Common 233,333 Edward L. Daniel $100,000 Note 05/05/98 Common 233,333 Kenneth G. Mason $100,000 Note 05/05/98 Common 233,333 Bill J. Angelos, Jr. $100,000 Note 05/05/98 Common 1,200,000 Sheldon I. Herman $100,000 Note 05/05/98 Common 200,000 Harry G. Brix Marketing Services 05/05/98 Common 1,200,000 Richard A. Chase $100,000 Note payable in print media advertising 12/24/99 Common 60,000 Baradaran Revocable $150,000 Trust 12/30/99 Common 10,000 Daniel Robert & Dorothy Joan Egan $ 25,000 12/31/99 Common 6,000 CBD Int'l Inc. $ 15,000 PSP FBO Clark C. Broome 01/01/00 Common 28,000 Benno & Ingrid Gauer $ 70,000 01/10/00 Common 21,980 CPM Networks Investments, LTD Yousa Jaber $ 54,950 01/14/00 Common 20,000 Gerry & Virginia Doell $ 50,000 01/12/00 Common 20,000 Richard & Katherine $ 50,000 Lyons 01/24/00 Common 60,000 Alfred & Sharon Knight $150,000 01/26/00 Common 6,861 Albert J. Dyck $ 17,152.50 01/26/00 Common 6,000 Leon & Connie Oosterhoff $ 15,000 01/28/00 Common 10,000 Gary Oosterhoff $ 25,000 02/01/00 Common 8,000 Ray & Vivian Schartner $ 20,000 02/02/00 Common 12,000 Frederick & Madelon $ 30,000 Holpp 02/03/00 Common 3,000 Scott Robinson $ 7,500 02/07/00 Common 24,000 Gary Smith $ 60,000 02/08/00 Common 6,000 Bill Angelos $ 15,000 02/08/00 Common 6,000 Kerry Angelos $ 15,000 02/08/00 Common 6,000 Vic Devlaeminck $ 15,000 02/10/00 Common 15,000 Brad & Cheryl Biegert $ 15,000 02/10/00 Common 116,000 Thomas Ashlock $ 290,000 02/11/00 Common 1,000,000 EasyTel Canada 8,914,850 common shares of EasyTel Canada 02/15/00 Common 8,000 Ibrahim Darwish $ 20,000 02/17/00 Common 18,000 Brian & Leeann Bunn $ 45,000 02/18/00 Common 6,000 Gloria Rosela Askew $ 15,000 02/26/00 Common 12,000 Jack & Rita Daughery $ 30,000 03/21/00 Common 16,000 Dan Boettcher $ 40,000 03/30/00 Common 6,000 David Lovett $ 15,000 04/12/00 Common 20,000 Richard & Katherine $ 50,000 Lyons 04/13/00 Common 8,000 Ronald & Colleen $ 20,000 Polinder 04/17/00 Common 12,000 Mallard Mac Enterprises, Ltd. $ 45,000 04/17/00 Common 26,000 577990 Alberta, Ltd. $ 97,500 5/17/00 Common 6,000 John H. Macbeth $ 15,000 5/17/00 Common 8,000 Reg Hardin Radford $ 20,000 5/17/00 Common 6,500 Dennis Wickersham $ 16,250 05/20/00 Common 6,000 Robin Kressback $ 15,000 05/29/00 Common 6,000 Robert H. DuBose III. $ 15,000 05/30/00 Common 6,000 Robert H. DuBose $ 15,000 05/31/00 Common 7,000 William Hoffman $ 17,500 06/02/00 Common 6,000 W. Glenn & Connie $ 15,000 Norton 06/07/00 Common 6,000 Michael & Margaret $ 15,000 Faulkner 06/20/00 Common 18,000 James Elliott $ 45,000 6/29/00 Common 6,000 Roger Charest $ 15,000 6/29/00 Common 6,000 Magnolia Place $ 15,000 6/29/00 Common 6,000 Colin Porozni $ 15,000 6/29/00 Common 6,000 Nick & Nancy Porozni $ 15,000 6/29/00 Common 6,000 Probob Holdings Ltd. $ 15,000 6/29/00 Common 6,000 Reg Hardin Radford $ 15,000 6/29/00 Common 6,000 782409 Azbram Ltd. Willis Porozni $ 15,000 6/29/00 Common 6,000 Mallett Property Management, Ltd. $ 15,000 6/29/00 Common 7,000 Ronald A. Pearson $ 17,500 6/29/00 Common 6,000 Ray & Vivian Turris $ 15,000 6/29/00 Common 6,000 571403 BC LTD $ 15,000 6/29/00 Common 8,720 591384 B.C. LTD $ 21,800 09/16/00 Common 53,693 Asher Milgrom 45.05% of M&M Communications 09/16/00 Common 192,816 Axon Connectivity Telecommunication Technology, Inc. Switches 09/29/00 Common 12,000 Todd Adamson $ 30,000
The Company claims Section 4(2), and regulation "D", Rule 505, private offering exemptions from the registration provisions of the Securities Act of 1933 for the above unregistered securities sales in the United States within the last three years. ITEM 11. DESCRIPTION OF SECURITIES. The Company has only one class of common equity shares. There are no restrictive dividend, voting, or preemption rights. Nor are there any provisions in the charter or By-Laws that would delay, defer or prevent a change in control of the Company. 18 ITEM 12. INDEMNIFICATION OF DIRECTORS AND OFFICERS. There are indemnification provisions in the By-Laws of the Company for its Directors and Officers. A temporary binder has been issued for Directors' Errors and Omissions Insurance with a policy date of August 10, 2000. ITEM 13. FINANCIAL STATEMENTS. ITEM 14. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE. There have been no changes in accountants or disagreements with the Company's accountants on accounting and financial disclosure. ITEM 15. FINANCIAL STATEMENTS AND EXHIBITS. Independent Auditors Report . . . . . . . . . . . . . . . F - 2 Balance sheet. . . . . . . . . . . . . . . . . . . . . . . F - 3 Statements of income and expense. . . . . . . . . . . . F - 4 Statements of shareholders' equity . . . . . . . . . . . F - 5 Statements of cash flows . . . . . . . . . . . . . . . . F - 6 Notes to financial statements. . . . . . . . . . . . . . F - 7 19 INDEPENDENT AUDITOR'S REPORT Board of Directors and Shareholders Pacific Telcom, Inc. and Subsidiary I have audited the accompanying balance sheets of Pacific Telcom, Inc. and Subsidiary as of June 30, 2000, December 31, 1999 and 1998, and the related statements of income and changes in shareholders' equity for the six month interim period ending June 30, 2000, the years in the ended December 31, 1999, and 1998, and the statements of cash flows for the interim period ended June 30, 2000 and the years ended December 31, 1999 and 1998. These financial statements are the responsibility of the Pacific Telcom Inc. management. My responsibility is to express an opinion on these consolidated financial statements based on my audits. The June 30, 2000 statements of the Subsidiary, EasyTel Canada, were audited by other auditors whose report, dated August 25, 2000, expressed an unqualified opinion on those statements. I conducted my audits in accordance with generally accepted auditing standards. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Pacific Telcom Inc. and Subsidiary as of June 30, 2000, December 31, 1999 and 1998, and the results of its operations for the interim period ending June 30, 2000, the two years in the period ended December 31, 1999, and its cash flows for the interim period ending June 30, 2000 and the years ended December 31, 1999 and 1998, in conformity with generally accepted accounting principles. This report is intended solely for the information and use of management, the Board of Directors and for required regulatory reporting. The report is not intended to be and should not be used by anyone other than these specified parties. David Christensen CPA Vancouver, Washington September 12, 2000 F - 2
PACIFIC TELCOM, INC. CONSOLIDATED BALANCE SHEETS As of June 30, 2000 and December 31, June 30, 2000 1999 1998 ------------ ---------- ---------- ASSETS Current Assets Cash and Cash Equilivants (Note 1) $ 382,701 $ 69,901 $ 65,436 Account Receivable EASYTEL- Joint Venture (Note 1) 307,564 8,592 Subscription Receivable 60,367 Other Receivables (Note 1) 23,284 ------------ ---------- ---------- Total Current Assets 773,916 78,493 65,436 Fixed Assets Telecommunications Platform Equipment, Net 2,479,496 141,869 167,633 Furniture and Equipment, Net 137,979 71,231 16,348 ------------ ---------- ---------- Total Fixed Assets, Net (Notes 1 & 7) 2,617,475 213,100 183,981 License for Canadian Operations (Note 3) 158,378 Goodwill (Notes 1 & 3) 966,707 - - Notes Receivable-Related Party - - 266,534 Print media Due (Note 8) 86,000 100,000 100,000 Prepaid and Deferred Expenses 94,652 26,293 2,575 ------------ ---------- ---------- TOTAL ASSETS 4,697,128 417,886 618,526 ============ ========== ========== Liabilities Current Liabilities Accounts Payable 1,439,089 6,009 100,589 Payroll Liabilities 8,232 62,125 54,000 Notes Payable-Current Portion (Notes 9 & 10) Note Payable - Cascade Partners - 25,929 Note Payable - XXXLLC - 112,000 150,000 Note Payable-Bank 17,420 Contingent Contract Payable (Note 3) 150,000 Reserve for Customer Prepaid Balances 46,927 ------------ ---------- ---------- Total Current Liabilities 1,661,668 206,063 304,589 ------------ ---------- ---------- Long Term Liabilities Due to EasyTel USA for Telecommunication Equipment 615,150 Shareholder Advances 121,651 Note Payable-Bank (Note 9) 30,300 ------------ ---------- ---------- Total Liabilities 2,428,769 206,063 304,589 ------------ ---------- ---------- Shareholders equity Common Stock-No Par Common Stock - No Par, 25,000,000 Authorized 3,440,153 922,500 641,000 Issued and Outstanding at June 30, 2000, 10,458,540 shares Issued and Outstanding at 12-31-99, 8,727,459 shares Issued and Outstanding at 12-31-98, 8,697,459 shares Total Common Stock-No Par 3,440,153 922,500 641,000 Deficit accumulated during development stage (Note 2) (1,189,778) (710,677) (327,063) Accumulated Other Comprehensive Income (Note 18) 17,984 - - ------------ ---------- ---------- Total Shareholders Equity (Notes 13 & 19) 2,268,359 211,823 313,937 ------------ ---------- ---------- Total Liabilities and Shareholders Equity 4,697,128 417,886 618,526 ============ ========== ==========
The accompanying notes are an integral part of these statements F - 3
PACIFIC TELCOM, INC. CONSOLIDATED STATEMENTS OF INCOME AND EXPENSE 6 months Ending December 31 December 31 June 30, 2000 1999 1998 ------------- ------------- ---------- Ordinary Income/Expense Total Sales Revenue (Note 1) $ 637,128 $ 118,857 $ 1,124 Total Cost of Services Sold 591,339 126,487 23,142 ------------- ------------- ---------- Gross Profit from Sales 45,789 (7,630) (22,018) ------------- ------------- ---------- Operating Expenses Advertising 7,704 7,513 1,250 Automobile Expense 1,518 2,948 1,717 Computer Parts, Software & Supplies 5,440 3,041 2,558 Consulting Fees 32,250 18,500 20,000 Delivery and Messenger 5,691 3,141 1,184 Development and other expenses 595 1,140 110,161 Filing fees 4,206 - - General and Administrative 20,400 9,343 4,254 Independent Contractor 17,439 70,500 5,000 Insurance 4,085 2,884 1,085 Interest Expense 1,736 22,027 - Payroll Expenses 143,637 78,328 54,000 Printing and Reproduction 2,207 4,084 2,186 Professional Fees 41,695 64,284 37,059 Rent 1,400 18,527 8,000 Repairs 3,883 - - Stock Transfer Fees 2,287 3,852 2,476 Taxes 10,042 - - Telephone 24,989 11,542 3,707 Travel & Entertainment 90,219 56,490 10,086 Utilities 1,005 2,996 50 ------------- ------------- ---------- Total Expense 422,428 381,139 264,773 ------------- ------------- ---------- Net Operating Income\(Loss) (376,639) (388,769) (286,791) Other Income\Expense Total Other Income (Note 6) 109,495 19,351 6,209 ------------- ------------- ---------- Other Expense 22,946 Amortization Expense (Notes 1& 3) 38,812 Depreciation Expense (Notes 1& 7) 150,199 35,561 14,937 ------------- ------------- ---------- Total Other Expense 211,957 35,561 14,937 ------------- ------------- ---------- Net Other Income\Expense (102,462) (16,210) (8,728) ------------- ------------- ---------- Income/Loss before tax (479,101) (404,980) (295,519) ------------- ------------- ---------- Tax Benefit-Deferred Tax NOL (Notes 11 & 12 ) - 21,365 - ------------- ------------- ---------- Net Income\(Loss) (Note 18) (479,101) (383,615) (295,519) ============= ============= ========== Per Share-Basic (Note 16) $ (0.04) (0.04) (0.03) Per Share-Diluted $ (0.04) (0.04) (0.03)
The accompanying notes are an integral part of these statements F - 4
PACIFIC TELECOM, INC. CONSOLIDATED STATEMENT OF CHANGES IN SHARDHOLDERS EQUITY FOR THE PERIOD ENDED JUNE 30, 2000 AND THE YEARS ENDED DECEMBER 31, 1999 AND 1998 Retained Other Total Common Stock Earnings\ Comprehensive Shareholders Shares Amount (Loss) Income Equity -------------- ----------- --------------- ------------- ----------- - - ------------------------------- -------------- ----------- --------------- ------------- ----------- Balance December 31, 1997 3,449,900 $ 31,000 $ (31,543) - $ (543) - - ------------------------------- -------------- ----------- --------------- ------------- ----------- Net Loss for 1998 $ (295,519) $ (295,519) Common Stock Issued $ 610,000 - - ------------------------------- -------------- ----------- --------------- ------------- ----------- Balance December 31, 1998 8,697,459 $ 641,000 $ (327,062) - $ 313,938 - - ------------------------------- -------------- ----------- --------------- ------------- ----------- Net Loss for 1999 $ (383,615) $ (383,615) Common Stock Issued $ 281,500 - - ------------------------------- -------------- ----------- --------------- ------------- ----------- Balance December 31, 1999 8,727,459 $ 922,500 $ (710,677) - $ 211,823 =============================== ============== =========== =============== ============= =========== Consolidated Net Loss for period ending June 30, 2000 (479,101) (479,101) Common Stock Issued 2,517,653 2,517,653 Comprehensive Income 17,984 17,984 - - ------------------------------- -------------- ----------- --------------- ------------- ----------- Balance June 30, 2000 10,458,540 $3,440,153 (1,189,778) $ 17,984 $2,268,359 =============================== ============== =========== =============== ============= ===========
F - 5
PACIFIC TELCOM, INC. CONSOLIDATED STATEMENT OF CASH AND CASH EQUILIVANTS for the period ending June 30, 2000 and the year ended December 31, June 30, 2000 1999 1998 ------------ ---------- ---------- OPERATING ACTIVITIES: Net Income/(Loss) $ (479,101) $(383,615) $(295,511) Adjustments to reconcile Net Income to net cash provided by operations: Amortization 33,335 - - Depreciation 150,199 35,528 2,038 Non-cash gain for sale/exchange of equipment (108,959) - - Accounts receivable (increase)\decrease (322,256) (14,690) 6,098 Subscription receivable (increase) (60,367) - - Notes receivable-Related Party (increase)\decrease - 266,534 (266,534) Accounts Payable change increase\(decrease) 2,061,100 (69,012) 75,021 Increase in Customer Prepaid balances 46,927 - - Payroll Liabilities change increase\(decrease (53,893) 62,125 - Accounts payable change for legal services - (19,500) 19,500 Salaries Payable increase\decrease change - (54,000) 54,000 Notes Payable increase (reduction)- Cascade (25,929) 25,929 - Notes Payable increase\(reduction) - XXXLLC (112,000) (38,000) 150,000 Notes payable to bank current portion increase 17,420 - - ------------ ---------- ---------- Net cash provided by Operating Activities: 1,625,577 (188,701) (255,388) ------------ ---------- ---------- INVESTING ACTIVITIES: Purchase of Telecommunication Equipment (2,473,900) - - Purchase of Furniture and Equipment (130,618) (64,650) (186,050) Purchase of EasyTel Canada (101,055) - - Change of Prepaid Expenses (68,359) (23,718) (102,575) Other 957 34 - ------------ ---------- ---------- Net cash provided by Investing Activities (2,772,975) (88,334) (288,625) ------------ ---------- ---------- FINANCING ACTIVITIES: Sales of Common Stock-No Par 1,600,000 281,500 610,000 ------------ ---------- ---------- Net cash provided by Financing Activities 1,600,000 281,500 610,000 ------------ ---------- ---------- Net cash increase for period 452,602 4,465 65,987 Cash at beginning of period 69,901 $ 65,436 $ (551) ------------ ---------- ---------- Cash and cash equilivants at end of period 382,701 $ 69,901 $ 65,436 ============ ========== ==========
The accompanying notes are an integral part of these statements F - 6 PACIFIC TELCOM, INC. NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS INTERIM PERIOD ENDED JUNE 30, 2000 AND YEARS ENDED DECEMBER 31, 1999, 1998 NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: This is a summary of significant accounting policies of Pacific Telcom Inc. and subsidiary EasyTel Canada. The financial statements and notes are representation of the Company's management who is responsible for their integrity and objectivity. These accounting policies conform to generally accepted accounting principles and have been consistently applied in the preparation of the financial statements. NATURE OF OPERATIONS The Company is a telecommunications business. The Company has entered into a joint venture with EasyTel so that the Company can offer advanced telecommunications packages suited for business, professional and individual users. CONSOLIDATED STATEMENTS The Consolidated Financial Statements include the accounts of the parent company and subsidiary (EasyTel Canada), after elimination of intercompany accounts and transactions. The accounts of the subsidiary are consolidated as of June 30, 2000. The statements are not consolidated as of December 1999 and December 1999 as EasyTel Canada was purchased on February 11, 2000. CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Company considers cash in banks to be cash equivalents. ESTIMATES INHERENT IN THE FINANCIAL STATEMENTS Preparing the Company's financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. ALLOWANCE FOR ACCOUNTS RECEIVABLE: A valuation allowance for accounts receivable is based on management's estimate of the amount necessary to recognize possible losses. There currently is an allowance for accounts receivable as June 30, 2000 in the amount of $42,384. F - 7 NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) POLICY FOR ACCOUNTING FOR BUSINESS COMBINATIONS, ALLOCATION OF PURCHASE PRICE, AND ACQUISITION CONTINGENCIES The Company assesses each business combination to determine whether the pooling of interests or the purchase method of accounting is appropriate. For those business combinations accounted for under the pooling of interests method, the financial statements are combined with those of the Company at their historical amounts, and, if material, all periods presented are restated as if the combination occurred on the first day of the earliest year presented. For those acquisitions accounted for using the purchase method of accounting, the Company allocates the cost of the acquired business to the assets acquired and the liabilities assumed based on estimates of fair values thereof. These estimates are revised during the allocation period as necessary when, and if, information regarding contingencies becomes available to define and quantify assets acquired and liabilities assumed. The allocation period varies but does not exceed one year. To the extent contingencies are resolved or settled during the allocation period, such items are included in the revised allocation of the purchase price. After the allocation period, the effect of changes in such contingencies is included in results of operations in the periods in which the adjustments are determined. In certain business combinations, the Company agrees to pay additional amounts to the seller's contingent upon achievement of certain conditions. Contingent payments, when incurred, are recorded as purchase price adjustments, based on the nature of each contingent payment. ACCOUNTING POLICY FOR GOODWILL Cost in excess of net assets of the business acquired (goodwill) represents the unamortized excess of the cost of acquiring a business over the fair values of the net assets received at the date of acquisition. It is being amortized on a straight-line basis over periods of 15 years and is stated net of accumulated amortization of $33,335 and at June 30, 2000. Amortization expense charged to operations was $33,335 for the period ending June 30, 2000. PROPERTY AND EQUIPMENT AND DEPRECIATION METHODS Property and equipment are recorded at cost. Expenditures for major additions and improvements are capitalized, and minor replacements, maintenance, and repairs are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the cost and accumulated depreciation are removed from the accounts and any resulting gain or loss is included in the results of operations for the respective period. Depreciation is provided over the estimated useful lives of the related assets using the straight-line method for financial statement purposes. The Company uses other depreciation methods (generally accelerated) for tax purposes where appropriate. The estimated useful lives for significant property and equipment categories are as follows: Vehicles 3 to 5 years Furniture and equipment 3 to 10 years F - 8 NOTE 1-SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED): ADVERTISING COSTS Advertising expenditures are expensed when incurred. Total advertising expenses were $12,500 for the period ending June 30, 2000, $7,513 in 1999 and $1,250 in 1998. CONTINGENCIES Certain conditions may exist as of the date the financial statements are issued, which may result in a loss to the Company but which will only be resolved when one or more future events occur or fail to occur. The Company's management and its legal counsel assess such contingent liabilities, and such assessment inherently involves an exercise of judgment. In assessing loss contingencies related to legal proceedings that are pending against the Company or unasserted claims that may result in such proceedings, the Company's legal counsel evaluates the perceived merits of any legal proceedings or unasserted claims as well as the perceived merits of the amount of relief sought or expected to be sought therein. If the assessment of a contingency indicates that it is probable that a material loss has been incurred and the amount of the liability can be estimated, then the estimated liability would be accrued in the Company's financial statements. If the assessment indicates that a potentially material loss contingency is not probable but is reasonably possible, or is probable but cannot be estimated, then the nature of the contingent liability, together with an estimate of the range of possible loss if determinable and material, would be disclosed. Loss contingencies considered remote are generally not disclosed unless they involve guarantees, in which case the nature of the guarantee would be disclosed. RECLASSIFICATIONS Certain reclassifications have been made to the prior years' financial statements to conform to the current year presentation. These reclassifications had no effect on previously reported results of operations or retained earnings. F - 9 NOTE 2-REALIZATION OF ASSETS: As shown in the accompanying financial statements, the Company incurred a net loss of $479,101, $383,615 and $295,519 during the 6-month period ending June 30, 2000 and the years ended December 31, 1999, and December 31, 1998. The Company's current liabilities exceeded its current assets by $887,752 as of June 30, 2000. However, most of the current liabilities are payable to the company's joint venture partner, EasyTel USA for equipment to be placed into service. Company management have projected sales revenue, based on current activity, to meet and exceed, the operating needs of the company in the current operating year ended December 31, 2000. These factors, as well as the uncertain conditions that the Company faces relative to its continued ability to raise capital and conduct operations create an uncertainty as to the Company's ability to continue as a going concern. The Company has developed a plan to raise capital, and has currently met the capital goals of management through sales of stock to shareholders, and has additional commitments. The ability of the Company to continue as a going concern is dependent upon the continued success of the plan. The financial statements do not include any adjustments that might be necessary should the Company be unable to continue as a going concern. The Company has an outstanding Private Placement Offering for $5,000,000. Subsequent to December 31, 1999, and in the first six months of 2000, the Company has raised $1,600,000 in additional capital and has additional commitments for $2,100,000 by the Placement closing date of October 31, 2000. NOTE 2(A)-SUBSEQUENT EVENTS Subsequent to June 30, 2000, the Company is in the process of securing an equipment leases for additional expansion into other market areas. On September 14, 2000, the Board of Directors approved a resolution for the Company to issue up to $10,000,000 in Medium-Term, Convertible, 9% Capital Notes in increments of $500,000 per Capital Note. The underwriting firm has approved this offering. NOTE 3-PURCHASE OF EASYTEL CANADA On February 11, 2000, the Company acquired EasyTel Canada, which is involved in the development of the telecommunications business in Canada. The acquisition, which was accomplished through the issuance of common stock and cash, was accounted for under the purchase method of accounting and, accordingly, the results of operations have been included in the Company's consolidated financial statements since the date of acquisition. The purchase price of approximately $1,171,000 was allocated to the individual assets acquired and liabilities assumed based upon their respective estimated fair values at the effective date of acquisition. The transaction resulted in cost in excess of net assets acquired of approximately $1,000,000, of which $90,510 was allocated to Licenses and the remainder to Goodwill. F - 10 NOTE 4-EXCLUSIVE RIGHTS In a special meeting of the shareholders on April 2, 1998, the shareholders approved the issuance of shares (not to exceed 10% of the current number of issued shares) to the shareholders of EasyTel Inc. (a Nevada Corporation) for the purpose of acquiring the marketing and reselling rights of the products and services of EasyTel Inc. NOTE 5-ACCOUNTS RECEIVABLE EASYTEL-JOINT VENTURE The accounts receivable are due from the joint venture partner, EasyTel USA. Revenue of the company is shared with EasyTel USA in exchange for the use of the technology for the telecommunications platforms. The revenue share with EasyTel USA is 50% of gross revenue. NOTE 6-UNUSUAL OR NONRECURRING INCOME WITH JOINT VENTURE PARTNER The results of operations for the second quarter of 2000 include (1) a $108,959 nonrecurring, non-cash, other consulting income derived from EasyTel USA (a related party) for the sale and exchange of telecommunication equipment. NOTE 7-FIXED ASSETS AND DEPRECIATION EXPENSE Premises and equipment consisted of the following for the 6 month period ending June 30,200 and for the years ending at December 31:
June 30 1999 1998 ----------- --------- --------- Telecommunications Platform Equipment $2,654,461 $180,561 $180,561 Furniture and Equipment 213,655 83,037 18,387 Less: accumulated depreciation (250,641) (50,498) (14,937) ----------- --------- --------- 2,617,475 213,100 184,011
Depreciation expense for the 6 months ended June 30, 2000, 1999 and 1998 was $150,199, $35,561 and $14,937 respectively. NOTE 8-PRINT MEDIA DUE Print media due represents media/barter credit from MRI International that was granted in exchange for stock issuance. The credit is for media that is available at the time of booking and does not have a cash redemption value, and the estimated value is stated in terms of media time credits and not cash value. NOTE 9-BANK LOAN The company assumed a bank loan with the purchase of EasyTel Canada. A portion of the cash proceeds ($32,500) paid to the seller was assigned as collateral for the loan. The loan bears interest at prime plus 3 % and matures in June 2003. Payments are made monthly consisting of $2,167 of principal plus interest. F - 11 NOTE 10-NOTES PAYABLE Notes payable to Cascade Partners and XXXLLC represent current obligations of the company. The note payable to XXX LLC is dated 12-31-98 with interest at 6% and was paid in full subsequent to December 31, 1999. The note to Cascade Partners was paid in full subsequent to December 31, 1999. NOTE 11-INCOME TAXES The provision for income taxes consists of the following: DECEMBER 31, 1999 1998 -------- -------- Currently Payable: Federal 0 0 State 0 0 Deferred Tax Expense (21) (0) -------- -------- Total (21) 0 -------- -------- The net deferred tax liability on the balance sheet at December 31, 1998 consists of the following: DECEMBER 31, 1999 1998 Deferred Tax Assets 21 - -------- -------- Deferred Tax Liabilities - - 21 - -------- -------- The net deferred federal income tax asset resulting from differences between financial reporting and tax bases for depreciation. There was no valuation allowance for deferred tax assets as of December 31, 1999. The Company has determined that it is not required to establish a valuation allowance for the deferred tax assets as management believes it is more likely than not that the deferred tax asset of $21,000 will be realized principally through carry forward of taxable income in future years. NOTE 12-NON-CAPITAL LOSS CARRYFORWARD The company has non-capital loss carryforwards to reduce taxable income. Pacific Telcom Inc. has net operating loss carryforwards available of $788,943 that expire in years 2011 through 2019. EasyTel Canada has loss carryforwards of $494,000 that expire in years 2005 through 2007. NOTE 13-STOCKHOLDERS' EQUITY F - 12 On May 07, 1991, the number of authorized shares of common stock was increased from 1,000,000 to 25,000,000 shares. The shares have no par value and no market. NOTE 14-RELATED PARTY TRANSACTIONS The following transactions occurred between the Company and other affiliated parities: 1. Shares were issued for organizational services to the only three stockholders in the amounts stated below: Edward L. Daniel 1,168,000 Kenneth G. Mason 1,364,000 Bill J. Angelos, Jr. 1,317,900 2. Kenneth G. Mason is the company legal advisor and also a major shareholder. NOTE 15-LEASE OBLIGATION The Company has entered into an operating lease agreement for its corporate office on March 27, 2000 for one year. The annual rent of $41,666 was prepaid. The Company records monthly rent expense equal to the total paid over the lease term, divided by the number of months of the lease term. The Company has an option to renew the lease for one year at a maximum increase of 4%. NOTE 16-EARNING PER SHARE Basic net earnings (loss) per common share is computed by dividing net earnings (loss) applicable to common shareholders by the weighted-average number of common shares outstanding during the period. Diluted net earnings (loss) per common share is determined using the weighted-average number of common shares outstanding during the period, adjusted for the dilative effect of common stock equivalents, consisting of shares that might be issued upon exercise of common stock options. NOTE 17-EMPLOYMENT AGREEMENTS WITH RELATED PARTIES The company has entered into employment agreements with the following shareholder-officers with basic terms of the agreement as follows: Name Term Base Compensation Bonus Compensation ---- ---- ------------------ ------------------ Bill J. Angelos, Jr. 5 years $10,000 per month 1\2 of 1% of net income Plus $500 increases for new Geographic markets F - 13 NOTE 18-COMPREHENSIVE INCOME Comprehensive income consists of net income and other gains and losses affecting shareholders' equity that, under generally accepted accounting principles are excluded from net income. For the Company, such items consist primarily of foreign currency translation gains and losses. The changes in the components of other comprehensive income (loss) are as follows: ------------------- 2000 ------------------- Pre-Tax Tax Amount Expense --------- -------- Net Loss (479,101) $ 0 --------- -------- Foreign currency translation 17,984 $ 0 adjustments Total other Comprehensive loss (461,117) $ 0 ========= ======== NOTE 19- STOCK TRANSACTIONS On March 26, 1998, the Board of Directors declared a hundred-for-one stock split and a cash dividend of $.07 per share for the first half of 1998. In addition, the shareholders approved a resolution increasing the number of shares authorized to 10 million of no par stock. On April 24, 1998, the Board of Directors declared a three-for-two stock split of the then currently issued and outstanding shares. All share and per share amounts have been restated to retroactively reflect these stock splits. F - 14 (A) EXHIBITS The following exhibits are filed with this registration statement: Exhibit Number Exhibit Name - - ------- ------------ 3.1 Articles of Incorporation 3.2 Amendment to the Articles of Incorporation 3.3 Amendment to the Articles of Incorporation 3.4 By-Laws 3.5 Letter Of Good Standing from the State of Illinois 4.1 Sample Stock Certificate of the Registrant 5.1 Legality Opinion Letter 10.1 Strategic Alliance Agreement - EasyTel/Pacific TelCom 10.2 Addendum to Strategic Alliance Agreement 10.3 Alliance Agreement - ILD 10.4 Alliance Agreement - INA 10.5 Alliance Agreement - ProNet 10.6 Alliance Agreement - IC 10.7 Alliance Agreement - N21 10.8 Stock Purchase Agreement - M&M 10.9 Exhibit to Stock Purchase Agreement - M&M 10.10 Asset Purchase Agreement - Axxon 10.11 Exhibit to Asset Purchase Agreement - Axxon 10.12 Stock Purchase Agreement - EasyTel Canada (Dated 2/11) 10.13 Exhibits to Stock Purchase Agreement - EasyTel Canada (Dated 2/11) 10.14 Termination of Stock Purchase Agreement - EasyTel Canada (Dated 2/11) 10.15 Stock Purchase Agreement - EasyTel Canada (Dated 11/6) 10.16 Exhibits to Stock Purchase Agreement - EasyTel Canada (Dated 11/6) SIGNATURES In accordance with Section 12 of the Securities Exchange Act of 1934, the registrant caused this registration statement to be signed on its behalf by the undersigned, thereunto duly authorized. PACIFIC TELCOM, INC. (Registrant) Date: November 9, 2000 By /s/ Bill J. Angelos, Jr. ------------------------------------ Bill J. Angelos, Jr., Chairman and Chief Executive Officer EX-3.1 2 0002.txt ARTICLES OF INCORPORATION File Number 5636-939-2 92221941 State of Illinois Office of The Secretary of State [graphic omitted : state seal] Whereas, ARTICLES OF INCORPORATION OF DRAYTON HALL & CO. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATI8ON ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984. Now Therefore, I, George H. Ryan, Secretary of State of the State of Illinois, by virtue of the powers vested in me by law, do hereby issue this certificate and attach hereto a copy of the Application of the aforesaid corporation. In Testimony Whereof, I hereto set my hand and cause to be affirmed the Great Seal of the State of Illinois, at the City of Springfield, this 2nd day of May A.D. 1991 and of the Independence of the United States the two hundred and 15th. [signature] Secretary of State APPLICATION OF ARTICLES OF INCORPORATION GEORGE H. RYAN Secretary of State State of Illinois ARTICLES OF INCORPORATION Pursuant to the provisions of "The Business Corporation Act of 1983", the undersigned incorporator(s) hereby adopt the following Articles of Incorporation. ARTICLE ONE The name of the corporation is Drayton Hall & Co. ARTICLE TWO The name and address of the initial registered agent and its registered office are: Registered Agent Kenneth G. Mason Registered Office 33 N. LaSalle Street, #2131 Chicago, IL 60602 Cook ARTICLE THREE The purpose or purposes for which the corporation is organized are: Financial planning, investment counseling and for the transaction of any and all lawful purpose for which corporations may be incorporated under the Illinois Business Corporation Act of 1983. ARTICLE FOUR Paragraph 1: The Authorized shares shall be: Class Par value per share Number of Shares Authorized Common N/A 1,000,000 Paragraph 2: the preferences, qualifications, limitations, restrictions and the special or relative rights in respect of the shares of each class are: ARTICLE FIVE The number of shares to be issued initially, and the consideration to be received by the corporation therefore, are: Par Value Number of Shares Consideration Class per share proposed to be issued to be received therefore Common N/A 1,000,000 $1000 ARTICLE SIX OPTIONAL The number of directors constituting the initial Board of Directors of the Corporation is 1, and the names and addresses of the persons who are to serve as directors until the first annual meeting of shareholders or until their successors be elected and qualify are: Name Residential Address Edward L. Daniel 3034 W. Logan Blvd., Chicago ARTICLE SEVEN OPTIONAL (a) It is estimated that the value of all property to be owned by the corporation for the following year wherever ocated is ______ (b) It is estimated that the value of the property to be located within the State of Illinois during the following year will be _______ (c) It is estimated that the gross amount of business which will be transacted by the corporation during the following year will be _______ (d) It is estimated that the gross amount of business which will be transacted from places of business in the State of Illinois during the following year will be ______ ARTICLE EIGHT OTHER PROVISIONS Attach a separate sheet of this size for any other provision to be included in the Articles of Incorporation, e.g., authorizing pre-emptive rights; denying cumulative voting; regulating internal affairs; voting majority requirements; fixing a duration other than perpetual; etc. NAMES AND ADDRESS OF INCORPORATORS The undersigned incorporator(s) do hereby declare(s), under penalties of perjury, that the statements made in the foregoing Articles of Incorporation are true. Dated April 24, 1991 [signature] Address Kenneth G. Mason 33 N. LaSalle Street Chicago, Illinois, 60602 EX-3.2 3 0003.txt AMENDMENT TO ARTICLES OF INCORPORATION File Number 5636-939-2 98251648 6621/0044 51 001 page 1 of 5 1998-03-31 10:45:59 Cook County Recorder 29.00 State of Illinois Office of The Secretary of State Whereas, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF DRAYTON HALL & CO. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984 Now Therefore, I, George H. Ryan, Secretary of State of the State of Illinois, by virtue of the pwers vested in me by law, do hereby issue this certificate and attach hereto a copy of the Application of the aforesaid corporation. [graphic omitted : state seal] In Testimony Whereof, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois, at the City of Springfield, this 26th day of March A.D. 1998 and of the Independence of the United States the two hundred and 22nd. [signature] George H. Ryan Secretary of State 98251648 page 2 of 5 Form BCA-10.30 ARTICLES OF AMENDMENT File #5636-939-2 1. CORPORATE NAME: Drayton Hall & Co. (note 1) 2. MANNER OF ADOPTION OF AMENDMENT: The following amendment of the Articles of Incorporation was adopted on May 7, 1991 in the manner indicated below. (X on box only) ___ By a majority of the incorporators, provided no directors were named in the articles of incorporation and no directors have been elected; (note 2) ___ By a majority of the board of directors, in accordance with Section 10.10, the corporation having issued no shares as of the time of adoption of this amendment; (note 2) ___ By a majority of the board of directors, in accordance with Section 10.15, shares having been issued but shareholder action not being required for the adoption of the amendment; (note 3) _X_ By the shareholders, in accordance with Section 10.20, a resolution of the board of directors having been duly adopted and submitted to the shareholders. At a meeting of shareholders, not less than the minimum number of votes required by statute and by the articles of incorporation were voted in favor of the amendment; (note 4) ___ By the shareholders, in accordance with Sections 10.20 and 7.10, a resolution of the board of directors having been duly adopted and submitted to the shareholders. A consent in writing has been signed by shareholders having not less than the minimum number of votes required by statute and by the articles of incorporation. Shareholders who have not consented in writing have been given notice in accordance with Section 7.10; (notes 4 & 5) ___ By the shareholders, in accordance with Sections 10.20 and 7.10, a resolution of the board of directors having been duly adopted and submitted to the shareholders. A consent in writing has been signed by all the shareholders entitled to vote on this amendment. (note 5) 3. TEXT OF AMENDMENT a. When amendment effects a name change, insert the new corporate name below. Use page 2 for all other amendments. Article I: The name of the corporation is: ________________________________ (new name) b. (if amendment affects the corporate purpose, the amended purpose is required to be set forth in its entirety. If there is not sufficient space to do so, add on or more sheets of this size) Resolved that Article 4, Paragraph 1 be amended to state: Authorized shares, issued shares, and consideration received: Class Par Authorized Number of Proposed Consideration to be issued Common n/a 25,000,000 Paragraph 2: Shareholders of originally authorized and issued common shares only set forth in these articles shall have preemptive rights to acquire additional common shares whenever so authorized. 4. The manner, if not set forth in Article 3b, in which any exchange, reclassification or cancellation of issued shares or a reduction of the number of authorized shares of any class below the number of issued shares of that class provided for or effected by this amendment, is as follows: None 5. (a) The manner, if not set forth in Article 3b, in which said amendment effects a change in the amount of paid-in capital (paid-in capital replaces the terms Stated Capital and Paid-in Surplus and is equal to the total of these accounts) is as follows: (b) The amount of paid-in capital (Paid-in Capital replaces the terms Stated Capital and Paid-in surplus and is equal to the total of these accounts) as changed by this amendment is as follows: Before amendment After amendment Paid-in Capital _______________ ______________ 6. The undersigned corporation has caused this statement to be signed by its duly authorized officers, each of whom affirms under penalties of perjury, that the facts stated herein are true. Dated March 24, 1998 Drayton Hall & Co. Attested by [signature] Kenneth G. Mason, Secretary [signature] Edward L. Daniel, President 7. If amendment is authorized pursuant to Section 10.10 by the incorporators, the incorporators must sign below, and type or print name and title. OR If amendment is authorized by the directors pursuant to Section 10.10 and there are no officers, then a majority of the directors or such directors as may be designated by the board, must sign below, and type or print name and title. The undersigned affirms, under the penalties of perjury, that the facts stated herein are true. NOTES and INSTRUCTIONS NOTE 1: State the true exact corporate name as it appears on the records of the office of the Secretary of state, BEFORE any amendments herein report. NOTE 2: Incorporators are permitted to adopt amendments ONLY before any shares have been issued and before any directors have been named or elected. NOTE 3: Directors my adopt amendments without shareholder approval in alloy seven instances, as follows: (a) to remove the names and addresses of directors named in the articles of incorporation (b) to remove the name and address of the initial registered agent and registered office , provided a statement pursuant to Section 5.10 is also filed (c) to increase, decrease, create or eliminate the par value of the shares of any class, so long as no class or series of shares is adversely affected (d) to split the issued whole shares and unissued authorized shares by multiplying them by a whole number, so long as no class or series is adversely affected thereby; (e) to change the corporate name by substituting the word "corporation", "incorporated", "company", "limited", or the abbreviation "corp.", "inc.", "co." or "ltd." for a similar word or abbreviation in the name, or by adding a geographical attribution to the name; (f) to reduce the authorized shares of any class pursuant to a cancellation statement filed in accordance with Section 9.05 (g) to reinstate the articles of incorporation as currently amended NOTE 4: All amendments not adopted under Section 10.10 or Section 10.15 require (1) that the board of directors adopt a resolution setting forth the proposed amendment and (2) that the shareholders approve the amendment. Shareholder approval may be (1) by vote at a shareholders' meeting (either annual or special) or (2) by consent, in writing, without a meeting. To be adopted, the amendment must receive the affirmative vote or consent of the holders of at least 2/3 of the outstanding shares entitled to vote on the amendment (but if class voting applies, then also at least a 2.3 vote within each class is required) The articles of incorporation may supersede the 2/3 vote requirement by specifying any smaller or larger vote requirement not less than a majority of the outstanding shares entitled to vote and not less that a majority within each class when class voting applies. (section 10.10) NOTE 5: When shareholder approval is by consent, all shareholders must be given notice of the proposed amendment at least 5 days before the consent is signed. If the amendment is adopted, shareholders who have not signed the consent must be promptly notified of the passage of the amendment. (Section 7.10 and 10.20) EX-3.3 4 0004.txt AMENDMENT TO THE ARTICLES OF INCORPORATION 98410036 File Number 5636-939-2 98410036 7531/0138 27 001 Page 1 of 6 1998-05-18- 11:35:02 Cook County Recorder 31.00 State of Illinois Office of The Secretary of State Whereas, ARTICLES OF AMENDMENT TO THE ARTICLES OF INCORPORATION OF DRAYTON HALL & CO. INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS HAVE BEEN FILED IN THE OFFICE OF THE SECRETARY OF STATE AS PROVIDED BY THE BUSINESS CORPORATION ACT OF ILLINOIS, IN FORCE JULY 1, A.D. 1984 Now Therefore, I, George H. Ryan, Secretary of State of the State of Illinois, by virtue of the pwers vested in me by law, do hereby issue this certificate and attach hereto a copy of the Application of the aforesaid corporation. [graphic omitted : state seal] In Testimony Whereof, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois, at the City of Springfield, this 13th day of May A.D. 1998 and of the Independence of the United States the two hundred and 22nd. [signature] George H. Ryan Secretary of State Form BCA-10.30 ARTICLES OF AMENDMENT File #5636-939-2 Filed May 14 1998 George H. Ryan Secretary of State 1. CORPORATE NAME: Drayton Hall & Co. (note 1) 2. MANNER OF ADOPTION OF AMENDMENT: The following amendment of the Articles of Incorporation was adopted on May 9, 1991 in the manner indicated below. (X on box only) ___ By a majority of the incorporators, provided no directors were named in the articles of incorporation and no directors have been elected; (note 2) ___ By a majority of the board of directors, in accordance with Section 10.10, the corporation having issued no shares as of the time of adoption of this amendment; (note 2) ___ By a majority of the board of directors, in accordance with Section 10.15, shares having been issued but shareholder action not being required for the adoption of the amendment; (note 3) _X_ By the shareholders, in accordance with Section 10.20, a resolution of the board of directors having been duly adopted and submitted to the shareholders. At a meeting of shareholders, not less than the minimum number of votes required by statute and by the articles of incorporation were voted in favor of the amendment; (note 4) ___ By the shareholders, in accordance with Sections 10.20 and 7.10, a resolution of the board of directors having been duly adopted and submitted to the shareholders. A consent in writing has been signed by shareholders having not less than the minimum number of votes required by statute and by the articles of incorporation. Shareholders who have not consented in writing have been given notice in accordance with Section 7.10; (notes 4 & 5) ___ By the shareholders, in accordance with Sections 10.20 and 7.10, a resolution of the board of directors having been duly adopted and submitted to the shareholders. A consent in writing has been signed by all the shareholders entitled to vote on this amendment. (note 5) 3. TEXT OF AMENDMENT a. When amendment effects a name change, insert the new corporate name below. Use page 2 for all other amendments. Article I: The name of the corporation is: Pacific TelCom, Inc. (new name) b. (if amendment affects the corporate purpose, the amended purpose is required to be set forth in its entirety. If there is not sufficient space to do so, add on or more sheets of this size) SEE ATTACHED 4. The manner, if not set forth in Article 3b, in which any exchange, reclassification or cancellation of issued shares or a reduction of the number of authorized shares of any class below the number of issued shares of that class provided for or effected by this amendment, is as follows: NO CHANGE 5. (a) The manner, if not set forth in Article 3b, in which said amendment effects a change in the amount of paid-in capital (paid-in capital replaces the terms Stated Capital and Paid-in Surplus and is equal to the total of these accounts) is as follows: NO CHANGE (b) The amount of paid-in capital (Paid-in Capital replaces the terms Stated Capital and Paid-in surplus and is equal to the total of these accounts) as changed by this amendment is as follows: Before amendment After amendment Paid-in Capital _______________ ______________ 6. The undersigned corporation has caused this statement to be signed by its duly authorized officers, each of whom affirms under penalties of perjury, that the facts stated herein are true. Dated May 9, 1998 Drayton Hall & Co. Attested by [signature] Kenneth G. Mason, Secretary [signature] Edward L. Daniel, President 7. If amendment is authorized pursuant to Section 10.10 by the incorporators, the incorporators must sign below, and type or print name and title. OR If amendment is authorized by the directors pursuant to Section 10.10 and there are no officers, then a majority of the directors or such directors as may be designated by the board, must sign below, and type or print name and title. The undersigned affirms, under the penalties of perjury, that the facts stated herein are true. NOTES and INSTRUCTIONS NOTE 1: State the true exact corporate name as it appears on the records of the office of the Secretary of state, BEFORE any amendments herein report. NOTE 2: Incorporators are permitted to adopt amendments ONLY before any shares have been issued and before any directors have been named or elected. NOTE 3: Directors may adopt amendments without shareholder approval in alloy seven instances, as follows: (a) to remove the names and addresses of directors named in the articles of incorporation (b) to remove the name and address of the initial registered agent and registered office , provided a statement pursuant to Section 5.10 is also filed (c) to increase, decrease, create or eliminate the par value of the shares of any class, so long as no class or series of shares is adversely affected (d) to split the issued whole shares and unissued authorized shares by multiplying them by a whole number, so long as no class or series is adversely affected thereby; (e) to change the corporate name by substituting the word "corporation", "incorporated", "company", "limited", or the abbreviation "corp.", "inc.", "co." or "ltd." for a similar word or abbreviation in the name, or by adding a geographical attribution to the name; (f) to reduce the authorized shares of any class pursuant to a cancellation statement filed in accordance with Section 9.05 (g) to reinstate the articles of incorporation as currently amended NOTE 4: All amendments not adopted under Section 10.10 or Section 10.15 require (1) that the board of directors adopt a resolution setting forth the proposed amendment and (2) that the shareholders approve the amendment. Shareholder approval may be (1) by vote at a shareholders' meeting (either annual or special) or (2) by consent, in writing, without a meeting. To be adopted, the amendment must receive the affirmative vote or consent of the holders of at least 2/3 of the outstanding shares entitled to vote on the amendment (but if class voting applies, then also at least a 2.3 vote within each class is required) The articles of incorporation may supersede the 2/3 vote requirement by specifying any smaller or larger vote requirement not less than a majority of the outstanding shares entitled to vote and not less that a majority within each class when class voting applies. (section 10.10) NOTE 5: When shareholder approval is by consent, all shareholders must be given notice of the proposed amendment at least 5 days before the consent is signed. If the amendment is adopted, shareholders who have not signed the consent must be promptly notified of the passage of the amendment. (Section 7.10 and 10.20) TEXT OF AMENDMENT 3B. To operate, own, manage, and control a company engaged in automated telecommunications and task management services and the sale of telecommunications products. To purchase, exchange, acquire, lease, own mortgage, encumber, improve, or cause to be improved, use, lend, borrow, produce, manufacture, assemble, construct, operate, service, maintain, convey and subdivide, plat, trade and deal in any property, real, personal or mixed, choices in action, or an interest therein, either directly or indirectly, as personal or mixed, choices in action, or an interest therein, either directly or indirectly , as license or franchisee, individually or in association with other individuals, partnerships, firms, corporations, or entities, whether public, governmental, or private, and generally to engage in or conduct any form of manufacturing, mercantile, service, or real estate enterprise as may be necessary or convenient in connection with any business of the corporation not contrary to the Illinois Business Corporation Act, within the State of Illinois, and in the various other states, territories, and dependencies of the United States, in the District of Columbia, and in any or all foreign countries, not as real estate brokers. To have and exercise all powers necessary to convenient to effect any or all of the purposes for which the corporation is formed and for any lawful purpose under the Business Corporation Act of 1983. EX-3.4 5 0005.txt BY-LAWS OF PACIFIC TELCOM, INC. ARTICLE I OFFICES The corporation shall continuously maintain in the State of Illinois a registered office and a registered agent whose business office is identical with such registered office, and may have other offices within or without the state. ARTICLE II SHAREHOLDERS SECTION 1. ANNUAL MEETING. An annual meeting of the shareholders shall be held on the first Tuesday in May of each year or at such time as the board of directors may designate for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday, such meeting shall be held on the next succeeding business day. SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders may be called either by the president, by the board of directors or by the holders of not less than one-fifth of all the outstanding shares of the corporation entitled to vote, for the purpose or purposes stated in the call of the meeting. SECTION 3. PLACE OF MEETING. The board of directors may designate any place, as the place of meeting for any annual meeting or for any special meeting called by the board of directors. If no designation is made, or if a special meeting be otherwise called, the place of meeting shall be at the registered office. SECTION 4. NOTICE OF MEETINGS. Written notice stating the place, date, and hour of the meeting and, in the case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than 10 nor more than 60 days before the date of the meeting, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or ex-change of assets not less than 20 nor more than 60 days before the date of the meeting, either personally or by mail by or at the direction of the president, or the secretary, or the officer or persons calling the meeting, to each shareholder of record entitled to vote at such meeting. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail addressed to the shareholder at his or her address as it appears on the records of the corporation, with postage thereon prepaid. When a meeting is adjourned to another time or place, notice need not be given of the adjourned meeting if the time and place thereof are announced at the meeting at which the adjournment is taken. SECTION 5. FIXING OF RECORD DATE. For the purpose of determining the shareholders entitled to notice of or to vote at any meeting of shareholders, or shareholders entitled to receive payment of any dividend, or in order to make a determination of shareholders for any other proper purpose, the board of directors of the corporation may fix in advance a date as the record date for any such determination of shareholders, such date in any case to be not more than 60 days and for a meeting of shareholders, not less than 10 days, or in the case of a merger, consolidation, share exchange, dissolution or sale, lease or exchange of assets , not less than 20 days before the date of such meeting. If no record date is fixed for the determination of shareholders entitled to notice of or to vote at a meeting of shareholders, or shareholders entitled to receive payment of a dividend, the date on which notice of the meeting is mailed or the date on which the resolution of the board of directors declaring such dividend is adopted, as the case may be, shall be the record date for such determination of shareholders. A determination of shareholders shall apply to any adjournment of the meeting. SECTION 6. VOTING LISTS. The officer or agent having charge of the transfer book for shares of the corporation shall make, within 20 days after the record date for a meeting of shareholders or 10 days before such meeting, whichever is earlier, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of 10 days prior to such meeting, shall be kept on file at the registered office of the corporation and shall be subject to inspection by any shareholder, and to copying at the shareholder's expense, at any time during usual business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. The original share ledger or transfer book, or a duplicate thereof kept in this State, shall be prima facie evidence as to who are the shareholders entitled to examine such list or share ledger or transfer book or to vote at any meeting of shareholders. SECTION 7. QUORUM. The holders of a majority of the outstanding shares of the corporation entitled to vote on a matter, represented in person or by proxy, shall constitute a quorum for consideration of such matter at any meeting of shareholders, but in no event shall a quorum consist of less than one-third of the outstanding shares entitled so to vote, provided that if less than a majority of the outstanding shares are represented at said meeting, a majority of the shares so represented may adjourn the meeting at any time without further notice. If a quorum is present, the affirmative vote of the majority of the shares represented at the meeting shall be the act of the shareholders, unless the vote of a greater number or voting by classes is required by the Business Corporation Act, the articles of incorporation or these by-laws. At any adjourned meeting at which a quorum shall be present, any business may be transacted which might have been transacted at the original meeting. Withdrawal of shareholders from any meeting shall not cause failure of a duly constituted quorum at that meeting. SECTION 8. PROXIES. Each shareholder may appoint a proxy to vote or otherwise act for him or her by signing an appointment form and delivering it to the person so appointed, but no such proxy shall be valid after 11 months from the date of its execution, unless otherwise provided in the proxy. SECTION 9. VOTING OF SHARES. Each outstanding share, regardless of class, shall be entitled to one vote in each matter submitted to vote at a meeting of shareholders, and in all elections for directors, every shareholder shall have the right to vote the number of shares owned by such shareholder for as many persons as there are directors multiplied by the number of such shares or to distribute such cumulative votes in any proportion among any number of candidates. Each shareholder may vote either in person or by proxy as provided in SECTION 8 hereof. SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares held by the corporation in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares entitled to vote at any given time. Shares registered in the name of another corporation, domestic or foreign, may be voted by any officer, agent, proxy or other legal representative authorized to vote such shares under the law of incorporation of such corporation. Shares registered in the name of a deceased person, a minor ward or a person under legal disability, may be voted by his or her administrator, executor or court appointed guardian, either in person or by proxy without a transfer of such shares into the name of such administrator, executor or court appointed guardian. Shares registered in the name of a trustee may be voted by him or her, either in person or by proxy. Shares registered in the name of a receiver may be voted by such receiver, and shares held by or under the control of a receiver may be voted by such receiver without the transfer thereof into his or her name if authority to do so is contained in an appropriate order of the court by which such receiver was appointed. A shareholder whose shares are pledged shall be entitled to vote such shares until the shares have been transferred into the name of the pledgee, and thereafter the pledgee shall be entitled to vote the shares so transferred. Any number of shareholders may create a voting trust for the purpose of conferring upon a trustee or trustees the right to vote or otherwise represent their shares, for a period not to exceed 10 years, by entering into a written voting trust agreement specifying the terms and conditions of the voting trust, and by transferring their shares to such trustee or trustees for the purpose of the agreement. Any such trust agreement shall not become effective until a counterpart of the agreement is deposited with the corporation at its registered office. The counterpart of the voting trust agreement so deposited with the corporation shall be subject to the same right of examination bya shareholder of the corporation, in person or by agent or attorney, as are the books and records of the corporation, and shall be subject to examination by any holder of a beneficial interest in the voting trust, either in person or by agent or attorney, at any reasonable time for any proper purpose. Shares of its own stock belonging to this corporation shall not be voted, directly or indirectly, at any meeting and shall not be counted in determining the total number of outstanding shares at any given time, but shares of its own stock held by it in a fiduciary capacity may be voted and shall be counted in determining the total number of outstanding shares at any given time. SECTION 11. CUMULATIVE VOTING. In all elections for directors, every shareholder shall have the right to vote in person or by proxy, the number of shares owned by him/her, for as many persons as there are directors to be elected, or to cumulate such votes and give one candidate as many votes as the number of directors multiplied by the number of his/her shares shall equal, or to distribute them on the same principle among as many candidates as he/she shall think fit. The articles of incorporation may be amended to limit or eliminate cumulative voting rights in all or specified circumstances, or to limit or deny voting rights or to provide special voting rights as to any class or classes or series of shares of the corporation. SECTION 12. INSPECTORS. At any meeting of shareholders, the presiding officer may, or upon the request of any shareholder, shall appoint one or more persons as inspectors for such meeting. Such inspectors shall ascertain and report the number of shares represented at the meeting, based upon their determination of the validity and effect of proxies; count all votes and report the results; and do such other acts as are proper to, conduct the election and voting with impartiality and fairness to all the shareholders. Each report of an inspector shall be in writing and signed by him or her or by a majority of them if there be more than one, inspector acting at such meeting. If there is more than one inspector, the report of a majority shall be the report of the inspectors. The report of the inspector or inspectors on the number of shares represented at the meeting and the results of the voting shall be prima facie evidence thereof. SECTION 13. INFORMAL ACTION BY SHAREHOLDERS. Any action required to be taken at a meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting and without a vote, if a consent in writing, setting forth the action so taken shall be signed (a) if 5 days prior notice of the proposed action is given in writing to all of the shareholders entitled to vote with respect to he subject matter hereof, by the holders of outstanding shares having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voting or (b) by all of the shareholders entitled to vote with respect to the subject matter thereof. Prompt notice of the taking of the corporate action with out a meeting by less than unanimous written consent shall be given in writing to those shareholders who have not consented in writing In the event that the action which is consented to is such as would have required the filing of a certificate under any section of the Business Corporation Act if such action had been voted only the shareholders at a meeting thereof, the certificate filed under such selection shall state, in lieu of any statement required by such section concerning any vote of shareholders that written notice and consent have been given in accordance with the provisions of the Business Corporation Act governing informal action by shareholders. SECTION 14. VOTING BY BALLOT. Voting on any question or in any election may be by voice unless the presiding officer shall order or any shareholder shall demand that voting be by ballot. ARTICLE III DIRECTORS SECTION 1. GENERAL POWERS. The business of the corporation shall be managed by or under the direction of its board of directors. A majority of the board of directors may establish reasonable compensation for their services and the services of other officers, irrespective of any personal interest. SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of directors of the corporation shall be one. Each director shall hold office until the next annual meeting of shareholders; or until his successor shall have been elected and qualified. Directors need not be residents of Illinois or shareholders of the corporation. The number of directors may be increased or decreased from time to time by the amendment of this section. No decrease shall have the effect of shortening the term of any incumbent director. SECTION 3. REGULAR MEETINGS. A regular meeting of the board of directors shall be held without other notice than this by-law, immediately after the annual meeting of shareholders. The board of directors may provide, by resolution, the time and place for holding of additional regular meetings without other notice than such resolution. SECTION 4. SPECIAL MEETINGS. Special meetings of the board of directors may be called by or at the request of the president or any two directors. The person or persons authorized to call special meetings of the board of directors may fix any place as the place for holding any special meeting of the board of directors called by them. SECTION 5. NOTICE. Notice of any special meeting shall be given at least days previous thereto by written notice to each director at his business address. If mailed, such notice shall be deemed to be delivered when deposited in the United States mail so addressed, with postage thereon prepaid. If notice be given by telegram, such notice shall be deemed to be delivered when the telegram is delivered to the telegram company. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the board of directors need be specified in the notice or waiver of notice of such meeting. SECTION 6. QUORUM. A majority of the number of directors fixed by these by-laws shall constitute a quorum for transaction of business at any meeting of the board of directors, provided that if less than a majority of such number of directors are present at said meeting, a majority of the directors present may adjourn the meeting at any time without further notice. SECTION 7. MANNER OF ACTING. The act of the majority of the directors present at a meeting at which a quorum is present shall be the act of the board of directors, unless the act of a greater number is required by statute, these by-laws, or the articles of incorporation. SECTION 8. VACANCIES. Any vacancy on the board of directors may be filled by election at the next annual or special meeting of shareholders. A majority of the board of directors may fill any vacancy prior to such annual or special meeting of shareholders. SECTION 9. RESIGNATION AND REMOVAL OF DIRECTORS. A director may resign at any time upon written notice to the board of directors. A director may be removed with or without cause, by a majority of shareholders if the notice of the meeting names the director or directors to be removed at said meeting. SECTION 10. INFORMAL ACTION BY DIRECTORS. The authority of the board of directors may be exercised without a meeting if a consent in writing, setting forth the action taken, is signed by all of the directors entitled to vote. SECTION 11. COMPENSATION. The board of directors, by the affirmative vote of a majority of directors then in office, and respective of any personal interest of any of its members, shall have authority to establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise notwithstanding any director conflict of interest. By resolution of the board of directors, the directors may be paid their expenses, if any, of attendance at each meeting of the board. No such payment previously mentioned in this section shall preclude any director from serving the corporation in any other capacity and receiving compensation therefore. SECTION 12. PRESUMPTION OF ASSENT. A director of the corporation who is present at a meeting of the board of directors at which action on any corporate matter is taken shall be conclusively presumed to have assented to the action taken unless his or her dissent shall be entered in the minutes of the meeting or unless he or she shall file his or her written dissent to such action with the person acting as the secretary of the meeting before the adjournment thereof or shall forward such dissent by registered or certified mail to the secretary of the corporation immediately after the adjournment of the meeting. Such right to dissent shall not apply to a director who voted in favor of such action. SECTION 13. COMMITTEES. A majority of the board of directors may create one or more committees of two or more members to exercise appropriate authority of the board of directors. A majority of such committee shall constitute a quorum for transaction of business. A committee may transact business without a meeting by unanimous written consent. ARTICLE IV OFFICERS SECTION I. NUMBER. The officers of the corporation shall be a ,president, one or more vice-presidents, a treasurer, a secretary, and such other officers as may be elected or appointed by the board of directors. Any two or more offices may be held by the same person. SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the corporation shall be elected annually by the board of directors at the first meeting of the board of directors held after each annual meeting of shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as conveniently may be. Vacancies may be filled or new offices created and filled at any meeting of the board of directors. Each officer shall hold office until his successor shall have been duly elected and shall have qualified or until his death or until he shall resign or shall have been removed in the manner hereinafter provided. Election of an officer shall not of itself create contract rights. SECTION 3. REMOVAL. Any officer elected or appointed by the board of directors may be removed by the board or directors whenever in its judgment the best interest of the corporation would be served thereby, but such removal shall be without prejudice to the contract rights, if any, of the person so removed. SECTION 4. PRESIDENT. The president shall be the principal executive officer of the corporation. Subject to the direction and control of the board of directors, he/she shall be in charge of the business of the corporation; he shall see that the resolutions and directions of the board of directors are carried into effect except in those instances in which that responsibility is specifically assigned to some other person by the board of directors; and, in general, he/she shall charge all duties incident to the office of president and such other duties as may be prescribed by the board of directors from time to time. He shall preside at all meetings of the shareholders and of the board of directors. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, he may execute for the corporation certificates for its shares, and any contracts, deeds, mortgages, bonds or other instruments which the board of directors has authorized to be executed, and he may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto authorized by the board of airector8, according to the requirements of the form of the instrument. He may vote all securities which the corporation is entitled to vote except as and to the extent such authority shall be vested in a different officer or agent of the corporation by the board of directors. SECTION 5. THE VICE-PRESIDENTS. The vice-president (or in the event there be more than one vice-president, each of the vice-presidents) shall assist the president in the discharge of his/her duties as the president may direct and shall perform such other duties as from time to time may be assigned to him/her by the president or by the board of directors. In the absence of the president or in the event of his/her inability or refusal to act, the vice-president (or in the event there be more than one vice president, the vice-presidents in the order designated by the board of directors, or by the president if the board of directors has not made such a designation, or in the absence of any designation then in the order of seniority of tenure as vice-president) shall perform the duties of the president, and when so acting, shall have the powers of and be subject to all the restrictions upon the president. Except in those instances in which the authority to execute is expressly delegated to another officer or agent of the corporation or a different mode of execution is expressly prescribed by the board of directors or these by-laws, the vice-president (or each of them if there are more than one) may execute for the corporation certificates for its shares and any contracts deeds, mortgages, bonds or other instruments which the board of directors has authorized to be executed, and he/she may accomplish such execution either under or without the seal of the corporation and either individually or with the secretary, any assistant secretary, or any other officer thereunto authorized by the board of directors, according to the requirements of the form of the instrument. SECTION 6. THE TREASURER. The treasurer shall be the principal accounting and financial officer of the corporation. He shall: (a) have charge of and be responsible for the maintenance of adequate books of account for the corporation; (b) have charge and custody of all funds and securities of the corporation, and be responsible therefore and for the receipt and disbursement thereof; and (c) perform all the duties incident to the office of treasurer and such other duties as from time to time may be assigned to him by the president or by the board of directors. If required by the board of directors, the treasurer shall give a bond for the faithful discharge of his duties in such sum and with such surety or sureties as the board of directors may determine. SECTION 7. THE SECRETARY. The secretary shall: (a) record the minutes of the shareholders and of the board of directors meetings in one or more books provided for that purpose; (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by law; (c) be custodian of he corporate records and of the seal of the corporation; (d) keep a register of the post-office address of each shareholder which shall be furnished to the secretary by such shareholder; (e) sign with the president, or a vice-president, or any other officer there unauthorized by the board of directors, certificates for shares of the corporation, the issue of which shall have been authorized by the board of directors, and any contracts, deeds, mortgages, bonds" or other instruments which the board of directors has authorized to be executed, according to the requirements of the form of, the instrument, except when a different mode of execution is expressly prescribed by the board of directors or these by laws; (f) have general charge of the stock transfer books of the corporation; (g) have authority to certify the by-laws, resolutions of the shareholders and board of directors and committees thereof, and other documents of the corporation as true and correct copies thereof, and (h) perform all duties incident to the office of secretary and such other duties as from time to time may be assigned to him/her by the president or by the board of directors. SECTION 8. ASSISTANT TREASURERS AND ASSISTANT SECRETARIES. The assistant treasurers and assistant secretaries shall perform such duties as shall be assigned to them by the treasurer or the secretary, respectively, or by the president or the board of directors. The assistant secretaries may sign with the president, or a vice-president, or any other officer thereunto authorized by the board of directors, certificates for shares of the corporation, the issue of which shall have been authorized by the board of directors, and any contracts, deeds, mortgages, bonds, or other instruments which the board of directors has authorized to be executed according to the requirements of the form of the instrument, except when a different mode of execution is expressly prescribed by the board of directors or these by-laws. The assistant treasurers shall respectively, if required by the board of directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the board of directors shall determine. SECTION 9. SALARIES. The salaries of the officers shall be fixed from time to time by the board of directors and no officer shall be prevented from receiving such salary by reason of the act that he is also a director of the corporation. ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS SECTION 1. CONTRACTS. The board of directors may authorize any officer or officers, agent or agents, to enter into any contract or execute and deliver any instrument in the name of and on behalf of the corporation, and such authority may be general or confined to specific instances. SECTION 2. LOANS. No loans shall be contracted on behalf of the corporation and no evidences of indebtedness shall be issued in name unless authorized by a resolution of the board of directors. SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness if issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of type corporation and in such manner as shall from time to time be determined by resolution of the board of directors. SECTION 4. DEPOSITS. All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as the board of directors may select. ARTICLE VI SHARES AND THEIR TRANSFER SECTION I. SHARES REPRESENTED BY CERTIFICATES AND UNCERTIFICATED SHARES. Shares either shall be represented by certificates or shall be uncertificated shares. Certificates representing shares of the corporation shall be signed by the appropriate officers and may be sealed with the seal or a facsimile of the seal of the corporation. If a certificate is countersigned by a transfer agent or registrar, other than the corporation or its employee, any other signatures may be facsimile. Each certificate representing shares shall be consecutively numbered or otherwise identified, and shall also state the name of the person to whom issued, the number and class of shares (with designation of series, if any), the date of issue, and that the corporation is organized under Illinois law. If the corporation is authorized to issue hares of more than one class or of series within a class, the certificate shall also contain such information or statement as may be required by law. Unless prohibited by the articles of incorporation, the board of directors may provide by resolution that some or all of any class or series of shares shall be uncertificated shares. Any such resolution shall not apply to shares represented by a certificate until the certificate has been surrendered to the corporation. Within a reasonable time after the issuance or transfer of uncertificated shares, the corporation shall send the registered owner thereof a written notice of all information that would appear on a certificate. Except as otherwise expressly provided by law, the rights and obligations of the holders of uncertificated shares shall be identical to those of the holders of certificates representing shares of the same class and series. The name and address of each shareholder, the number and class of shares held and the date on which the shares were issued shall be entered on the books of the corporation. The person in whose name shares stand on the books of the corporation shall be deemed the owner thereof for all purposes as regards the corporation. SECTION 2. LOST CERTIFICATES. If a certificate representing shares has allegedly been lost or destroyed the board of directors may in its discretion, except as may b~ required by law, direct that a new certificate be issued upon such indemnification and other reasonable requirements as it may impose. SECTION 3. TRANSFERS OF SHARES. Transfer of shares of the corporation shall be recorded on the books of the corporation. Transfer of shares represented by a certificate, except in the case of a lost or destroyed certificate, shall be made on surrender for cancellation of the certificate for such shares. A certificate presented for transfer must be duly endorsed and accompanied by proper guaranty of signature and other appropriate assurances that the endorsement is effective. Transfer of an uncertificated share shall be made on receipt by the corporation of an instruction from the registered owner or other appropriate person. The instruction shall be in writing or a communication in such form as may be agreed upon in writing by the corporation. ARTICLE VII FISCAL YEAR The fiscal year of the corporation shall be fixed by resolution of the board of directors. ARTICLE VIII DISTRIBUTIONS The board of directors may authorize, and the corporation may make, distributions to its shareholders, subject to any restrictions in its articles of incorporation or provided by law. ARTICLE IX SEAL The corporate seal shall have inscribed thereon the name of the corporation and the words "Corporate Seal, Illinois." The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced, provided that the affixing of the corporate seal to an instrument shall not give the instrument additional force or effect, or change the construction thereof, and the use of the corporate sef1l is not mandatory. ARTICLE X WAIVER OF NOTICE Whenever any notice is required to be given under the provisions of these by-laws or under the provisions of the articles of incorporation or under the provisions of The Business Corporation Act of the State of Illinois, a waiver thereof in writing, signed by the person or persons entitled to such notice, whether before or after the time stated therein, shall be deemed equivalent to the giving of such notice. Attendance at any meeting shall constitute waiver of notice thereof unless the person at the meeting objects to the holding of the meeting because proper notice was not given. ARTICLE XI INDEMNIFICATION OF OFFICERS. DIRECTORS, EMPLOYEES AND AGENTS SECTION 1. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of the corporation) by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or who is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise, against expenses (including attorneys' fees), judgments, fines and amounts paid in settlement actually and reasonably incurred by such person in connection with such action, suit or proceeding if he acted in good faith and in a manner he reasonably believed to be in or not, opposed to the best interests of the corporation, and, with respect to any criminal action or proceeding, had no reasonable cause to believe his or her conduct was unlawful. The termination of any action, suit or proceeding by judgment or settlement, conviction or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which he or she reasonably believed to be in or not opposed to the best interests of the corporation, and with respect to any criminal action or proceeding, had reasonable cause to believe that his conduct was unlawful. SECTION 2. The corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action or suit by or in the right of the corporation to procure a judgment in its favor by reason of the fact that such person is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit if he or she acted in good faith and in a manner he or she reasonably believed to be in or not opposed to the best interests of the corporation and except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable for negligence or misconduct in the performance of his duty to the corporation unless and only to the extent that the court in which such action or suit was brought shall determine upon application that despite the adjudication of liability but in view of all the circumstances of the case. Such person is fairly and reasonably entitled to indemnity for such expenses which the court shall deem proper. SECTION 3. To the extent that a director, officer, employee, or agent of a corporation has been successful. on the merits or otherwise, in the defense of any action, suit or proceeding referred to in sections 1 and 2, or in defense of any claim, issue or matter therein, such person shall be indemnified against expenses actually and reasonably incurred by such person in connection wherewith. SECTION 4. Any indemnification under sections 1 and 2 shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he or she has met the applicable standard of conduct set forth in sections 1 and 2. Such determination shall be made (a) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit or proceeding, or (b) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion, or (c) by the shareholders. SECTION 5. Expenses incurred in defending a civil or criminal action, suit or proceeding may be paid by the corporation in advance of the final disposition of such action, suit or proceeding, as authorized by the board of directors in the specific case, upon receipt of an undertaking by or on behalf of the director, officer, employee or agent to repay such amount, unless it shall ultimately be determined that he or she is entitled to be indemnified by the corporation as authorized in this article. SECTION 6. The indemnification provided by this article shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any by-law, agreement vote of shareholders or disinterested directors or otherwise, both as to action in his or her official capacity and as to action in an there capacity while holding such office, and shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a person. SECTION 7. The corporation shall have power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust or other enterprise against any liability asserted against such person and incurred by such person in any such capacity, or arising out of his or her status as such, whether or not the corporation would have the power to indemnify such person against such liability under the provisions of these sections. SECTION 8. If the corporation has paid indemnity or had advanced expenses to a director, officer, employee or agent, the corporation shall report the indemnification or advance in writing to the shareholders with or before the notice of the next shareholders meeting. SECTION 9. References to "the corporation" shall include, in addition to the surviving corporation, any merging corporation, including any corporation having merged with a merging corporation, absorbed in a merger which otherwise would have lawfully been entitled to indemnify its directors, officers, and employees or agents. ARTICLE XII AMENDMENTS Unless the power to make, alter, amend or repeal the bylaws is reserved to the shareholders by the articles of incorporation, the by-laws of the corporation may be made, altered, amended or repealed by the shareholders or the board of directors, but no by-law adopted by the shareholders may be altered, amended or repealed by the board of directors if the by-laws so provide. The by-laws may contain any provisions for the regulation and management of the affairs of the corporation not inconsistent with the law or the articles of incorporation. EX-3.5 6 0006.txt LETTER OF GOOD STANDING File Number 5636-939-2 [graphic excluded: Seal of Illinois] State of Illinois Office of The Secretary of State To all whom these Presents Shall Come, Greeting: I, Jesse White, Secretary of State of the State of Illinois, do hereby certify that PACIFIC TELCOM, INC., A DOMESTIC CORPORATION, INCORPORATED UNDER THE LAWS OF THIS STATE MAY 2, 1991, APPEARS TO HAVE COMPLIED WITH ALL THE PROVISIONS OF BUSINESS CORPORATION ACT OF THIS STATE RELATING TO THE FILING OF ANNUAL REPORTS AND PAYMENT OF FRANCHISE TAXES, AND AS OF THIS DATE, IS IN GOOD STANDING AS A DOMESTIC CORPORATION IN THE STATE OF ILLINOIS [graphic omitted : state seal] In Testimony Whereof, I hereto set my hand and cause to be affixed the Great Seal of the State of Illinois, this 31ST day of October A.D. 2000. [signature] Jesse White Secretary of State EX-4.1 7 0007.txt INCORPORATED UNDER THE LAWS OF THE STATE OF ILLINOIS NUMBER SHARES XXX XXX [GRAPHIC OMITTED] [PACIFIC TELCOM LOGO] SEE REVERSE SIDE FOR CERTAIN DEFINITIONS CUSIP 694888 108 THIS CERTIFIES THAT IS THE OWNER OF COMMON STOCK WITH NO PAR VALUE PACIFIC TELCOM, INC. Transferable on the books of the Corporation by the registered holder in person or by Attorney duly authorized in writing upon surrender of this Certificate properly endorsed. This Certificate and the shares represented hereby are subject to the laws of the State of Illinois, and to the Articles of Incorporation and Bylaws of the Corporation, as now or hereafter amended. This certificate is nor valid unless countersigned by the Transfer Agent of the Corporation. WITNESS the facsimile signatures of it duly authorized officers. Dated: /s/ Kenneth G. Mason /s/ Edward Daniel ---------------------- ------------------------ Secretary President Countersigned: ILLINOIS STOCK TRANSFER COMPANY Transfer Agent /s/ Authorized Officer EX-5.1 8 0008.txt OPINION LETTER RE: LEGALITY October 31, 2000 Bill J. Angelos, President Pacific Telcom, Inc. Fountain View Business Park 4270 S. Decatur Blvd., Ste. A-9 Las Vegas, NV 89103 Re: United States Securities and Exchange Commission Form 10-SB Dear Mr. Angelos: This firm has acted as general counsel to Pacific Telcom, Inc., an Illinois corporation with respect to its incorporation, issuance of shares and continued Good Standing with the Secretary of State of Illinois. This Opinion Letter is furnished to you regarding these matters in respect to Form 10-SB. In connection with our representation of the Corporation, we have assisted the Corporation in its incorporation, filing of Articles of Amendment and such documents and reports necessary to maintain the Good Standing of the Corporation in the State of Illinois. We have made such inquiry of the officers of the Corporation and have examined such corporate and other records, documents, certificates of officers of the Corporation and of public officials for the purposes of this Opinion Letter. In rendering our opinions, we have relied, as to all questions of fact material to these opinions, upon certificates of public officials and officers of the Corporation. We have assumed the genuineness of all signatures and the authenticity of all documents submitted to us as originals and the conformity to original documents of all documents submitted to us as copies, whether certified or not. In addition, in rendering our opinions, we have reviewed and are relying on the following documents: (A) Articles of Incorporation; (B) Articles of Amendment of March 26, 1998; (C) Articles of Amendment of May 13, 1998; (D) The corporate book, including the by-laws and the minutes of meetings of its Board of Directors and Shareholders contained therein; and (E) A Certificate of Good Standing from the Illinois Secretary of State indicating that the Corporation is duly incorporation and validly existing as of October 31, 2000. In rendering these opinions, we have assumed the following to be true: (1) The authenticity and completeness of all Documents submitted to us as originals and the conformity of all documents submitted to us as copies to the original documents; (2) Physical delivery of the Documents where delivery is a prerequisite to their enforceability; and (3) The capacity of all natural persons. Based on the foregoing, and in reliance on and subject to the assumptions, qualifications, exceptions and limitations set forth in this Opinion Letter, we are of the opinion that: 1. The Corporation is a corporation duly organized and validly existing under the laws of the State of Illinois. The Corporation has all requisite power and authority to own and operate its business as presently conducted and to own and hold the assets and properties used in connection therewith; 2. The Corporation is not required to be licensed or qualified as a foreign corporation in any state or other jurisdiction in which it is not presently so licensed or qualified; 3. To our knowledge, there is no litigation or legal proceeding pending or threatened against or adversely affecting the Corporation; 4. The Corporation's authorized capital stock has been duly authorized, is validly issued and shares are fully paid and non-assessable. This Opinion Letter is provided to you as a legal opinion and not as a guarantee of the matters discussed herein. Our opinions are limited to the matters expressly stated herein, and no other opinions may be implied or inferred. These opinions are rendered as of the date set forth above. We expressly disclaim any obligation to advise you of any changes in the circumstances, laws or events that may occur after this date or otherwise to update these opinions. Very truly yours, Kenneth G. Mason General Counsel EX-10.1 9 0009.txt STRATEGIC ALLIANCE AGREEMENT ------------------------------ This Agreement is entered into and made effective as of the day of April 23, 1998 by and between EasyTe1, a Nevada Corporation ("EasyTel") and Drayton Hall & Co., an Illinois Corporation ("Drayton"). Whereas, EasyTel is in the business of providing;) delivering marketing and selling telecommunications services (hereinafter 'EasyTel') Whereas" Drayton is capable of re-selling the telecommunications products and services aforesaid of EasyTel; Whereas, both parties seek the mutually successful expansion of the geographic markets and customer base of the products and services of EasyTel by a strategic alliance hereto. II IS HEREBY AGREED AS FOLLOWS: 1. So as to effectuate the mutual goals of the parties and permit Dray ton the ability to bring the products and services of EasyTel to new markets and to new customers, EasyTel grants to Dra~1on, strictly subject to the terms and conditions herein, the rights to re-sell and further commercially disseminate telecommunications products and services of EasyTel that operate on the proprietary platform of EasyTel, now or hereafter developed, collectively called "EasyTel". 2. The term of these rights shall be for a period often years from the date of this Agreement and may be extended for successive five-year terms by the mutual written consent of both parties, on the same terms and conditions as set forth herein. It is agreed by the parties that if this Agreement is not extended beyond its ten year term, at the termination of the Agreement, Drayton and EasyTel shall continue to hold joint rights, title, and ownership to any and al! Universal Office platforms implemented by the parties pursuant to this Agreement. Further, if this agreement is not renewed beyond the ten year term of this Agreement the parties shall continue to maintain the ownership rights and proprietary rights to such subscribers enrolled herein, according to the terms of the Strategic Alliance Agreement jointly. Further, if this Agreement is not renewed beyond the ten year term of this Agreement, the parties agree that all revenues generated following the termination of this Agreement, as derived from the Universal Office platform so jointly owned and from the jointly owned customer base accrued during the course of the term of this agreement, shall thereafter be distributed to the parties on the same terms as set forth herein, or as later amended in writing subsequently by the parties during the initial term of this agreement. 3. Drayton is hereby authorized to utilize all features and services afforded by EasyTel software, including, but not limited to: system prompts and application prompts necessary during the course of providing the EasyTel services. Drayton understands and acknowledges that the ownership of the software described herein is vested in the Universal Office Corporation, a Nevada corporation, but is licensed to EasyTel. Drayton further agrees not to make any claim known or unknown, to said software as to its fitness for its intended purpose herein. 4. Drayton shall, pursuant to this Agreement open new geographic markets to implement the re-selling of such services and products of EasyTel. The parties agree that Drayton is permitted to utilize one or more third party marketing entities to assist in effectuating such re-selling. 5. Pursuant to this Agreement, the parties agree to allocate, share, and divide adjusted gross revenues from the re-sale of services and products of EasyTel wheresoever marketed by Drayton, on an equal fifty-percent (50%) division to each party. 6. For the purpose of the Strategic Alliance Agreement, adjusted gross revenue shall be defined as all revenues generated from customer usage of telecommunication services, less all fees consisting of telephone billing costs, 20% marketing costs, charge backs relating to credit card usage and credit card fees. 7. Drayton shall serve to re-sell the products and services of EasyTel, on behalf of EasyTel, within the continental United States, in accordance with this Agreement. EasyTel shall not grant the same re-selling rights hereunder to any other party in a geographic market opened by Drayton for a period of two years from the date of the opening of such new geographic market. If EasyTel does grant such similar or comparable re-selling rights to a third party after a two year period from the opening of new geographic market by Drayton, EasyTel shall not grant such re-selling rights to any third party at any terms more favorable than those set forth herein. Drayton agrees that it will not vend or resell any services of the kind offered by, or competing with, EasyTel from any other vendor for so long as Drayton shall resell the telecommunications products and services of EasyTel, wheresoever Drayton is engaged in business. It is agreed by the parties that the first four new geographic markets to be opened by Drayton under this Agreement shall be: San Francisco, Chicago, Las Vegas, and New York City. Subject to access 10 telephone lines and installation of equipment Drayton shall open the first of these markets on August 1, 1998. Drayton shall open the remaining three of these markets on or before the end of 1998. These dates and schedules may be modified by the mutual consent of the parties as conditions so require. 8. The parties represent and covenant relating to the EasyTel telecommunications products and service that: a. Title to all patents trademarks, trade names and/or service marks of the products and services herein in use on the date of this Agreement are, and shall remain the property of EasyTel. Drayton shall have only such rights or use hereto as is required for its re-selling activities and functions during the term of this Agreement, or subsequent Agreements between the parties. b. Drayton acknowledges that it has, and shall continue to receive from EasyTel confidential information that is the property and trade secret of EasyTel and that any unauthorized use, unauthorized publication, or any unauthorized disclosure to any third party of such confidential information may cause immediate and substantial harm to EasyTel. Drayton will take all reasonable steps to maintain the confidentiality of the confidential information. Drayton agrees not to disclose to any third party any and all such confidential information belonging to EasyTel acquired by Drayton as a result of this Agreement. Drayton shall not, without EasyTel's prior written consent, disclose, provide, or make available any of the confidential information in any form to any person, except to its employees whose access is necessary to enable Drayton to perform under this agreement, to marketing affiliates and in the ordinary course of securities compliance procedures, Drayton agrees to maintain all such confidential information provided to it by EasyTel so1ely for Drayton's own internal use and/or no other purpose. c. Drayton agrees" covenants and warrants to EasyTel that it shall not use or apply software, technology, confidential information or trade secrets belonging to EasyTel for any other purpose except those purposes set forth in the Strategic Alliance Agreement. 9. EasyTel and Drayton shall each be separately responsible for their own respective operating costs and routine overhead expenses. a. Drayton shall be solely responsible for all costs relating to the opening of new re-selling markets, including, but not limited to, start up-costs, equipment, administrative expenses, sales and overhead directly related to Drayton, rental and lease expenses. b. Upon the opening of each and every new market by Drayton, Drayton agrees to purchase and install a Universal Office Mode148 (with 48 ports) to provide service in that area. EasyTel, at its discretion, and at no additional cost to Drayton, may install additional hardware and software to increase the port capacity to deliver service to more customers under this Agreement, In return for increasing the capacity of the Universal Office with additiona1 48 ports to 96 ports (doubling the capacity), EasyTel and Drayton will each own fifty percent (50%) of the equipment and the installation". c. Drayton represents that it will expend adequate funds required for the opening of each new geographic market. Such expenditures shall be made by Drayton as necessarily required for re-selling costs, product advertising, including the purchase and installation of equipment and other overhead expenses. Such equipment expenditures shall include an initial installation in each new market location or equipment consisting of a 48 port Universal Office platform capable of being expanded to 288 ports, with additional hardware and software. d. Drayton hereby agrees to pay to EasyTel for minimum line access charges as follows: for each of the first four new geographic market locations opened by Drayton, Drayton shall pay for each location for the fourth, fifth, and sixth month of each said location the sum of $3,000.00; thereafter, for so Long as Drayton operates not more than four new geographic locations; Drayton shall pay to EasyTel for each location that has been opened for six months, the sum of $6,250.00. Subsequent new geographic market locations shall be negotiated as to minimum line access payments, as agreed by the parties in writing, All such minimum payments as set forth in this Subparagraph 8d, shall be credited toward Drayton's share of monthly line access charges and dial tone costs related to the delivery' of the services. 10. EasyTel shall be responsible for providing "back office" and technical support to Drayton to allow Drayton to administer the EasyTel services, and EasyTel shall be responsible for such costs. Back office service shall include: remote operation of Drayton Universal Office platform, software maintenance, software development, software improvement or modification, long distance access maintenance, maintenance of customer account information, billing processing and services) collection of customer remittances, technical support and segregation of revenues allocable to Drayton pursuant to this Agreement. Revenues for the parties to be divided pursuant to this Agreement shall be held in a clearing account pursuant to credit card processing procedures determined by EasyTel. Revenues accrued to Drayton as a result of reselling conducted by Drayton shall be disbursed to Drayton from the EasyTel clearing account maintained by EasyTel for its credit card processing purposes. 11. All revenues to Drayton from EasyTel shall be paid on a monthly basis as earned, For purposes of such revenues, services, and products revenues are deemed earned at the time of full payment received or credited debited by EasyTel from such customer and user. The parties agree that EasyTel closes its books on the last day of each month and distributions of revenues to Drayton from EasyTel shall be forwarded to Drayton on the 15th day of the following month. 12. Drayton agrees that EasyTel shall establish from such revenues, a reserve for the purpose of refunding charge-backs to customers and credit card processing costs in an amount equal to 5% of credit card processing charges of gross revenues due to the parties. This 5% reserve shall be so deducted for a period of three months. During the fourth month, after settlement of charge-backs, processing costs of charge card issuers and other relevant costs being settled and subtracted from the reserve, the balance of the reserve relevant to the first month shall be divided and disbursed equally between the parties. Likewise, this process shall be repeated during the fifth month for the 5% reserve held back during the second month. The parties shall continue withholding revenues in the amount of 5% of credit card processing charges and disbursing this reserve) after settlement of these costs and charge-backs, on a continuing three month arrears basis as set forth in this paragraph. The parties agree that the provisions of this Paragraph 12 may be an1ended in the future according to the mutual agreement of the parties. 13. EasyTel shall furnish to Drayton, on a monthly basis, a statement certified by an Officer of EasyTel, specifying all products and services re- sold by Drayton and its affiliates, if any) per market, per month- This statement shall be forwarded to Drayton on the 15th day of the following month. 15. EasyTel agrees to make available to Drayton its latest technology relating to Universal Office and such other products or services re-marketed by Drayton for EasyTel as part of this Agreement. 16. As an acquisition fee for the re-selling rights acquired by Dray ton, Drayton shall pay to EasyTel for the re-selling rights herein payment in the form of 990,000 common shares in Drayton of its authorized and issued common shares representing 9.9% of its authorized and issued. It is agreed that Drayton shall be raising additional capital through the sale of its securities or issuing further securities pursuant to shareholder approval that may cause a dilution of the percentage of ownership in this Paragraph 16. 17. It is agreed between the parties hereto that they will not disclose either, directly or indirectly to any third person any confidential information relating to the business, properties or financial conditions which any party hereto has disclosed to the other. 18. EasyTel warrants and represents to Drayton that EasyTel holds, possess, and retains all interests, proprietary rights and ownership to the Universal Office sufficient for the grant of re-selling rights herein. 19. EasyTel represents that it holds a license from the Universal Office Corporation concerning the software that the Universal Office platform operates under this strategic alliance agreement. EasyTel represents that it has no notice from Universal Office of any action, suit, proceeding, claim, or arbitration pending, threatened or contemplated by at1y governmental or regulatory agency concerning the Universal Office or products or services provided by EasyTel herein which would have the effect of restricting, prohibiting, or delaying the consummation of this strategic a11iance agreement for reselling rights described herein. 20. Each party hereto warrants and represents that neither the execution nor delivery of this Agreement, nor the consummation of the agreement set forth herein will result in, with or without the giving of notice or lapse of time, or both, a violation of any material contract, agreement, license, regulatory prohibition, or material instrument to which either party hereto is a signatory. both, a violation of any material contract, agreement, license regulatory prohibition, or material instrument to which either party hereto is a signatory, 21. Drayton represents and warrants that it shall not at any time attempt to encumber, convey, transfer, or take any other action that would impair any proprietary property right or interest of EasyTel. 22. This Agreement shall be binding on any successors of the parties. Neither party shall have the right to assign its interests in this Agreement to any other party without the express written permission and consent of the other party. 23. Either party hereto shall have the right to terminate this Agreement and the re-marketing arid re-selling rights granted herein in the event of any of the following: a. A party breaches the Agreement and does not cure such breach within 30 days after notice thereof from the other party specifying such breach; b. Dissolution, insolvency or bankruptcy of a party whether voluntary or involuntary; c. Appointment of a trustee or receiver for a party; then) and in addition to all other rights and remedies which the other party may have at law or in equity, the other party may, at its option, terminate this Agreement by notice thereof in writing specifying the reason for such termination and a termination date. Such termination shall become effective on the date of the termination set forth in the notice of termination, but in no event earlier than 30 days from the date of mailing thereof. In the event of termination of this Agreement, Drayton shall return all materials furnished by EasyTel, including all relevant documents received by Drayton tram EasyTel. 24. Nothing contained in this Agreement shall be construed as conferring by waiver, implication, estoppel or otherwise upon Dray ton, any license) or any trade secrets) or know how from EasyTel. No such other proprietary rights shall arise from this Agreement or from any acts) statements or dealings resulting in the execution of this Agreement, except as stated herein regarding re-selling rights. 25. EasyTel shall not be responsible for the failure to deliver any telecommunications products or services~ or to continue to deliver the same, under this Agreement due to federal, state, or municipal action, statute, ordinance or regulation, strike, or other labor trouble, riots or other civil disturbance, acts .of God consisting of natural disasters, whether weather related, or otherwise, state of war, or circumstances within or without the United States not subject to the control of EasyTel which prevents or hinders the delivery, or continued delivery of any product) service or responsibility of EasyTel hereunder. 26. This agreement shall be governed by and construed in accordance with the laws of tile State of Nevada. 27. This Agreement contains the entire understanding between and among the parties and supersedes any prior understanding and agreements among them respecting the subject matter of this Agreement. 28. If at any time during the term of this Agreement by dispute, difference, or disagreement shall arise upon or in respect of the Agreement, and the meaning and construction hereof, every such dispute) difference, and disagreement shall be referred to a single arbiter agreed upon by the parties, or if no single arbiter can be agreed upon, an arbiter or arbiters) shall be selected in accordance with the rules of the American Arbitration Association and such dispute, difference, or disagreement shall be settled by arbitration in accordance with the then prevailing commercial rules of the American Arbitration, and judgment upon the award rendered by the arbiter may be entered in any court having jurisdiction thereof. 29. The parties hereto shall execute and deliver all documents, provide all tnfoffi1ation and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of the Agreement. This Agreement may be signed in counterparts of original or facsimile form, and all so executed shall constitute one Agreement, binding on all the parties hereto even though all the parties are not signatories to the original or same counterpart. 30. Nothing herein shall be construed to be to the benefit of any third par1y, nor is it intended that any provision shall be for the benefit of any third party. 31. If any provision of this Agreement, or the application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby Dated: April 23, 1998 EasvTel DRAYTON HALL & CO. A Nevada Corporation An Illinois Corporation by: by: Its Corporate Secretary Its Authorized Representative Thomas Ska1a Bill J. Angelos, Jr. EX-10.2 10 0010.txt Addendum To the Strategic Alliance Agreement (Dated April 23, 1998) This Addendum dated October 21, 1999, is incorporated in, made a part of and is attached to that certain Strategic Alliance Agreement, dated April 23, 1998 between EasyTel, a Nevada corporation, "EasyTel", and Pacific TelCom, an Illinois corporation, "Re-Seller", (previously, Drayton Hall & Go.) Replaces and supercedes paragraph 5, page 2, of the Strategic Alliance Agreement, which currently is: "5. Pursuant to this Agreement the parties agree to allocate, share, and divide adjusted gross revenues from the re-sale of services and products of EasyTel wheresoever marketed by Drayton, on an equal fifty-percent (50%) division to each party." To be replaced with: '"5. The parties agree to allocate, share, and divide Adjusted Gross Revenues from re-selling of such services, provisioned on any Universal Office jointly owned by the parties, on an equal fifty-percent (50%) division to each party. The Adjusted Gross Revenues shall be defined as: a. All revenues generated from customer fees and usage, from all customers serviced on the jointly owned Universal Office. b. Less, dial tone and related telephone company billing, to be paid to EasyTel, (based on direct cost from the underlying carriers) c. Less, $3.00 per month, from each account, for general switch support and customer services paid to EasyTel. * The above $3.00 includes $0.50 designated for customer service, Re-Seller may choose to provide its own in-house customer service and retain said $0.50. ** The above $3.00 also includes $1.00 per month per each toll-free number (DINS), and $0.4275 per month, for each DID d. Less, credit card processing fees and chargebacks, (pass through costs from the credit card processor). e. Less, the Activation Fee, twenty percent (20%) for sales commissions from the Monthly Fees and ten percent (10%) from the Usage Fees, all to be paid directly to the Re-Seller responsible for generating the business, (the Marketing dollars). f. Less, $2.50 per month, as an EasyTip, to customers directly as Referral Fees to the referring customer." Replace and supercede paragraph 6, page 2 and top of page 3, of the Strategic Alliance Agreement, which currently is: "6. For the purpose of the Strategic Alliance Agreement, adjusted gross revenues shall be defined as all revenues generated from customer usage of telecommunication services, less all fees consisting of telephone billing costs, 20% marketing costs, charge backs relating to credit card usage and credit card fees. II "6. Re-Seller agrees that from time to time it will assume the roll of a "Guest Re- Seller", and place business, customers and traffic, on Universal Office Switches belonging to other Switched Re-Sellers "Host Re-Seller". And, from time to time other Switched Re-Sellers may place their business, customers and traffic on Re-Sellers' Universal Office. Re-Seller understands that the above reciprocal agreement is a material condition for EasyTel to enter into the Strategic Alliance Agreement with Re- Seller. Re-Seller will participate in all revenues derived from either placing business on other Switched Re-Sellers' Universal Offices or when hosting business from other Re-Sellers on their Universal Office. The following will describe the terms for sharing the above revenues. The Adjusted Gross Revenues as described in paragraph 5, will be divided equally between the Host Re-5eller, the Guest Re-5eller and EasyTel. Thirty three percent point three (33.3%) to each. " Dated: October 21, 1999 FOR: EasyTel FOR: Pacific TelCom By: By: Thomas Skala, Secretary Bill Angelos, President EX-10.3 11 0011.txt RE-SELLER'S REPRESENTATIVE AGREEMENT ------------------------------------ (SWITCH-LESS RE-SELLER'S REP AGREEMENT) THIS AGREEMENT is entered into on December 2, 1999, by and between EASYTEl, a Nevada corporation (hereinafter "EASYTEL") and INTERNATIONAL LEADERSHIP DEVELOPMENT, (hereinafter " ILD"). RECITALS 1. EASYTEL is an electronic information and enhanced telecommunication services and systems provider to end users as "Business Services", and through its Switched Re-Seller agreement with M&M COMMUNICATIONS and PACIFIC TELCOM, INC, (hereinafter jointly "Switched Re-Sellers"), to ILD as "Commercial Services", and; 2. EASYTEL offers proprietary information services, the Universal Telephone Number, Follow-Me services, Call Screening, voice mail, FaxMail, Fax-on-Demand, paging, domestic and international telephone service, Pre-Paid Services, and various call processing programs, as a service, on its proprietary platforms known as "The Universal Office", (hereinafter "EASYTEL Services"), and; 3. ILD currently has access to certain national and international distribution channels consisting of independent business owners, also known as Amway/Quixtar independent business owners (hereinafter "IBOS"), and; 4. ILD is a member of a newly created alliance between Network TwentyOne, International Network Associates, ProNet Global Inc, International Leadership Development, and International Connection (hereinafter the "Alliance"), and; 5. The parties wish to create a business relationship in which ILD and each member of the Alliance will receive commissions and other compensation based on the amount of EasyTel services sold by each member of the Alliance to their own IBOs, and other independent business owners and professionals, and; 6. Whereas it is the intent of each member of the Alliance to enter into an identical Re-Seller's Representative Agreement contemporaneously, as part of a joint plan and; 7. "ILD Downline" means and refers to customers that are referred to EasyTel by ILD IBOs (or such IBO's referees whether or not such referees are IBOs). NOWTHEREFORE, THE PARTIES AGREE AS FOLLOWS: 1. EASYTEL'S CHARGES EasyTel's charges for using EasyTel's Universal Telephone Number for customers that are referred by ILD Downline are as follows: a. $25 Activation Fee. (UPON WRITTEN NOTICE TO EASYTEL, ILD OR ANY OTHER MEMBER OF THE ALLIANCE CAN CHOOSE TO HAVE THE ACTIVATION FEE WAIVED OR REDUCED FOR THEIR OWN IBOS). b. $25 Monthly Fee c. $25 usage for prepaid calling time will be established by the users floor limit. 2. COMPENSATION TO ILD a. FOR EACH ILD DOWNLINE who activates a Universal Telephone Number, EasyTel shall pay to ILD the following: I The $25 activation fee paid by each ILD Downline (or such lesser amount paid should ILD request that the activation fee be reduced). II A $5 per user commission paid each month for each ILD Downline with a Universal Telephone Number. The total number of ILD Downline for the payment calculation will be based on the number of ILD Downline who have current Universal Telephone Numbers on the 25th of the month. (I.e. if 1000 ILD Downline are subscribers to the Universal Telephone Number as of the 25th of the month, then ILD would receive $5,000 as a commission for that particular month). III A ten percent (10%) commission on all billable telecommunication usage generated by ILD Downline will be paid each month to ILD. 3. COMPENSATION TO THE ALLIANCE a. The Alliance and/or its members may sell EasyTel services to other IBOs who are not a part of or belong to any of the Alliance Members (for example other Amway or Quixtar Distributors) but are IBOs who would like to utilize EasyTel Services (hereinafter "Non-Alliance IBO"). The term "Non-Alliance IBO" for the purposes of calculating payments owned to the Alliance shall also include customers that are referred to EasyTel by Non-Alliance IBOs and such IBO's downline referrals (whether or not such referrals are IBOs). For each new Non-Alliance IBO who activates a Universal Telephone Number, EasyTel shall pay theALLIANCE directly the following: ---------------------------------------------------- I A $5 activation fee. II A $1.00 per user commission paid each month for each Non-Alliance IBO with a current Universal Telephone Number. The total number of Non-Alliance IBOs for the payment calculation will be based on the number such IBOs with active Universal Telephone Numbers on the 25th of the month. (I.e. if 1000 Non-Alliance IBOs are active subscribers to the Universal Telephone Number as of the 25th of the month, then the Alliance would receive $1,000 as a commission for that particular month). III A five percent (5%) commission on all billable telecommunication usage generated by the Non-Alliance IBOs will be paid each month directly to the Alliance. 4. For every account referred to EasyTel, a monthly credit of $2.50 will be applied to the referring person's EasyTel account. ("EASYTIP" credit). In this way, an EasyTel subscriber can build unlimited EasyTel credit to offset their telecommunication expenses. 5. SIX MONTH EXCLUSIVE MARKETING RIGHTS TO THE ALLIANCE Network TwentyOne, in a previous agreement with EasyTel, for a one-time none-refundable fee, reserved the exclusive right to introduce and sell EasyTel services to other North American Amway organizations for a period of 90 days. Network TwentyOne and EasyTel agree to transfer this exclusive right to the Alliance. In consideration for the Alliance and all its members agreeing to endorse and utilize the EasyTel Universal Telephone Number as its exclusive company sanctioned unified messaging tool, EasyTel agrees to extend the above exclusive right to a term of six months from the date of this Agreement. In the event ILD, or any other member of the Alliance, has negotiated a Letter of Intent with another Amway organization within the six month period regarding the EasyTel services, EasyTel agrees to allow an additional 30 days to execute a final Re-Seller Agreement with any such organization. In the event that during the above six months, other North American Amway groups establish contact with EasyTel in order to negotiate a contract with EasyTel, but without the involvement of the Alliance, EasyTel is free to conclude such negotiations on the condition that it preserves the compensation to the Alliance as per section 3 above. 6. Restricted Use of NameEASYTEL -------------------------------- a. ILD may utilize EASYTEL'S trademarks "EASYTEL", "UNIVERSAL TELEPHONE NUMBER" and "UNIVERSAL OFFICE" but only for the purpose of re-selling EASYTEL Services. b. This grant of the right to utilize EASYTEL'S trademarks shall not give rise to any proprietary interest or claim to the name EASYTEL, or any specific product, service or geographical territory, but rather shall merely indicate that ILD is an authorized Re-Seller's Rep of EASYTEL products and services. 7. No Exclusive Territory or Other Relationship ------------------------------------------------- This agreement does not grant to ILD any geographical territory, exclusive or otherwise. This agreement does not create any partnership, joint venture, agency, franchise or relationship other than specifically described herein. 8. EASYTEL Services ----------------- EASYTEL services and products shall consist of services provided by EASYTEL on its proprietary platforms and services purchased by EASYTEL from its subsidiaries, affiliates and other service providers under its own private label and specifications or services and equipment provided by EASYTEL as a Re-Seller's and/or aggregator. 9. No Franchise Fee ------------------ ILD shall not pay EASYTEL any franchise fees. 10. ILDProduction Quotas and Other Standards -------------------------------------------- a. The ILD agrees to produce at least 1000 new EasyTel customers each quarter during the first five quarters or cumulative new customers of 1000 in the 1st quarter, 2000 by the second quarter, 3000 by the third quarter and so on. ILD will have met all Production Quotas for purposes of this agreement should they produce 5,000 new EasyTel customers by the end of the fifth quarter. b. ILD shall not collect money from IBOs for EasyTel services, as collection obligations shall be borne by EasyTel. c. ILD shall accurately disclose all charges to its IBOs correctly. ILD and its representatives SHALL not misrepresent any of the EASYTEL Services. d. EASYTEL shall have the right to cancel this agreement without compensation of any kind to ILD if ILD is in breach of any of the subparagraphs above. However, EasyTel shall not be entitled to a refund of those amount paid to ILD prior to cancellation hereof. PPPatrick PhillipsBecause the language on 9a stands on its own. I am trying to eliminate redundancy.George, why is 9a deleted here?EASYTEL shall not exercise its right of termination without first having given 30 days written notice to ILD. Cancellation of this agreement shall be EasyTel's sole remedy, and ILD shall not be liable for damages, consequential or incidental, as a result of a breach of any of the terms of this Agreement. 11. Activation Fees, Commissions and Overrides ---------------------------------------------- EasyTel shall calculate activation Fees, Commissions and Overrides on total payments collected. EasyTel will maintain all Activation Fees, Commissions and Overrides records. Said Records will be provided via a monthly report submitted by EasyTel to ILD. Commissions and Overrides will not be paid on bad debt, charge backs, write-offs or fraud (collectively "Non-Commission Amounts"). EasyTel shall offset all commissions advanced on "Non-Commission Amounts" against all Commissions due. ILD shall not be entitled to receive any Commissions or Overrides with respect to any customer not accepted by EASYTEL for services, or which are terminated (excluding amounts due to ILD prior to such termination), or any services not covered by this Agreement. 12. Promotional Information ------------------------ ILD agrees to adhere to all standards set forth by EASYTEL for the preparation and distribution of both advertising and promotional materials. All promotional material must be pre-approved by EASYTEL when ILD OR ILD CLIENTS USE EASYTEL'S LOGO AND NAME, before it is distributed to the public. 13. Advertising ----------- ILD agrees to submit all advertisements to EASYTEL in advance, for the purpose of screening to determine compliance with EASYTEL policies. EASYTEL shall promptly review all such advertising and shall not unreasonably withhold its approval of such advertising. Publication of advertising without prior approval by EASYTEL shall be grounds for termination of this Agreement by EASYTEL. Any marketing and promotional materials developed by ILD for EasyTel at ILD's expense shall be restricted to the sole use of ILD, ILD's clients. GENERAL TERMS AND CONDITIONS 1. MUTUAL NONDISCLOSURE WHEREAS, in connection with the contemplated transaction between the parties, each party to this Agreement may find it beneficial to disclose to the other party documentation or other technical business information (hereinafter "INFORMATION") which the disclosing party considers proprietary. It is specifically understood and agreed that INFORMATION ------------------------------------------------------------- described pursuant to this agreement may be marked proprietary. Either --------------------------------------------------------------------------- because it has been developed internally by the disclosing party, or --------------------------------------------------------------------------- because it has been received by the disclosing party subject to a --------------------------------------------------------------------------- continuing obligation to maintain the confidentiality of the INFORMATION, -------------------- or for other reasons. A. INFORMATION deemed to be proprietary which is provided in a tangible form shall be marked in a manner to indicate that it is considered proprietary or otherwise subject to limited distribution as provided herein. If the INFORMATION is provided orally, the disclosing individual shall clearly identify it as being proprietary at the time of disclosure. B. With respect to INFORMATION provided under this Agreement, the party to whom the INFORMATION is disclosed, its agents and any consultants working with the party in regard to this matter shall: a. Hold the INFORMATION in confidence and protect it in accordance with the security regulations by which it protects its own proprietary or confidential INFORMATION which it does not wish to disclose; b. Restrict disclosure of the INFORMATION solely to employees and affiliated employees who have a need to know and not disclose it to any other parties. c. Advise those employees of their obligations with respect to the INFORMATION. d. Use the INFORMATION only for the purposes hereunder except as may otherwise be agreed upon in writing. C. The party to whom INFORMATION is disclosed shall have no obligation to reserve the proprietary nature of any INFORMATION which: a. Was previously known to it free of any obligation to keep it confidential. b. Is disclosed to third parties by the other party without restriction. c. Is or becomes publicly available by other than unauthorized disclosure. d. Is independently developed by it. D. The INFORMATION shall be deemed the property of the disclosing party, and upon request, the other party will return all INFORMATION received in tangible form within ten days to the disclosing party or destroy all such INFORMATION. E Nothing contained in this Agreement shall be construed as granting or conferring rights by license or otherwise in any INFORMATION disclosed. F. All Confidential Information belongs solely to, and is owned exclusively, by the disclosing party. G. The Confidential Information disclosed in this transaction will not be used for any purpose except as permitted by this Agreement. H. The Confidential Information disclosed will not in any way be used, directly or indirectly, to compete with the business of the other parties to this agreement. All parties agree that its affiliates, employees, agents or representatives shall not circumvent or attempt to circumvent the provider of its relationship(s) with any vendors, suppliers, employees, consultants, or other party or parties associated with the provider of the Confidential Information. J. All parties agree to notify the others immediately upon the receipt of any form of legal process or government order requiring disclosure of the Confidential Information. Parties also agree to cooperate with the disclosing party's effort to preserve the secrecy and confidentiality of the Confidential Information, to the extent provided under applicable laws. 2. TERM. The term of this Agreement shall be for five years, commencing November 1, 1999. Providing that any provisions of this Agreement are not in default, ILD shall have the right to extend the term for two additional five-year periods. ILD may exercise this option only by delivering written notice thereof to EASYTEL within the last 90 days of the initial term of the first extension. 3. ARBITRATION If any dispute arises between or among the Parties, or if it becomes necessary to enforce the terms of this Agreement, the final binding remedy (except for an injunctive type relief action which will be brought in the State or Federal Courts) will be resolved by arbitration. Any dispute arising between the parties will be submitted to arbitration in the State of Washington in accordance with the rules of the American Arbitration Association then in effect. 4. INTERPRETATION OF AGREEMENT This Agreement has been negotiated by the parties and shall be given fair and reasonable interpretation in accordance with the words hereof, without regard to who drafted any particular provision hereof. 5. GOVERNING LAW. Any controversy or claim arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. 6. ATTORNEY'S FEES. In the event of any action, suit, or proceeding brought under or in connection with this Agreement, the prevailing Party shall be entitled to recover, and the other Party agrees to pay, the prevailing Party's costs and expenses in connection therewith, including reasonable attorney's fees. 7. HEADINGS. The titles or headings used in this Agreement are for reference and convenience only, and are not to be considered in the construction hereof. 8. TIME OF ESSENCE. Time is of the essence in this agreement. 9. ASSIGNMENTS. This agreement shall be binding on, and inure to the benefit of, the Parties to it and their respective heirs, legal representatives, successors and assignees. Provided, however, that ILD may not assign its rights under this agreement without the prior written consent of EASYTEL (which shall not be unreasonably withheld). Any assignment made in violation hereof shall be void and shall constitute grounds upon which EASYTEL may terminate this agreement. 10. NOTICES. All notices, requests, demands, and other communications under this Agreement shall be in writing, and be deemed to have been served on that date if served personally on the Party or on the postmark date affixed by the United States Postal Service if mailed to the Party. Documents must be mailed by first-class registered or certified mail, Federal Express or special delivery, postage prepaid, and properly addressed as follow. IF TO EASYTEL: IF TO PACIFIC TELCOM, INC: EASYTEL PACIFIC TELCOM, INC 320 East Charleston Boulevard 5604 Sligo Street Suite 204-221 Las Vegas, NV 89130 Las Vegas, Nevada 89104 IF TO ILD: IF TO M&M COMMUNICATIONS INTERNATIONAL LEADERSHIP M&M COMMUNICATIONS DEVELOPMENT 2781 W. MacArthur Blvd Ste B - 170 1920 W. Weile Street Santa Ana, CA 92704 Spokane, WA 99208 Any Party may change its address for purposes of this paragraph by giving the other parties written notice of the new address in the manner set forth above, provided such notification shall not be effective until receipt thereof. 11. SEVERABILITY AND WAIVERS. The invalidity of any provision of this agreement shall not affect the validity or enforceability of the other provisions hereof. 12. AMENDMENTS. No amendment or modification of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in a written and duly executed form by the parties against whom enforcement of the amendment, modification or waiver is sought. This Agreement constitutes the entire agreement among the parties with respect to the transactions contemplated hereby, and it supersedes all prior oral or written agreements, commitments or understandings among the parties with respect to the matters provided herein. 13. GENERAL RELEASE AND INDEMNITY RELATING TO PREVIOUS AGREEMENT. Because of changes in the previous business relationships between the parties, the formation of the Alliance and in consideration for entering into this Agreement all parties hereto waive any claim of any kind or nature, known or unknown, which may have arisen out of the Previous Agreement. All parties acknowledge that this general release waives the benefits of Civil Code Section 1542 for California residents, which provides: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affect his settlement with the debtor." 14. FORCE MAJEURE. Neither Party shall be liable for any delay, interruption, or failure in performance under this Agreement, which results directly or indirectly from acts of God, civil or military authority, acts of public enemies, war, accidents, fires, explosions, earthquakes, floods, the elements, tornado's, hurricanes, labor disputes, riots, delays of common carriers or suppliers, voluntary or mandatory compliance's with any governmental act, regulation or request, or any similar cause beyond the control or without the fault of such Party. 15. AUTHORIZATION. In executing this Agreement, the parties each expressly acknowledge, covenant and agree that he/she/it/they have the present intention, ability and willingness to perform each act, condition and covenant described in this Agreement to be performed by each of them. They further acknowledge and agree that the obligations to be preformed them as described herein shall be joint and several in nature. Dated: November 11 1999 FOR: EASYTEL FOR: INTERNATIONAL LEADERSHIP DEVELOPMENT By:____________________________ By:____________________________ Randall Skala, President Jack Daughery FOR: PACIFIC TELCOM, INC. M&M COMMUNICATIONS By:____________________________ By:____________________________ Bill Angelos, President Michael Murphy, President M&M COMMUNICATIONS By:____________________________ Asher Milgrom, Corporate Secretary EX-10.4 12 0012.txt RE-SELLER'S REPRESENTATIVE AGREEMENT ------------------------------------- (Switch-less Re-Seller's Rep Agreement) THIS AGREEMENT is entered into on November 11, 1999, by and between EasyTel, a Nevada corporation (hereinafter "EasyTel") and International Network Associates, (hereinafter " INA"). RECITALS 1. EasyTel is an electronic information and enhanced telecommunication services and systems provider to end users as "Business Services", and through its Switched Re-Seller agreement with M&M Communications and Pacific TelCom, Inc, (hereinafter jointly "Switched Re-Sellers"), to INA as "Commercial Services", and; 2. EasyTel offers proprietary information services, the Universal Telephone Number, Follow-Me services, Call Screening, voice mail, FaxMail, Fax-on-Demand, paging, domestic and international telephone service, Pre-Paid Services, and various call processing programs, as a service, on its proprietary platforms known as "The Universal Office", (hereinafter "EasyTel Services"), and; 3. INA currently has access to certain national and international distribution channels consisting of independent business owners, also known as Amway/Quixtar independent business owners (hereinafter "IBOs"), and; 4. INA is a member of a newly created alliance between Network TwentyOne, International Network Associates, ProNet Global Inc, International Leadership Development, and International Connection (hereinafter the "Alliance"), and; 5. The parties wish to create a business relationship in which INA and each member of the Alliance will receive commissions and other compensation based on the amount of EasyTel services sold by each member of the Alliance to their own IBOs, and other independent business owners and professionals, and; 6. Whereas it is the intent of each member of the Alliance to enter into an identical Re-Seller's Representative Agreement contemporaneously, as part of a joint plan and; 7. "INA Downline" means and refers to customers that are referred to EasyTel by INA IBOs (or such IBO's referees whether or not such referees are IBOs). NOWTHEREFORE, the parties agree as follows: 1. Easytel's Charges EasyTel's charges for using EasyTel's Universal Telephone Number for customers that are referred by INA Downline are as follows: a. $25 Activation Fee. (Upon written notice to EasyTel, INA or any other member of the Alliance can choose to have the activation fee waived or reduced for their own IBOs). b. $25 Monthly Fee c. $25 usage for prepaid calling time will be established by the users floor limit. 2. Compensation to INA a. For each INA Downline who activates a Universal Telephone Number, EasyTel shall pay to INA the following: I The $25 activation fee paid by each INA Downline (or such lesser amount paid should INA request that the activation fee be reduced). II A $5 per user commission paid each month for each INA Downline with a Universal Telephone Number. The total number of TwentyOne Downline for the payment calculation will be based on the number of TwentyOne Downline who have current Universal Telephone Numbers on the 25th of the month. (I.e. if 1000 TwentyOne Downline are subscribers to the Universal Telephone Number as of the 25th of the month, then INA would receive $5,000 as a commission for that particular month). III A ten percent (10%) commission on all billable telecommunication usage generated by TwentyOne Downline will be paid each month to INA. 3. Compensation to the Alliance a. The Alliance and/or its members may sell EasyTel services to other IBOs who are not a part of or belong to any of the Alliance Members (for example other Amway or Quixtar Distributors) but are IBOs who would like to utilize EasyTel Services (hereinafter "Non-Alliance IBO"). The term "Non-Alliance IBO" for the purposes of calculating payments owned to the Alliance shall also include customers that are referred to EasyTel by Non-Alliance IBOs and such IBO's downline referrals (whether or not such referrals are IBOs). For each new Non-Alliance IBO who activates a Universal Telephone Number, EasyTel shall pay the Alliance directly the following: I A $5 activation fee. II A $1.00 per user commission paid each month for each Non-Alliance IBO with a current Universal Telephone Number. The total number of Non-Alliance IBOs for the payment calculation will be based on the number such IBOs with active Universal Telephone Numbers on the 25th of the month. (I.e. if 1000 Non-Alliance IBOs are active subscribers to the Universal Telephone Number as of the 25th of the month, then the Alliance would receive $1,000 as a commission for that particular month). III A five percent (5%) commission on all billable telecommunication usage generated by the Non-Alliance IBOs will be paid each month directly to the Alliance. 4. For every account referred to EasyTel, a monthly credit of $2.50 will be applied to the referring person's EasyTel account. ("EasyTip" credit). In this way, an EasyTel subscriber can build unlimited EasyTel credit to offset their telecommunication expenses. 5. SIX Month Exclusive Marketing Rights to the Alliance Network TwentyOne, in a previous agreement with EasyTel, for a one-time none-refundable fee, reserved the exclusive right to introduce and sell EasyTel services to other North American Amway organizations for a period of 90 days. Network TwentyOne and EasyTel agree to transfer this exclusive right to the Alliance. In consideration for the Alliance and all its members agreeing to endorse and utilize the EasyTel Universal Telephone Number as its exclusive company sanctioned unified messaging tool, EasyTel agrees to extend the above exclusive right to a term of six months from the date of this Agreement. In the event INA, or any other member of the Alliance, has negotiated a Letter of Intent with another Amway organization within the six month period regarding the EasyTel services, EasyTel agrees to allow an additional 30 days to execute a final Re-Seller Agreement with any such organization. In the event that during the above six months, other North American Amway groups establish contact with EasyTel in order to negotiate a contract with EasyTel, but without the involvement of the Alliance, EasyTel is free to conclude such negotiations on the condition that it preserves the compensation to the Alliance as per section 3 above. 6. Restricted Use of Name EasyTel a. INA may utilize EasyTel's trademarks "EasyTel", "Universal Telephone Number" and "Universal Office" but only for the purpose of re-selling EasyTel Services. b. This grant of the right to utilize EasyTel's trademarks shall not give rise to any proprietary interest or claim to the name EasyTel, or any specific product, service or geographical territory, but rather shall merely indicate that INA is an authorized Re-Seller's Rep of EasyTel products and services. 7. No Exclusive Territory or Other Relationship This agreement does not grant to INA any geographical territory, exclusive or otherwise. This agreement does not create any partnership, joint venture, agency, franchise or relationship other than specifically described herein. 8. EasyTel Services EasyTel services and products shall consist of services provided by EasyTel on its proprietary platforms and services purchased by EasyTel from its subsidiaries, affiliates and other service providers under its own private label and specifications or services and equipment provided by EasyTel as a Re-Seller's and/or aggregator. 9. No Franchise Fee INA shall not pay EasyTel any franchise fees. 10. INA Production Quotas and Other Standards a. The INA agrees to produce at least 1000 new EasyTel customers each quarter during the first five quarters or cumulative new customers of 1000 in the 1st quarter, 2000 by the second quarter, 3000 by the third quarter and so on. INA will have met all Production Quotas for purposes of this agreement should they produce 5,000 new EasyTel customers by the end of the fifth quarter. b. INA shall not collect money from IBOs for EasyTel services, as collection obligations shall be borne by EasyTel. c. INA shall accurately disclose all charges to its IBOs correctly. INA and its representatives SHALL not misrepresent any of the EasyTel Services. d. EasyTel shall have the right to cancel this agreement without compensation of any kind to INA if INA is in breach of any of the subparagraphs above. However, EasyTel shall not be entitled to a refund of those amount paid to INA prior to cancellation hereof. [PP1]EasyTel shall not exercise its right of termination without first having given 30 days written notice to INA. Cancellation of this agreement shall be EasyTel's sole remedy, and INA shall not be liable for damages, consequential or incidental, as a result of a breach of any of the terms of this Agreement. 11. Activation Fees, Commissions and Overrides EasyTel shall calculate activation Fees, Commissions and Overrides on total payments collected. EasyTel will maintain all Activation Fees, Commissions and Overrides records. Said Records will be provided via a monthly report submitted by EasyTel to INA. Commissions and Overrides will not be paid on bad debt, charge backs, write-offs or fraud (collectively "Non-Commission Amounts"). EasyTel shall offset all commissions advanced on "Non-Commission Amounts" against all Commissions due. INA shall not be entitled to receive any Commissions or Overrides with respect to any customer not accepted by EasyTel for services, or which are terminated (excluding amounts due to INA prior to such termination), or any services not covered by this Agreement. 12. Promotional Information INA agrees to adhere to all standards set forth by EasyTel for the preparation and distribution of both advertising and promotional materials. All promotional material must be pre-approved by EasyTel when the INA or INA clients use EasyTel's logo and name, before it is distributed to the public. 13. Advertising INA agrees to submit all advertisements to EasyTel in advance, for the purpose of screening to determine compliance with EasyTel policies. EasyTel shall promptly review all such advertising and shall not unreasonably withhold its approval of such advertising. Publication of advertising without prior approval by EasyTel shall be grounds for termination of this Agreement by EasyTel. Any marketing and promotional materials developed by INA for EasyTel at INA's expense shall be restricted to the sole use of INA, INA's clients. GENERAL TERMS AND CONDITIONS 1. MUTUAL NONDISCLOSURE WHEREAS, in connection with the contemplated transaction between the parties, each party to this Agreement may find it beneficial to disclose to the other party documentation or other technical business information (hereinafter "INFORMATION") which the disclosing party considers proprietary. It is specifically understood and agreed that INFORMATION described pursuant to this agreement may be marked proprietary. Either because it has been developed internally by the disclosing party, or because it has been received by the disclosing party subject to a continuing obligation to maintain the confidentiality of the INFORMATION, or for other reasons. A. INFORMATION deemed to be proprietary which is provided in a tangible form shall be marked in a manner to indicate that it is considered proprietary or otherwise subject to limited distribution as provided herein. If the INFORMATION is provided orally, the disclosing individual shall clearly identify it as being proprietary at the time of disclosure. B. With respect to INFORMATION provided under this Agreement, the party to whom the INFORMATION is disclosed, its agents and any consultants working with the party in regard to this matter shall: a. Hold the INFORMATION in confidence and protect it in accordance with the security regulations by which it protects its own proprietary or confidential INFORMATION which it does not wish to disclose; b. Restrict disclosure of the INFORMATION solely to employees and affiliated employees who have a need to know and not disclose it to any other parties. c. Advise those employees of their obligations with respect to the INFORMATION. d. Use the INFORMATION only for the purposes hereunder except as may otherwise be agreed upon in writing. C. The party to whom INFORMATION is disclosed shall have no obligation to reserve the proprietary nature of any INFORMATION which: a. Was previously known to it free of any obligation to keep it confidential. b. Is disclosed to third parties by the other party without restriction. c. Is or becomes publicly available by other than unauthorized disclosure. d. Is independently developed by it. D. The INFORMATION shall be deemed the property of the disclosing party, and upon request, the other party will return all INFORMATION received in tangible form within ten days to the disclosing party or destroy all such INFORMATION. E Nothing contained in this Agreement shall be construed as granting or conferring rights by license or otherwise in any INFORMATION disclosed. F. All Confidential Information belongs solely to, and is owned exclusively, by the disclosing party. G. The Confidential Information disclosed in this transaction will not be used for any purpose except as permitted by this Agreement. H. The Confidential Information disclosed will not in any way be used, directly or indirectly, to compete with the business of the other parties to this agreement. All parties agree that its affiliates, employees, agents or representatives shall not circumvent or attempt to circumvent the provider of its relationship(s) with any vendors, suppliers, employees, consultants, or other party or parties associated with the provider of the Confidential Information. J. All parties agree to notify the others immediately upon the receipt of any form of legal process or government order requiring disclosure of the Confidential Information. Parties also agree to cooperate with the disclosing party's effort to preserve the secrecy and confidentiality of the Confidential Information, to the extent provided under applicable laws. 2. TERM. The term of this Agreement shall be for five years, commencing November 1, 1999. Providing that any provisions of this Agreement are not in default, INA shall have the right to extend the term for two additional five-year periods. INA may exercise this option only by delivering written notice thereof to EasyTel within the last 90 days of the initial term of the first extension. 3. ARBITRATION If any dispute arises between or among the Parties, or if it becomes necessary to enforce the terms of this Agreement, the final binding remedy (except for an injunctive type relief action which will be brought in the State or Federal Courts) will be resolved by arbitration. Any dispute arising between the parties will be submitted to arbitration in the State of Georgia in accordance with the rules of the American Arbitration Association then in effect. 4. INTERPRETATION OF AGREEMENT This Agreement has been negotiated by the parties and shall be given fair and reasonable interpretation in accordance with the words hereof, without regard to who drafted any particular provision hereof. 5. GOVERNING LAW. Any controversy or claim arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. 6. ATTORNEY'S FEES. In the event of any action, suit, or proceeding brought under or in connection with this Agreement, the prevailing Party shall be entitled to recover, and the other Party agrees to pay, the prevailing Party's costs and expenses in connection therewith, including reasonable attorney's fees. 7. HEADINGS. The titles or headings used in this Agreement are for reference and convenience only, and are not to be considered in the construction hereof. 8. TIME OF ESSENCE. Time is of the essence in this agreement. 9. ASSIGNMENTS. This agreement shall be binding on, and inure to the benefit of, the Parties to it and their respective heirs, legal representatives, successors and assignees. Provided, however, that INA may not assign its rights under this agreement without the prior written consent of EasyTel (which shall not be unreasonably withheld). Any assignment made in violation hereof shall be void and shall constitute grounds upon which EasyTel may terminate this agreement. 10. NOTICES. All notices, requests, demands, and other communications under this Agreement shall be in writing, and be deemed to have been served on that date if served personally on the Party or on the postmark date affixed by the United States Postal Service if mailed to the Party. Documents must be mailed by first-class registered or certified mail, Federal Express or special delivery, postage prepaid, and properly addressed as follow. IF TO EasyTel: IF TO Pacific TelCom, Inc: EasyTel Pacific TelCom, Inc 320 East Charleston Boulevard 5604 Sligo Street Suite 204-221 Las Vegas, NV 89130 Las Vegas, Nevada 89104 IF TO INA: IF TO M&M COMMUNICATIONS International Network Associates M&M Communications 8700 Auburn Folsom Road 2030 West Summerwind Suite 100 Santa Ana, CA 92704 Granite Bay, CA 95746 Any Party may change its address for purposes of this paragraph by giving the other parties written notice of the new address in the manner set forth above, provided such notification shall not be effective until receipt thereof. 11. SEVERABILITY AND WAIVERS. The invalidity of any provision of this agreement shall not affect the validity or enforceability of the other provisions hereof. 12. AMENDMENTS. No amendment or modification of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in a written and duly executed form by the parties against whom enforcement of the amendment, modification or waiver is sought. This Agreement constitutes the entire agreement among the parties with respect to the transactions contemplated hereby, and it supersedes all prior oral or written agreements, commitments or understandings among the parties with respect to the matters provided herein. 13. GENERAL RELEASE AND INDEMNITY RELATING TO PREVIOUS AGREEMENT. Because of changes in the previous business relationships between the parties, the formation of the Alliance and in consideration for entering into this Agreement all parties hereto waive any claim of any kind or nature, known or unknown, which may have arisen out of the Previous Agreement. All parties acknowledge that this general release waives the benefits of Civil Code Section 1542 for California residents, which provides: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affect his settlement with the debtor." 14. FORCE MAJEURE. Neither Party shall be liable for any delay, interruption, or failure in performance under this Agreement, which results directly or indirectly from acts of God, civil or military authority, acts of public enemies, war, accidents, fires, explosions, earthquakes, floods, the elements, tornado's, hurricanes, labor disputes, riots, delays of common carriers or suppliers, voluntary or mandatory compliance's with any governmental act, regulation or request, or any similar cause beyond the control or without the fault of such Party. 15. AUTHORIZATION. In executing this Agreement, the parties each expressly acknowledge, covenant and agree that he/she/it/they have the present intention, ability and willingness to perform each act, condition and covenant described in this Agreement to be performed by each of them. They further acknowledge and agree that the obligations to be preformed them as described herein shall be joint and several in nature. Dated: November 11, 1999 FOR: EasyTel FOR: International Network Associates. By:____________________________ By:____________________________ Randall Skala, President Jim Floor, President FOR: Pacific TelCom, Inc. M&M Communications By:____________________________ By:____________________________ Bill Angelos, President Michael Murphy, President EX-10.5 13 0013.txt RE-SELLER'S REPRESENTATIVE AGREEMENT ------------------------------------ (SWITCH-LESS RE-SELLER'S REP AGREEMENT) THIS AGREEMENT is entered into on November 11, 1999, by and between EASYTEl, a Nevada corporation (hereinafter "EASYTEL") and PRONET GLOBAL I, INC., (hereinafter " ProNet"). RECITALS 1. EASYTEL is an electronic information and enhanced telecommunication services and systems provider to end users as "Business Services", and through its Switched Re-Seller agreement with M&M COMMUNICATIONS and PACIFIC TELCOM, INC, (hereinafter jointly "Switched Re-Sellers"), to ProNet as "Commercial Services", and; 2. EASYTEL offers proprietary information services, the Universal Telephone Number, Follow-Me services, Call Screening, voice mail, FaxMail, Fax-on-Demand, paging, domestic and international telephone service, Pre-Paid Services, and various call processing programs, as a service, on its proprietary platforms known as "The Universal Office", (hereinafter "EASYTEL Services"), and; 3. ProNet currently has access to certain national and international distribution channels consisting of independent business owners, also known as Amway/Quixtar independent business owners (hereinafter "IBOS"), and; 4. ProNet is a member of a newly created alliance between Network TwentyOne, International Network Associates, ProNet Global Inc, International Leadership Development, and International Connection (hereinafter the "Alliance"), and; 5. The parties wish to create a business relationship in which ProNet and each member of the Alliance will receive commissions and other compensation based on the amount of EasyTel services sold by each member of the Alliance to their own IBOs, and other independent business owners and professionals, and; 6. Whereas it is the intent of each member of the Alliance to enter into an identical Re-Seller's Representative Agreement contemporaneously, as part of a joint plan and; 7. "ProNet Downline" means and refers to customers that are referred to EasyTel by ProNet IBOs (or such IBO's referees whether or not such referees are IBOs). NOWTHEREFORE, THE PARTIES AGREE AS FOLLOWS: 1. EASYTEL'S CHARGES EasyTel's charges for using EasyTel's Universal Telephone Number for customers that are referred by ProNet Downline are as follows: a. $25 Activation Fee. (UPON WRITTEN NOTICE TO EASYTEL, PRONET OR ANY OTHER MEMBER OF THE ALLIANCE CAN CHOOSE TO HAVE THE ACTIVATION FEE WAIVED OR REDUCED FOR THEIR OWN IBOS). b. $25 Monthly Fee c. $25 usage for prepaid calling time will be established by the users floor limit. 2. COMPENSATION TO PRONET a. FOR EACH PRONET DOWNLINE who activates a Universal Telephone Number, EasyTel shall pay to ProNet the following: I The $25 activation fee paid by each ProNet Downline (or such lesser amount paid should ProNet request that the activation fee be reduced). II A $5 per user commission paid each month for each ProNet Downline with a Universal Telephone Number. The total number of ProNet Downline for the payment calculation will be based on the number of ProNet Downline who have current Universal Telephone Numbers on the 25th of the month. (I.e. if 1000 ProNet Downline are subscribers to the Universal Telephone Number as of the 25th of the month, then ProNet would receive $5,000 as a commission for that particular month). III A ten percent (10%) commission on all billable telecommunication usage generated by ProNet Downline will be paid each month to ProNet. 3. COMPENSATION TO THE ALLIANCE a. The Alliance and/or its members may sell EasyTel services to other IBOs who are not a part of or belong to any of the Alliance Members (for example other Amway or Quixtar Distributors) but are IBOs who would like to utilize EasyTel Services (hereinafter "Non-Alliance IBO"). The term "Non-Alliance IBO" for the purposes of calculating payments owned to the Alliance shall also include customers that are referred to EasyTel by Non-Alliance IBOs and such IBO's downline referrals (whether or not such referrals are IBOs). For each new Non-Alliance IBO who activates a Universal Telephone Number, EasyTel shall pay the ALLIANCE directly the following: ----------------------------------------------------- I A $5 activation fee. II A $1.00 per user commission paid each month for each Non-Alliance IBO with a current Universal Telephone Number. The total number of Non-Alliance IBOs for the payment calculation will be based on the number such IBOs with active Universal Telephone Numbers on the 25th of the month. (I.e. if 1000 Non-Alliance IBOs are active subscribers to the Universal Telephone Number as of the 25th of the month, then the Alliance would receive $1,000 as a commission for that particular month). III A five percent (5%) commission on all billable telecommunication usage generated by the Non-Alliance IBOs will be paid each month directly to the Alliance. 4. For every account referred to EasyTel, a monthly credit of $2.50 will be applied to the referring person's EasyTel account. ("EASYTIP" credit). In this way, an EasyTel subscriber can build unlimited EasyTel credit to offset their telecommunication expenses. 5. SIX MONTH EXCLUSIVE MARKETING RIGHTS TO THE ALLIANCE Network TwentyOne, in a previous agreement with EasyTel, for a one-time none-refundable fee, reserved the exclusive right to introduce and sell EasyTel services to other North American Amway organizations for a period of 90 days. Network TwentyOne and EasyTel agree to transfer this exclusive right to the Alliance. In consideration for ProNet and the Alliance and all its members agreeing to endorse and utilize the EasyTel Universal Telephone Number as its exclusive company sanctioned unified messaging tool, EasyTel agrees to extend the above exclusive right to a term of six months from the date of this Agreement. In the event ProNet, or any other member of the Alliance, has negotiated a Letter of Intent with another Amway organization within the six month period regarding the EasyTel services, EasyTel agrees to allow an additional 30 days to execute a final Re-Seller Agreement with any such organization. In the event that during the above six months, other North American Amway groups establish contact with EasyTel in order to negotiate a contract with EasyTel, but without the involvement of the Alliance, EasyTel is free to conclude such negotiations on the condition that it preserves the compensation to the Alliance as per section 3 above. 6. Restricted Use of NameEASYTEL -------------------------------- a. ProNet may utilize EASYTEL'S trademarks "EASYTEL", "UNIVERSAL TELEPHONE NUMBER" and "UNIVERSAL OFFICE" but only for the purpose of re-selling EASYTEL Services. b. This grant of the right to utilize EASYTEL'S trademarks shall not give rise to any proprietary interest or claim to the name EASYTEL, or any specific product, service or geographical territory, but rather shall merely indicate that ProNet is an authorized Re-Seller's Rep of EASYTEL products and services. 7. No Exclusive Territory or Other Relationship -------------------------------------------- This agreement does not grant to ProNet any geographical territory, exclusive or otherwise. This agreement does not create any partnership, joint venture, agency, franchise or relationship other than specifically described herein. 8. EASYTEL Services ---------------- EASYTEL services and products shall consist of services provided by EASYTEL on its proprietary platforms and services purchased by EASYTEL from its subsidiaries, affiliates and other service providers under its own private label and specifications or services and equipment provided by EASYTEL as a Re-Seller's and/or aggregator. 9. No Franchise Fee ---------------- ProNet shall not pay EASYTEL any franchise fees. 10. ProNetProduction Quotas and Other Standards ----------------------------------------------- a. The ProNet agrees to produce at least 1000 new EasyTel customers each quarter during the first five quarters or cumulative new customers of 1000 in the 1st quarter, 2000 by the second quarter, 3000 by the third quarter and so on. ProNet will have met all Production Quotas for purposes of this agreement should they produce 5,000 new EasyTel customers by the end of the fifth quarter. b. PRONET shall not collect money from IBOs for EasyTel services, as collection obligations shall be borne by EasyTel. c. ProNet shall accurately disclose all charges to its IBOs correctly. ProNet and its representatives SHALL not misrepresent any of the EASYTEL Services. d. EASYTEL shall have the right to cancel this agreement without compensation of any kind to ProNet if ProNet is in breach of any of the subparagraphs above. However, EasyTel shall not be entitled to a refund of those amounts paid to ProNet prior to cancellation hereof. EASYTEL shall not exercise its right of termination without first having given 30 days written notice to ProNet. Cancellation of this agreement shall be EasyTel's sole remedy, and ProNet shall not be liable for damages, consequential or incidental, as a result of a breach of any of the terms of this Agreement. 11. Activation Fees, Commissions and Overrides ------------------------------------------ EasyTel shall calculate activation Fees, Commissions and Overrides on total payments collected. EasyTel will maintain all Activation Fees, Commissions and Overrides records. Said Records will be provided via a monthly report submitted by EasyTel to ProNet. Commissions and Overrides will not be paid on bad debt, charge backs, write-offs or fraud (collectively "Non-Commission Amounts"). EasyTel shall offset all commissions advanced on "Non-Commission Amounts" against all Commissions due. ProNet shall not be entitled to receive any Commissions or Overrides with respect to any customer not accepted by EASYTEL for services, or which are terminated (excluding amounts due to ProNet prior to such termination), or any services not covered by this Agreement. 12. Promotional Information ----------------------- ProNet agrees to adhere to all standards set forth by EASYTEL for the preparation and distribution of both advertising and promotional materials. All promotional material must be pre-approved by EASYTEL when PRONET OR PRONET CLIENTS USE EASYTEL'S LOGO AND NAME, before it is distributed to the public. 13. Advertising ----------- PRONET agrees to submit all advertisements to EASYTEL in advance, for the purpose of screening to determine compliance with EASYTEL policies. EASYTEL shall promptly review all such advertising and shall not unreasonably withhold its approval of such advertising. Publication of advertising without prior approval by EASYTEL shall be grounds for termination of this Agreement by EASYTEL. Any marketing and promotional materials developed by ProNet for EasyTel at Print's expense shall be restricted to the sole use of ProNet, Print's clients. GENERAL TERMS AND CONDITIONS 1. MUTUAL NONDISCLOSURE WHEREAS, in connection with the contemplated transaction between the parties, each party to this Agreement may find it beneficial to disclose to the other party documentation or other technical business information (hereinafter "INFORMATION") which the disclosing party considers proprietary. It is specifically understood and agreed that INFORMATION ------------------------------------------------------------- described pursuant to this agreement may be marked proprietary. Either --------------------------------------------------------------------------- because it has been developed internally by the disclosing party, or --------------------------------------------------------------------------- because it has been received by the disclosing party subject to a --------------------------------------------------------------------------- continuing obligation to maintain the confidentiality of the INFORMATION, --------------------------------------------------------------------------- or for other reasons. -------------------- A. INFORMATION deemed to be proprietary which is provided in a tangible form shall be marked in a manner to indicate that it is considered proprietary or otherwise subject to limited distribution as provided herein. If the INFORMATION is provided orally, the disclosing individual shall clearly identify it as being proprietary at the time of disclosure. B. With respect to INFORMATION provided under this Agreement, the party to whom the INFORMATION is disclosed, its agents and any consultants working with the party in regard to this matter shall: a. Hold the INFORMATION in confidence and protect it in accordance with the security regulations by which it protects its own proprietary or confidential INFORMATION which it does not wish to disclose; b. Restrict disclosure of the INFORMATION solely to employees and affiliated employees who have a need to know and not disclose it to any other parties. c. Advise those employees of their obligations with respect to the INFORMATION. d. Use the INFORMATION only for the purposes hereunder except as may otherwise be agreed upon in writing. C. The party to whom INFORMATION is disclosed shall have no obligation to reserve the proprietary nature of any INFORMATION which: a. Was previously known to it free of any obligation to keep it confidential. b. Is disclosed to third parties by the other party without restriction. c. Is or becomes publicly available by other than unauthorized disclosure. d. Is independently developed by it. D. The INFORMATION shall be deemed the property of the disclosing party, and upon request, the other party will return all INFORMATION received in tangible form within ten days to the disclosing party or destroy all such INFORMATION. E Nothing contained in this Agreement shall be construed as granting or conferring rights by license or otherwise in any INFORMATION disclosed. F. All Confidential Information belongs solely to, and is owned exclusively, by the disclosing party. G. The Confidential Information disclosed in this transaction will not be used for any purpose except as permitted by this Agreement. H. The Confidential Information disclosed will not in any way be used, directly or indirectly, to compete with the business of the other parties to this agreement. All parties agree that its affiliates, employees, agents or representatives shall not circumvent or attempt to circumvent the provider of its relationship(s) with any vendors, suppliers, employees, consultants, or other party or parties associated with the provider of the Confidential Information. J. All parties agree to notify the others immediately upon the receipt of any form of legal process or government order requiring disclosure of the Confidential Information. Parties also agree to cooperate with the disclosing party's effort to preserve the secrecy and confidentiality of the Confidential Information, to the extent provided under applicable laws. 2. TERM. The term of this Agreement shall be for five years, commencing November 1, 1999. Providing that any provisions of this Agreement are not in default, PRONET shall have the right to extend the term for two additional five-year periods. ProNet may exercise this option only by delivering written notice thereof to EASYTEL within the last 90 days of the initial term of the first extension. 3. ARBITRATION If any dispute arises between or among the Parties, or if it becomes necessary to enforce the terms of this Agreement, the final binding remedy (except for an injunctive type relief action which will be brought in the State or Federal Courts) will be resolved by arbitration. Any dispute arising between the parties will be submitted to arbitration in the State of Michigan in accordance with the rules of the American Arbitration Association then in effect. 4. INTERPRETATION OF AGREEMENT This Agreement has been negotiated by the parties and shall be given fair and reasonable interpretation in accordance with the words hereof, without regard to who drafted any particular provision hereof. 5. GOVERNING LAW. Any controversy or claim arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. 6. ATTORNEY'S FEES. In the event of any action, suit, or proceeding brought under or in connection with this Agreement, the prevailing Party shall be entitled to recover, and the other Party agrees to pay, the prevailing Party's costs and expenses in connection therewith, including reasonable attorney's fees. 7. HEADINGS. The titles or headings used in this Agreement are for reference and convenience only, and are not to be considered in the construction hereof. 8. TIME OF ESSENCE. Time is of the essence in this agreement. 9. ASSIGNMENTS. This agreement shall be binding on, and inure to the benefit of, the Parties to it and their respective heirs, legal representatives, successors and assignees. Provided, however, that ProNet may not assign its rights under this agreement without the prior written consent of EASYTEL (which shall not be unreasonably withheld). Any assignment made in violation hereof shall be void and shall constitute grounds upon which EASYTEL may terminate this agreement. 10. NOTICES. All notices, requests, demands, and other communications under this Agreement shall be in writing, and be deemed to have been served on that date if served personally on the Party or on the postmark date affixed by the United States Postal Service if mailed to the Party. Documents must be mailed by first-class registered or certified mail, Federal Express or special delivery, postage prepaid, and properly addressed as follow. IF TO EASYTEL: IF TO PACIFIC TELCOM, INC: EASYTEL PACIFIC TELCOM, INC 320 East Charleston Boulevard 5604 Sligo Street Suite 204-221 Las Vegas, NV 89130 Las Vegas, Nevada 89104 IF TO PRONET: IF TO M&M COMMUNICATIONS PRONET GLOBAL I, INC. M&M COMMUNICATIONS 5075 Cascade Road SE 2030 West Summerwind Suite K Santa Ana, CA 92704 Grand Rapids, MI 49546 Any Party may change its address for purposes of this paragraph by giving the other parties written notice of the new address in the manner set forth above, provided such notification shall not be effective until receipt thereof. 11. SEVERABILITY AND WAIVERS. The invalidity of any provision of this agreement shall not affect the validity or enforceability of the other provisions hereof. 12. AMENDMENTS. No amendment or modification of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in a written and duly executed form by the parties against whom enforcement of the amendment, modification or waiver is sought. This Agreement constitutes the entire agreement among the parties with respect to the transactions contemplated hereby, and it supersedes all prior oral or written agreements, commitments or understandings among the parties with respect to the matters provided herein. 13. GENERAL RELEASE AND INDEMNITY RELATING TO PREVIOUS AGREEMENT. Because of changes in the previous business relationships between the parties, the formation of the Alliance and in consideration for entering into this Agreement all parties hereto waive any claim of any kind or nature, known or unknown, which may have arisen out of the Previous Agreement. All parties acknowledge that this general release waives the benefits of Civil Code Section 1542 for California residents, which provides: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affect his settlement with the debtor." 14. FORCE MAJEURE. Neither Party shall be liable for any delay, interruption, or failure in performance under this Agreement, which results directly or indirectly from acts of God, civil or military authority, acts of public enemies, war, accidents, fires, explosions, earthquakes, floods, the elements, tornado's, hurricanes, labor disputes, riots, delays of common carriers or suppliers, voluntary or mandatory compliance's with any governmental act, regulation or request, or any similar cause beyond the control or without the fault of such Party. 15. AUTHORIZATION. In executing this Agreement, the parties each expressly acknowledge, covenant and agree that he/she/it/they have the present intention, ability and willingness to perform each act, condition and covenant described in this Agreement to be performed by each of them. They further acknowledge and agree that the obligations to be preformed them as described herein shall be joint and several in nature. Dated: November 16 1999 FOR: EASYTEL FOR: PRONET GLOBAL I, INC. By:____________________________ By:____________________________ Thomas Skala, CEO Robert Blanchard President FOR: PACIFIC TELCOM, INC. M&M COMMUNICATIONS By:____________________________ By:____________________________ Bill Angelos, President Michael Murphy, President EX-10.6 14 0014.txt RE-SELLER'S REPRESENTATIVE AGREEMENT ------------------------------------ (SWITCH-LESS RE-SELLER'S REP AGREEMENT) THIS AGREEMENT is entered into on December 2, 1999, by and between EASYTEl, a Nevada corporation (hereinafter "EASYTEL") and INTERNATIONAL CONNECTION, (hereinafter "IC"). RECITALS 1. EASYTEL is an electronic information and enhanced telecommunication services and systems provider to end users as "Business Services", and through its Switched Re-Seller agreement with M&M COMMUNICATIONS and PACIFIC TELCOM, INC, (hereinafter jointly "Switched Re-Sellers"), to IC as "Commercial Services", and; 2. EASYTEL offers proprietary information services, the Universal Telephone Number, Follow-Me services, Call Screening, voice mail, FaxMail, Fax-on-Demand, paging, domestic and international telephone service, Pre-Paid Services, and various call processing programs, as a service, on its proprietary platforms known as "The Universal Office", (hereinafter "EASYTEL Services"), and; 3. IC currently has access to certain national and international distribution channels consisting of independent business owners, also known as Amway/Quixtar independent business owners (hereinafter "IBOS"), and; 4. IC is a member of a newly created alliance between Network TwentyOne, International Network Associates, ProNet Global Inc, International Leadership Development, and International Connection (hereinafter the "Alliance"), and; 5. The parties wish to create a business relationship in which IC and each member of the Alliance will receive commissions and other compensation based on the amount of EasyTel services sold by each member of the Alliance to their own IBOs, and other independent business owners and professionals, and; 6. Whereas it is the intent of each member of the Alliance to enter into an identical Re-Seller's Representative Agreement contemporaneously, as part of a joint plan and; 7. "IC Downline" means and refers to customers that are referred to EasyTel by IC IBOs (or such IBO's referees whether or not such referees are IBOs). NOWTHEREFORE, THE PARTIES AGREE AS FOLLOWS: 1. EASYTEL'S CHARGES EasyTel's charges for using EasyTel's Universal Telephone Number for customers that are referred by IC Downline are as follows: a. $25 Activation Fee. (UPON WRITTEN NOTICE TO EASYTEL, IC OR ANY OTHER MEMBER OF THE ALLIANCE CAN CHOOSE TO HAVE THE ACTIVATION FEE WAIVED OR REDUCED FOR THEIR OWN IBOS). b. $25 Monthly Fee c. $25 usage for prepaid calling time will be established by the users floor limit. 2. COMPENSATION TO IC a. FOR EACH IC DOWNLINE who activates a Universal Telephone Number, EasyTel shall pay to IC the following: I The $25 activation fee paid by each IC Downline (or such lesser amount paid should IC request that the activation fee be reduced). II A $5 per user commission paid each month for each IC Downline with a Universal Telephone Number. The total number of IC Downline for the payment calculation will be based on the number of IC Downline who have current Universal Telephone Numbers on the 25th of the month. (I.e. if 1000 IC Downline are subscribers to the Universal Telephone Number as of the 25th of the month, then IC would receive $5,000 as a commission for that particular month). III A ten percent (10%) commission on all billable telecommunication usage generated by IC Downline will be paid each month to IC. 3. COMPENSATION TO THE ALLIANCE a. The Alliance and/or its members may sell EasyTel services to other IBOs who are not a part of or belong to any of the Alliance Members (for example other Amway or Quixtar Distributors) but are IBOs who would like to utilize EasyTel Services (hereinafter "Non-Alliance IBO"). The term "Non-Alliance IBO" for the purposes of calculating payments owned to the Alliance shall also include customers that are referred to EasyTel by Non-Alliance IBOs and such IBO's downline referrals (whether or not such referrals are IBOs). For each new Non-Alliance IBO who activates a Universal Telephone Number, EasyTel shall pay theALLIANCE directly the following: ---------------------------------------------------- I A $5 activation fee. II A $1.00 per user commission paid each month for each Non-Alliance IBO with a current Universal Telephone Number. The total number of Non-Alliance IBOs for the payment calculation will be based on the number such IBOs with active Universal Telephone Numbers on the 25th of the month. (I.e. if 1000 Non-Alliance IBOs are active subscribers to the Universal Telephone Number as of the 25th of the month, then the Alliance would receive $1,000 as a commission for that particular month). III A five percent (5%) commission on all billable telecommunication usage generated by the Non-Alliance IBOs will be paid each month directly to the Alliance. 4. For every account referred to EasyTel, a monthly credit of $2.50 will be applied to the referring person's EasyTel account. ("EASYTIP"credit). In this way, an EasyTel subscriber can build unlimited EasyTel credit to offset their telecommunication expenses. 5. SIX MONTH EXCLUSIVE MARKETING RIGHTS TO THE ALLIANCE Network TwentyOne, in a previous agreement with EasyTel, for a one-time none-refundable fee, reserved the exclusive right to introduce and sell EasyTel services to other North American Amway organizations for a period of 90 days. Network TwentyOne and EasyTel agree to transfer this exclusive right to the Alliance. In consideration for the Alliance and all its members agreeing to endorse and utilize the EasyTel Universal Telephone Number as its exclusive company sanctioned unified messaging tool, EasyTel agrees to extend the above exclusive right to a term of six months from the date of this Agreement. In the event IC, or any other member of the Alliance, has negotiated a Letter of Intent with another Amway organization within the six month period regarding the EasyTel services, EasyTel agrees to allow an additional 30 days to execute a final Re-Seller Agreement with any such organization. In the event that during the above six months, other North American Amway groups establish contact with EasyTel in order to negotiate a contract with EasyTel, but without the involvement of the Alliance, EasyTel is free to conclude such negotiations on the condition that it preserves the compensation to the Alliance as per section 3 above. 6. Restricted Use of NameEASYTEL ----------------------------- a. IC may utilize EASYTEL'S trademarks "EASYTEL", "UNIVERSAL TELEPHONE NUMBER" and "UNIVERSAL OFFICE" but only for the purpose of re-selling EASYTEL Services. b. This grant of the right to utilize EASYTEL'S trademarks shall not give rise to any proprietary interest or claim to the name EASYTEL, or any specific product, service or geographical territory, but rather shall merely indicate that IC is an authorized Re-Seller's Rep of EASYTEL products and services. 7. No Exclusive Territory or Other Relationship -------------------------------------------- This agreement does not grant to IC any geographical territory, exclusive or otherwise. This agreement does not create any partnership, joint venture, agency, franchise or relationship other than specifically described herein. 8. EASYTEL Services ---------------- EASYTEL services and products shall consist of services provided by EASYTEL on its proprietary platforms and services purchased by EASYTEL from its subsidiaries, affiliates and other service providers under its own private label and specifications or services and equipment provided by EASYTEL as a Re-Seller's and/or aggregator. 9. No Franchise Fee ---------------- IC shall not pay EASYTEL any franchise fees. 10. ICProduction Quotas and Other Standards --------------------------------------- a. The IC agrees to produce at least 1000 new EasyTel customers each quarter during the first five quarters or cumulative new customers of 1000 in the 1st quarter, 2000 by the second quarter, 3000 by the third quarter and so on. IC will have met all Production Quotas for purposes of this agreement should they produce 5,000 new EasyTel customers by the end of the fifth quarter. b. IC shall not collect money from IBOs for EasyTel services, as collection obligations shall be borne by EasyTel. c. IC shall accurately disclose all charges to its IBOs correctly. IC and its representatives SHALL not misrepresent any of the EASYTEL Services. d. EASYTEL shall have the right to cancel this agreement without compensation of any kind to IC if IC is in breach of any of the subparagraphs above. However, EasyTel shall not be entitled to a refund of those amount paid to IC prior to cancellation hereof. EASYTEL shall not exercise its right of termination without first having given 30 days written notice to IC. Cancellation of this agreement shall be EasyTel's sole remedy, and IC shall not be liable for damages, consequential or incidental, as a result of a breach of any of the terms of this Agreement. 11. Activation Fees, Commissions and Overrides ------------------------------------------ EasyTel shall calculate activation Fees, Commissions and Overrides on total payments collected. EasyTel will maintain all Activation Fees, Commissions and Overrides records. Said Records will be provided via a monthly report submitted by EasyTel to IC. Commissions and Overrides will not be paid on bad debt, charge backs, write-offs or fraud (collectively "Non-Commission Amounts"). EasyTel shall offset all commissions advanced on "Non-Commission Amounts" against all Commissions due. IC shall not be entitled to receive any Commissions or Overrides with respect to any customer not accepted by EASYTEL for services, or which are terminated (excluding amounts due to IC prior to such termination), or any services not covered by this Agreement. 12. Promotional Information ----------------------- IC agrees to adhere to all standards set forth by EASYTEL for the preparation and distribution of both advertising and promotional materials. All promotional material must be pre-approved by EASYTEL when THE IC OR IC CLIENTS USE EASYTEL'S LOGO AND NAME, before it is distributed to the public. 13. Advertising ----------- IC agrees to submit all advertisements to EASYTEL in advance, for the purpose of screening to determine compliance with EASYTEL policies. EASYTEL shall promptly review all such advertising and shall not unreasonably withhold its approval of such advertising. Publication of advertising without prior approval by EASYTEL shall be grounds for termination of this Agreement by EASYTEL. Any marketing and promotional materials developed by IC for EasyTel at IC's expense shall be restricted to the sole use of IC, IC's clients. GENERAL TERMS AND CONDITIONS 1. MUTUAL NONDISCLOSURE WHEREAS, in connection with the contemplated transaction between the parties, each party to this Agreement may find it beneficial to disclose to the other party documentation or other technical business information (hereinafter "INFORMATION") which the disclosing party considers proprietary. It is specifically understood and agreed that INFORMATION ------------------------------------------------------------- described pursuant to this agreement may be marked proprietary. Either --------------------------------------------------------------------------- because it has been developed internally by the disclosing party, or --------------------------------------------------------------------------- because it has been received by the disclosing party subject to a --------------------------------------------------------------------------- continuing obligation to maintain the confidentiality of the INFORMATION, --------------------------------------------------------------------------- or for other reasons. -------------------- A. INFORMATION deemed to be proprietary which is provided in a tangible form shall be marked in a manner to indicate that it is considered proprietary or otherwise subject to limited distribution as provided herein. If the INFORMATION is provided orally, the disclosing individual shall clearly identify it as being proprietary at the time of disclosure. B. With respect to INFORMATION provided under this Agreement, the party to whom the INFORMATION is disclosed, its agents and any consultants working with the party in regard to this matter shall: a. Hold the INFORMATION in confidence and protect it in accordance with the security regulations by which it protects its own proprietary or confidential INFORMATION which it does not wish to disclose; b. Restrict disclosure of the INFORMATION solely to employees and affiliated employees who have a need to know and not disclose it to any other parties. c. Advise those employees of their obligations with respect to the INFORMATION. d. Use the INFORMATION only for the purposes hereunder except as may otherwise be agreed upon in writing. C. The party to whom INFORMATION is disclosed shall have no obligation to reserve the proprietary nature of any INFORMATION which: a. Was previously known to it free of any obligation to keep it confidential. b. Is disclosed to third parties by the other party without restriction. c. Is or becomes publicly available by other than unauthorized disclosure. d. Is independently developed by it. D. The INFORMATION shall be deemed the property of the disclosing party, and upon request, the other party will return all INFORMATION received in tangible form within ten days to the disclosing party or destroy all such INFORMATION. E Nothing contained in this Agreement shall be construed as granting or conferring rights by license or otherwise in any INFORMATION disclosed. F. All Confidential Information belongs solely to, and is owned exclusively, by the disclosing party. G. The Confidential Information disclosed in this transaction will not be used for any purpose except as permitted by this Agreement. H. The Confidential Information disclosed will not in any way be used, directly or indirectly, to compete with the business of the other parties to this agreement. All parties agree that its affiliates, employees, agents or representatives shall not circumvent or attempt to circumvent the provider of its relationship(s) with any vendors, suppliers, employees, consultants, or other party or parties associated with the provider of the Confidential Information. J. All parties agree to notify the others immediately upon the receipt of any form of legal process or government order requiring disclosure of the Confidential Information. Parties also agree to cooperate with the disclosing party's effort to preserve the secrecy and confidentiality of the Confidential Information, to the extent provided under applicable laws. 2. TERM. The term of this Agreement shall be for five years, commencing November 1, 1999. Providing that any provisions of this Agreement are not in default, IC shall have the right to extend the term for two additional five-year periods. IC may exercise this option only by delivering written notice thereof to EASYTEL within the last 90 days of the initial term of the first extension. 3. ARBITRATION If any dispute arises between or among the Parties, or if it becomes necessary to enforce the terms of this Agreement, the final binding remedy (except for an injunctive type relief action which will be brought in the State or Federal Courts) will be resolved by arbitration. Any dispute arising between the parties will be submitted to arbitration in the State of Illinois in accordance with the rules of the American Arbitration Association then in effect. 4. INTERPRETATION OF AGREEMENT This Agreement has been negotiated by the parties and shall be given fair and reasonable interpretation in accordance with the words hereof, without regard to who drafted any particular provision hereof. 5. GOVERNING LAW. Any controversy or claim arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. 6. ATTORNEY'S FEES. In the event of any action, suit, or proceeding brought under or in connection with this Agreement, the prevailing Party shall be entitled to recover, and the other Party agrees to pay, the prevailing Party's costs and expenses in connection therewith, including reasonable attorney's fees. 7. HEADINGS. The titles or headings used in this Agreement are for reference and convenience only, and are not to be considered in the construction hereof. 8. TIME OF ESSENCE. Time is of the essence in this agreement. 9. ASSIGNMENTS. This agreement shall be binding on, and inure to the benefit of, the Parties to it and their respective heirs, legal representatives, successors and assignees. Provided, however, that IC may not assign its rights under this agreement without the prior written consent of EASYTEL (which shall not be unreasonably withheld). Any assignment made in violation hereof shall be void and shall constitute grounds upon which EASYTEL may terminate this agreement. 10. NOTICES. All notices, requests, demands, and other communications under this Agreement shall be in writing, and be deemed to have been served on that date if served personally on the Party or on the postmark date affixed by the United States Postal Service if mailed to the Party. Documents must be mailed by first-class registered or certified mail, Federal Express or special delivery, postage prepaid, and properly addressed as follow. IF TO EASYTEL: IF TO PACIFIC TELCOM, INC: EASYTEL PACIFIC TELCOM, INC 320 East Charleston Boulevard 5604 Sligo Street Suite 204-221 Las Vegas, NV 89130 Las Vegas, Nevada 89104 IF TO: IC IF TO M&M COMMUNICATIONS INTERNATIONAL CONNECTION M&M COMMUNICATIONS 390 South 8th Street 2781 W. MacArthur Blvd Ste B - 170 Second Floor Santa Ana, CA 92704 West Dundee, ILL 60118 Any Party may change its address for purposes of this paragraph by giving the other parties written notice of the new address in the manner set forth above, provided such notification shall not be effective until receipt thereof. 11. SEVERABILITY AND WAIVERS. The invalidity of any provision of this agreement shall not affect the validity or enforceability of the other provisions hereof. 12. AMENDMENTS. No amendment or modification of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in a written and duly executed form by the parties against whom enforcement of the amendment, modification or waiver is sought. This Agreement constitutes the entire agreement among the parties with respect to the transactions contemplated hereby, and it supersedes all prior oral or written agreements, commitments or understandings among the parties with respect to the matters provided herein. 13. GENERAL RELEASE AND INDEMNITY RELATING TO PREVIOUS AGREEMENT. Because of changes in the previous business relationships between the parties, the formation of the Alliance and in consideration for entering into this Agreement all parties hereto waive any claim of any kind or nature, known or unknown, which may have arisen out of the Previous Agreement. All parties acknowledge that this general release waives the benefits of Civil Code Section 1542 for California residents, which provides: "A general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affect his settlement with the debtor." 14. FORCE MAJEURE. Neither Party shall be liable for any delay, interruption, or failure in performance under this Agreement, which results directly or indirectly from acts of God, civil or military authority, acts of public enemies, war, accidents, fires, explosions, earthquakes, floods, the elements, tornado's, hurricanes, labor disputes, riots, delays of common carriers or suppliers, voluntary or mandatory compliance's with any governmental act, regulation or request, or any similar cause beyond the control or without the fault of such Party. 15. AUTHORIZATION. In executing this Agreement, the parties each expressly acknowledge, covenant and agree that he/she/it/they have the present intention, ability and willingness to perform each act, condition and covenant described in this Agreement to be performed by each of them. They further acknowledge and agree that the obligations to be preformed them as described herein shall be joint and several in nature. Dated: December 2, 1999 FOR: EASYTEL FOR: INTERNATIONAL CONNECTION. By:____________________________ By:____________________________ Randall Skala, President Brian Hayes, President FOR: PACIFIC TELCOM, INC. M&M COMMUNICATIONS By:____________________________ By:____________________________ Bill Angelos, President Michael Murphy, President M&M COMMUNICATIONS By_____________________________ Asher Milgrom, Corporate Secretary EX-10.7 15 0015.txt RESELLER'S REPRESENTATIVE AGREEMENT ------------------------------------------ (Switch-Iess Re-Seller's Rep Agreement) THIS AGREEMENT is entered into on November 1, 1999, by and between EasyTel, a Nevada corporation (hereinafter 'EasyTel') and Network TwentyOne International, Inc., (hereinafter, Network TwentyOne"). RECITALS 1. EasyTel is an electronic information and enhanced telecommunication services and systems provider to end users as "Business Services", and through its Switched Re-Seller agreement with M&M Communications and Pacific TelCom, Inc, (hereinafter jointly "Switched Re-Sellers"), to Network TwentyOne as "Commercial Services", and; 2. EasyTel offers proprietary information services, the Universal Telephone Number, Follow-Me services, Call Screening, voice mail, FaxMail, Fax-on-Demand, paging, domestic and international telephone service, Pre-Paid Services, and various call processing programs, as a service, on its proprietary platforms known as 'The Universal Office", (hereinafter "EasyTel Services"), and; 3. Network TwentyOne currently has access to certain national and international distribution channels consisting of independent business owners, also known as Amway/Quixtar independent business owners (hereinafter "IBOS"), and; 4. Network TwentyOne is a member of a newly created alliance between Network TwentyOne, International Network Associates. ProNet Global Inc, International Leadership Development, and International Connection (hereinafter the "Alliance"), and; 5. The parties wish to replace the Resellers Agreement dated September 4, 1999 (the "Previous Agreement", with this Agreement and create a business relationship in which Network TwentyOne and each member of the Alliance will receive commissions and other compensation based on the amount of EasyTel services sold by each member of the Alliance to their own IBOs, and other independent business owners and professionals, and; 6. Whereas it is the intent of each member of the Alliance to enter into an identical Re-Seller's Representative Agreement contemporaneously, as part of a joint plan and; . 7. "Network TwentyOne Downline" means and refers to customer3 that are referred to EasyTel by Network TwentyOne IBOs (or such IBO's referees whether or not such referees are IBOs). Page 1 of 10 NOW THEREFORE, the parties agree as follows: 1. Easytel's Charges EasyTel's charges for using EasyTel's Universal Telephone Number for customers that are referred by Network TwentyOne Downline are as follows: a. $25 Activation Fee. (Upon written notice to EasyTel, Network TwentyOne or any other member of the Alliance can choose to have the activation fee waived or reduced for their own IBOs). b. $25 Monthly Fee c. $25 usage for prepaid calling time will be established by the users floor limit. 2. Compensation to Network TwentyOne a. For each Network TwentyOne Downline who activates a Universal Telephone Number, EasyTel shall pay to Network TwentyOne the following: I The $25 activation fee paid by each Network TwentyOne Downline (or such lesser amount paid should Network TwentyOne request that the activation fee be reduced). II A $5 per user commission paid each month for each Network TwentyOne Downline with a Universal Telephone Number. The total number of TwentyOne Downline for the payment calculation will be based on the number of TwentyOne Downline who have current Universal Telephone Numbers on the 25th of the month. (I.e. if 1000 TwentyOne Downline are subscribers to the Universal Telephone Number as of the 25th of the month, then Network TwentyOne would receive $5,000 as a commission for that particular month). III A ten percent (10%) commission on all billable telecommunication usage generated by TwentyOne Downline will be paid each month to Network TwentyOne. 3. Compensation to the Alliance a. The Alliance and/or its members may sell EasyTel services to other IBOs who are not a part of or belong to any of the Alliance Members (for example other Amway or Quixtar Distributors) but are IBOs who would like to utilize EasyTel Services (hereinafter .'Non-Alliance IBO"). The term "Non-Alliance IBO for the purposes of calculating payments owned to the Alliance shall also include customers that are referred to EasyTel by Non-Alliance IBOs and such lBO's downline referrals (whether(or not such referrals are IBOs). . For each new Non-Alliance IBO who activates a Universal Telephone Number, EasyTel shall pay the ALLIANCE directly the following: ------------------------------------------------------- I A $5 activation fee. II A $1.00 per user commission paid each month for each Non- Alliance IBO with a current Universal Telephone Number. The total number of Non-Alliance IBOs for the ,payment calculation , will be based on the number such IBOs with active Universal Telephone Numbers on the 25th of the month. (I,e. if 1000 Non-Alliance IBOs are active subscribers to the Universal Telephone Number as of the 25th of the month, then the Alliance would receive $1.000 as a commission for that particular month). III A five percent (5%) commission on all billable telecommunication usage generated by the Non-Alliance IBOs will be paid each month directly to the Alliance. 4. For every account referred to EasyTel, a monthly credit of $2.50 will be applied to the referring person's EasyTel account. ("EasyTip credit). In this way, an EasyTel subscriber can build unlimited EasyTel credit to offset their telecommunication expenses. 5. SIX Month Exclusive Marketing Rights to the Alliance Network TwentyOne. in a previous agreement with EasyTel, for a one-time none-refundable fee, reserved the exclusive right to irltroduce and sell EasyTel services to other North American Amway organiziations for a period of 90 days. Network TwentyOne and EasyTel agree to transfer this exclusive right to the Alliance. In consideration for the Alliance and all its members agreeing to endorse and utilize the EasyTel Universal Telephone Number as its exclusive company sanctioned unified messaging tool. EasyTel agrees to extend the above exclusive right to a term of six months from the date of this Agreement. Easytel acknowledges that members of the Alliance will maintain a few Amvox accounts for administrative purposes. Page 3 of 10 In the event Network TwentyOne, or any other member of the Alliance, has negotiated a Letter of Intent with another Amway organization within the six month period regarding the EasyTel services, EasyTel agrees .to allow an additional 30 days to execute a final Re-Seller Agreement with any such organization. In the event that during the above six months, other North American Amway groups establish contact with EasyTel in order to negotiate a contract with EasyTel, but without the involvement of the Alliance, EasyTel is free to conclude such negotiations on the condition that it preserves the compensation to the Alliance as per section 3 above. 6. Restricted Use of Name EasyTel ---------------------------------- a. Network TwentyOne may utilize EasyTel's trademarks "EasyTeI, "Universal Telephone Number" and "Universal Office" but only for the purpose of re-selling EasyTel Services. b. This grant of the right to utilize EasyTel's trademarks shall not give .rise to any proprietary interest or claim to the naml3 EasyTel or any specific product, service or geographical territory, but rather shall merely indicate that Network TwentyOne is an authorized Re-Seller's Rep of EasyTel products and services. 7 No Exclusive Territory or Other Relationship ------------------------------------------------ This agreement does not grant to Network TwentyOne any geographical territory, exclusive or otherwise. This agreement does not create any partnership, joint venture, agency, franchise or relationship other than specifically described herein. 8. EasyTel Services ----------------- EasyTel services and products shall consist of services provided by EasyTel on its proprietary platforms and 5ervices purchased by EasyTel from its subsidiaries, affiliates and other service providers under its own private label and specifications or services and equipment provided by EasyTel as a Re-Seller's and/or aggregator . 9. No Franchise Fee ------------------ Network TwentyOne shall not pay EasyTel any franchise fees. Page 4 of 10 10. Network TwentyOne Production Quotas and Other Standards ------------------------------------------------------------- a. The Network TwentyOne agrees to produce at least 1000 new EasyTel customers each quarter during the first five quarters or cumulative new customers of 1000 in the 1st quarter, 2000 by the second quarter, 3000 by the third quarter and so on. Network TwentyOne will have met all Production Quotas for purposes of this agreement should they produce 5,000 new EasyTel customers by the end of the fifth quarter. b. Network TwentyOne shall not collect money from IBOs for EasyTel services, as collection obligations shall be borne by EasyTel. c. Network TwentyOne shall accurately disclose all charges to its IBOs correctly. Network TwentyOne and its representatives SHALL not misrepresent any of the EasyTel Services. d. EasyTel shall have the right to cancel this agreement without compensation of any kind to Network TwentyOne if Network TwentyOne is in breach of any of the subparagraphs above. However, EasyTel shall not be entitled to a refund of those amount paid to Netvwork TwentyOne prior to cancellation hereof. EasyTel shall not exercise its right of termination without first having given 30 days written notice to Network TwentyOne. Cancellation of this agreement shall be EasyTel's sole remedy, and Network TwentyOne shall not be liable for damages, consequential or incidental, as a result of a breach of any of the terms of this Agreement. 11. Activation Fees, Commissions and Overrides ---------------------------------------------- EasyTel shall calculate activation Fees, Commissions and Overrides on total payments collected. EasyTel will maintain all Activation Fees, Commissions and Overrides records. Said Records will be provided via a monthly report submitted by EasyTel to Network TwentyOne. Commissions and Overrides will not be paid on bad debt, charge backs, write-offs or fraud (collectively "Non-Commission Amounts"). EasyTel shall offset a[1 commissions advanced on "Non-Commission Amounts" against all Commissions due. Network TwentyOne shall not be entitled to receive any Commissions or Overrides with respect to any customer not accepted by EasyTel for services, or which are terminated (excluding amounts due to Network TwentyOne prior to such termination), or any services not covered by this Agreement. Page 5 of 10 12. Promotional Information ------------------------ Network TwentyOne agrees to adhere to all standards set forth by EasyTel for the preparation and distribution of both advertising and promotional materials. All promotional material must be pre-approved by EasyTel when the Network TwentyOne or Network TwentyOne clients use EasyTel's logo and name, before it is distributed to the public. 13. Advertising ----------- Network TwentyOne agrees to submit all advertisements to EasyTel in advance, for the purpose of screening to determine compliance with EasyTel policies. EasyTel shall promptly review all such advertising and shall not unreasonably withhold its approval of such advertising. Publication of advertising without prior approval by EasyTel shall be grounds for termination of this Agreement by EasyTel. Any marketing and promotional materials developed by Network TwentyOne for EasyTel at Network TwentyOne's expense shall be restricted to the sole use of Network TwentyOne, Network TwentyOne's clients. GENERAL TERMS AND CONDITIONS 1. MUTUAL NONDISCLOSURE WHEREAS, in connection with the contemplated transaction between the parties, each party to this Agreement may find it beneficial to disclose to the other party documentation or other technical business information (hereinafter "INFORMATION") which the disclosing party considers proprietary. It is specifically understood and agreed that INFORMATION described pursuant to this agreement may be marked proprietary. Either because it has been developed internally by the disclosing party or because it has been received by the disclosing party subject to a continuing obligation to maintain the confidentiality of the INFORMATION, or for other reasons. A. INFORMATION deemed to be proprietary which is provided in a tangible form shall be marked in a manner to indicate that it is considered proprietary or otherwise subject to limited distribution as provided herein. If the INFORMATION is provided orally, the disclosing individual shall clearly identify it as being proprietary at the time of disclosure. B. With respect to INFORMATION provided under this Agreement, the party to whom the INFORMATION is disclosed, its agents and any consultants working with the Page 6 of 10 party in regard to this matter shall; a. Hold the INFORMATION in confidence and protect it in accordance with the security regulations by which it protects its own proprietary or confidential INFORMATION which it does not wish to disclose; b. Restrict disclosure of the INFORMATION solely to employees and affiliated employees who have a need to know and not disclose it to any other parties. c. Advise those employees of their obligations with respect to the INFORMATION d. Use the INFORMATION only for the purposes hereunder except as may otherwise be agreed upon in writing. C. The party to whom INFORMATION is disclosed shall have no obligation to reserve the proprietary nature of any INFORMATION which: a. Was previously known to it free of any obligation to keep it confidential b. Is disclosed to third parties by the other party without restriction. c. Is or becomes publicly available by other than unauthorized disclosure d. Is independently developed by it. D. The INFORMATION shall be deemed the property of the disclosing party and upon request the other party will return all INFORMATION received in tangible form within ten days to the disclosing party or destroy all such INFORMATION. E Nothing contained in this Agreement shall be construed as granting or conferring rights by license or otherwise in any INFORMATION disclosed. F. All Confidential Information belongs solely to and is owned exclusively, by the disclosing party. G. The Confidential Information disclosed in this transaction will not be used for any purpose except as permitted by this Agreement. H. The Confidential Information disclosed will not in any way be used, directly or indirectly, to compete with the business of the other parties to this agreement. All parties agree that its affiliates. employees, agents or representatives shall not circumvent or attempt to circumvent the provider of its relationship(s) with any vendors, suppliers, employees, consultants, or other party or parties associated Page 7 of 10 with the provider of the Confidential Information. J. All parties agree to notify the others immediately upon the receipt of any form of legal process or government order requiring disclosure of the Confidential Information. Parties also agree to cooperate with the disclosing party's effort to preserve the secrecy and confidentiality of the Confidential Information, to the extent provided under applicable laws. 2. TERM. The term of this Agreement shall be for five years, commencing November , 1, 1999. Providing that any provisions of this Agreement are not in default, Network TwentyOne shall have the right to extend the term for two additional five-year periods. Network TwentyOne may exercise this option only by delivering written notice thereof to EasyTel within the last 90 days of the initial term of the first extension. 3. ARBITRATION If any dispute arises between or among the Parties, or if it becomes necessary to enforce the terms of this Agreement, the final binding remedy (except for an injunctive type relief action which will be brought in the State or Federal Courts) will be resolved by arbitration. Any dispute arising between the parties will be submitted to arbitration in the State of Georgia in accordance with the rules of the American Arbitration Association then in effect. 4. INTERPRETATION OF AGREEMENT This Agreement has been negotiated by the parties and shall be given fair and reasonable interpretation in accordance with the words hereof, without regard to who drafted any particular provision hereof. 5. GOVERNING LAW. Any controversy or claim arising out of or relating to this Agreement shall be governed by and construed in accordance with the laws of the State of Nevada. 6. ATTORNEY'S FEES. In the event of any action, suit, or proceeding brought under or in connection with this Agreement, the prevailing Party shall be entitled to recover I and the other Party agrees to pay I the prevailing Party's costs and expenses in connection therewith, including reasonable attorney's fees. 7. HEADINGS. The titles or headings used in this Agreement are for reference and convenience only, and are not to be considered in the construction hereof. 8. TIME OF ESSENCE. Time is of the essence in this agreement. 9. ASSIGNMENTS. This agreement shall be binding on, and inure to the benefit of the Parties to it and their respective heirs, legal representatives, successors and assignees. Provided, however, that Network TwentyOne may not assign its rights under this agreement without the prior written consent of EasyTel (which shall not be unreasonably withheld). Any assignment made in violation hereof shall be void and shall constitute grounds upon which EasyTel may terminate this agreement Page 8 of 10 10. NOTICES. All notices, requests, demands, and other communications under this Agreement shall be in writing, and be deemed to have been served on that date if served personally on the Party or on the postmark date affixed by the United . States Postal Service if mailed to the Party. Documents must be mailed by first-class registered or cer1ified mail, Federal Express or special delivery, postage prepaid, and properly addressed as follow. IF TO EasyTel: IF TO Pacific TelCom, Inc: EasyTel Pacific TelCom, Inc 320 East Charleston Boulevard 5604 Sligo Street Suite 204-221 Las Vegas, .NV 89130 Las Vegas, Nevada 89104 . IF TO Network TwentyOne: IF TO M&M COMMUNICATIONS Network TwentyOne M&M Communications 4550 River Green Parkway 2030 West Summerwind Suite 100 Santa Ana, CA 92704 Duluth, GA 30096 Any Party may change its address for purposes of this paragraph by giving the other parties written notice of the new address in the manner set forth above, provided such notification shall not be effective until receipt thereof. 11. SEVERABILITY AND WAIVERS. The invalidity of any provision of this agreement shall not affect the validity or enforceability of the other provisions hereof. 12. AMENDMENTS. No amendment or modification of this Agreement, and no waiver hereunder, shall be valid or binding unless set forth in a written and duly executed form by the parties against whom enforcement of the amendment, modification or waiver is sought. This Agreement constitutes the entire agreement among the parties with respect to the transactions contemplated hereby I and it supersedes all prior oral or written agreements, commitments or understandings among the parties with respect to the matters provided herein. 13. GENERAL RELEASE AND INDEMNITY RELATING TO PREVIOUS AGREEMENT. Because of changes in the previous business relationships between the parties, the formation of the Alliance and in consideration for entering Page 9 of 10 into this Agreement all parties hereto waive any claim of any kind or nature, known or unknown, which may have arisen out of the Previous Agreement. ALI parties acknowledge that This general release waives the benefits of Civil Code Section 1542 for California residents, which provides: nA general release does not extend to claims which the creditor does not know or suspect to exist in his favor at the time of executing the release, which if known by him must have materially affect his settlement with the debtor" 14. FORCE MAJEURE. Neither Party shall be liable for any delay, interruption, or failure in performance under this Agreement, which results directly or indirectly from acts of God, civil or military authority; acts of public enemies, war, accidents fires, explosions, earthquakes, floods, the elements, tornado's, hurricanes, labor disputes, riots, delays of common carriers or suppliers, voluntary or mandatory compliance's with any governmental act, regulation or request, or any similar cause beyond the control or without the fault of such Party - 15. AUTHORIZATION. In executing this Agreement, the parties each expressly acknowledge, covenant and agree that he/she/it/they have the present intention, ability and willingness to perform each act, condition and covenant described in this Agreement to be performed by each of them. They further acknowledge and agree that the obligations to be preformed them as described herein shall be joint and several in nature. Dated: November 11 1999 FOR: EasyTel FOR: Network TwentyOne International, Inc. By: Thomas Skala, CEO By: Jim Dornan FOR; Pacific TelCom, Inc. M&M Communications Bill Angelos, President Michael Murphy. President and By Asher Milqrom, Corporate Secretary Page 10 of 10 EX-10.8 16 0016.txt STOCK PURCHASE AGREEMENT This Agreement ("Agreement") is entered into this date by and among Pacific Telcom, Inc., an Illinois corporation ("Purchaser"), and Asher Milgrom ("Seller"). WHEREAS, the Seller is a shareholder of M&M Communications, a Nevada corporation ("Corporation"), of which 4505 shares (the "Shares") have been issued to Seller; and WHEREAS, said Shares constitute 45.05% of the issued and outstanding capital stock of the Corporation; and WHEREAS, the Purchaser desires to purchase from Milgrom and Milgrom desires to sell to the Purchaser all of the Shares owned by Milgrom on the terms and subject to the conditions set forth herein. NOW THEREFORE, IT IS AGREED AS FOLLOWS: Section 1. Purchase of Shares. - - ---------- -------------------- 1.1 Purchase of Shares. Subject to the terms and conditions set forth -------------------- herein, at the Closing (as defined below) Milgrom will sell all of the Shares owned by Milgrom to the Purchaser and the Purchaser will purchase all of the Shares owned by Milgrom from Milgrom, said Shares constituting forty-five percent 45.05% of all of the issued and outstanding capital stock of the Corporation as of the Closing. 1.2 Purchase Price. In consideration of the transfer, conveyance and --------------- assignment of the Shares, Purchaser shall pay to the Seller the following amounts of cash and duly authorized and issued common shares of Pacific Telcom, Inc., subject to adjustment as described herein, to be paid in the following manner. 1.2.1 Payments of Cash. Purchaser shall pay One Hundred Thirty-Four Thousand ------------------ Two Hundred Thirty-Two Dollars ($134,232) payable to Seller. Purchaser shall pay to the seller on the Initial Closing Date the sum of $5,000. The balance of the purchase price after the Initial Closing Date of $129,232 shall be paid within forty-five days of the Closing Date. This obligation shall be represented by a Promissory Note in substantially the form set forth on a Exhibit "A" hereto ("Note"), to be made and delivered by the Purchaser to the Seller at Closing. 1.2.2 Payment in Common Stock. Delivery shall be made by the Purchaser to the ------------------------ Seller on the Closing Date of 53,693 common shares of authorized and issued stock of Pacific Telcom, Inc. 1.3 Additional Consideration. ------------------------- 1.3.1 Basis of Additional Consideration. M&M Communications, Inc. is a party ----------------------------------- to a series of agreements entered into on or about December 2, 1999 by and between the Corporation, EasyTel, a Nevada corporation and the representative members of an Alliance of entities having access to certain national and international distribution channels consisting of independent business owners, said agreements collectively refer to as Re-Seller's Representative Agreements. The Re-Seller's Representative Agreements function to refer customers to subscribe to the EasyTel services. M&M Communications is the owner of a 6T telecommunication switch in Encino, California, through which a portion of these referred accounts are hosted on this switch. It is the intention of the parties that Seller receive a portion of the revenues derived from accounts hosted on the Encino telecommunication switch, measured by Seller's percentage of ownership of M&M Communications, times a multiple of two of the revenue due to the Alliance, as set forth in the Re-Seller's Representative Agreements, solely limited to revenues derived from the existing and current subscriber base on the Closing Date solely on the Encino switch. 1.3.2 Formula of Additional Consideration. Purchaser will pay to Seller -------------------------------------- additional consideration in the form of a three year "Earn-Out". Seller will receive from Purchaser an amount equal to 45.05% of the current revenues only generated by the Alliance under the Re-Seller's Representative Agreement, as fixed on the Closing Date, multiplied twice. Of this Earn-Out compensation due Seller, 50% will be paid in cash on a monthly basis. The balance of the 50% of revenues due Seller from the Purchaser will be paid in Pacific Telcom, Inc. common stock once per year, at the end of each of the three years of the Earn-Out. The value of the share price of Pacific Telcom, Inc. stock, for the purposes of annual payments to Seller as part of this Earn-Out will be determined by the weighted average of the market price of a Pacific Telcom, Inc. common share over the last three months of each relevant year. The calendar years for determining the Earn-Out will begin on the first day of the first full month following the Closing Date. Section 2. Representations and Warranties of Seller. As a material - - ---------- -------------------------------------------- inducement to the Purchaser to enter into this Agreement and purchase the Shares, the Seller represents and warrants that: 2.1 Organization and Corporate Power. The Corporation is a corporation duly -------------------------------- incorporated and validly existing under the laws of the State of Nevada and the Corporation is qualified to do business in every jurisdiction in which its ownership of property or conduct of business requires it to qualify. The Corporation has all requisite corporate power and authority and all material licenses, permits and authorizations necessary to own and operate its properties and to carry on its business as now conducted. The copies of the Corporation's articles of incorporation and bylaws have been furnished to the Purchaser and such copies reflect all amendments made thereto at any time prior to the date of this Agreement and such copies are correct and complete. Seller is Secretary of the Corporation and has personal knowledge of the correctness and completeness of all of the above, and all matters set forth in this Section 2. 2.2 Capital Stock and Related Matters. The authorized capital stock of the ---------------------------------- Corporation consists of 25,000 Shares, 10,000 of which are issued and outstanding and are owned, beneficially and of record, by the Shareholders and no other shares, common or otherwise, of the Corporation are issued and outstanding. The Corporation does not have outstanding and has not agreed, orally or in writing, to issue any shares or securities convertible or exchangeable for any shares, nor does it have outstanding nor has it agreed, orally or in writing, to issue any options or rights to purchase or otherwise acquire its shares. The Corporation is not subject to any obligation (contingent or otherwise) to repurchase or otherwise acquire or retire any of its shares. The Corporation has not violated any applicable securities laws or regulations in connection with the offer or sale of its securities other than violations that have been, or will before the Closing have been, corrected by post-issuance filings. All of the outstanding shares of the Corporation's capital stock are validly issued, fully paid and nonassessable. The Seller has, and upon purchase thereof pursuant to the terms of this Agreement the Purchaser will have, good and marketable title to the Shares, free and clear of all security interests, liens, encumbrances or other restrictions or claims, subject only to restrictions as to marketability imposed by securities laws. Assuming that the representations in Section 3.6 are true and correct, the Seller has not violated nor will violate any applicable securities laws in connection with the offer or sale of the Shares to the Purchaser hereunder. 2.3 Subsidiaries. The Corporation has no, nor has it had any, subsidiaries ------------ or affiliated companies and does not otherwise own or control, directly or indirectly, any equity interest in any other corporation or entity. 2.4 Conduct of Business; Liabilities. Except as set forth in Schedule 2.4, --------------------------------- the Corporation is not in default under, and no condition exists that with notice or lapse of time would constitute a default of the Corporation under (i) any mortgage, loan agreement, evidence of indebtedness or other instrument evidencing borrowed money to which the Corporation is a party or by which the Corporation or the properties of the Corporation are bound or (ii) any judgment, order or injunction of any court, arbitrator or governmental agency that would reasonably be expected to affect materially and adversely the business, financial condition or results of operations of the Corporation taken as a whole. 2.5 Absence of Certain Changes. Except as contemplated or permitted by this -------------------------- Agreement, as of the Closing Date there will not have been: 2.5.1 Any material adverse change in the business, financial condition, operations or assets of the Corporation; 2.5.2 Any damage, destruction or loss, whether covered by insurance or not materially adversely affecting the properties or business of the Corporation; 2.5.3 Any sale or transfer by the Corporation of any tangible or intangible asset other than in the ordinary course of business, any mortgage or pledge or the creation of any security interest, lien or encumbrance on any such asset, or any lease of property, including equipment, other than tax liens with respect to taxes not yet due and contract rights of customers in inventory; 2.5.4 Any declaration, setting aside or payment of a distribution in respect of or the redemption or other repurchase by the Corporation of any stock of the Corporation; 2.5.5 Any material transaction not in the ordinary course of business of the Corporation; 2.5.6 The discharge or satisfaction of any material lien or encumbrance or the payment of any material liability other than current liabilities in the ordinary course of business; 2.5.7 The making of any material loan, advance or guaranty to or for the benefit of any person except the creation of accounts receivable in the ordinary course of business; or 2.5.8 An agreement to do any of the foregoing. 2.8 Title and Related Matters. The Corporation has good and marketable title --------------------------- to all of its property, real and personal, free and clear of all security interests, mortgages, liens, pledges, charges, claims or encumbrances of any kind or character. 2.9 Litigation. Seller acknowledges that as to Seller and or the ---------- Corporation there are in existence material actions, suits, proceedings, orders, investigations or claims pending or overtly threatened against either the Seller or the Corporation, or both, at law or in equity. 2.10 General Release. In consideration of the Agreement made hereunder and an ---------------- acknowledgment by the Seller of the material litigation against the Seller and/or the Corporation, therefore the Seller hereby releases and forever discharges the Purchaser and each of its shareholders, directors, officers, representatives, attorneys, and employees, past, present, and future, individually and collectively for any and all claims, demands, causes of action, or liabilities against the Seller relating to Seller's investment or ownership of the Shares, as well as all claims, counter-demands, debts, setoffs, damages, causes of action and obligations of every kind and nature, including attorneys' fees, for all known and unknown, anticipated and unanticipated claims of damages arising out of Seller's employment as a director, officer, representative and agent of the Corporation, or in his capacity as a shareholder. Notwithstanding the above, this Release shall not affect Seller's rights and obligations otherwise set forth in this Agreement. 2.11 Indemnification. In fulfillment of the General Release made by the Seller --------------- to the Purchaser in Section 2.10, Seller further covenants, agrees, and promises to defend and indemnify the Purchaser relating to any cause of action brought against the Purchaser by another shareholder of the Corporation or by any other relative to the matters set forth in the General Release contained in Section 2.10. In the event that Seller fails to defend or indemnify Purchaser, Purchaser shall be entitled to setoff from amounts due the Seller under the Earn-Out provisions of this Agreement, any and all costs of such defense undertaken by itself, including attorneys' fees and costs, as well as any amounts of resulting liability accrued to Purchaser as a result of such existing prior material litigation heretofore disclosed by Seller relating to Seller's ownership or holding of the Shares in any way. 2.12 Compliance with Laws. To the best of the Seller's knowledge, the ---------------------- Corporation is, in the conduct of its business, in substantial compliance with all laws, statutes, ordinances, regulations, orders, judgments or decrees applicable to them, the enforcement of which, if the Corporation was not in compliance therewith, would have a materially adverse effect on the business of the Corporation, taken as a whole. The Seller has not received any notice of any asserted present or past failure by the Corporation to comply with such laws, statutes, ordinances, regulations, orders, judgments or decrees. 2.13 No Brokers or Finders. There are no claims for brokerage commissions, ------------------------ finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of the Seller. 2.14 Disclosure. Neither this Agreement nor any of the schedules, attachments, ---------- written statements, documents, certificates or other items prepared or supplied to the Purchaser by or on behalf of the Seller with respect to this purchase contain any untrue statement of a material fact or omit a material fact necessary to make each statement contained herein or therein not misleading. Seller has not intentionally concealed any fact known by such person to have a material adverse effect upon the Corporation's existing or expected financial condition, operating results, assets, customer relations, employee relations or business prospects taken as a whole. 2.15 Personnel. Schedule 2.15 sets forth a true and complete list of: --------- 2.15.1 The names and title of all officers of the Corporation; President - Secretary - Asher Milgrom Treasurer -- 2.15.2 The names of all directors of the Corporation; and 2.15.3 The names and addresses of all other shareholders of the Corporation. 2.16 Operating Rights. The Corporation has all operating authority, licenses, ----------------- franchises, permits, certificates, consents, rights and privileges (collectively "Licenses") as are necessary or appropriate to the operation of its business as now conducted and as proposed to be conducted and which the failure to possess would have a material adverse effect on the assets, operations or financial condition of the Corporation. Such Licenses are in full force and effect, no violations have been or are expected to have been recorded in respect of any such licenses, and no proceeding is pending or, to the knowledge of the Corporation, threatened that could result in the revocation or limitation of any such licenses. The Corporation has conducted its business so as to comply in all material respects with all such Licenses. 2.17 Minute Books. The minute books of the Corporation contain a complete ------------- summary of all meetings of directors and a list of all shares issued to shareholders since the time of incorporation and reflect all transactions referred to in such minutes accurately in all material respects. Section 3. Representations and Warranties of Purchaser. As a material - - ---------- ----------------------------------------------- inducement to the Seller to enter into this Agreement and sell the Shares, the Purchaser hereby represents and warrants to the Seller as follows: 3.1 Organization; Power. The Purchaser is a corporation duly incorporated -------------------- and validly existing under the laws of the State of Illinois, and has all requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder. 3.2 Authorization. The execution, delivery and performance by the Purchaser ------------- of this Agreement and all other agreements contemplated hereby to which the Purchaser is a party have been duly and validly authorized by all necessary corporate action of the Purchaser, and this Agreement and each such other agreement, when executed and delivered by the parties thereto, will constitute the legal, valid and binding obligation of the Purchaser enforceable against it in accordance with its terms, except as enforceability may be limited by applicable bankruptcy, insolvency and similar statutes affecting creditors' rights generally and judicial limits on equitable remedies. 3.3 No Conflict with Other Instruments or Agreements. The execution, ------------------------------------------------------ delivery and performance by the Purchaser of this Agreement and all other agreements contemplated hereby to which the Purchaser is a party will not result in a breach or violation of, or constitute a default under, its Articles of Incorporation or Bylaws or any material agreement to which the Purchaser is a party or by which the Purchaser is bound. 3.4 Governmental Authorities. Except as set forth in Schedule 3.4, (i) the ------------------------- Purchaser is not required to submit any notice, report or other filing with any governmental or regulatory authority in connection with the execution and delivery by the Purchaser of this Agreement and the consummation of the purchase and (ii) no consent, approval or authorization of any governmental or regulatory authority is required to be obtained by the Purchaser or any affiliate in connection with the Purchaser's execution, delivery and performance of this Agreement and the consummation of this purchase. 3.5 Litigation. There are no actions, suits, proceedings or governmental ---------- investigations or inquiries pending or, to the knowledge of the Purchaser, threatened against the Purchaser or its properties, assets, operations or businesses that might delay, prevent or hinder the consummation of this purchase. 3.6 Investment Representations --------------------------- 3.6.1 The Purchaser is acquiring the Shares for investment for the Purchaser's own account, not as a nominee or agent, and not with the view to, or for resale in connection with, any distribution thereof. The Purchaser understands that the Shares to be purchased have not been, and will not be, registered under the Securities Act or the securities laws of any state by reason of a specific exemption from the registration provisions of the Securities Act and the applicable state securities laws, the availability of which depends upon, among other things, the bona fide nature of the investment intent and the accuracy of the Purchaser's representations as expressed herein. The Purchaser is acquiring the Shares without expectation, desire or need for resale and not with the view toward distribution, resale, subdivision or fractionalization of the Shares. 3.6.2 The Purchaser understands that the Shares to be purchased have not been registered under Securities Act of 1933 ("1933 Act") or under any state securities law. 3.6.3 The Purchaser understands that no public market now exists for the Shares and that it is uncertain that a public market will ever exist for the Shares. 3.7 Disclosure. To the Purchaser's knowledge, this Agreement, with the ---------- Exhibits hereto, when taken as a whole, does not contain any untrue statement of a material fact concerning the Purchaser or omit to state a material fact necessary in order to make the statements concerning the Purchaser contained herein not misleading in light of the circumstances under which they were made. 3.8 Litigation. There are no actions, suits, proceedings or investigations ---------- pending against the Purchaser or the Purchaser's properties before any court or governmental agency (nor, to the Purchaser's knowledge, is there any threat thereof) which would impair in any way the Purchaser's ability to enter into and fully perform the Purchaser's commitments and obligations under this Agreement or the transactions contemplated hereby. 3.9 Compliance with Other Instruments. The execution, delivery and performance --------------------------------- of and compliance with this Agreement, and the issuance of shares will not result in any material violation of, or conflict with, or constitute a material default under, any Purchaser's articles of incorporation or bylaws or any of the Purchaser's material agreements nor result in the creation of any mortgage, pledge, lien, encumbrance or charge against any of the assets or properties of the Corporation or the Shares. 3.10 No Brokers or Finders. The Purchaser has not, and will not, incur, ------------------------ directly or indirectly, as a result of any action taken by the Purchaser, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement. Section 4. Conduct of Corporation's Business Pending the Closing. From the - - ---------- ----------------------------------------------------- date hereof until the Closing, and except as otherwise consented to or approved by the Purchaser, the Seller covenants and agrees with the Purchaser as follows: 4.1 Distributions. The Corporation will not declare, pay or set aside for ------------- payment any dividend or other distribution in respect of its capital stock. 4.2 Capital Changes. The Corporation will not issue any shares of its ---------------- stock, or issue or sell any securities convertible into, or exchangeable for, or options, warrants to purchase or rights to subscribe to, any shares of its stock or subdivide or in any way reclassify any shares of its capital stock, or repurchase reacquire, cancel or redeem any such shares. 4.3 Assets. The assets, property and rights now owned by the Corporation ------ will be used, preserved and maintained, as far as practicable, in the ordinary course of business, to the same extent and in the same condition as said assets, property and rights are on the date of this Agreement, and no unusual or novel methods of manufacture, purchase, sale, management or operation of said properties or business or accumulation or valuation of inventory will be made or instituted. Without the prior consent of the Purchaser, the Corporation will not encumber any of its assets or make any commitments relating to such assets, property or business, except in the ordinary course of its business. Section 5. Covenants of Seller. The Seller covenants and agrees with the - - ---------- --------------------- Purchaser as follows: - - ----- 5.1 Supplements to Schedules. From time to time prior to the Closing, the -------------------------- Seller will promptly supplement or amend the Exhibits and Schedules with respect to any matter hereafter arising that, if existing or occurring at the date of this Agreement, would have been required to be set forth or described in any Exhibit or Schedule and will promptly notify the Purchaser of any breach by either of them that either of them discovers of any representation, warranty or covenant contained in this Agreement. No supplement or amendment of any Exhibit or Schedule made pursuant to this Section will be deemed to cure any breach of any representation of or warranty made in this Agreement unless the Purchaser specifically agrees thereto in writing; provided, however, that if this purchase is closed, the Purchaser will be deemed to have waived its rights with respect to any breach of a representation, warranty or covenant or any supplement to any Schedule of which it shall have been notified pursuant to this Subsection. 5.2 No Solicitation. Until the Closing or termination pursuant to Section ---------------- 10 of this Agreement, the Seller shall not directly or indirectly, encourage, solicit, initiate or enter into any discussions or negotiations concerning any disposition of any of the capital stock or all or substantially all of the assets of the Corporation (other than pursuant to this Agreement), or any proposal therefor, or furnish or cause to be furnished any information concerning the Corporation to any party in connection with any transaction involving the acquisition of the capital stock or assets of the Corporation. The Seller will promptly inform the Purchaser of any inquiry (including the terms thereof and the person making such inquiry) received by any responsible officer or director of the Corporation or the Seller after the date hereof and believed by such person to be a bona fide, serious inquiry relating to any such proposal. Section 6. Covenant of Purchaser. The Purchaser will use its best efforts - - ---------- ---------------------- to cause the conditions set forth in Section 8 to be satisfied. Section 7. Conditions Precedent to the Obligations of Purchaser. Each and - - ---------- ----------------------------------------------------- every obligation of the Purchaser under this Agreement is subject to the satisfaction, at or before the Closing, of each of the following conditions: 7.1 Representations and Warranties; Performance. Each of the ---------------------------------------------- representations and warranties made by the Seller herein will be true and ------ correct in all material respects as of the Closing with the same effect as though made at that time except for changes contemplated, permitted or required by this Agreement; the Seller will have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed and complied with by him prior to the Closing. 7.2 Litigation. No other material action, suit or proceeding before any ---------- court, governmental or regulatory authority will have been commenced and be continuing, and no investigation by any governmental or regulatory authority will have been commenced and be continuing, and at the time of Closing, no action, investigation, suit or proceeding will be threatened against the Seller or the Purchaser or any of their affiliates, associates, officers or directors, seeking to restrain, prevent or change this purchase, questioning the validity or legality of this purchase or seeking damages in connection with this purchase, other than Seller has previously disclosed. Section 8. Conditions Precedent to the Obligations of Seller. Each and - - ---------- ----------------------------------------------------- every obligation of the Seller under this Agreement is subject to the satisfaction, at or before the Closing, of each of the following conditions: 8.1 Representations and Warranties; Performance. Each of the ---------------------------------------------- representations and warranties made by the Purchaser herein will be true and ------ correct in all material respects as of the Closing with the same effect as though made at that time except for changes contemplated, permitted or required by this Agreement; the Purchaser will have performed and complied with all agreements, covenants and conditions required by this Agreement to be performed and complied with by it prior to the Closing; and the Seller will have received, at the Closing, a certificate of the Purchaser, signed by the President of the Purchaser, stating that each of the representations and warranties made by the Purchaser herein is true and correct in all material respects as of the Closing except for changes contemplated, permitted or required by this Agreement and that the Purchaser has performed and complied with all agreements, covenants and conditions required by this Agreement to be performed and complied with by it prior to the Closing. 8.2 Corporate Action. The Purchaser will have furnished to the Sellers a ----------------- copy, certified by the Secretary of the Purchaser, of the resolutions of the Purchaser authorizing the execution, delivery and performance of this Agreement. Section 9. Closing. - - ---------- ------- 9.1 Closing. The parties shall meet on September 16, 2000 at such time and ------- place as they mutually agree, or on such later date as is mutually agreeable to the parties hereto as they shall designate in a written instrument. Purchaser shall deliver to the Seller such certificates representing payment in common stock, as set forth in Section 1.2.2 within ten days of the Closing. Seller shall deliver to the Purchaser any and all certificates representing the Shares not more than five days from the date of the Closing. Purchaser shall submit to Seller within 14 days of the Closing, its Note representing the payment in cash relating to the Shares, as set forth in Section 1.2.1. Notwithstanding these duties of each party to deliver such documents as set forth herein in Section 9.1, the transaction set forth in this Agreement shall be deemed closed at the Closing. Each party shall execute and deliver such other documents as otherwise required under this Agreement within 30 days from the Closing herein. Section 10. General Provisions. - - ----------- ------------------- 10.1 Amendment and Modification. Subject to applicable law, this Agreement may -------------------------- be amended, modified or supplemented only by a written agreement signed by the Purchaser and the Sellers. 10.2 Payment of Fees and Expenses. Each party to this Agreement will be -------------------------------- responsible for, and will pay, all of its own fees and expenses, including those for its own counsel and accountants, incurred in the negotiation, preparation and consumption of this Agreement and this purchase and sale. 10.3 Governing Law. The interpretation and construction of this Agreement and -------------- all matters relating hereto shall be governed by the laws of the State of Illinois relating to contracts made and to be performed in Illinois. 10.4 Waiver of Terms. Any of the terms or conditions of this Agreement may be ---------------- waived at any time by the party or parties entitled to the benefits thereof, but only by a written notice signed by an authorized representative of the party or parties waiving such terms or conditions. 10.5 Captions. The article and section captions used herein are for reference -------- purposes only, and shall not in any way affect the meaning or interpretation of this Agreement. 10.6 Publicity. Prior to the Effective Date, none of the parties hereto shall --------- issue any press release or make any other statement to the media relating to this Agreement or the matters contained herein without obtaining the prior approval of the Buyer. 10.7 Notices. All notices, requests, demands and other communications required ------- or permitted hereunder will be in writing and will be deemed to have been duly given when delivered by hand or by air express courier. If to the Purchaser: Pacific Telcom, Inc. Fountain View Business Park 4270 S. Decatur Blvd., Ste. A-9 Las Vegas, NV 89103 Attention: Bill J. Angelos, President With a copy to: Kenneth G. Mason General Counsel 33 N. LaSalle St., Ste. 2131 Chicago, IL 60602 If to the Seller to: Asher Milgrom Axon Connectivity Technology, Inc. 22 Miners Trail Irvine, CA 92620 With a copy to: Lon Stephens Stephens & Kray 5000 Birch St., Ste. 410 Newport Beach, CA 92660 10.8 Entire Agreement. This Agreement contains the entire understanding ----------------- between and among the parties and supersedes any prior understandings and agreements among them respecting the subject matter of this Agreement. 10.9 Agreement Binding. This Agreement shall be binding upon the heirs, ------------------ executors, administrators, successors and assigns of the parties hereto. 10.10 Pronouns and Plurals. All pronouns and any variations thereof shall be ---------------------- deemed to refer to the masculine, feminine, neuter, singular, or plural as the identity of the person or persons may require. 10.11 Presumption. This Agreement or any section thereof shall not be ----------- construed against any party due to the fact that said Agreement or any section - thereof was drafted by said party. 10.12 Further Action. The parties hereto shall execute and deliver all --------------- documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of the Agreement. 10.13 Parties in Interest. Nothing herein shall be construed to be to the --------------------- benefit of any third party, nor is it intended that any provision shall be for the benefit of any third party. 10.14 Savings Clause. If any provision of this Agreement, or the application --------------- of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. IN WITNESS WHEREOF, this Agreement has been executed by the parties this 16th day of September, 2000. PACIFIC TELCOM, INC. an Illinois Corporation By:_____________________________ Bill J. Angelos, President ________________________________ Asher Milgrom, Seller EX-10.9 17 0017.txt EXHIBIT "A" ----------- PROMISSORY NOTE This Promissory Note is made on this 16th day of September, 2000 by and between Pacific Telcom, Inc., an Illinois corporation (hereinafter "Purchaser") and Asher Milgrom (hereinafter "Seller") pursuant to a Stock Purchase Agreement made between them this date (hereinafter the "Agreement"). This Promissory Note is made pursuant to the Agreement and is subject to the terms and provisions set forth in the Agreement, as if fully stated herein. Pursuant to Section 1.2.1 of the Agreement, Purchaser promises to pay to the Seller at 22 Miners Trail, Irvine, CA 92620, or at such other place as may be designated in writing by the Seller, the principal sum of One Hundred Twenty-Nine Thousand Two Hundred Thirty-Two ($129,232), with interest waived. The aforesaid principal sum shall be paid on October 31, 2000. This Promissory Note is not assignable by Purchaser or by Seller without the written consent of the other. Purchaser shall pay all sums due under this Promissory Note on the due date, however, Seller grants Purchaser the right to prepay any and all sums due under this Note, without penalty. The execution, delivery and performance of this Promissory Note are within the Seller's corporate powers, having been duly authorized and are not in contravention of the terms of Purchaser's Articles of Incorporation and By-Laws, or of any agreement or undertaking to which Purchaser is a party, or by which it is bound. Any forbearance by the Seller in exercising any right or remedy of enforcement, or otherwise, afforded by applicable law shall not be deemed a waiver of or preclude the exercise of any right or remedy. This Promissory Note and the rights and obligations of the parties hereto shall be governed by and construed with the laws of the State of Illinois without regard to conflict of laws principles. PACIFIC TELCOM, INC. Accepted: By:______________________ _________________________ Bill J. Angelos Asher Milgrom President SCHEDULE 2.15 PERSONNEL The undersigned, Asher Milgrom, is the Secretary of M&M Communications, a Nevada corporation ("Corporation") whose common shares are the subject of a Stock Purchase Agreement dated September 16, 2000 ("Agreement") which has been entered into between Asher Milgrom, individually as Seller, and Pacific Telcom, Inc., as Purchaser. Pursuant to Section 2.15 of the Agreement, I hereby certify, in my capacity as Secretary of M&M Communications, as follows: 2.15.1 The names and titles of all officers of the corporation are: President - - Asher Milgrom Secretary - - Asher Milgrom Treasurer - - Bruce Boyd 2.15.2 The names of all directors of the corporation are: a. Michael Murphy b. Asher Milgrom c. Randall Skala d. Bruce Boyd e. Michael Murphy f. EasyTel, a Nevada Corporation 2.15.3 The names and addresses of all other shareholders of the corporation are: a. Michael Murphy, 2030 W. Summerwind, Santa Ana, CA 92704. b. EasyTel Canada Corporation, 18 King St. East, Ste. 1402, Toronto, Ontario, Canada M5C1C4 c. Corporate Registered Agent: 320 E. Charleston Blvd., Las Vegas, NV. Date: September 16, 2000 ____________________________ Asher Milgrom, Individually, and Secretary of M&M Communications SCHEDULE - SECTION 2 OFFICER'S CERTIFICATE The undersigned, Asher Milgrom, is the Secretary of M&M Communications, a Nevada corporation ("Corporation"). A Sale of Assets Agreement dated September 16, 2000 ("Agreement") has been entered into by and between Asher Milgrom, as Seller and Pacific Telcom, Inc., as Purchaser. Pursuant to Section 2 of the Agreement, as Secretary of M&M Communications, I hereby certify as follows: 1. The Corporation has been duly incorporated, validly existing, and in good standing under the laws of the State of Nevada. 2. The authorized capital stock of the Corporation consists of 25,000 Shares, 10,000 of which are issued and outstanding and no other Shares, common or otherwise of the Corporation are issued and outstanding. 3. All of the outstanding Shares of the Corporation's capital stock are validly issued, fully paid and non-assessable. The Shares sold pursuant to the Agreement are free and clear of all security interest, liens, pledges, encumbrances, or other restrictions. 4. The representations and warranties contained in Section 2 of the Agreement are true and complete on and as of the date hereof. Dated this 16th day of September, 2000 ____________________________ Asher Milgrom, Individually, and as Secretary of M&M Communications SCHEDULE - SECTION 8.2 OFFICER'S CERTIFICATE The undersigned, Bill J. Angelos, is the President of Pacific Telcom, Inc., an Illinois corporation and is the purchaser ("Purchaser") under a Stock Purchase Agreement dated September 16, 2000 ("Agreement") which has been entered into by and between the Purchaser and Asher Milgrom, individually, as Seller. Pursuant to Section 8.2 of the Agreement, I hereby certify as follows: 5. That the Board of Directors of Pacific Telcom, Inc. have authorized the execution, delivery, and performance of the Agreement to be entered into by Pacific Telcom, Inc. in connection with the transaction set forth therein. 6. The Corporation is now a corporation duly organized, validly existing, and in good standing under the laws of Illinois and has all requisite corporate power and authority to deliver its shares pursuant to the Agreement and all matters under the Agreement have been duly authorized by all necessary corporate action. The Agreement constitutes a valid and binding Agreement of the Purchaser in accordance with its terms. Date: September 16, 2000 __________________________ Bill J. Angelos, President Pacific Telcom, Inc. SCHEDULE - SECTION 1.3.2 AMENDMENT TO FORMULA Purchaser and Seller hereby enter into this Amendment to the Formula set forth in Section 1.3.2 of the Sale of Assets Agreement dated September 16, 2000 ("Agreement") which has been entered into by and between Asher Milgrom, as Seller and Pacific Telcom, Inc., as Purchaser. It is expressly agreed by the parties that the terms of the Amendment set forth in this Schedule supersede and replace the Formula of Additional Consideration stated in the Agreement. For the purposes of Section 1.3.2 of the Agreement, the Formula of Additional Consideration shall be that as of the date of this Agreement, Seller's value in the Global Alliance Agreement, known to the parties as the Re-seller's Representative Agreement is $8,000.00 per month and will remain fixed at the sum of $8,000.00 per month for the term of the Earned-Out, unless the Global Alliance Agreement, known as the Re-seller's Representative Agreement is canceled and rendered null and void. All other terms set forth in Section 1.3.2 of the Agreement concerning the form of payment of the Earned-Out shall remain in effect. Dated the 16th day of September, 2000 PACIFIC TELCOM, INC. By: ______________________________ Bill J. Angelos, Jr. President ______________________________ Asher Milgrom EX-10.10 18 0018.txt SALE OF ASSETS AGREEMENT This Sale of Assets Agreement is entered into this day by and among Axon Connectivity Technology Inc., a Nevada corporation (hereinafter "Seller" or "Axon"), and Pacific Telcom, Inc., an Illinois corporation (hereinafter "Purchaser" or "PacTel"). WHEREAS, the Seller is engaged in the business of Re-Seller of EasyTel services and products and is the owner of assets including, but not limited to equipment, telecommunication switches, contract rights, accounts hosted on such switches leasehold interests and miscellaneous rights used in connection with the operation of such assets its business; and WHEREAS, the Purchaser desires to purchase, and the Seller desires to sell the assets used, or intended to be used, in the operation of the Seller's business as specifically set forth and described herein. NOW THEREFORE, IT IS AGREED AS FOLLOWS: Section 1. Assets Purchased. - - ---------- ----------------- The Seller agrees to sell to the Purchaser and the Purchaser agrees to purchase from the Seller, on the terms and conditions set forth in this Agreement, the assets set forth as follows ("Assets"): a. A 6T telecommunication switch located in San Diego, California; b. A 6T telecommunication switch located in Minneapolis, Minnesota; c. The rights to the completion of the purchase from EasyTel, or its affiliate, and installation of a 6T switch in New York, New York; d. The rights to the completion of the purchase from EasyTel, or its affiliate, and installation of a 6T switch in Miami, Florida; and e. Any and all accounts hosted on telecommunications switches in San Diego, Minneapolis, New York and Miami. Section 2. Excluded Assets. Excluded from this sale and purchase are the - - ---------- ---------------- Seller's accounts receivable, cash, notes receivable, prepaid accounts, the corporate seals, minute books, stock transfer books, general ledger and other accounting records (except as otherwise provided herein), other records related exclusively to the organization, existence or share capitalization of the Seller, its affiliates, subsidiaries, and any other assets of the business not specified in Section 1. The Seller shall make its general ledger and other accounting records available for inspection by the Purchaser from time to time upon reasonable request, as they relate to the Assets. Section 3. Liabilities Assumed. - - ---------- -------------------- 3.1 Except as otherwise provided below, the Purchaser agrees to assume and pay, discharge or perform, as appropriate, only the liabilities and obligations of the Seller ("Assumed Liabilities") specifically set forth as follows: a. The balance of the payment of the T6 switch in New York, New York to EasyTel; b. The balance of the payment of the T6 switch in Miami, Florida to EasyTel; and c. Dial tone charges and/or other expenses accrued as a result of the use of the Assets to EasyTel, only from the date of Closing, forward. 3.2 Notwithstanding Section 3.1, the Purchaser shall not assume, agree to pay, discharge or perform, or incur, as the case may be, any of the following liabilities: 3.2.1 liabilities (including principal and interest) arising out of loans and other indebtedness owing to any person or entity, excluding only the Assumed Liabilities; 3.2.2 liabilities of the Seller not arising in the ordinary course of its business incurred or accrued prior to the Closing, unless an Assumed Liability; and 3.2.3 any liability or obligation owed by the Seller and/or arising out of or in connection with the Assets to EasyTel, or any other party, accrued prior to the Closing Date. 3.3 The obligations of the Purchaser under this Section are subject to whatever rights the Purchaser may have under this Agreement or otherwise for breach by the Seller of any representation, warranty, covenant or agreement contained in this Agreement, including but not limited to any right of indemnification provided by this Agreement. Section 4. Purchase Price. The total aggregate purchase price for the - - ---------- --------------- Assets is Nine Hundred Sixty-Four Thousand Eighty Dollars ($964,080). The Purchase price shall be allocated as follows. 4.1 Payments of Cash. Purchaser shall pay Four Hundred Eighty-Two Thousand ------------------ Forty Dollars ($482,040) to be paid to the Seller by Purchaser. The purchase price after the Initial Closing Date of $482,040 shall be payable by the Purchaser to the Seller in twelve (12) equal installments of $40,170.00, the first such installment to be due and payable on November 1, 2000 and once per month thereafter until fully paid. This obligation shall be represented by an Installment Note in substantially the form set forth on Exhibit "A" hereto ("Note"), to be made and delivered by the Purchaser to the Seller with 30 days of the Initial Closing Date. 4.2 Payment in Common Stock. -------------------------- Delivery shall be made by the Purchaser to the Seller with 30 days of the Initial Closing Date of 192,816 shares of Pacific Telcom, Inc. common stock which has been duly authorized by the Purchaser. Of the payment in common stock, Seller agrees that 96,408 shares of Pacific Telcom, Inc. stock will bear a legend restricting the transferability of such shares for a time period of one year from the Initial Closing Date. The remaining balance of 96,408 common shares of Pacific Telcom, Inc. stock will bear a legend restricting the transferability of such shares for a time period of two years from the Initial Closing Date. Notwithstanding, Purchaser will permit Seller, by a way of a written instruction by Purchaser to the public transfer agent of the Purchaser, the Illinois Stock Transfer Company, to convey all of the shares of Pacific Telcom, Inc. common stock comprising the payment in common stock to its shareholders, creditors, or designees. Each of the shares comprising the payment in common stock of 192,816 shares of Pacific Telcom, Inc. may only be transferred a single time within 30 days of the Initial Closing Date, as an exception to the restriction from transferability of the shares representing payment in common stock. Purchaser shall assist such single transfer by directing its general counsel to forward a Letter of Opinion to the public transfer agent of the Purchaser permitting such single transfer of the shares representing the payment in common stock to Seller. Section 5. Payment of Purchase Price. The purchase price for the Assets - - ---------- ---------------------------- shall be paid as set forth in Section 4, unless said terms are modified in a writing mutually agreed to by the parties. Section 6. Adjustments. The operation of the assets as part of the Seller's - - --------- ----------- business and related income, liabilities and expenses up to the close of business on the day before the Closing Date shall be for the account of the Seller and only thereafter for the account of the Purchaser. Section 7. Use of Names. The Seller agrees that after the Closing, Seller - - ---------- -------------- shall no longer utilize the name of Seller in any manner whatsoever in conjunction with, the operation of or the maintenance of the Assets or with any account hosted on the Assets. Section 8. Other Agreements. At Closing, the parties shall execute the - - ---------- ----------------- following additional agreements: 8.1 Assignment. Within 30 days of the Initial Closing Date, the Seller shall ---------- execute an Assignment substantially in the form set forth on Exhibit B regarding all equipment, 6T switches regarding the Assets as more fully described in Section 1. Section 9. Agreements Concerning Assets. After Closing and until the Note - - ---------- ----------------------------- is paid in full, the Purchaser covenants and agrees as follows: 9.1 Purchaser's Operation of the Business. The Purchaser will maintain and ----------------------------------------- operate the Assets acquired from the Seller pursuant to this Agreement in a comparable manner to the manner in which it was operated before the Initial Closing Date and shall operate such business on a continuous and regular basis in accordance with all local, state, federal and other laws and regulations governing the conduct of the business. This provision, however, shall not be construed to preclude the Purchaser from interrupting the operation of the business temporarily for a reasonable time for the purpose of making repairs, remodeling or constructing improvements, or because of any emergency or conditions reasonably beyond the Purchaser's control and reasonably requiring temporary cessation of operation of the business. 9.2 Maintenance of Equipment. The Purchaser will maintain the Assets in good -------------------------- condition and repair, reasonable wear and tear expected. 9.3 Taxes. Except for amounts being contested in good faith, the Purchaser ----- will pay, before delinquency, all taxes, license fees and assessments relative to the Assets or its use and shall pay any and all other taxes, liens, assessments and charges relative to the Purchaser's conduct of the business, accrued from the Closing Date forward. Section 10. Closing and Initial Closing Date. - - ----------- ------------------------------------ 10.1 Time and Place. The closing of the sale and purchase of the Assets shall --------------- take place on September 16, 2000 ("Closing Date" or "Initial Closing Date"), at a time and place to be determined by the parties. If Closing has not occurred on or prior to November 30, 2000, then any party may elect to terminate this Agreement. If, however, the Closing has not occurred because of a breach of contract by one or more parties, the breaching party or parties shall remain liable for breach of contract. 10.2 Obligations of Seller at the Closing. Within 30 days of the Initial ----------------------------------------- Closing Date, Seller shall deliver to the Purchaser the following: 10.2.1 one or more bills of sale from the Seller conveying all of the Assets to the Purchaser, in the form as set forth in Exhibit C; 10.2.2 a copy of the resolutions of the Seller's board of directors and shareholders, authorizing the execution, delivery and performance of this Agreement and any other agreement to be entered into by the Seller in connection herewith, and the transactions contemplated hereby; 10.2.3 within 30 days of the Initial Closing Date all necessary consents of third parties, including without limitation, EasyTel, InfoUSA, MCI, and AT&T to be assigned to and/or assumed by the Purchaser hereunder; 10.2.4 such other assignments, bills of sale, instruments of conveyance, certificates of officers and other documents as reasonably may be requested by the Purchaser prior to the Closing to consummate this Agreement and the transactions contemplated hereby. 10.3 Obligations of Purchaser at the Closing. At the Closing, the Purchaser --------------------------------------- shall execute, or cause to be executed, and shall deliver to the Seller the following: 10.3.1 the Note; 10.3.2 the Common Shares; 10.3.3 such certificates of officers and other documents as reasonably may be requested by the Seller prior to the Closing to consummate this Agreement and the transactions contemplated hereby. Section 11. Seller Obligation Prior to Closing. - - ----------- -------------------------------------- 11.1 Seller's Operation of Business Prior to Closing. The Seller agrees that ------------------------------------------------- between the date of this Agreement and the Closing Date, the Seller will: 11.1.1 Continue to operate the Assets that are the subject of this Agreement in the usual and ordinary course and in substantial conformity with all applicable laws, ordinances, regulations, rules or orders, and will use its best efforts to preserve the Assets organization and preserve the continued operation of the Assets with its customers, suppliers and others having business relations with the Seller. 11.1.2 Not assign, sell, lease or otherwise transfer or dispose of any of the Assets. 11.1.3 Maintain all the Assets in their present condition, reasonable wear and tear and ordinary usage excepted. 11.2 Access to Premises and Information. At reasonable times prior to the -------------------------------------- Initial Closing Date, the Seller will provide the Purchaser and its representatives with reasonable access during business hours to the assets, titles, contracts and records of the Seller and furnish such additional information concerning the Seller's Assets as the Purchaser from time to time may reasonably request. 11.3 Conditions and Best Efforts. The Seller will use its best efforts to ------------------------------ effectuate the transactions contemplated by this Agreement and to fulfill all the conditions of the obligations of the Seller under this Agreement, and will do all acts and things as may be required to carry out its respective obligations under this Agreement and to consummate and complete this Agreement. Section 12. Covenants of Purchaser Prior to Closing. - - ----------- -------------------------------------------- 12.1 Conditions and Best Efforts. The Purchaser will use its best efforts to ----------------------------- effectuate the transactions contemplated by this Agreement and to fulfill all the conditions of the Purchaser's obligations under this Agreement, and shall do all acts and things as may be required to carry out the Purchaser's obligations and to consummate this Agreement. Section 13. Seller's Representations and Warranties. The Seller represents - - ----------- --------------------------------------- and warrants to the Purchaser as follows: 13.1 Corporate Existence. The Seller is now, and on the Initial Closing Date -------------------- will be, a corporation duly organized, validly existing and in good standing under the laws of the State of Nevada has all requisite corporate power and authority to own and convey its properties and assets and carry on its business and is good standing in each jurisdiction in which such qualification is required. 13.2 Corporation Power and Authorization. The Seller has full corporate -------------------------------------- authority to execute and deliver this Agreement and any other agreement to be executed and delivered by the Seller in connection herewith, and to carry out the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate and shareholder action. No other corporate proceedings by the Seller will be necessary to authorize this Agreement or the carrying out of the transactions contemplated hereby. This Agreement constitutes a valid and binding Agreement of the Seller in accordance with its terms. 13.3 Conflict with Other Agreements, Consents and Approvals. With respect to -------------------------------------------------------- (i) the articles of incorporation or bylaws of the Seller, (ii) any applicable law, statute, rule or regulation, (iii) any contract to which the Seller is a party or may be bound, or (iv) any judgment, order, injunction, decree or ruling of any court or governmental authority to which the Seller is a party or subject, the execution and delivery by the Seller of this Agreement and any other agreement to be executed and delivered by the Seller in connection herewith and the consummation of the transactions contemplated hereby will not (a) result in any violation, conflict or default, or give to others any interest or rights, including rights of termination, cancellation or acceleration, (b) require any authorization, consent, approval, exemption or other action by any court or administrative or governmental body which has not been obtained, or any notice to or filing with any court or administrative or governmental body which has not been given or done, or (c) require the consent of any third party. 13.4 Compliance with Law. The Seller's use of the Assets, wherever located, --------------------- has been in compliance with all applicable federal, state, local or other governmental laws or ordinances, the non-compliance with which, or the violation of which, might have a material adverse affect on the Assets, the Assumed Liabilities or the financial condition, results of operations or anticipated business prospects of the Purchaser, and the Seller has received no claim or notice of violation with respect thereto. Without in any way limiting the generality of the foregoing, the Seller is in compliance with, and is subject to no liabilities under, any and all applicable laws, governmental rules, ordinances, regulations and orders pertaining to the presence, management, release, discharge or disposal of toxic or hazardous waste material or substances, pollutants (including conventional pollutants) and contaminants. The Seller has obtained all material permits, licenses, franchises and other authorizations necessary for the conduct of its business. 13.5 Title to Assets. Seller holds good and marketable title to the Assets, ----------------- free and clear of restrictions on or conditions to transfer or assignment, and free and clear of liens, pledges, charges or encumbrances. 13.6 Property Rights. Except, in each case, as set forth herein: ---------------- 13.6.1 The Seller owns, possesses or has the right to use all intellectual property rights necessary or required to conduct its business as presently conducted, or otherwise used by the Seller; 13.6.2 no royalties or other amounts are payable by the Seller to other persons by reason of the ownership or the use of the any intellectual property owned or used by the Seller; 13.6.3 The Seller is not a party to, or subject to, any contract which currently requires, or upon the passage of time or occurrence of an event or contingency (whether of default or otherwise) will require, the conveyance or disclosure of secret processes or formulae related to, any intellectual property of the Seller; 13.6.4 All 6T hardware and software included among the Assets and currently used and/or necessary to the conduct of the Seller's business, are in good working order; 13.6.5 The Seller has obtained and delivered to the Purchaser all consents and approvals of third parties necessary to duly transfer to the Purchaser all of the Seller's rights, title and interest in and to all of its intellectual property included among the Assets. 13.7 Litigation. The Seller has no knowledge of any claim, litigation, ---------- proceeding or investigation pending or threatened against the Seller that might - directly result in any material adverse change in the Assets or condition of Assets being conveyed under this Agreement, except as threatened by Michael Murphy. 13.8 Accuracy of Representations and Warranties. None of the representations -------------------------------------------- or warranties of the Seller contain or will contain any untrue statement of a material fact or omit or will omit or misstate a material fact necessary in order to make statements in this Agreement not misleading. The Seller knows of no fact that has resulted, or that in the reasonable judgment of the Seller will result in a material change in the business, operations or assets of the Seller that has not been set forth in this Agreement or otherwise disclosed to the Purchaser. Section 14. Representations of Purchaser. The Purchaser represents and - - ----------- ------------------------------ warrants as follows: 14.1 Corporate Existence. The Purchaser is now, and on the Closing Date will -------------------- be, a corporation duly organized, validly existing and in good standing under the laws of the State of Illinois, has all requisite corporate power and authority to enter into this Agreement and perform its obligations hereunder. 14.2 Authorization. The Purchaser has full corporate authority to execute and ------------- deliver this Agreement and any other agreement to be executed and delivered by the Purchaser in connection herewith, and to carry out the transactions contemplated hereby. The execution and delivery of this Agreement and the consummation of the transactions contemplated hereby have been duly authorized by all necessary corporate and shareholder action. No other corporate proceedings by the Purchaser will be necessary to authorize this Agreement or the carrying out of the transactions contemplated hereby. This Agreement constitutes a valid and binding Agreement of the Seller in accordance with their terms. 14.3 Conflict with Other Agreements, Consents and Approvals. With respect to -------------------------------------------------------- (i) the articles of incorporation or bylaws of the Purchaser, (ii) any applicable law, statute, rule or regulation, (iii) any contract to which the Purchaser is a party or may be bound, or (iv) any judgment, order, injunction, decree or ruling of any court or governmental authority to which the Purchaser is a party or subject, the execution and delivery by the Purchaser of this Agreement and any other agreement to be executed and delivered by the Purchaser in connection herewith and the consummation of the transactions contemplated hereby will not (a) result in any violation, conflict or default, or give to others any interest or rights, including rights of termination, cancellation or acceleration, or (b) require any authorization, consent, approval, exemption or other action by any court or administrative or governmental body which has not been obtained, or any notice to or filing with any court or administrative or governmental body which has not been given or done. 14.4 Brokerage. The Purchaser has not employed any broker, finder or similar --------- agent in connection with the transactions contemplated by this Agreement, or taken action that would give rise to a valid claim against any party for a brokerage commission, finder's fee or similar compensation. 14.5 Accuracy of Representations and Warranties. None of the representations -------------------------------------------- or warranties of the Purchaser contain or will contain any untrue statement of a material fact or omit or will omit or misstate a material fact necessary in order to make the statements contained herein not misleading. Section 15. Conditions Precedent to Purchaser's Obligations. The obligation - - ---------- ----------------------------------------------- of the Purchaser to purchase the Assets is subject to the fulfillment, prior to or at the Closing Date, of each of the following conditions, any one or portion of which may be waived in writing by the Purchaser: 15.1 Representations, Warranties and Covenants of Seller. The representations ---------------------------------------------------- and warranties of the Seller contained herein and the information contained in the Exhibits and any other documents delivered by the Seller in connection with this Agreement shall be true and correct in all material respects at the Closing; and the Seller shall have performed all obligations and complied with all agreements, undertakings, covenants and conditions required by this Agreement to be performed or complied with by it or prior to the Closing. 15.2 Conditions of the Business. There shall have been no material adverse ----------------------------- change in the manner of operation or condition of the Seller's Assets prior to the Closing Date. 15.3 No Suits or Actions. At the Closing Date no suit, action or other ---------------------- proceeding shall have been threatened or instituted to restrain, enjoin or otherwise prevent the consummation of this Agreement or the contemplated transactions. Section 16. Conditions Precedent to Obligations of the Seller. The - - ----------- ------------------------------------------------------- obligations of the Seller to consummate the transactions contemplated by this Agreement are subject to the fulfillment, prior to or at the Closing Date, of each of the following conditions, any one or a portion of which may be waived in writing by the Seller; 16.1 Representations, Warranties and Covenants of Purchaser. All ----------------------------------------------------------- representations and warranties made in this Agreement by the Purchaser shall be true as of the Closing Date as fully as though such representations and warranties had been made on and as of the Closing Date, and the Purchaser shall not have violated or shall not have failed to perform in accordance with any covenant contained in this Agreement. Section 17. Transaction Deemed Closed. It is acknowledged by the Purchaser and - - ---------- ------------------------- the Seller that at the Initial Closing Date, each party shall have an affirmative duty to deliver documents as set forth more fully in Section 8, Section 10.2, and Section 10.3. Purchaser shall further have a duty to make payment in common stock to the Seller subsequent to the Initial Closing Date. Pursuant to this Section 17, the transaction set forth in this Agreement shall be deemed closed on the Initial Closing Date. Each party shall execute such Agreements, deliver such documents and make such payments in stock as otherwise required under this Agreement within 30 days from the Initial Closing Date as part of the Closing herein. Section 18. Risk of Loss. The risk of loss, damage or destruction to any - - ----------- ------------ of the equipment, inventory or other personal property to be conveyed to the Purchaser under this Agreement shall be borne by the Seller to the time of Closing. In the event of such loss, damage or destruction, the Seller, to the extent reasonable, shall replace the lost property or repair or cause to repair the damaged property to its condition prior to the damage. If replacement, repairs or restorations are not completed prior to Closing, then the purchase price shall be adjusted by an amount agreed upon by the Purchaser and the Seller that will be required to complete the replacement, repair or restoration following Closing. If the Purchaser and the Seller are unable to agree, then the Purchaser, at its sole option and notwithstanding any other provision of this Agreement, upon notice to the Seller, may rescind this Agreement and declare it to be of no further force and effect, in which event there shall be no Closing of this Agreement and all the terms and provisions of this Agreement shall be deemed null and void. If, prior to Closing, any of the real properties that are the subject of the leases to be assumed by the Purchaser are materially damaged or destroyed, then the Purchaser may rescind this Agreement in the manner provided above unless arrangements for repair satisfactory to all parties involved are made prior to Closing. Section 19. Indemnification and Survival. - - ----------- ------------------------------ 19.1 Survival of Representations and Warranties. All representations and ---------------------------------------------- warranties made in this Agreement shall survive the Closing of this Agreement, except that any party to whom a representation or warranty has been made in this Agreement shall be deemed to have waived any misrepresentation or breach of representation or warranty of which such party had knowledge prior to Closing. Any party learning of a misrepresentation or breach of representation or warranty under this Agreement shall immediately give written notice thereof to all other parties to this Agreement. The representations and warranties in this Agreement shall terminate two years from the Closing Date, and such representations or warranties shall thereafter be without force or effect, except any claim with respect to which notice has been given to the party to be charged prior to such expiration date. 19.2 Seller's Indemnification. ------------------------- 19.2.1 The Seller hereby agrees to indemnify and hold the Purchaser, it successors and assigns harmless from and against: 19.2.2 (i) Any and all damages, losses, claims, liabilities, deficiencies and obligations of every kind and description, contingent or otherwise, arising out of or related to the operation of the Seller's business prior to the close of business on the day before the Closing Date, (ii) any liability or obligation of the Seller which is not an Assumed Liability, (iii) any and all damage or deficiency resulting from any material misrepresentation, breach of warranty or covenant, or nonfulfillment of any agreement on the part of the Seller under this Agreement, and (iv) any and all actions, suits, claims, proceedings, investigation, audits, demands, assessments, fines, judgments, costs and other expenses (including, without limitation, reasonable audit and attorneys fees) incident to any of the foregoing. 19.2.3 The Seller's indemnity obligations under Section 19.2 shall be subject to the following: (i) If any claim is asserted against the Purchaser that would give rise to a claim by the Purchaser against the Seller for indemnification under the provisions of this Section, then the Purchaser shall promptly give written notice to the Seller concerning such claim and the Seller shall, at no expense to the Purchaser, defend the claim. (ii) The Seller shall not be required to indemnify the Purchaser for an amount that exceeds the total purchase price paid by the Purchaser under this Agreement. 19.3 Purchaser's Indemnification. The Purchaser agrees to defend, indemnify, ---------------------------- and hold harmless the Seller from and against (i) any and all claims, liabilities and obligations of every kind and description arising out of or related to the operation of the business following Closing, or arising out of the Purchaser's failure to perform obligations of the Seller expressly assumed by the Purchaser pursuant to this Agreement; (ii) after the Closing, any liability or obligation of the Seller which is an Assumed Liability, (iii) any and all damage or deficiency resulting from any material misrepresentation, breach of warranty or covenant, or nonfulfillment of any agreement on the part of the Purchaser under this Agreement, and (iv) any and all actions, suits, claims, proceedings, investigation, audits, demands, assessments, fines, judgments, costs and other expenses (including, without limitation, reasonable audit and attorneys fees) incident to any of the foregoing. Section 20. Default. - - ----------- ------- 20.1 Remedies. If the Purchaser fails to perform any of the terms, covenants, -------- conditions or obligations of this Agreement or the Note, time of payment and performance being of the essence, then the Seller, subject to the requirements of the notice provided in this Section, may have any or all of the following remedies: 20.1.1 The right to declare the full unpaid balance of the Note immediately due and payable. 20.1.2 The right to exercise each and all of the remedies granted to the Seller by the Illinois Uniform Commercial Code. 20.1.3 The right to exercise any other remedy available in law or equity to the Seller. 20.2 Notice of Default. The Purchaser shall not be deemed in default for ------------------- failure to perform the terms, covenants and conditions of this Agreement, other than failure to make payments on the Note, until notice of the default has been given to the Purchaser and the Purchaser has failed to remedy the default within 45 days after the notice. If the Purchaser fails to make any payment within thirty days of the date the same becomes due under the Note, the Purchaser shall be deemed in default and the Seller shall not be obligated to give notice to the Purchaser of a declaration of default. Section 21. Bulk Transfers. The Purchaser waives compliance by the Seller - - ----------- --------------- with the relevant Bulk Transfers Article of the Uniform Commercial Code, and any other similar laws in any applicable jurisdiction (collectively "Bulk Transfers Law") in respect to the transactions contemplated by this Agreement. The Seller shall indemnify the Purchaser from, and hold it harmless against, any liabilities, damages, costs and expenses resulting from or arising out of (i) the parties' failure to comply with any Bulk Transfers Law with respect to the transactions contemplated by this Agreement, or (ii) any action brought or levy made as a result thereof, except for the Assumed Liabilities. If the Seller fails to comply with the provisions of this Section and the Purchaser is required to pay any creditor of the Seller in order to protect the property purchased under this Agreement from claims or liens of the Seller's creditors, except those assumed by the Purchaser, then the Purchaser may offset the amount it pays against the balance due the Seller on the Note by furnishing to the Seller proof of such payment in the form of a receipt from the creditor involved. Section 22. Miscellaneous Provisions. - - ----------- ------------------------- 22.1 Amendment and modification. Subject to applicable law, this Agreement may -------------------------- be amended, modified or supplemented, as the parties mutually agree, by a written Agreement signed by a duly appointed representative of the Purchaser and Seller. 22.2 Expenses. The parties hereto shall pay all of their own expenses relating -------- to the transactions contemplated by this Agreement, including the fees and expenses of their respective counsel, accountants, and financial advisers. 22.3 Governing Law. The interpretation and construction of this Agreement and -------------- all matters relating hereto shall be governed by the laws of the State of Illinois relating to contracts made and to be performed in Illinois. 22.4 Waiver of Terms. Any of the terms or conditions of this Agreement may be ---------------- waived at any time by the party or parties entitled to the benefits thereof, but only by a written notice signed by an authorized representative of the party or parties waiving such terms or conditions. 22.5 Captions. The article and section captions used herein are for reference -------- purposes only, and shall not in any way affect the meaning or interpretation of this Agreement. 22.6 Publicity. Prior to the Initial Closing Date, none of the parties hereto --------- shall issue any press release or make any other statement to the media relating to this Agreement or the matters contained herein without obtaining the prior approval of the Buyer. 22.7 Notices. All notices, requests, demands and other communications required ------- or permitted hereunder will be in writing and will be deemed to have been duly given when delivered by hand or by air express courier. If to the Purchaser: Pacific Telcom, Inc. Fountain View Business Park 4270 S. Decatur Blvd., Ste. A-9 Las Vegas, NV 89103 Attention: Bill J. Angelos, President With a copy to: Kenneth G. Mason, General Counsel 33 N. LaSalle St., Ste. 2131 Chicago, IL 60602 If to the Sellers to: Asher Milgrom, President Axon Connectivity Technology, Inc. 22 Miners Trail Irvine, CA 92620 With a copy to: Lon Stephens Stephens & Kray 5000 Birch St., Ste. 410 Newport Beach, CA 92660 22.8 Entire Agreement. This Agreement contains the entire understanding ----------------- between and among the parties and supersedes any prior understandings and agreements among them respecting the subject matter of this Agreement. 22.9 Agreement Binding. This Agreement shall be binding upon the heirs, ------------------ executors, administrators, successors and assigns of the parties hereto. 22.10 Pronouns and Plurals. All pronouns and any variations thereof shall be ---------------------- deemed to refer to the masculine, feminine, neuter, singular, or plural as the identity of the person or persons may require. 22.11 Presumption. This Agreement or any section thereof shall not be ----------- construed against any party due to the fact that said Agreement or any section thereof was drafted by said party. 22.12 Further Action. The parties hereto shall execute and deliver all --------------- documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of the Agreement. 22.13 Parties in Interest. Nothing herein shall be construed to be to the --------------------- benefit of any third party, nor is it intended that any provision shall be for the benefit of any third party. 22.14 Savings Clause. If any provision of this Agreement, or the application --------------- of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto this 2nd day of October, 2000. PACIFIC TELCOM, INC. AXON CONNECTIVITY an Illinois Corporation TECHNOLOGY, INC., a Nevada Corporation By:____________________________ By:____________________________ Bill J. Angelos, President Asher Milgrom, President EX-10.11 19 0019.txt EXHIBIT "A" ----------- INSTALLMENT NOTE This Installment Note is made on this 2nd day of October, 2000 by and between Pacific Telcom, Inc., an Illinois corporation (hereinafter "Purchaser" or "Pac-Tel") and Axon Connectivity Technology Inc., a Nevada Corporation (hereinafter "Seller" or "Axon") pursuant to a Sale of Assets Agreement made between them this date ("Agreement"). This Installment Note is made pursuant to the Agreement and is subject to the terms and provisions set forth in the Agreement, as if fully stated herein. Pursuant to the terms set forth in Section 4.1 of the Agreement, Purchaser promises to pay to the order of Seller at 22 Miners Trail, Irvine, CA 92620, or at such other place as may be designated in writing by Seller, the principal sum of Four Hundred Eighty-Two Thousand Forty ($482,040), with interest waived. Such principal sum shall be paid as follows: Purchaser shall pay to Seller the principal sum in six equal installments of Forty Thousand One Hundred Seventy Dollars ($40,170). The first installment shall be due on March 1, 2001 and once per month thereafter until fully paid in October, 2001. This Installment Note is not assignable by Purchaser or Seller without the written consent of the other. Notwithstanding, Purchaser may assign its rights hereunder to a shareholder holding 100% of the common shares of Seller, individually, which consent shall not be unreasonably withheld by Purchaser to the Shareholder of Seller. The execution, delivery and performance of this Installment Note are within the Seller's corporate powers, having been duly authorized and are not in contravention of the terms of Pac-Tel's Articles of Incorporation and By-Laws, or of any agreement or undertaking to which Pac-Tel is a party or by which it is bound. Purchaser shall pay all sums due under this Installment Note and Seller grants Purchaser the right to pre-pay any and all installments under this Note, without penalty. Any forbearance by the Seller in exercising any right or remedy of enforcement, or otherwise, afforded by applicable law shall not be deemed a waiver of or preclude the exercise of any right or remedy. This Installment Note and the rights and obligations of the parties hereto shall be governed by and construed with the laws of the State of Illinois without regard to conflict of laws principles. PACIFIC TELCOM INC. By:______________________ Bill J. Angelos President Accepted: AXON CONNECTIVITY TECHNOLOGY INC. By:______________________ Asher Milgrom President EXHIBIT "B" ----------- ASSIGNMENT This Assignment is entered into the 2nd day of October, 2000 by and between Axon Connectivity Technology Inc., a Nevada Corporation ("Seller") and Pacific Telcom, Inc., an Illinois corporation ("Purchaser"), pursuant to a Sale of Assets Agreement entered into by and between the parties this date ("Agreement"), the terms of which are specifically incorporated herein by reference. Whereas, the Seller and the Purchaser have this date entered into a Sale of Assets Agreement wherein the Seller has agreed to sell substantially all of its assets and business to the Purchaser and assign such other and further rights to the its assets. NOW THEREFORE, IT IS AGREED AS FOLLOWS: The Seller hereby assigns, transfers, and conveys to the Purchaser all of its right, title, and interest in and to the down payment on 6T switches in New York, New York and Miami, Florida, as well as all rights to complete the purchase and installation of such 6T switches from EastyTel, InfoUSA, or such of their affiliates as the case may be and Seller assigns any and all rights to any accounts hosted on telecommunication switches in San Diego, Minneapolis, New York, and Miami existing now or any time in the future. AXON CONNECTIVITY TECHNOLOGY INC. By:______________________ Asher Milgrom President EXHIBIT "C" ----------- BILL OF SALE This Bill of Sale is made this 2nd day of October, 2000 pursuant to the Sale of Assets Agreement ("Agreement") by and between Axon Connectivity Technology Inc., a Nevada Corporation ("Seller") and Pacific Telcom, Inc., an Illinois corporation ("Purchaser") wherein Seller has agreed to sell Assets as set forth in the Agreement the Purchaser. In consideration of the Purchase Price set forth in the Agreement and other good and valuable consideration, in hand received by Seller from Purchaser, the receipt and sufficiency of which is hereby acknowledged, Seller does hereby grant, sell, transfer, convey, deliver, and set over to Purchaser this date all of Seller's right, title and interest hereto in: 1. A 6T telecommunication switch located in San Diego, California, bought by Seller from InfoUSA, EasyTel, and/or one of their affiliates. 2. A 6T telecommunication switch located in Minneapolis, Minnesota, bought by Seller from InfoUSA, EasyTel, and/or one of their affiliates. 3. The deposit and/or credit of Seller of a 6T telecommunication switch to be located in New York, New York, with InfoUSA, EasyTel, and/or their affiliate, along with all rights to the completion of the purchase and/or installation of said 6T telecommunication switch therein. 4. The deposit and/or credit of Seller of a 6T telecommunication switch to be located in Miami, Florida, with InfoUSA, EasyTel, and/or their affiliate, along with all rights to the completion of the purchase and/or installation of said 6T telecommunication switch therein. 5. Any and all accounts hosted on the 6T telecommunication switches in San Diego, Minneapolis, New York, and Miami, as aforesaid, along with all rights to revenues derived therefrom, now and in the future. Date: October 2, 2000 AXON CONNECTIVITY TECHNOLOGY INC. By:__________________________ Asher Milgrom, President SCHEDULE 10.2.2 DIRECTOR'S AND OFFICER'S CERTIFICATE The undersigned, Asher Milgrom, is the President and a Director of Axon Connectivity Technology Inc., a Nevada corporation ("Corporation"). A Sale of Assets Agreement dated October 2, 2000 ("Agreement") has been entered into by and between the Corporation, as Seller and Pacific Telcom, Inc., as Purchaser. Pursuant to Section 10.2.2 of the Agreement, I hereby certify as follows: 6. That the Board of Directors and the shareholders of the Corporation have authorized the execution, delivery, and performance of the Agreement, and any other agreement to be entered into the Corporation in connection with the Agreement and the transactions set forth therein. 7. The Corporation is now a Corporation duly organized, validly existing, and in good standing under the laws of the State of Nevada and has all requisite corporate power and authority to own and convey its properties and assets under the Agreement and the execution and delivery of the Agreement have been duly authorized by all necessary corporate and shareholder action. The Agreement constitutes a valid and binding Agreement of the Seller in accordance with its terms. 8. The Corporation holds good and marketable title to the Assets set forth in Section 1 of the Agreement, free and clear of restrictions on or conditions to Sale, transfer, or assignment, and free and clear of liens, pledges, charges, or encumbrances. 9. As set forth in Section 13.8 of the Agreement the representations and warranties of the Corporation are true and complete on and as of the date hereof. Date: October 2, 2000 __________________________ Asher Milgrom, President and Director SCHEDULE 14 OFFICER'S CERTIFICATE The undersigned, Bill J. Angelos, is the President of Pacific Telcom, Inc., an Illinois corporation and is the purchaser ("Purchaser") under a Sale of Assets Agreement dated October 2, 2000 ("Agreement") which has been entered into by and between the Purchaser and Axon Connectivity Technology Inc., a Nevada corporation, as Seller. Pursuant to Section 14 of the Agreement, I hereby certify as follows: 10. The Purchaser is full Corporate authority to execute and deliver the Agreement and any other matters to be made and delivered by the Purchaser in connection therewith, and to carryout the transaction contemplated with all duly authorized Corporate authority. Date: October 2, 2000 __________________________ Bill J. Angelos, President Pacific Telcom, Inc. EX-10.12 20 0020.txt STOCK PURCHASE AGREEMENT ------------------------ THIS STOCK PURCHASE AGREEMENT ("Agreement") dated as of February 11, 2000 by and among PACIFIC TELCOM, INC., a corporation organized under the laws of Illinois ("Buyer"), EASYTEL CANADA CORPORATION, a corporation organized under the laws of the Province of Ontario (the "Corporation") and RICHARD C. GOLDSTEIN, being the duly appointed Sellers' Representative of the Selling Shareholders ("Sellers" or "Shareholders" or "Selling Shareholders"). WITNESSETH WHEREAS, the Selling Shareholders collectively own of record and beneficially one hundred percent (100%) of the issued and outstanding shares of the common stock of EasyTel Canada consisting of 6,315,000 shares of common stock, no par value (the "Shares"); and WHEREAS, the Sellers own in addition to 6,315,000 common shares issued and outstanding on February 4, 2000, the date of the Letter of Intent between the parties and the further amount of 2,599,850 common shares representing such shares derived from outstanding options for common stock exercised and Class A special shares, nonvoting, converted to common shares pursuant to the Articles of Corporation and by-laws of the Corporation; and WHEREAS, it is the intention of the parties hereto that, upon consummation of the purchase and sale of the Shares pursuant to this Agreement, at Closing effective as of the date hereof (the "Effective Date") Buyer shall own one hundred percent (100%) of all of the issued and outstanding shares of common stock of the Corporation; NOW, THEREFORE, IT IS AGREED: Section 1. Sale and Purchase. ------------------- 1.1 Sale of the Shares. Subject to the terms and conditions herein stated, ------------------ the Selling Shareholders agree to sell, assign, transfer and deliver the shares to Buyer on the Effective Date, and Buyer agrees to purchase the outstanding common shares from the Selling Shareholders on the Effective Date. The certificates representing the Shares shall be duly endorsed to the Buyer, or accompanied by Stock Powers and Assignment Separate from Certificate, duly executed in favor of the Buyer, by the relevant Selling Shareholder. The Selling Shareholders agree to cure at any time any deficiencies with respect to the endorsement of the certificates representing the shares or with respect to the Stock Power with Assignment Separate from Certificate, accompanying any such certificates. Section 2.0 Purchase Price. --------------- 2.1 Payment. In consideration of the transfer, conveyance and assignment -------- of the Shares, the Buyer shall pay to the Selling Shareholders the sum of Two Hundred Fifty Thousand Dollars ($250,000) and One Million (1,000,000) duly authorized and issued common shares of Pacific Telcom, Inc., subject to adjustment as described herein, to be paid in the following manner. 2.2 Payments of Cash. Buyer shall pay One Hundred Fifty Thousand Dollars ---------------- ($150,000) payable in the form of check or by wire transfer, at the direction of the Corporation on the Effective Date as a deposit to be held by Sellers subject to Section 4.1 hereof. A further sum of One Hundred Thousand Dollars ($100,000) shall be due to the Corporation upon the Buyer having its common shares of stock publicly tradable on or before November 15, 2000 within the price ranges and upon the conditions as set forth herein in Section 4.1 "Finality". If the Seller elects not to undo the subject transaction on the Closing Date upon the occurrence of the events set forth in Section 4.1 "Finality", the further sum of One Hundred Thousand Dollars ($100,000) shall be due to Sellers on November 15, 2000. 2.3 Payment in Common Stock. Delivery shall be made by the Buyer to the ------------------------ Selling Shareholders on the Effective Date of One Million (1,000,000) of common shares of authorized and issued stock of Pacific Telcom, Inc., subject to the terms and conditions of Section 3.3 and 4.1 "Finality". 2.4 Adjustment to Purchase Price. That portion of the Purchase Price paid ---------------------------- by Buyer to Selling Shareholders in common stock of Buyer is subject to adjustment, as set forth in Section 4.1 "Finality". It is the agreement of Buyer and Sellers that adjustments to the Purchase Price, pursuant to the provisions regarding "Finality" such that the value received by Sellers from Buyer, after its receipt of common shares shall be an amount equal to Ten Million Dollars ($10,000,000) aggregate value of common shares, in the express condition and event of an adjustment to the Purchase Price thereto. 2.5 Separate Agreements. The Buyer's Agreement herein is intended to be -------------------- made with and effective concerning each and every Selling Shareholder of the Corporation. In the event that it is necessary for the Buyer to have a separate Agreement with any such Selling Shareholder, such separate Agreement shall not be deemed a separate sale and such a separate Agreement shall not affect or act to construe an adjustment to the Purchase Price. Section 3.0 Effective Date; Delivery. -------------------------- 3.1 Closing. On the Effective Date , the parties shall meet at 10:00 a.m. ------- on February 11, 2000 at the offices of Kenneth G. Mason, Esq., 33 N. LaSalle St., Suite 2131, Chicago, Illinois 60602, or on such later date as is mutually agreeable to the parties hereto as the parties hereto shall by a written instrument designate. 3.2 Selling Shareholders' Delivery of Shares. On the Effective Date, ------------------------------------------- Selling Shareholders, through their duly appointed Sellers' Representative, shall deliver to Buyer endorsed Certificates or endorsed Assignments Separate from Certificate with Stock Powers in the amount of 100% of the Corporation's Common Stock Representative by shares constituting 6,315,000 authorized and issued common shares of the Corporation outstanding on February 4, 2000; 600,000 common shares representing the exercise of 600,000 options from a total of 600,000 outstanding options of the corporation; and 1,999,850 common shares representing 540,500 Class A special shares converted from February 4, 2000 to the Effective Date, for a total of 8,914,850 aggregate common shares of the Corporation. 3.3 Procedures to Deliver Buyer's Shares. Notwithstanding any of the ----------------------------------------- foregoing, it is expressly agreed by the parties that the delivery by Buyer of 1,000,000 common shares of Pacific Telcom, Inc. to Sellers shall be paid and transferred to the Selling Shareholders pursuant to the following procedures: 3.3.1Selling Shareholders Duty to Deliver. Selling Shareholders shall ------------------------------------ deliver to the Buyer at the Effective Date a Final Shareholders List to be affixed to this Agreement as Exhibit A. Said list shall state, for every Selling Shareholder, the Shareholder's name and address, the number of shares of the Corporation held on the Effective Date, and the number of shares of the Buyer to be received in exchange thereto. No fractional shares or script will be issued by Buyer. It is understood by the parties that the aggregate number of shares to be paid to the Selling Shareholders at the Effective Date shall not exceed 1,000,000 shares of Pacific Telcom, Inc. regardless of the number of shares of common stock of the Corporation issued and outstanding at the Effective Date. On the Effective Date, upon delivery in a form satisfactory to Buyer of the certificates representing the Shares of the Corporation to be purchased and acquired hereunder, Buyer, by its Secretary, will issue and transmit by facsimile to the public transfer agent of the Buyer, Illinois Stock Transfer Corporation, a Letter of Instruction, in a form substantially as set forth herein as Exhibit B, directing Robert Pearson, President of Illinois Stock Transfer Corporation to issue 1,000,000 authorized shares of Pacific Telcom, Inc. common stock in book form pursuant to the information set forth in the Corporation's List of Shareholders presented at the Effective Date. 3.3.2Reserve of Cash on the Effective Date. In the event that on the --------------------------------------- Effective Date, Sellers do not deliver certificates representing one hundred percent (100%) of the Corporation's common stock issued and outstanding at the Effective Date, a Reserve of Cash shall be withheld from the deposit at closing representing a sum equal to the percentage of Certificates of outstanding common stock of the Corporation not delivered on the Effective Date. This Reserve shall be held by Buyer's counsel in a trust account or client fund account, without interest, to be released to Sellers upon the delivery of the remaining undelivered endorsed certificates of common stock of the Corporation or endorsed assignments separate from certificate with endorsed stock power equivalent to then constitute the delivery of 100% of the common shares of the Corporation issued and outstanding on the Effective Date. 3.3.3Issuance of Certificated Ownership. Subsequent to the Effective ----------------------------------- Date, Selling Shareholders, individually, shall receive certificated shares upon delivery by the Secretary of Buyer to Illinois Stock Transfer Corporation, the exchange agent hereunder, of duly endorsed certificates representing the shares of common stock of EasyTel Canada acquired hereunder. For each such certificate of the Corporation received by the Buyer for each Selling Shareholder in satisfactory form, the Exchange Agent of the Buyer shall be directed by the Secretary of the Buyer to convert Selling Shareholders' ownership indicia in Buyer from book form to certificated form and to transmit such stock certificates to the Selling Shareholders, individually, with a transmittal letter substantially in the form as set forth in Exhibit C attached hereto. Section 4. Other Agreements. ----------------- 4.1 Finality and Attached Rider. On the Effective Date of this transaction ---------------------------- shall be the date hereof, however, the transaction shall be deemed to be in escrow pending the Closing Date which shall be the later of the date the common stock of the Buyer is publicly tradable and neither the Sellers nor the Buyer has exercised their option to unwind or terminate the transaction or November 30, 2000, if on such date the common stock of Buyer is not publicly tradable unless on such date the Sellers elect not to exercise their right to terminate this Agreement and undo the subject the transaction. Closing of the intended transaction shall be conditional upon the condition described hereinafter in Section 4.1 subsequent to the transaction. It is the intention of Buyer to have its common shares of stock publicly tradable on or before November 15, 2000. It is an express condition precedent to the transaction that the Issue Price of the common shares of Pacific Telcom, Inc. on its first date of public trading shall be not less than $5.00 per share. In the event that said Issue Price shall be not less than $8.00 per share and not more than $12.00 per share, this transaction shall be deemed complete and irreversible. If the Issue Price is at least $5.00 per share, but less than $8.00 per share, the parties agree to adjust the Purchase Price in favor of Sellers such that Buyer shall pay such further shares of its common stock to equal $10,000,000 value, based upon such an Issue Price of less than $8.00 per share of Pacific Telcom, Inc. common shares. In the event that the common shares of Pacific Telcom, Inc. are publicly tradable on November 15, 2000 at a trading price or issue price less than $5.00 per share, the parties agree that either the Buyer or Seller shall have the option to terminate and undo the subject transaction, where upon Buyer and Sellers will conduct all steps, take all actions and execute all documents necessary to restore Buyer and Sellers to their original position on the date prior to the Effective Date. In the event that the common shares of Pacific Telcom, Inc. are not publicly tradable on November 15, 2000, the parties agree that the Seller's Representative will have the option to deem the subject transaction terminated whereupon Buyer and Seller agree to undo the subject transaction, as above or, at the option of Seller's Representative Seller shall have the right to deem the transaction finalized, even in the event that the common shares of Pacific Telcom, Inc. are not publicly tradable on November 15, 2000. 4.2 Goods and Services Tax. Based upon estimates of the Corporation ------------------------- received from its Chartered Accountants, on a non-audited basis, the Corporation is eligible to recover, or be refunded, an amount estimated to be $12,847 as a result of its prior two fiscal years, resulting from the Goods and Services Tax. Further, the Corporation, in good faith, believes it will be entitled to a further amount recoverable, as and for Goods and Services Tax, for its fiscal year ending March 31, 2000. Buyer agrees that the Corporation, notwithstanding the effect of this Purchase Agreement otherwise, shall be solely entitled to all such sums refunded from, or returnable to the Corporation as a result of Goods and Services Tax treatments. 4.3 Funding New Territories. Subsequent to the Effective Date, it shall be ------------------------ the duty and obligation of the Buyer to make such capital investments necessary as to allow the capacity and capability for the issuance of Local Access Numbers for four new Canadian cities, for the purposes of the subscription of new subscribers to the telecommunications products and services currently offered separately by Buyer and Sellers. 4.4 Grant of Authority for Certain Continued Operations. The Buyer grants ----------------------------------------------------- to the Corporation, through its President, the limited right to operate the Corporation for certain essential post Effective Date duties and responsibilities. This grant of authority to operate Toronto switches shall continue until April 30, 2000, without further and additional operating expenses by the Buyer other than the Deposit herein. From the Effective Date until April 30, 2000, the Corporation shall continue to be responsible for its routine expenses, overhead and ordinary expenses of operation, as specifically set forth in Exhibit D. The Corporation will apply its own sources of business revenues toward the timely payment of such routine expenses, until April 30, 2000. This grant of authority is intended to permit the conclusion of post Effective Date matters, including, by a way of illustration, filing of tax returns, distribution of cash payments of the Purchase Price by Buyer to the Selling Shareholders and the holding of common shares of the Buyer in trust to accommodate the exercise of outstanding options of employees and certain special service providers of the Corporation, and the exercise of Class A special shares. Notwithstanding the foregoing, Buyer shall be financially responsible for the expenses of capital investment for the Corporation's Toronto switches and for all attendant charges to that switch from the Effective Date, forward. Further, subsequent to April 30, 2000, notwithstanding the Corporation's limited grant of authority to operate certain functions, Buyer shall assume expenses of capital investment for the Corporation's operations thereafter, pending the conditions set forth regarding "Finality" in Section 4.1. 4.5 Retention of Management. Buyer agrees to continue to retain the ------------------------- services of Richard C. Goldstein as Chief Executive Officer of the Corporation, notwithstanding the limited grant of authority to operate set forth above. Buyer shall tender to him an Employment Agreement mutually acceptable to Richard C. Goldstein and Buyer. The parties acknowledge and agree that the retention of Mr. Goldstein shall act as a benefit to the Buyer during transition and for continued operations and benefits of the Corporation thereafter, and such hiring shall not be deemed to constitute an apparent conflict-of-interest on the part of Mr. Goldstein. Buyer further agrees, within 14 days of the Effective Date to cause its Board of Directors to appoint Richard C. Goldstein as a director of Pacific Telcom, Inc. and to have Mr. Goldstein serve on the same terms and conditions as the members of the existing Board of Directors of the Buyer. 4.6 Repayment of Capital and Sharing of Revenues. It is the understanding --------------------------------------------- of Buyer and Sellers, that the Closing of this Purchase Agreement is in escrow until the Date as described in Section 4.1 "Finality". In the event that the transaction does not close on the Closing Date, Buyer and Sellers shall undo the subject transaction of this Purchase Agreement, pursuant to Section 4.1 "Finality", in such event, the parties agree that there shall be a resulting Joint Venture between them concerning the Capital Investment made by the Buyer in having equipped four new cities with the capacity for the services to be sold by the parties and the revenues derived from the joint marketing efforts of the Buyer and Sellers. Under the terms of such a resulting Joint Venture, revenue, after deduction of Buyer approved operating costs, will be apportioned as follows: one third of such revenues are to be apportioned to Buyer to be taken as a credit toward capital expenditures in new geographical markets, as set forth above; thereafter remaining revenues shall be divided equally between Buyer and Sellers. Upon completion of repayment of Buyer for the aforesaid capital investments, such joint venture revenues shall be shared by the parties equally, after payment of all pre-approved or budgeted costs. In the event that Buyer and Sellers undo the subject transaction to the Purchase Agreement and establish such a resulting Joint Venture, it is expressly agreed that all prior sources of revenues of the Corporation and all subsequently developed sources of revenues exclusively generated by the Corporation shall remain the sole property of the Corporation and shall not be considered revenues attributable to the resulting Joint Venture. 4.7 Liabilities. Except as set forth in the un-audited Financial ----------- Statements of the Corporation of March 31, 1999 (a copy of which is attached hereto as Exhibit E), copies of which have been delivered to the Buyer, the Corporation is possessed of liabilities regarding a loan payable in the current amount due of $25,000. Buyer shall expressly assume this loan, which carries a monthly debt service of approximately $3,500.00, and Buyer shall be entitled to ownership and title of a cash deposit of $32,500.00 as security for the repayment of the principal amount of the loan in its aggregate amount of approximately $79,870 as of February 9, 2000. 4.8 Accounts Receivable. With respect to all accounts receivable, the -------------------- Buyer shall be vested with title to all such accounts receivable in existence on April 30, 2000. 4.9 Employee Benefits. Any and all liability of the Corporation for ------------------ employee benefits or for paid vacations or for any other employee benefit accruals, shall be paid in full as of the Effective Date. Sellers' Representative shall provide Buyer with such a certificate that such actions have taken place as Buyer may reasonably request. 4.10 Tax Returns. Sellers' Representative will timely file, or cause to be ----------- filed on behalf of the Corporation, any tax returns required to be filed with respect to any taxes for the fiscal period ending March 31, 2000 to reflect the operations of the Corporation up to and including that date. All such tax returns shall be prepared and filed using tax accounting methods and principals which are consistent with those used in tax returns for preceding tax periods, by the Chartered Accountants of the Corporation. 4.11 Deposit With Visa. Any and all deposits maintained with Visa as and ------------------ for security for the processing of credit card transactions shall remain unaffected by the subject transaction, but title to such deposit shall be transferred to the Buyer, as part of the subject transaction. 4.12 Other Financial Benefits. It is agreed by the parties that the Buyer ------------------------- shall have full rights, title and interest to all accounts receivable of the Corporation, and shall receive the right to claim non-capital loss carry forward amounts on the Corporation's balance sheet as other and further benefits to the Buyer pursuant to the subject transaction. Section 5.0 Representations and Warranties of the Corporation. Except as may be ------------------------------------------------- set forth on a Schedule of Exceptions, attached hereto as Schedule Q, to be presented at the Effective Date, the Corporation hereby represents and warrants to the Buyer as set forth below. The Schedule of Exceptions shall be presented by the Corporation to the Buyer prior to the execution of this Purchase Agreement and shall be attached hereto as an exhibit. The Schedule of Exceptions shall specifically identify the relevant sub-paragraph of this Agreement, and the statements made in each Schedule of Exceptions shall be deemed to be representations and warranties as if made hereunder. 5.1 Organization and Standing; Articles and Bylaws. The Corporation is a ------------------------------------------------ corporation duly incorporated and validly existing and in good standing under the laws of the Province of Ontario. The Corporation has requisite corporate power and authority to own and operate its properties and assets, and to carry on its business as presently conducted and as proposed to be conducted. The Corporation is duly qualified and authorized to do business, and is in good standing in each jurisdiction where the nature of its activities and of its properties (both owned and leased) makes such qualification necessary and where a failure to do so qualify would have a material adverse effect on its business or properties. The Articles in the form attached hereto as Exhibit F have been filed with the Minister of Commercial Relations before the date hereof. 5.2 Corporate Power. The Corporation will have at the Effective Date and ---------------- on the Closing Date all requisite legal and corporate power and authority to execute and deliver this Agreement and to carry out and perform its obligations under the terms of this Agreement. 5.3 Subsidiaries. The Corporation has no subsidiaries or affiliated ------------ companies and does not otherwise own or control, directly or indirectly, any equity interest in any corporation or entity. 5.4 Capitalization. The authorized capital stock of the Corporation on -------------- February 4, 2000 consists of a) 6,315,000 shares of common stock issued and outstanding and b) 540,500 Class A special shares convertible to 3.7 common shares each issued and outstanding on February 4, 2000. The outstanding shares have been duly authorized and validly issued, and are fully paid and nonassesable and were issued in compliance with all relevant securities laws. The Corporation has reserved: (i) 600,000 shares of common stock for issuance upon exercise of various options held by directors, employees and service providers; and (ii) 1,999,850 shares of common stock for issuance upon conversion of Class A special shares; and there are (i) no other options, warrants or other rights to purchase any of the Corporation 's authorized and unissued capital stock, or any security directly or indirectly convertible into or exchangeable for shares of capital stock of the Corporation, (ii) so far as known to the Corporation, no voting trust or voting agreements among, or irrevocable proxies executed by, stockholders of the Corporation, (iii) so far as known to the Corporation, no agreements among stockholders proving for the purchase or sale of the Corporation 's capital stock, and (iv) no obligations (contingent or otherwise) of the Corporation to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof. All such issued and outstanding options and warrants have been duly and validly issued in compliance with applicable federal and state securities laws. 5.5 Authorization. All corporate action on the part of the Corporation, ------------- its directors and shareholders necessary for the authorization, execution, delivery and performance of this Agreement and delivery of the shares has been taken prior to the Effective Date. The shares are free of any liens, encumbrances, or restrictions and are not subject to any preemptive rights or rights of first refusal. 5.6 Liabilities. Except as set forth in Corporation's financial statements ----------- as of March 31, 1999, copies of which have been heretofore delivered to Buyer, the Corporation has no liabilities or obligations, absolute or contingent, except liabilities and obligations which have been incurred in the ordinary course of business none of which, in the aggregate, exceeds $10,000, except such liabilities as are disclosed in the financial statements of the Corporation in Exhibit E. 5.7 Title to Properties and Assets; Liens, Etc. Except for purchase and -------------------------------------------- lease and similar arrangements covering minor assets such as copiers and postage meters, the Corporation has good and marketable title to its material properties and assets, is not in default of any material lease, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than the lien of current taxes not yet due and payable, except as set forth in Exhibit G. 5.8 Compliance with Other Instruments. Corporation is not in violation of --------------------------------- any term of its Articles or Bylaws, or in any material respect of any term or provision of the mortgages, indebtedness, indentures, contracts, agreements, or instruments or any other material agreement, or any judgment or decree. The best of its knowledge, the Corporation is not in violation of any order, statute, rule or regulation applicable to the Corporation where such violation would materially and adversely affect the Corporation; to the Corporation's actual knowledge, the Corporation is not in violation of any order, statute or regulation applicable to the Corporation. The execution, delivery and performance of and compliance with this Agreement has not resulted and will not result in any material violation of, or conflict with, or constitute a material default under, the Corporation's Articles or Bylaws or any of such material agreements nor result in the creation of, or mortgage, pledge, lien, encumbrance or charge upon any of the material properties or assets of the Corporation. 5.9 Litigation. There are no actions, suits, proceedings or investigations ---------- pending against the Corporation or its properties or in which the Corporation is the plaintiff, before any court or governmental agency nor, to the Corporation's knowledge, is there any threat thereof or any reasonable basis therefor. 5.10 Employees. To the Corporation's knowledge, no employee of the --------- Corporation is in violation of any material term of any employment contract, if any, exclusive agreement or any other contract or agreement relating to the relationship of such employee with the Corporation or any other party because of the nature of the business conducted or to be conducted by the Corporation. The Corporation is not aware that any officer or key employee, or that any group of key employees, intends to terminate his or its employment with the Corporation, nor does the Corporation have a present intention to terminate the employment of any key employee. The Corporation has in all material respects complied with all applicable Provincial and federal laws related to employment. 5.11 Exclusive Licenses. The Corporation (i) owns and has the right to use, ------------------ free and clear of all liens, charges, claims and restrictions an Exclusive License Agreement between the Corporation and Infotrust TELCO and an Exclusive Re-Sellers Agreement with Universal Office Corporation, attached hereto as Exhibit H and Exhibit I, necessary for the operation of its business now conducted and proposed to be conducted, and (ii) the Corporation is not obligated or under any liability whatsoever to make payments by a way of royalties, fees, or otherwise to any owner or licensee of the Exclusive License of the Exclusive License Agreement, with respect to the use thereof or in connection with the conduct of its business, or otherwise. To the knowledge of the Corporation, the Corporation has not infringed upon nor is it infringing such Exclusive License or other intellectual property of any third party. The Company is not aware of any violation of the Company's Exclusive License Agreement, or its Exclusive Re-Sellers Agreement or other proprietary rights. 5.12 Duties to Option Holders. Pursuant to Section 4.4, the Corporation ------------------------- holds a grant of authority to hold, in a fiduciary capacity, such shares of Pacific Telcom, Inc. common stock equivalent to accommodate the exercise of outstanding options of employees and certain special service providers of the Corporation. The Corporation agrees to perform the distribution of such common shares of Buyer to such option holders promptly upon the exercise of such options and it is agreed that the Corporation shall be entitled to retain the proceeds of such exercise. The Corporation agrees to indemnify and hold harmless Buyer and its officers, directors and agents harmless from any and all damages, losses, costs, or expenses suffered or incurred, directly or indirectly, through application of the Corporation's or Buyer's assets or otherwise, as a result of any and all claims, demands, suits, causes of action, proceedings, judgments, and liabilities, including reasonably counsel fees incurred in litigation or otherwise, assessed, incurred or sustained by or against any of them with respect to or arising out of any such indicia fiduciary duty by the Corporation to any such option holder. 5.13 Brokers or Finders. There are no claims for brokerage commissions, -------------------- finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of the Corporation. 5.14 Operating Rights. The Corporation has all operating authority, ----------------- licenses, franchises, permits, certificates, consents, rights and privileges (collectively "Authority") as are necessary or appropriate to the operation of its business as now conducted and as proposed to be conducted and which the failure to possess would have a material adverse effect on the assets, operations or financial condition of the Corporation. Such Authority are in full force and effect, no violations have been or are expected to have been recorded in respect of any such authority, and no proceeding is pending or, to the knowledge of the Corporation, threatened that could result in the revocation or limitation of any such authority. The Corporation has conducted its business so as to comply in all material respects with all such Authority. 5.15 Minute Books. The minute books of the Corporation contain a complete ------------- summary of all meetings of directors and shareholders since the time of incorporation and reflect all transactions referred to in such minutes accurately in all material respects. 5.16 Taxes. All federal and Provincial tax returns required to be filed by ----- the Corporation have been filed and are true in all material respects, and all taxes, assessments, fees, and other governmental charges upon the Corporation, or upon any of its properties, income, or franchises, shown in such returns to be due and payable have been paid except those contested by the Corporation in good faith as described in Exhibit J and for which adequate reserves have been set up; or if any such tax returns have not been filed or if any such taxes have not been paid or so reserved for, the failure to so file or to pay would not in the aggregate have a material adverse impact on the properties or business of the Corporation. 5.17 Disclosure. None of the representations or warranties made by the ---------- Corporation in this Agreement and no written information in the Exhibits hereto or otherwise furnished to the Buyers in this Agreement or Exhibits contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein and therein not misleading. The Corporation is not aware of any fact which has not been disclosed to the Buyers which would have a material adverse effect on the Corporation's business, prospects, condition, affairs or operations. The Corporation acknowledges that all information set forth in the Exhibits solely from reliance from information supplied to Buyer by the Corporation and that the Corporation is not aware of any error, omission, or untrue statement of a material fact in the information relied upon by the Buyer in the preparation of the Exhibits. 5.18 Transactions with Affiliates. Except for (i) regular salary payments ------------------------------ and fringe benefits under an individual's compensation package with the Corporation, and (ii) certain advances that have been made to the Corporation by certain key employees as described on Exhibit K, and (iii) certain related party transactions involving consulting fees and rent as described in Exhibit L, none of the officers, employees, directors, or affiliates of the Corporation, or members of their families is a party to any agreements, understandings, or proposed transactions with the Company. The Corporation has not guaranteed or assumed any obligations of the Corporation's officers, directors, or employees. 5.19 Corporation's Contracts. Except with respect to contracts or ------------------------ understandings between the Corporation and its customers entered into in the ordinary course of business, all material contracts and agreements of the Corporation (i) with expected receipts or expenditures in excess of $10,000, or (ii) with provisions restricting or affecting the development or distribution of the Corporation's products or services, or (iii)that provide indemnification by the Corporation with respect to infringements of proprietary rights, to which the Corporation is a party as of the Effective Date are listed on Exhibits H and I. All such contracts and agreements are legally binding, valid, and in full force and effect in all material respects. The Corporation has received no indication of reduced activity relating to any contract or agreement with any customer of the Corporation, and the Corporation has no knowledge of any current customer of the Corporation that intends to reduce or discontinue its business with the Corporation. 5.20 Financial Statements. The Corporation has delivered to the Buyers --------------------- un-audited financial statements for the periods ending March 1, 1999. All such financial statements fairly present the financial condition of the Corporation as of such dates and the results of operations of the Company for such respective periods. 5.21 Absence of Certain Changes. There has not been since January 1, 2000 ---------------------------- up to and including the Effective Date, any event or condition of any character which has materially and adversely affected the Corporation's business, prospects, conditions, affairs, operations, properties or assets, including but not limited to: 5.21.1 any material adverse change in the financial condition, assets, liabilities or business of the Corporation; 5.21.2 any damage, destruction or loss of any of the properties or assets of the Corporation (whether or not covered by insurance) materially and adversely affecting the business or plans of the Corporation; or 5.21.3 any labor trouble, or any other event or condition of any character, which the Corporation knows or has reason to know would materially and adversely affect the business or plans of the Corporation. 5.22 Employee Benefits. Except for stock options outstanding on the ------------------ Effective Date, forth in Exhibit M, the Corporation has no other currently existing employment, bonus, pension, profit sharing, deferred compensation, stock bonus, retirement, stock purchase, phantom stock or similar plans. 5.23 Absence of Undisclosed Liabilities. The Corporation does not have any ----------------------------------- outstanding claims, liabilities, obligations, or indebtedness, whether accrued, absolute, contingent, or otherwise, except as set forth in the Balance Sheet or referred to in the footnotes thereto, other than liabilities incurred subsequent to the Balance Sheet Date in the ordinary course of business. The Corporation is not in default in respect of the terms or conditions of any indebtedness. Section 6. Representations and Warranties of the Buyer. The Buyer ------------------------------------------------- represents and warrants to the Corporation with respect to the purchase of the Shares as follows: 6.1 Organization. Buyer is a Corporation duly organized and existing under ------------ the laws of the State of Illinois, and has all requisite corporate authority to make, execute, deliver and perform this Agreement and this Agreement has been duly authorized and approved by all required corporate action of the Buyer. Buyer has an authorized single class of common stock in the amount of 25,000,000 shares. On the Effective Date, Buyer has 8,949,459 outstanding shares. 6.2 No violation. Neither the execution and delivery of this Agreement, ------------ nor the consummation of the transactions contemplated within the Agreement will constitute a violation of, or be in conflict with, or result in a cancellation of, or constitute a default under, or create or cause the acceleration of any debt, obligation or liability affecting, or resulting in the creation or imposition of any security interest, lien, or other encumbrance upon any of the assets owned or used by, or any of the capital stock of the Buyer under: (i) any term or provision of the Articles of Incorporation or by-laws of Buyer; (ii) any judgment, decree, order, regulation, or rule of any court or government authority; (iii) any statute or law; (iv) any contract, agreement, indenture, lease or other commitment to which Buyer is a party or by which it is bound; or (v) cause any material change in the rights or obligations of any party under which such contract, agreement, indenture, or commitment. 6.3 No Impairment. Buyer is not impaired by any law, regulation or order ------------- of any court or federal, state, municipal or other governmental department, commission, board, bureau, agency, or instrumentality and: (i) there are no law suits, proceedings, claims, or governmental investigations pending or to the knowledge of Buyer, threatened against or involving Buyer which could materially impair its business; and (ii) there are no judgments, consents, decrees, injunctions, or any other judicial or administrative mandates outstanding against Buyer which impair and adversely affect its property, assets, liabilities, financial condition, results of operations, or business prospects or its right to conduct is business as presently conducted. 6.4 Disclosure. None of the representations or warranties made by the ---------- Buyer in this Agreement and no written information furnished to the Selling Shareholders in this Agreement or otherwise, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein and therein not misleading. The Buyer is not aware of any fact which has not been disclosed to the Selling Shareholders which would have a material adverse affect on the rights and obligations of the Selling Shareholders. 6.5 Shares of the Buyer. The outstanding shares of the Buyer have been ------------------- duly authorized and validly issued, and are fully paid and non-assessable and were issued in compliance with all applicable federal and state securities laws. The issuance of Buyer's shares transferred to the Selling Shareholders herein are with out the requirement of regulatory approval from any applicable federal and state regulatory agency. The common shares of the Buyer paid to the Selling Shareholders hereunder are, at the Effective Date, not publicly tradable, have not been registered to be traded publicly on the Effective Date, and on the Effective Date no public market exists for the trading of such common shares of the Buyer. Certificates representing the authorized and issued common shares of the Buyer as part of the Purchase Price hereunder are issued with a restrictive legend pursuant to relevant federal securities laws and rule making of the United States Securities and Exchange Commission including the Securities and Exchange Act of 1933, the Securities Exchange Act of 1934, Regulation D thereunder and Rule 144 thereunder. As such, shares of the Buyer acquired by the Selling Shareholders as part of the Purchase Price herein, are not freely transferable or freely tradable until such time as a publicly tradable market for the common shares of the Buyer does exist, whereupon the general counsel of the Buyer shall, upon the request of a Selling Shareholder, issue such a letter of opinion to the public transfer agent of the Buyer setting forth such an opinion regarding the free tradability and transferability of common shares of the Buyer held by a Selling Shareholder. Thereupon, such shares are deemed to be freely tradable. Costs of such letter of opinion shall be paid by the Buyer. The Buyer shall use its best efforts to register all of its outstanding common shares at the time of its public offering. 6.6 Dilution. Buyer represents that shares of the Buyer acquired by the -------- Selling Shareholders pursuant to the subject transaction are subject to significant and substantial dilution in the future. Buyer hereby discloses that Selling Shareholders shall not be acquiring a substantial enough proportion or percentage of the outstanding issuance of common stock of the Buyer to acquire management control of the Buyer, elect directors or officers of the Buyer or in other method or manner prevent such future dilution. Selling Shareholders acknowledge the representation further of Buyer that, in the event such dilution occurs, it is foreseeable that such a dilution would be substantial and would have a significant effect in reducing the percentage of ownership of the Selling Shareholders, individually and collectively. 6.7 Access to Data. Buyer has had an opportunity to discuss the ---------------- Corporation's business, management and financial affairs with its management and the opportunity to review the Corporation's most recent un-audited financial statement for a complete fiscal year and business plan. Buyer has also had an opportunity to ask questions of officers of the Corporation which questions were answered to its satisfaction. 6.8 Brokers or Finders. The Buyer has not, and will not, incur, directly ------------------ or indirectly, as a result of any action taken by such Buyer, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement. 6.9 Tax Liability. To the extent it deems necessary, it has reviewed with -------------- its own tax advisors the federal, state, local and foreign tax consequences of this investment and the transactions contemplated by this Agreement. It relies solely on such advisors and not on any statements or representations of the Corporation or any of its agents. It understands that it (and not the Corporation) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. Section 7. Representations and Warranties of Selling Shareholders. The Selling ------------------------------------------------------ Shareholders (collectively and individually severally represent and warrant to the Buyer with respect to the purchase of the shares as follows: 7.1 Access to Data. The Selling Shareholders have had an opportunity to ---------------- discuss the terms and conditions of the Purchase Agreement with the Corporation's management and have had an opportunity to ask questions of officers of the Corporation, which questions were answered to their satisfaction. 7.2 Authority. The Selling Shareholder has all requisite legal power and --------- authority to execute and deliver this Purchase Agreement and certificates for the shares of the Corporation hereunder and to carry out and perform its obligations under the terms of this Agreement. 7.3 Disclosure. To the best of his or her knowledge, this Agreement, with ---------- the Exhibits thereto, when taken as a whole, does not contain any untrue statement of a material fact concerning the corporation or omit to state a material fact necessary in order to make the statements concerning the corporation contained herein not misleading in light of the circumstances under which they were made. 7.4 Impairment. There are no actions, suits, proceedings, which impair in ---------- any way such Selling Shareholders' ability to enter into and fully perform its commitments and obligations under this Agreement or the transactions contemplated hereby. 7.5 Brokers or Finders. The Selling Shareholder has not, and will not, -------------------- incur, directly, or indirectly, as a result of any action taken by such Selling Shareholder, any liability for brokerage or finders' fees or agent's commissions or any similar charges in connection with this Agreement. 7.6 Compliance With Other Instruments. The execution, delivery and ------------------------------------ performance of and compliance with this Agreement, and the transference and delivery of shares will not result in any material violation of, or conflict with, or constitute a material default under any agreement, lien, mortgage, pledge, encumbrance or collateralization on the part of the Selling Shareholder. 7.7 General Release. In consideration of the agreements made hereunder, ---------------- each of the Selling Shareholders hereby release and forever discharge the Buyer and the Corporation, and each of their shareholders, officers, agents, representatives, attorneys, and employees, past, present, and future, individually and collectively for any and all claims, demands, causes of action or liabilities which each of the Selling Shareholders ever had or now has, apart from vested stock options, advances to the Corporation or consulting fees accrued, which each of the Selling Shareholders ever had or now has, or which their heirs, executors or administrators hereafter can, shall, or may have upon or by a reason of any matter or cause whatsoever, whether known or unknown, suspected or unsuspected, arising on or prior to the Effective Date, arising out of or in any way connected with each of the Selling Shareholders' relationship to the Corporation. Notwithstanding the above, this release shall not affect the Selling Shareholders' rights and obligations otherwise set forth in this Agreement. 7.8 Tax Returns. The Selling Shareholders will be solely responsible for ------------ any and all taxes incurred as a result of any taxable event to them generated by the entry into or performance of any term of this Agreement. Section 8. Conditions to Buyer's Obligations. The exchange of documents and ----------------------------------- shares by the parties purchase of the shares on the Effective Date is conditioned upon and subject to the fulfillment of obligations of the Sellers at or prior to the Effective Date as contained herein. 8.1 List of Selling Shareholders. The Corporation shall deliver to the ------------------------------- Purchaser on or before the Effective Date, relative to surviving shareholders, a list of: (i) unexercised options of the Corporation setting forth the name of the option holder, the address, the number of unexercised options, the exercise price of such options and the expiry date, to be set forth as Exhibit M; (ii) a list of remaining holders of Class A special shares setting forth the names of such surviving shareholders, addresses, number of shares on the Effective Date and the amount of unpaid cumulative dividends stated in US Dollars and set forth in this Agreement as Exhibit N; and (iii) a true and correct copy of the terms of the preferences and rights of Class A special shares, as set forth in the Articles of Incorporation, by-laws, or corporate minutes, to be attached to this Agreement as Exhibit O. 8.2 Supplemental Due Diligence. The Corporation shall provide the Buyer ---------------------------- not later than seven days from the Effective Date with a true and correct copy of the Articles of Incorporation of the Corporation, the by-laws of the Corporation, the complete corporate minutes of the Corporation, and a certificate of good standing, or such equivalent as is applicable to the Corporation. 8.3 Stock Certificates. Buyer shall receive stock certificates of the ------------------- Selling Shareholders representing all of the common shares of stock of the Corporation, duly endorsed for transfer as provided herein at the Effective Date, or accompanied by executed assignments separate from certificates with a stock power, in a form satisfactory to the Buyer. All endorsements on certificates, assignments or stock powers shall be signature guaranteed. 8.4 No Material Adverse Change. Prior to the Effective Date, there shall -------------------------- be no material adverse change in the assets or liabilities, the business or condition, financial or otherwise of the Corporation and the Sellers' representative shall deliver to Buyer a certificate in the form set forth as Exhibit P, dated the closing date, to such effect. Section 9. Conditions to the Sellers' Obligations. The exchange of documents --------------------------------------- and shares by the parties on the Effective Date is conditioned upon and subject to the fulfillment of the conditions set forth below. 9.1 Receipt of Purchase Price. The Selling Shareholder(s) shall receive ------------------------- the Deposit and the shares pursuant to the terms of Section 2.0. 9.2 Proceedings. All proceedings to be taken in connection with the ----------- transactions contemplated by this Agreement and all documents incident thereto shall be reasonably satisfactory in form and substance to Sellers and counsel. 9.3 Performance of Obligations. The Buyer shall have performed and ---------------------------- complied with all agreements and conditions herein required to be performed or complied with by them on or before the Effective Date. Section 10. General Provisions. ------------------- 10.1 Amendment and modification. Subject to applicable law, this Agreement --------------------------- may be amended, modified or supplemented, as the parties mutually agree, by a written Agreement signed by a duly appointed representative of the Buyer and a duly appointed representative of the Selling Shareholders. 10.2 Expenses. The parties hereto shall pay all of their own expenses -------- relating to the transactions contemplated by this Agreement, including the fees and expenses of their respective counsel, accountants, and financial advisers. 10.3 Governing Law. The interpretation and construction of this Agreement -------------- and all matters relating hereto shall be governed by the laws of the State of Illinois relating to contracts made and to be performed in Illinois. 10.4 Waiver of Terms. Any of the terms or conditions of this Agreement may ---------------- be waived at any time by the party or parties entitled to the benefits thereof, but only by a written notice signed by an authorized representative of the party or parties waiving such terms or conditions. 10.5 Captions. The article and section captions used herein are for -------- reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement. 10.6 Publicity. Prior to the Effective Date, none of the parties hereto --------- shall issue any press release or make any other statement to the media relating to this Agreement or the matters contained herein without obtaining the prior approval of the Buyer. 10.7 Notices. All notices, requests, demands and other communications ------- required or permitted hereunder will be in writing and will be deemed to have been duly given when delivered by hand or by air express courier. If to the Buyer: Pacific Telcom, Inc. 5604 Sligo St. Las Vegas, NV Attention: Bill J. Angelos With a copy to: Kenneth G. Mason General Counsel 33 N. LaSalle St., Ste. 2131 Chicago, IL 60602 If to the Sellers to: Richard C. Goldstein EasyTel Canada 18 King Street East, Ste. 1402 Toronto, Ontario M5C1C4 Canada With a copy to: Barry M. Polisuk Garfinkle, Biderman 1 Adelaide St. East #1401 Toronto, ON M5C2V9 10.8 Entire Agreement. This Agreement contains the entire understanding ----------------- between and among the parties and supersedes any prior understandings and agreements among them respecting the subject matter of this Agreement. 10.9 Agreement Binding. This Agreement shall be binding upon the heirs, ------------------ executors, administrators, successors and assigns of the parties hereto. 10.10Pronouns and Plurals. All pronouns and any variations thereof shall -------------------- be deemed to refer to the masculine, feminine, neuter, singular, or plural as the identity of the person or persons may require. 10.11Presumption. This Agreement or any section thereof shall not be ----------- construed against any party due to the fact that said Agreement or any section thereof was drafted by said party. 10.12Further Action. The parties hereto shall execute and deliver all --------------- documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of the Agreement. 10.13Parties in Interest. Nothing herein shall be construed to be to the ------------------- benefit of any third party, nor is it intended that any provision shall be for the benefit of any third party. 10.14Savings Clause. If any provision of this Agreement, or the --------------- application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto on the day and year first written above. PACIFIC TELCOM, INC. EASYTEL CANADA CORPORATION an Illinois Corporation an Ontario Corporation By:____________________________ By:____________________________ Bill J. Angelos, President Richard C. Goldstein President Selling Shareholders By:____________________________ Richard C. Goldstein Sellers' Representative EX-10.13 21 0021.txt EXHIBIT "A" ----------- Section 3.3.1 - - -------------- SHAREHOLDER'S LIST OF EASYTEL CANADA FEBRUARY 11, 2000 Set forth below are the existing holders of common stock on the Effective Date.
SHARES OF SHARES OF SHAREHOLDER NAME EASYTEL CANADA PACIFIC TELCOM, INC. - - ----------------------------- -------------- -------------------- Richard C. Goldstein 1,200,000 134,607 53 Hetherington Crescent Thornhill, Ontario L4J 2M9 Cindy Black Goldstein 1,200,000 134,607 53 Hetherington Crescent Thornhill, Ontario L4J 2M9 Melissa Goldstein 600,000 100,954 53 Hetherington Crescent Thornhill, Ontario L4J 2M9 Jacob Goldstein 600,000 100,954 53 Hetherington Crescent Thornhill, Ontario L4J 2M9 Goldstein Family Trust 300,000 33,649 53 Hetherington Crescent Thornhill, Ontario L4J 2M9 First Republic Securities 2,100,000 168,260 53 Hetherington Crescent Thornhill, Ontario L4J 2M9 InfoUSA 630,000 70,669 8530 Wilshire Blvd., Ste. 404 Beverly Hills, CA 90211 Sub-total 6,630,000 743,703 Richard Bogoroch 85,100 9,546 15 Caravan Dr. North York, ON M3B 1M9 Michael Bourgon 42,550 4,773 18 Hume Dr. Cambridge, ON N1T 2W1 Brian Crossley 85,100 9,546 844 Maple Ave. Milton, ON L9T 3N4 Nancy Dal Bello 85,100 9,546 35 Peru Rd. Milton, ON L9T 2V5 Bruce Davidson 166,500 18,677 430 Bell St. Milton, ON L9T 2B5 Greg Boehm & Assoc. Inc. 85,100 9,546 Investment Centre C-100 Victoria St. North Kitchener, ON N2H 6R5 Eldon Kelly 85,100 9,546 2572 Misener Ct. Mississauga, ON L5K 1N1 Keith Bundy 118,400 13,281 356 Bell St. Milton, ON L9T 2B4 David Jeffrey 92,500 10,376 1795 Solitaire Ct. Mississauga, ON L5L 2P2 Anne Lotz-Turner 85,100 9,546 7611 Appleby Line Milton, ON L9T 2Y1 Gerald McGibbon 92,500 10,376 2135 Madden Blvd. Oakville, ON L6H 3M3 Loretto Sarracini 85,100 9,546 1403-1155 Bough Beeches Blvd. Mississauga, ON L4W 4N9 Louis Solakofski 85,100 9,546 893-B Adelaide St. West Toronto, ON M6J 3T1 Frank Esposito 92,500 10,376 4040 Erindale Station Road Mississauga, ON L5C 3T8 Edward O'Rourke 85,100 9,546 29 Strathroy Crescent Waterdown, ON L0R 2H0 Betty MacDonald 185,000 20,752 714 Robertson Crescent Milton, ON L9T 4V5 Colin MacKenzie 96,200 10,791 543 Marcellus Dr. Milton, ON L9T 4E7 Charles Sammut 85,100 9,546 592 White Oak Dr. Cambridge, ON N1S 4J6 Hazel Schachner 85,100 9,546 7035 Twiss Rd. R.R. #3 Campbellville, ON L0P 1B0 Beryl Stevenson 85,100 9,546 79 Mary St. Georgetown, ON L7G 4V9 Ken Thompson 92,500 10,376 297 Oak St. Milton, ON L9T 1H6 Sub-total 1,999,850 224,328 Barry Polisuk 60,000 6,730 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Randall Skala 60,000 6,730 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Lisa MacLeod 50,000 5,609 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Andrea Hardy 40,000 4,487 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Andy Walczak 25,000 2,804 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Jeff Seaton 10,000 1,122 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Bob Coffey 10,000 1,122 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Erik Schwartz 15,000 1,683 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Markus Sauerbier 15,000 1,683 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Sub-total 285,000 31,969 Grand Total 8,914,850 1,000,000
EXHIBIT "B" ----------- Section 3.3.2 - - -------------- February 11, 2000 Illinois Stock Transfer Co. 209 W. Jackson Blvd., Ste. 903 Chicago, IL 60606 RE: Pacific Telcom, Inc. Acquisition of EasyTel Canada Dear Sirs: Please be advised that I am the Secretary and General Counsel to Pacific Telcom, Inc. Be further advised that on this date, a Stock Purchase Agreement was entered into between Pacific Telcom, Inc. and shareholders of EasyTel Canada, a corporation organized under the laws of the Province of Ontario whereby Pacific Telcom, Inc. is purchasing 100% of the issued and outstanding shares of the common stock of EasyTel Canada. As consideration, Pacific Telcom, Inc. is issuing 1,000,000 authorized newly issued shares to the common shareholders of EasyTel Canada and pursuant to the authority delegated to the undersigned you are hereby authorized and directed to issue, upon Original Issue, such shares in book entry form as separately directed. They have prepared a final shareholders list effective this date stating the name, address and number of shares of Pacific Telcom, Inc. each such shareholder is receiving in exchange for that shareholder conveying its common shares of EasyTel Canada to Pacific Telcom, Inc. It is agreed between the parties that shareholders of EasyTel Canada shall not on the date hereof receive in excess of 1,000,000 of Pacific Telcom, Inc. Pursuant to the by-laws of Pacific Telcom, Inc., you are hereby prevented from issuing any fractional shares and that all issuances of Pacific Telcom, Inc. stock on a stock-for-stock basis must be in whole shares. It is the agreement between the parties to the Stock Purchase Agreement that at the date hereof be the Effective Date of this transaction, this direction is being forwarded to you to issue 1,000,000 of Pacific Telcom, Inc. common stock in book form to the Selling Shareholders of EasyTel Canada in share amounts set forth in their shareholder list. The dates of issuance is to be February 11, 2000 and all shares in book form should be in accounts marked stop/restricted based upon such issuance date. Illinois Stock Transfer Co. February 11, 2000 Page 2 Upon my personal delivery to your offices of actual certificates representing the endorsed shares of the Selling Shareholders of their EasyTel Canada common stock, you are directed to convert the Selling shareholder's ownership from book form to certificated form and to transmit such stock certificates to the Selling Shareholders, individually with a transmittal letter substantially in the form set forth as an enclosure. Upon your receipt of this letter, please call me at (312) 372-6969 to signify your receipt and acknowledgment of the terms of this letter of instruction. Very truly yours, Kenneth G. Mason General Counsel and Secretary KGM/mpz Enclosure EXHIBIT "C" ----------- Section 3.3.3 - - -------------- Dear (Shareholder): It is my extreme pleasure to enclose your stock Certificate(s) for _________ shares of common stock of Pacific Telcom, Inc. The Certificate(s) represents your ownership in the holding company, exchanged for your old certificate(s) in EasyTel Canada Corporation. I appreciate your confidence in the company and will always work very hard to make sure you receive a proper return on your investment. As always, feel free to contact me with any comments or concerns you may have in the future. Respectfully yours, Bill J. Angelos President Pacific Telcom, Inc. Enclosure EXHIBIT "D" ----------- Section 4.4 - - ------------ EasyTel Canada Post Transaction Operation Expenses 1. Rent 2. Utilities 3. Customer Service salaries 4. Operating officer salary 5. Bookkeeper salary EXHIBIT "E" ----------- Section 4.7 - - ------------ EASYTEL CANADA CORPORATION UN-AUDITED FINANCIAL STATEMENTS MARCH 31, 1999 EXHIBIT "F" ----------- Section 5.1 - - ------------ ARTICLES OF INCORPORATION OF EASYTEL CANADA CORPORATION EXHIBIT "G" ----------- Section 5.7 - - ------------ STATEMENT OF LIENS OF CORPORATION 1. Bank of Montreal 2. Bank of Montreal Both liens represent security given pursuant to the Corporation's Small Business Loan. EXHIBIT "H" ----------- Section 5.11 - - ------------- EXCLUSIVE LICENSE AGREEMENT BETWEEN INFOTRUST TELCO AND EASYTEL CANADA CORPORATION EXHIBIT "I" ----------- Section 5.11 - - ------------- EXCLUSIVE RE-SELLERS AGREEMENT BETWEEN UNIVERSAL OFFICE CORPORATION AND EASYTEL CANADA CORPORATION EXHIBIT "J" ----------- Section 5.16 - - ------------- CONTESTED TAXES AND ASSESSMENTS The Corporation has no contested taxes and assessments and has no reserve, accordingly. EXHIBIT "K" ----------- Section 5.18 - - ------------- ADVANCES TO THE CORPORATION BY KEY EMPLOYEES The Corporation has received and has shown on its balance sheet shareholders' advances in the amount of $37,039 from Richard C. Goldstein. EXHIBIT "L" ----------- Section 5.18 - - ------------- RELATED PARTY TRANSACTIONS 1. The Corporation incurred in 1999 a consulting fee in the amount of $40,000 paid to First Republic Securities Corporation, a Shareholder of the Corporation. 2. In 1999, First Republic paid rent in the approximate amount of $15,000 for office space to the corporation, for which the corporation provided administrative services valued at approximately $5,000. EXHIBIT "M" ----------- Section 5.22 - - ------------- OUTSTANDING STOCK OPTIONS Set forth below are the existing holders of outstanding Stock Options on the Effective Date. Name of Option Holder Number of Options Expiry Date - - ------------------------ ------------------- ------------ None EXHIBIT "N" ----------- Section 8.1 - - ------------ CLASS A SPECIAL SHAREHOLDERS Set forth below are the existing shareholders of the Class A special shares on the Closing Date. Unpaid Name of Shareholder Number of Shares Cumulative Dividends - - --------------------- ------------------ --------------------- None EXHIBIT "O" ----------- Section 8.1 - - ------------ RIGHTS AND PREFERENCES OF CLASS A SPECIAL SHAREHOLDERS Set forth on Pages 3, 3A and in the attachments. EXHIBIT "P" ----------- Section 8.4 - - ------------ NO MATERIAL ADVERSE CHANGE SELLERS' REPRESENTATIVE CERTIFICATE ----------------------------------- RICHARD C. GOLDSTEIN, the Sellers' Representative herein represents to Buyer that prior to the Effective Date herein, there have been no material adverse change in the assets or liabilities, the business or condition, financial or otherwise, of the Corporation, its employees or customers, including, but not limited to, those changes that are a result of any legislative or regulatory change, revocation of any license or right to do business, fire, explosion, accident, casualty, labor trouble, flood, riot, condemnation or act of God or other public force or otherwise. Dated: February 11, 2000 ____________________________ Richard C. Goldstein Sellers' Representative EXHIBIT "Q" ----------- Section 5.0 - - ------------ SCHEDULE OF EXCEPTIONS I, Richard C. Goldstein, President of EasyTel Canada Corporation, do hereby state that the representations and warranties of the Corporation made herein and contained in this Agreement and/or in the Exhibit delivered pursuant hereto are true and correct, to the best of my knowledge, and that any exceptions as to the representations and warranties of the Corporation as set forth in the Stock Purchase Agreement to which this Certificate is an Exhibit are as follows: None ____________________________ Richard C. Goldstein, President EasyTel Canada Corporation EX-10.14 22 0022.txt AGREEMENT TO TERMINATE ---------------------- This Agreement to Terminate ("Termination Agreement") dated this 6th day of November, 2000 by and among PACIFIC TELCOM, INC., an Illinois corporation ("Buyer"), EASYTEL CANADA CORPORATION, ("Buyer"), a corporation organized under the laws of the Province of Ontario (the "Corporation"), and RICHARD C. GOLDSTEIN, being the duly appointed Sellers' Representative of the Selling Shareholders ("Sellers" or "Selling Shareholders"). WITNESSETH WHEREAS, the Buyer, the Corporation and the Selling Shareholders have entered into a Stock Purchase Agreement ("Agreement") whereby the Buyer acquired 100% of issued and outstanding shares of common stock of the Corporation; WHEREAS, the Agreement provides for certain circumstances and events to occur regarding Buyer's shares of common stock, the non occurrence of which gives rise to Sellers' right to terminate and unwind the Agreement and its terms. WHEREAS, it is mutually acknowledged by the parties that Buyer will be unable to fulfill said circumstances and events concerning its common shares of stock, to wit, that the common shares of Pacific TelCom, Inc., will be publicly tradable on or before November 15, 2000; and WHEREAS, the parties to the Agreement, pursuant to the exercise option of the Selling Shareholders to deem the Agreement terminated, do hereby act on their mutual best interests by the orderly and mutually agreeable termination and unwinding of said Agreement by the terms of this Termination Agreement as set forth as follows: 1. Acknowledgment of Rights. The parties acknowledge that it has been the -------------------------- duty of the Buyer to complete the process of having its common shares of stock publicly tradable on or before November 15, 2000. That pursuant to Section 4.1 of the Agreement regarding Finality, the Sellers retained the option to terminate the Agreement and to unwind and undo the subject transaction of the Agreement. 2. Exercise of Option. Buyer and Sellers agree, based upon the terms of -------------------- Section 4.1 of the Agreement, that the exercise of the option of the Sellers to terminate the Agreement and to undo the subject transaction is duly made by the Sellers and has been communicated to the Buyer, as a valid exercise of the option to terminate set forth in the Agreement. 3. Terms of Termination. -------------------- 3.1 Return of Selling Shareholders Shares. Pursuant to this ------------------------------------------- Termination Agreement, the Buyer shall cause the return of the certificates representing the outstanding common shares purchased by the Buyer described in Section 3.2 of the Agreement. Buyer shall direct the Transfer Agent of the Buyer to forward said shares in a manner consistent with this Termination Agreement. 3.2 Return of Purchase Price. --------------------------- 3.2.1No Return of Payment of Cash. Pursuant to Section 2.2 of the ---------------------------- Agreement, Buyer has previously paid to Seller in US dollars, the sum of One Hundred Thousand Dollars ($100,000). The parties acknowledge that the entirety of this sum has been applied to the expenses and costs of the operation of the Corporation, in the ordinary course of business. Buyer and Seller agree that there shall be no return of this portion of the payment pursuant to Section 2.2 and that Buyer shall have no right to an accounting thereof. 3.2.2Return of Payment of Common Stock. Pursuant to the terms of ---------------------------------- this Termination Agreement, the Selling Shareholders, by the Sellers' Representative, shall cause the return of the certificates representing Buyer's payment in common stock of the Pacific TelCom, Inc., to the Buyer, at the offices of the Secretary of Buyer. Payment of certificates in the amount of One Million Shares, shall be duly endorsed by the respective Selling Shareholder in a form acceptable to the Buyer. 3.3 Goods and Services Tax Credit. The Buyer shall be eligible ------------------------------ to recover from the Sellers a pro rata portion of any tax refund to the Corporation resulting from the Goods and Services Tax for its fiscal year ending March 31, 2001, if any. 3.4 Returning of Control Operations. On the Closing Date of this ---------------------------------- Termination Agreement, Buyer shall relinquish all corporate control of the Corporation and its operations to the Sellers. 3.5 Separation of Management. From the Closing Date henceforth, ------------------------- all officers and employees of the Corporation shall cease to be employed in any capacity by the Buyer. Any officer of the Corporation serving on the Board of Directors of the Buyer shall execute a resignation effective as of the Closing Date and Sellers shall deliver such resignations at Closing. 3.6 Resulting Joint Venture. To the extent that Buyer has failed ------------------------- to capitalize the installation of telecommunications switches in four new cities in Canada, no resulting joint venture shall survive from the Closing of this Termination Agreement. Sellers shall be entitled to all revenues from the Corporation's operations from the Closing Date forward. 3.7 Liabilities. From the Closing Date, the Sellers shall be ------------ solely responsible for the liabilities incurred by the Corporation. 3.8 Conveyance of Title to Properties. AS of the Closing Date, ---------------------------------- the Buyer hereby reconveys to the Corporation, on behalf of the Sellers, title to all properties conveyed by the Agreement. 3.9 Closing. The parties shall meet at 1:00 p.m. on November 6, -------- 2000 at the offices of the Buyer at Pacific TelCom, Inc., Fountain View Business Park, 4270 S. Decatur Blvd., Ste. A-9, Las Vegas, NV 89103, to conduct the Closing hereunder. 4. Authorizations. All actions undertaken on the part of Buyer, the -------------- Corporation and the Selling Shareholders to enter into this Termination Agreement have been duly and fully authorized on the part of each party. 5. Closing Tax Returns. All federal and Provincial tax returns required -------------------- to be filed as a result of this Termination Agreement shall be done so by the parties and each shall cooperate to effectuate the same on a timely basis. 6. Mutual General Release. In consideration of the mutual covenants and ------------------------ Agreements made hereunder, Buyer, the Corporation, the Sellers and the Shareholders' Representative on behalf of the Selling Shareholders, and each of their shareholders, directors, officers, representatives, attorneys and employees, past, present and future, individually and collectively release each and every other party for any and all causes of actions, claims, demands, and liabilities each party has or now has, by reason of any matter or cause whatsoever arising from or in any way connected to the Agreement or this Termination Agreement. 7. General Provisions. ------------------- 7.1 Expenses. Each party hereto shall pay all of their own expenses -------- related to the transactions contemplated by this Termination Agreement, including the fees and expenses of their respective counsels, accountants, transfer agents and financial advisers. 7.2 Governing Law. The interpretation and construction of this -------------- Agreement and all matters relating hereto shall be governed by the laws of the State of Illinois relating to contracts made and to be performed in Illinois. 7.3 Captions. The article and section captions used herein are for -------- reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement. 7.4 Publicity. Prior to the Closing Date, none of the parties hereto --------- shall issue any press release or make any other statement to the press or media relating to the Agreement or the matters contained therein. 7.5 Notices. All notices, requests, demands and other communications ------- required or permitted hereunder will be in writing and will be deemed to have been duly given when delivered by hand or by air express courier. If to the Buyer: Pacific TelCom, Inc. 4270 S. Decatur Blvd., Ste. A-9 Las Vegas, NV 89103 Attention: Bill J. Angelos With a copy to: Kenneth G. Mason General Counsel 33 N. LaSalle St., Ste. 2131 Chicago, IL 60602 If to the Sellers to: Richard C. Goldstein EasyTel Canada 18 King Street East, Ste. 1402 Toronto, Ontario M5C1C4 Canada With a copy to: Barry M. Polisuk Garfinkle, Biderman 1 Adelaide St. East #1401 Toronto, ON M5C2V9 7.6 Entire Agreement. This Agreement contains the entire ----------------- understanding between and among the parties and supersedes any prior understandings and agreements among them respecting the subject matter of this Agreement. 7.7 Savings Clause. If any provision of this Agreement, or the --------------- application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto on the day and year first written above. PACIFIC TELCOM, INC. EASYTEL CANADA CORPORATION an Illinois Corporation an Ontario Corporation By:____________________________ By:______________________________ Bill J. Angelos, President Richard C.Goldstein, President Selling Shareholders By:____________________________ Richard C. Goldstein Sellers' Representative EX-10.15 23 0023.txt STOCK PURCHASE AGREEMENT ------------------------ THIS STOCK PURCHASE AGREEMENT ("Agreement") dated as of November 6, 2000 by and among PACIFIC TELCOM, INC., a corporation organized under the laws of Illinois, PACIFIC TELCOM [CANADA] INC., a corporation organized under the laws of the Province of Ontario (collectively referred to hereafter as "Buyer"), EASYTEL CANADA CORPORATION, a corporation organized under the laws of the Province of Ontario (the "Corporation") and RICHARD C. GOLDSTEIN, being the duly appointed Sellers' Representative of the Selling Shareholders ("Sellers" or "Shareholders" or "Selling Shareholders"). WITNESSETH ---------- WHEREAS, the Selling Shareholders collectively own of record and beneficially one hundred percent (100%) of the issued and outstanding shares of the common stock of EasyTel Canada consisting of 6,315,000 shares of common stock, no par value (the "Shares"); and WHEREAS, the Sellers own in addition to 6,315,000 common shares issued and outstanding on November 3, 2000, and the further amount of 2,599,850 common shares representing such shares derived from outstanding options for common stock exercised and Class A special shares, nonvoting, converted to common shares pursuant to the Articles of Corporation and by-laws of the Corporation; WHEREAS, Pacific TelCom [Canada] Inc. is a wholly owned subsidiary of Pacific TelCom, Inc., and that the capital stock of Pacific TelCom [Canada] Inc. is comprised of two classes of stock to wit, common shares of no par value and Class A special shares, nonvoting, convertible to common shares of Pacific TelCom, Inc. pursuant to the Articles of Corporation and By-Laws of the Corporation; and WHEREAS, it is the intention of the parties hereto that, upon consummation of the purchase and sale of the Shares pursuant to this Agreement, at Closing effective as of the date hereof (the "Effective Date") Pacific TelCom [Canada] Inc. shall own one hundred percent (100%) of all of the issued and outstanding shares of common stock of the Corporation; and WHEREAS, Pacific TelCom, Inc. has agreed to be a party to this Agreement to guarantee the obligations of Pacific TelCom [Canada] Inc., its wholly owned subsidiary. NOW, THEREFORE, IT IS AGREED: Section 1. Sale and Purchase. ------------------- 1.1 Sale of the Shares. Subject to the terms and conditions herein stated, -------------------- the Selling Shareholders agree to sell, assign, transfer and deliver the shares to Pacific TelCom [Canada] Inc. on the Effective Date, and Buyer agrees to purchase the outstanding common shares from the Selling Shareholders on the Effective Date. The certificates representing the Shares shall be duly endorsed to Pacific TelCom [Canada] Inc., or accompanied by Stock Powers and Assignment Separate from Certificate, duly executed in favor of the Buyer, by the relevant Selling Shareholders. The Selling Shareholders agree to cure at any time any deficiencies with respect to the endorsement of the certificates representing the shares or with respect to the Stock Power with Assignment Separate from Certificate, accompanying any such certificates. Section 2.0 Purchase Price. -------------------- 2.1 Payment. In consideration of the transfer, conveyance and assignment ------- of the Shares, the Buyer shall pay to the Selling Shareholders the sum of Two Hundred Fifty Thousand Dollars ($250,000) and One Million One Hundred Twenty-Five Thousand (1,125,000) duly authorized and issued Class A special convertible shares of Pacific TelCom [Canada] Inc., subject to adjustment as described herein, to be paid in the following manner. 2.2 Payments of Cash. The Buyer shall pay to the Sellers in the form of ------------------ check or by wire transfer, at the direction of the Corporation, the sum of Two Hundred Fifty Thousand US Dollars ($250,000) not later than December 15, 2000. Buyer shall exercise its best efforts to submit this sum prior to December 15, 2000, and Sellers agree to accept prepayments in amounts less than this sum from Buyer on a periodic basis prior to December 15, 2000, to be credited to the amount due the Sellers in cash. 2.3 Payment in Common Stock. Delivery shall be made by the Buyer to the -------------------------- Selling Shareholders on the Effective Date of One Million One Hundred Twenty-Five Thousand (1,125,000) of Class A special convertible shares of authorized stock of Pacific TelCom [Canada] Inc., subject to the terms and conditions of Section 3.3, Section 4.1 and Section 4.2. 2.4 Adjustment to Purchase Price. That portion of the Purchase Price paid ------------------------------ by Buyer to the Selling Shareholders in Class A special shares of Buyer is subject to adjustment, as set forth in Section 4.1 "Finality". It is the agreement of Buyer and Sellers that adjustments to the Purchase Price, pursuant to the provisions regarding "Finality" shall be such that the value received by Sellers from Buyer, after the conversion by the Sellers of the Class A special convertible shares of Pacific TelCom [Canada] Inc. into common shares of Pacific TelCom, Inc., shall be an amount equal to Eleven Million Two Hundred Fifty Thousand Dollars ($11,250,000) as the aggregate value of common shares of Pacific TelCom, Inc., after the net affect of, or pursuant to, an adjustment to the purchase price hereto. 2.5 Separate Agreements. The Buyer's Agreement herein is intended to be -------------------- made with and effective concerning each and every Selling Shareholder of the Corporation. In the event that it is necessary for the Buyer to have a separate Agreement with any such Selling Shareholder, such separate Agreement shall not be deemed a separate sale and such a separate Agreement shall not affect or act to construe an adjustment to the Purchase Price. 2.6 No Prior Credits. It is agreed by the parties that no monies advanced ------------------ by the Buyer to the Sellers under any prior transactions or dealings shall comprise, or in any way be credited to the Purchase Price. Section 3.0 Effective Date; Delivery. -------------------------- 3.1 Closing. The Effective Date of this Agreement is November 6, 2000. On ------- the Effective Date, the parties shall meet at 3:00 p.m. at the offices of Pacific TelCom, Inc., 4270 S. Decatur Blvd., Ste. A-9, Las Vegas, NV 89103 and shall thereupon conduct the Closing of this Agreement and the transactions contemplated herein. 3.2 Selling Shareholders' Delivery of Shares. On the Effective Date, ------------------------------------------- Selling Shareholders, through their duly appointed Sellers' Representative, shall deliver to Pacific TelCom [Canada] Inc. endorsed Certificates or endorsed Assignments Separate from Certificate with Stock Powers in the amount of 100% of the Corporation's Common Stock represented by shares constituting 6,315,000 authorized and issued common shares of the Corporation outstanding on October 31, 2000; 625,000 common shares representing the exercise of 625,000 options from a total of 600,000 outstanding options of the corporation; and 1,999,850 common shares representing 540,500 Class A special shares converted from October 31, 2000 to the Effective Date, for a total of 8,939,850 aggregate common shares of the Corporation. 3.3 Procedures to Deliver Buyer's Shares. Notwithstanding any of the ---------------------------------------- foregoing, it is expressly agreed by the parties that the delivery by Buyer of 1,125,000 Class A special shares of Pacific TelCom [Canada] Inc. to Sellers, shall be paid and transferred to the Selling Shareholders pursuant to the following procedures: 3.3.1Selling Shareholders List. Selling Shareholders shall deliver to -------------------------- the Buyer at the Effective Date a Final Shareholders List to be affixed to this Agreement as Exhibit A. Said list shall state, for every Selling Shareholder, the Shareholder's name and address, the number of shares of the Corporation held on the Effective Date, and the number of shares of the Buyer to be received in exchange thereto. No fractional shares or script will be issued by Buyer. It is understood by the parties that the aggregate number of shares to be paid to the Selling Shareholders at the Effective Date shall not exceed 1,125,000 Class A special shares of Pacific TelCom [Canada] Inc. regardless of the number of shares of common stock of the Corporation issued and outstanding at the Effective Date. 3.3.2Issuance of Certificated Ownership. Subsequent to the Closing, ------------------------------------- Selling Shareholders, individually, shall each receive certificated shares of their representative pro rata allocation of Buyer's payment in stock, by delivery by the Buyer of certificated shares of Class A special shares of Pacific TelCom [Canada] Inc. convertible to common shares of Pacific TelCom, Inc., an Illinois corporation. Section 4. Other Agreements. ----------------- 4.1 Finality. The Effective Date of this transaction shall be the date -------- hereof, however, the transaction shall be deemed to be in escrow pending an event of Finality, as set forth in this Section 4.1, and the Closing Date of this Agreement shall be deemed to be on such event of Finality. An event of Finality shall occur upon the occasion of one of the following: An Initial Public Offering of common shares of Pacific TelCom, Inc.; the common shares of Pacific TelCom, Inc. becoming tradable on a public market; or November 15, 2001. On the occurrence of an Initial Public Offering (IPO) of Pacific TelCom, Inc. common shares on or before November 15, 2001, this Agreement shall be deemed closed and irreversible, by Sellers' election, without adjustment, in the event that the Issue Price under an IPO of the common shares of Pacific TelCom, Inc. shall not be less than $8.00 per share and not more than $12.00 per share. If the Issue Price is at least $5.00 per share, but less than $8.00 per share, the parties agree to adjust the Purchase Price in favor of Sellers, such that Pacific TelCom, Inc. shall pay such further shares of its common stock to equal Eleven Million One Hundred Twenty-Five Thousand Dollars ($11,125,000) value. In the event that no Initial Public Offering concerning the common shares of Pacific TelCom, Inc. occur on or before November 15, 2001, but that the common shares of Pacific TelCom, Inc. are publicly tradable on or before November 15, 2001, at a trading price or Issue Price of less than $5.00 per share, the parties agree that either the Buyer or Sellers shall have the option to terminate and undo the subject transaction whereupon the Buyers and Sellers will conduct all steps, take all actions and execute all documents necessary to restore Buyer and Sellers to their original position on the date prior to the Effective Date. However, if no Initial Public Offering of the common shares of Pacific TelCom, Inc. has occurred on or before November 15, 2001 but that the common shares of Pacific TelCom, Inc. are publicly tradable on or before November 15, 2001 at a trading price or Issue Price of $5.00 or more per common share, this transaction shall be deemed complete and irreversible, subject to the adjustments set forth herein. For the purposes of determining trading price on the occurrence of this event of Finality, the price of a common share of Pacific TelCom, Inc., shall be determined by the weighted average of such shares for the last ninety days prior to November 15, 2001. For an event of Finality to have occurred, that 90 day weighted average shall be not less than $5.00 per common share of Pacific TelCom, Inc. common stock. In the event that the common shares of Pacific TelCom, Inc. have not been the subject of an Initial Public Offering and are not publicly tradable on November 15, 2001, the parties agree that the Sellers' Representative will have the option to deem the transaction terminated, whereupon Buyer and Sellers agree to undo the subject transaction or, at the option of Sellers' Representative, Sellers shall have the right to deem the transaction finalized, even in the event that the common shares of Pacific TelCom, Inc. are not publicly tradable on November 15, 2001. In the event this Agreement is terminated and the transaction undone, no part of the $250,000 Purchase Price is refundable. 4.2 Conversion of Shares. ---------------------- 4.2.1Upon Finality. Upon an occurrence of an event of Finality, as set -------------- forth in Section 4.1 above, the 1,125,000 Class A special shares of Pacific TelCom [Canada] Inc. shall be thereupon converted to 1,125,000 common shares of Pacific TelCom, Inc., an Illinois corporation. Upon such conversion, Selling shareholders shall deliver to the Buyer all Class A special shares of Pacific TelCom [Canada] Inc. conveyed to Sellers as payment hereunder. All such certificates representing payment in stock by Buyer to Sellers, shall be duly endorsed in a form satisfactory to Buyer. Buyer shall thereupon issue to the Selling Shareholders in certificated form, an amount of Pacific TelCom, Inc. common shares equal to the Class A special shares held by each respective Selling Shareholder of Pacific TelCom [Canada] Inc. 4.2.2Further Features of Class A Special Shares. Notwithstanding the ------------------------------------------- provisions concerning the conversion of Class A Special Shares of Pacific TelCom [Canada] Inc. set forth in Sections 4.1 and 4.2.1, Sellers may convert any or all such Class A special shares at any time. Buyer Pacific TelCom, Inc. agrees to cause Pacific TelCom [Canada] Inc. to issue to Sellers a further amount of Class A special shares, on the occasion of any stock dividend, stock split, cash dividend or other distribution, in the same amounts per Class A special share of Pacific TelCom [Canada] Inc. that are accorded to the stockholders of common shares of Pacific TelCom, Inc. 4.3 Funding New Territories. Subsequent to the Effective Date, it shall be ------------------------ the duty and obligation of the Buyer to make such capital investments, on a priority basis, necessary as to allow the capacity and capability for the issuance of Local Access Numbers for four new Canadian cities and one existing open Canadian city, for the purposes of the subscription of new subscribers to the telecommunications products and services currently offered separately by Buyer and Sellers. Capital Investments are defined in this Section 4.3 to mean the costs of the purchase and installation of five T-1 telecommunication switches, along with necessary operating capital sufficient to pay for necessary operating expenses of the Corporation from the Effective Date thereafter. The duty and obligation of the Buyer to make the capital investments, on a priority basis, as set forth in this Section 4.3 is defined as follows: From sources of funding to Pacific TelCom, Inc., consisting of investment and equity capital, proceeds of debt instrument offerings and lease line proceeds, Buyer shall commit $.50 of each dollar of such funding received to be applied to the capital investments of this Section 4.3. This set-aside of capital funding shall continue until an aggregate amount of $1,035,000 has been so aggregated by the Buyer to be applied as described in this Section 4.3, based upon anticipated expenses of telecommunications switches in the amount of $207,000 per unit. It is understood by the parties that "Buyer" in this Section 4.3 means Pacific TelCom, Inc. and Pacific TelCom [Canada] Inc. 4.4 Guarantee. As a material inducement to Seller, Pacific TelCom, Inc. --------- has agreed to become a party to this Agreement and hereby covenants and agrees to indemnify and guarantee each and every one of the obligations of Pacific TelCom [Canada] Inc., its wholly owned subsidiary. 4.5 Grant of Authority for Certain Continued Operations. The Buyer grants ----------------------------------------------------- to the Corporation, through its President, the limited right to operate the Corporation for certain essential post Effective Date duties and responsibilities. This grant of authority shall extend to the operation of the Corporation's Toronto office and switches, only for as long as necessary to conduct the orderly transfer of such operations to the Buyer. Notwithstanding the foregoing, this grant of authority is further intended to permit the conclusion of certain post Effective Date matters, including, by a way of illustration, filing of tax returns, distribution of cash payments of the Purchase Price by Buyer to the Selling Shareholders and, to the extent required, the holding of Class A special shares of Pacific TelCom [Canada] Inc., in trust to accommodate the exercise of any remaining outstanding options held by option holders of the Corporation, and the exercise of rights accorded to the Corporation's holders of Class A special shares of the Corporation. No provision of this Section 4.4 shall be interpreted to limit the financial responsibility of the Buyer set forth in Section 4.3. 4.6 Retention of Management. Buyer agrees to continue to retain the ------------------------ services of Richard C. Goldstein as Chief Executive Officer of the Corporation, notwithstanding the limited grant of authority to operate set forth above. Buyer shall tender to him an Employment Agreement mutually acceptable to Richard C. Goldstein and Buyer. The parties acknowledge and agree that the retention of Mr. Goldstein shall act as a benefit to the Buyer during transition and for continued operations and benefits of the Corporation thereafter, and such hiring shall not be deemed to constitute an apparent conflict-of-interest on the part of Mr. Goldstein. Buyer further agrees, within 14 days of the Effective Date to cause its Board of Directors to appoint Richard C. Goldstein as a director of Pacific TelCom, Inc. and to have Mr. Goldstein serve on the same terms and conditions as the members of the existing Board of Directors of the Buyer. 4.7 Resulting Joint Venture and Sharing of Revenues. It is the ----------------------------------------------------- understanding of Buyer and Sellers, that the Closing of this Purchase Agreement is in escrow until the Date as described in Section 4.1 "Finality". In the event that the transaction does not close on the Closing Date, Buyer and Sellers shall undo the subject transaction of this Purchase Agreement, pursuant to Section 4.1 "Finality", in such event, the parties agree that there shall be a resulting Joint Venture between them concerning the Capital Investment made by the Buyer in having installed five telecommunications switches with the capacity for the services to be sold by the parties and the revenues derived from the joint marketing efforts of the Buyer and Sellers. Under the terms of such a resulting Joint Venture, revenue, after deduction of Buyer's approved operating costs, will be apportioned as follows: one third of such revenues are to be apportioned to Buyer to be taken as a credit toward capital expenditures attendant to such telecommunications switches, as set forth above; thereafter remaining revenues shall be divided equally between Buyer and Sellers. Upon completion of repayment of Buyer for the aforesaid capital investments, such joint venture revenues shall be shared by the parties equally, after payment of all pre-approved or budgeted costs. In the event that Buyer and Sellers undo the subject transactions of this Purchase Agreement and establish such a resulting Joint Venture, it is expressly agreed that all prior sources of revenues of the Corporation and all subsequently developed sources of revenues exclusively generated by the Corporation shall remain the sole property of the Corporation and shall not be considered revenues attributable to the resulting Joint Venture. 4.8 Liabilities. The Corporation is possessed of liabilities regarding a ----------- loan, carrying a monthly debt service of approximately $3,500.00. Buyer shall expressly assume the payments of this loan and, upon full repayment of the principal balance, Buyer shall be entitled to ownership and title of a cash security deposit in the amount of $32,500.00. 4.9 Accounts Receivable. With respect to all accounts receivable, the ------------------- Buyer shall be vested with title to all such accounts receivable in existence on Effective Date. 4.10 Employee Benefits. Any and all liability of the Corporation for ------------------ employee benefits or for paid vacations or for any other employee benefit accruals, shall be paid in full as of the Effective Date. Sellers' Representative shall provide Buyer with such a certificate that such actions have taken place as Buyer may reasonably request. 4.11 Tax Returns. Sellers' Representative will cooperate and assist in the ------------ preparation and filing, on behalf of the Corporation, of any tax returns yet to be filed with respect to any taxes for the fiscal period ending March 31, 2001 to reflect the operations of the Corporation during that fiscal year. All such tax returns shall be prepared and filed using tax accounting methods and principals which are consistent with those used in tax returns for preceding tax periods, by the Chartered Accountants of the Corporation. 4.12 Deposit With Visa. Any and all deposits maintained with Visa as and ------------------- for security for the processing of credit card transactions shall remain unaffected by the subject transaction, but title to such deposit shall be transferred to the Buyer, as part of the subject transaction. 4.13 Other Financial Benefits. It is agreed by the parties that the Buyer -------------------------- shall have full rights, title and interest to all accounts receivable of the Corporation, and shall receive the right to claim non-capital loss carry forward amounts on the Corporation's balance sheet as other and further benefits to the Buyer pursuant to the subject transaction, as of the Effective Date. Section 5.0 Representations and Warranties of the Corporation. Except as -------------------------------------------------- may be set forth on a Schedule of Exceptions, attached hereto as Schedule M, to be presented at the Effective Date, the Corporation hereby represents and warrants to the Buyer as set forth below. The Schedule of Exceptions shall be presented by the Corporation to the Buyer prior to the execution of this Purchase Agreement and shall be attached hereto as an exhibit. The Schedule of Exceptions shall specifically identify the relevant sub-paragraph of this Agreement, and the statements made in each Schedule of Exceptions shall be deemed to be representations and warranties as if made hereunder. 5.1 Organization and Standing; Articles and Bylaws. The Corporation is a ------------------------------------------------- corporation duly incorporated and validly existing and in good standing under the laws of the Province of Ontario. The Corporation has requisite corporate power and authority to own and operate its properties and assets, and to carry on its business as presently conducted and as proposed to be conducted. The Corporation is duly qualified and authorized to do business, and is in good standing in each jurisdiction where the nature of its activities and of its properties (both owned and leased) makes such qualification necessary and where a failure to do so qualify would have a material adverse effect on its business or properties. The Articles in the form attached hereto as Exhibit D have been filed with the Minister of Commercial Relations before the date hereof. 5.2 Corporate Power. The Corporation will have at the Effective Date and ---------------- on the Closing Date all requisite legal and corporate power and authority to execute and deliver this Agreement and to carry out and perform its obligations under the terms of this Agreement. 5.3 Subsidiaries. The Corporation has no subsidiaries or affiliated ------------ companies and does not otherwise own or control, directly or indirectly, any equity interest in any corporation or entity. 5.4 Capitalization. The authorized capital stock of the Corporation on -------------- November 3, 2000 consists of a) 6,315,000 shares of common stock issued and outstanding and b) 540,500 Class A special shares convertible to 3.7 common shares each issued and outstanding on November 3, 2000. The outstanding shares have been duly authorized and validly issued, and are fully paid and nonassesable and were issued in compliance with all relevant securities laws. The Corporation has reserved: (i) 600,000 shares of common stock for issuance upon exercise of various options held by directors, employees and service providers; and (ii) 1,999,850 shares of common stock for issuance upon conversion of Class A special shares; and there are (i) no other options, warrants or other rights to purchase any of the Corporation 's authorized and unissued capital stock, or any security directly or indirectly convertible into or exchangeable for shares of capital stock of the Corporation, (ii) so far as known to the Corporation, no voting trust or voting agreements among, or irrevocable proxies executed by, stockholders of the Corporation, (iii) so far as known to the Corporation, no agreements among stockholders proving for the purchase or sale of the Corporation 's capital stock, and (iv) no obligations (contingent or otherwise) of the Corporation to purchase, redeem or otherwise acquire any shares of its capital stock or any interest therein or to pay any dividend or make any other distribution in respect thereof. All such issued and outstanding options and warrants have been duly and validly issued in compliance with applicable federal and state securities laws. To the extent that any Class A special shares have been converted to US common shares, this shall not operate as an impairment to this Agreement of constitute an Exception. 5.5 Authorization. All corporate action on the part of the Corporation, ------------- its directors and shareholders necessary for the authorization, execution, delivery and performance of this Agreement and delivery of the shares has been taken prior to the Effective Date. The shares are free of any liens, encumbrances, or restrictions and are not subject to any preemptive rights or rights of first refusal. 5.6 Liabilities. Except as set forth in Corporation's financial statements ----------- as of March 31, 2000, copies of which have been heretofore delivered to Buyer, the Corporation has no undisclosed liabilities or obligations, absolute or contingent, except liabilities and obligations which have been incurred in the ordinary course of business none of which, in the aggregate, exceeds $10,000. 5.7 Title to Properties and Assets; Liens, Etc. Except for purchase and ---------------------------------------------- lease and similar arrangements covering minor assets such as copiers and postage meters, the Corporation has good and marketable title to its material properties and assets, is not in default of any material lease, in each case subject to no mortgage, pledge, lien, lease, encumbrance or charge, other than the lien of current taxes not yet due and payable, except as set forth in Exhibit E. 5.8 Compliance with Other Instruments. The Corporation is not in violation ----------------------------------- of any term of its Articles or Bylaws, or in any material respect of any term or provision of the mortgages, indebtedness, indentures, contracts, agreements, or instruments or any other material agreement, or any judgment or decree. The best of its knowledge, the Corporation is not in violation of any order, statute, rule or regulation applicable to the Corporation where such violation would materially and adversely affect the Corporation; to the Corporation's actual knowledge, the Corporation is not in violation of any order, statute or regulation applicable to the Corporation. The execution, delivery and performance of and compliance with this Agreement has not resulted and will not result in any material violation of, or conflict with, or constitute a material default under, the Corporation's Articles or Bylaws or any of such material agreements nor result in the creation of, or mortgage, pledge, lien, encumbrance or charge upon any of the material properties or assets of the Corporation. 5.9 Litigation. There are no actions, suits, proceedings or investigations ---------- pending against the Corporation or its properties or in which the Corporation is the plaintiff, before any court or governmental agency nor, to the Corporation's knowledge, is there any threat thereof or any reasonable basis therefor. 5.10 Employees. To the Corporation's knowledge, no employee of the --------- Corporation is in violation of any material term of any employment contract, if any, exclusive agreement or any other contract or agreement relating to the relationship of such employee with the Corporation or any other party because of the nature of the business conducted or to be conducted by the Corporation. The Corporation is not aware that any officer or key employee, or that any group of key employees, intends to terminate his or its employment with the Corporation, nor does the Corporation have a present intention to terminate the employment of any key employee. The Corporation has in all material respects complied with all applicable Provincial and federal laws related to employment. 5.11 Exclusive Licenses. The Corporation (i) owns and has the right to use, ------------------ free and clear of all liens, charges, claims and restrictions an Exclusive License Agreement between the Corporation and Infotrust TELCO and an Exclusive Re-Sellers Agreement with Universal Office Corporation, attached hereto as Exhibit F and Exhibit G, necessary for the operation of its business now conducted and proposed to be conducted, and (ii) the Corporation is not obligated or under any liability whatsoever to make payments by a way of royalties, fees, or otherwise to any owner or licensee of the Exclusive License of the Exclusive License Agreement, with respect to the use thereof or in connection with the conduct of its business, or otherwise. To the knowledge of the Corporation, the Corporation has not infringed upon nor is it infringing such Exclusive License or other intellectual property of any third party. The Company is not aware of any violation of the Company's Exclusive License Agreement, or its Exclusive Re-Sellers Agreement or other proprietary rights. 5.12 Duties to Option Holders. Pursuant to Section 4.4, the Corporation --------------------------- holds a grant of authority to hold, in a fiduciary capacity, such shares of Pacific TelCom [Canada] Inc. Class A shares of stock equivalent to accommodate the exercise of outstanding options of employees and certain special service providers of the Corporation. The Corporation agrees to perform the distribution of such Class A shares of Pacific TelCom [Canada] Inc. to such option holders promptly upon the exercise of such options and it is agreed that the Corporation shall be entitled to retain the proceeds of such exercise. The Corporation agrees to indemnify and hold harmless Buyer and its officers, directors and agents harmless from any and all damages, losses, costs, or expenses suffered or incurred, directly or indirectly, through application of the Corporation's or Buyer's assets or otherwise, as a result of any and all claims, demands, suits, causes of action, proceedings, judgments, and liabilities, including reasonably counsel fees incurred in litigation or otherwise, assessed, incurred or sustained by or against any of them with respect to or arising out of any such indicia fiduciary duty by the Corporation to any such option holder. 5.13 Brokers or Finders. There are no claims for brokerage commissions, -------------------- finders' fees or similar compensation in connection with the transactions contemplated by this Agreement based on any arrangement or agreement made by or on behalf of the Corporation. 5.14 Operating Rights. The Corporation has all operating authority, ----------------- licenses, franchises, permits, certificates, consents, rights and privileges (collectively "Authority") as are necessary or appropriate to the operation of its business as now conducted and as proposed to be conducted and which the failure to possess would have a material adverse effect on the assets, operations or financial condition of the Corporation. Such Authority are in full force and effect, no violations have been or are expected to have been recorded in respect of any such authority, and no proceeding is pending or, to the knowledge of the Corporation, threatened that could result in the revocation or limitation of any such authority. The Corporation has conducted its business so as to comply in all material respects with all such Authority. 5.15 Minute Books. The minute books of the Corporation contain a complete ------------- summary of all meetings of directors and shareholders since the time of incorporation and reflect all transactions referred to in such minutes accurately in all material respects. 5.16 Taxes. All federal and Provincial tax returns required to be filed by ----- the Corporation have been filed and are true in all material respects, and all taxes, assessments, fees, and other governmental charges upon the Corporation, or upon any of its properties, income, or franchises, shown in such returns to be due and payable have been paid, or if any such tax returns have not been filed or if any such taxes have not been paid or so reserved for, the failure to so file or to pay would not in the aggregate have a material adverse impact on the properties or business of the Corporation. 5.17 Disclosure. None of the representations or warranties made by the ---------- Corporation in this Agreement and no written information in the Exhibits hereto or otherwise furnished to the Buyers in this Agreement or Exhibits contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein and therein not misleading. The Corporation is not aware of any fact which has not been disclosed to the Buyer which would have a material adverse effect on the Corporation's business, prospects, condition, affairs or operations. The Corporation is not aware of any error, omission, or untrue statement of a material fact in the information relied upon by the Buyer in the preparation of the Exhibits. 5.18 Transactions with Affiliates. Except for (i) regular salary payments ------------------------------ and fringe benefits under an individual's compensation package with the Corporation, and (ii) certain advances that have been made to the Corporation by certain key employees as described on Exhibit H, and (iii) certain related party transactions involving consulting fees and rent as described in Exhibit I, none of the officers, employees, directors, or affiliates of the Corporation, or members of their families is a party to any agreements, understandings, or proposed transactions with the Company. The Corporation has not guaranteed or assumed any obligations of the Corporation's officers, directors, or employees. 5.19 Corporation's Contracts. Except with respect to contracts or ------------------------ understandings between the Corporation and its customers entered into in the ordinary course of business, all material contracts and agreements of the Corporation (i) with expected receipts or expenditures in excess of $10,000, or (ii) with provisions restricting or affecting the development or distribution of the Corporation's products or services, or (iii) that provide indemnification by the Corporation with respect to infringements of proprietary rights, to which the Corporation is a party as of the Effective date are listed as Exhibits F and G. All such contracts and agreements are legally binding. valid, and in full force and effect in all material respects. The Corporation has received no indication of reduced activity relating to any contract or agreement with any customer of the Corporation, and the Corporation has no knowledge of any current customer of the Corporation that intends to reduce or discontinue its business with the Corporation. 5.20 Financial Statements. The Corporation has previously delivered to the --------------------- Buyer un-audited financial statements for the periods ending June 30, 2000. All such financial statements fairly present the financial condition of the Corporation as of such dates and the results of operations of the Company for such respective periods. 5.21 Absence of Certain Changes. There has not been since June 30, 2000 up --------------------------- to and including the Effective Date, any event or condition of any character which has materially and adversely affected the Corporation's business, prospects, conditions, affairs, operations, properties or assets, including but not limited to: 5.21.1 any material adverse change in the financial condition, assets, liabilities or business of the Corporation; 5.21.2 any damage, destruction or loss of any of the properties or assets of the Corporation (whether or not covered by insurance) materially and adversely affecting the business or plans of the Corporation; or 5.21.3 any labor trouble, or any other event or condition of any character, which the Corporation knows or has reason to know would materially and adversely affect the business or plans of the Corporation. 5.22 Employee Benefits. Except for stock options outstanding on the ------------------ Effective Date, forth in Exhibit J, the Corporation has no other currently existing employment, bonus, pension, profit sharing, deferred compensation, stock bonus, retirement, stock purchase, phantom stock or similar plans. 5.23 Absence of Undisclosed Liabilities. The Corporation does not have any ----------------------------------- outstanding claims, liabilities, obligations, or indebtedness, whether accrued, absolute, contingent, or otherwise, except as set forth in the Balance Sheet or referred to in the footnotes thereto, other than liabilities incurred subsequent to the Balance Sheet Date of June 30, 2000 in the ordinary course of business. The Corporation is not in default in respect of the terms or conditions of any indebtedness. Section 6. Representations and Warranties of the Buyer. The Buyer ------------------------------------------------ represents and warrants to the Corporation with respect to the purchase of the Shares as follows: 6.1 Organization. ------------ 6.1.1Pacific TelCom, Inc. Pacific TelCom, Inc., an Illinois ------------------- corporation is a Corporation duly organized and existing under the laws of the State of Illinois, and has all requisite corporate authority to make, execute, deliver and perform this Agreement and this Agreement has been duly authorized and approved by all required corporate action of Pacific TelCom, Inc. Pacific TelCom, Inc. has an authorized single class of common stock in the amount of 25,000,000 shares. On the Effective Date, Pacific TelCom, Inc. has 10,846,040 outstanding common shares. 6.1.2Pacific TelCom [Canada] Inc. Pacific TelCom [Canada] Inc. is a ------------------------------ Corporation duly organized and existing under the laws of the Province of Ontario, and has all requisite corporate authority to make, execute, deliver and perform this Agreement and this Agreement has been duly authorized and approved by all required corporate action of Pacific TelCom [Canada] Inc. Pacific TelCom [Canada] Inc. has an authorized class of common voting shares of which 10,000 shares are outstanding and Class A special shares, which are nonvoting and convertible to common shares of Pacific TelCom, Inc. On the Effective Date, Pacific TelCom [Canada] Inc. has 11,125,000 outstanding Class A special shares. 6.2 No violation. Neither the execution and delivery of this Agreement, ------------ nor the consummation of the transactions contemplated within the Agreement will constitute a violation of, or be in conflict with, or result in a cancellation of, or constitute a default under, or create or cause the acceleration of any debt, obligation or liability affecting, or resulting in the creation or imposition of any security interest, lien, or other encumbrance upon any of the assets owned or used by, or any of the capital stock of either corporation constituting the Buyer under: (i) any term or provision of the Articles of Incorporation or by-laws of either corporation constituting the Buyer; (ii) any judgment, decree, order, regulation, or rule of any court or government authority; (iii) any statute or law; (iv) any contract, agreement, indenture, lease or other commitment to which either corporation constituting the Buyer is a party or by which it is bound; or (v) cause any material change in the rights or obligations of any party under which such contract, agreement, indenture, or commitment. 6.3 No Impairment. Neither of the corporations constituting the Buyer are -------------- impaired by any law, regulation or order of any court or federal, state, municipal, provincial or other governmental department, commission, board, bureau, agency, or instrumentality and: (i) there are no law suits, proceedings, claims, or governmental investigations pending or to the knowledge of Buyer, threatened against or involving Buyer which could materially impair its business; and (ii) there are no judgments, consents, decrees, injunctions, or any other judicial or administrative mandates outstanding against Buyer which impair and adversely affect its property, assets, liabilities, financial condition, results of operations, or business prospects or its right to conduct is business as presently conducted. 6.4 Disclosure. None of the representations or warranties made by the ---------- Buyer in this Agreement and no written information furnished to the Selling Shareholders in this Agreement or otherwise, contain any untrue statement of a material fact or omit to state a material fact necessary in order to make the statements contained herein and therein not misleading. The Buyer is not aware of any fact which has not been disclosed to the Selling Shareholders which would have a material adverse affect on the rights and obligations of the Selling Shareholders. 6.5 Shares of the Buyer. The outstanding Class A special shares of the ---------------------- Buyer have been duly authorized and validly issued, and are fully paid and non-assessable and were issued in compliance with all applicable provincial securities laws. The issuance of Buyer's Class A special shares transferred to the Selling Shareholders herein are without the requirement of regulatory approval from any applicable provincial regulatory agency. The Class A special shares of the Buyer paid to the Selling Shareholders hereunder and the common shares of Pacific TelCom, Inc. which they are convertible to, are at the Effective Date, not publicly tradable, have not been registered to be traded publicly on the Effective Date, and on the Effective Date no public market exists for the trading of such Class A special shares or common shares of the corporations constituting the Buyer. 6.6 Dilution. Buyer represents that upon an event of Finality, as set -------- forth in Section 4.1, whereby Class A special shares of Pacific TelCom [Canada] Inc. are converted to Pacific TelCom, Inc., common shares, that such common shares acquired by the Selling Shareholders pursuant to this transaction shall be subject to significant and substantial dilution. Upon such conversion to common shares of Pacific TelCom, Inc., it is understood by the Selling Shareholders that the Selling Shareholders shall not be acquiring a substantial enough proportion or percentage of the outstanding issuance of the common stock of Pacific TelCom, Inc. to acquire management control of Pacific TelCom, Inc., elect directors or officers, or in any other method or manner prevent other or continued dilution. Selling Shareholders acknowledge the representation further of Buyer that, in the event such dilution occurs, it is foreseeable that such a dilution would be substantial and would have a significant effect in reducing the percentage of ownership of the Selling Shareholders, individually and collectively. 6.7 Access to Data. Buyer has had an opportunity to discuss the ---------------- Corporation's business, management and financial affairs with its management and the opportunity to review the Corporation's most recent un-audited financial statement for a complete fiscal year and business plan. Buyer has also had an opportunity to ask questions of officers of the Corporation which questions were answered to its satisfaction. 6.8 Brokers or Finders. The Buyer has not, and will not, incur, directly ------------------ or indirectly, as a result of any action taken by such Buyer, any liability for brokerage or finders' fees or agents' commissions or any similar charges in connection with this Agreement. 6.9 Tax Liability. To the extent it deems necessary, it has reviewed with -------------- its own tax advisors the federal, state, local and provincial tax consequences of this investment and the transactions contemplated by this Agreement. It relies solely on such advisors and not on any statements or representations of the Corporation or any of its agents. It understands that it (and not the Corporation) shall be responsible for its own tax liability that may arise as a result of this investment or the transactions contemplated by this Agreement. Section 7. Representations and Warranties of Selling Shareholders. The -------------------------------------------------------- Selling Shareholders (collectively and individually) severally represent and warrant to the Buyer with respect to the purchase of the shares as follows: 7.1 Access to Data. The Selling Shareholders have had an opportunity to ---------------- discuss the terms and conditions of the Purchase Agreement with the Corporation's management and have had an opportunity to ask questions of officers of the Corporation, which questions were answered to their satisfaction. 7.2 Authority. The Sellers' Representative of the Selling Shareholders --------- have all requisite legal power and authority to execute and deliver this Purchase Agreement and certificates for the shares of the Corporation hereunder and to carry out and perform its obligations under the terms of this Agreement. 7.3 Disclosure. To the best of his or her knowledge, this Agreement, with ---------- the Exhibits thereto, when taken as a whole, does not contain any untrue statement of a material fact concerning the corporation or omit to state a material fact necessary in order to make the statements concerning the corporation contained herein not misleading in light of the circumstances under which they were made. 7.4 Impairment. There are no actions, suits, proceedings, which impair in ---------- any way such Selling Shareholders' ability to enter into and fully perform its commitments and obligations under this Agreement or the transactions contemplated hereby. 7.5 Brokers or Finders. The Selling Shareholders have not, and will not, -------------------- incur, directly, or indirectly, as a result of any action taken by such Selling Shareholders, any liability for brokerage or finders' fees or agent's commissions or any similar charges in connection with this Agreement. 7.6 Compliance With Other Instruments. The execution, delivery and ------------------------------------ performance of and compliance with this Agreement, and the transference and delivery of shares will not result in any material violation of, or conflict with, or constitute a material default under any agreement, lien, mortgage, pledge, encumbrance or collateralization on the part of the Selling Shareholders. 7.7 General Release. In consideration of the agreements made hereunder, ---------------- each of the Selling Shareholders hereby release and forever discharge the Buyer and the Corporation, and each of their shareholders, officers, directors, representatives, attorneys, and employees, past, present, and future, individually and collectively for any and all claims, demands, causes of action or liabilities which each of the Selling Shareholders ever had or now has, apart from vested stock options, advances to the Corporation or consulting fees accrued, which each of the Selling Shareholders ever had or now has, or which their heirs, executors or administrators hereafter can, shall, or may have upon or by a reason of any matter or cause whatsoever, whether known or unknown, suspected or unsuspected, arising on or prior to the Effective Date, arising out of or in any way connected with each of the Selling Shareholders' relationship to the Corporation. Notwithstanding the above, this release shall not affect the Selling Shareholders' rights and obligations otherwise set forth in this Agreement. 7.8 Tax Returns. The Selling Shareholders will be solely responsible for ------------ any and all taxes incurred as a result of any taxable event to them generated by the entry into or performance of any term of this Agreement. Section 8. Conditions to Buyer's Obligations. The exchange of documents ---------------------------------- and shares by the parties and the purchase of the shares on the Effective Date is conditioned upon and subject to the fulfillment of obligations of the Sellers at or prior to the Effective Date as contained herein. 8.1 List of Selling Shareholders. The Corporation shall deliver to the ------------------------------- Buyer on or before the Effective Date, relative to Selling Shareholders, a list of: (i) unexercised options of the Corporation setting forth the name of the option holder, the address, the number of unexercised options, the exercise price of such options and the expire date, to be set forth as Exhibit J; and (ii) a list of remaining holders of Class A special shares setting forth the names of such surviving shareholders, addresses, number of shares on the Effective Date and the amount of unpaid cumulative dividends stated in US Dollars and set forth in this Agreement as Exhibit K. 8.2 Stock Certificates. Buyer shall receive stock certificates of the ------------------- Selling Shareholders representing all of the common shares of stock of the Corporation, duly endorsed for transfer as provided herein at the Effective Date, or accompanied by executed assignments separate from certificates with a stock power, in a form satisfactory to the Buyer. All endorsements on certificates, assignments or stock powers shall be signature guaranteed, if so required. 8.3 No Material Adverse Change. Prior to the Effective Date, there shall -------------------------- be no material adverse change in the assets or liabilities, the business or condition, financial or otherwise of the Corporation and the Sellers' representative shall deliver to Buyer a certificate in the form set forth as Exhibit L, dated the Closing Date, to such effect. Section 9. Conditions to the Sellers' Obligations. The exchange of ------------------------------------------ documents and shares by the parties on the Effective Date is conditioned upon and subject to the fulfillment of the conditions set forth below. 9.1 Proceedings. All proceedings to be taken in connection with the ----------- transactions contemplated by this Agreement and all documents incident thereto shall be reasonably satisfactory in form and substance to Sellers and counsel. 9.2 Performance of Obligations. The Buyer shall have performed and -------------------------- complied with all agreements and conditions herein required to be performed or complied with by them on or before the Effective Date. Section 10. General Provisions. ------------------- 10.1 Amendment and Modification. Subject to applicable law, this Agreement --------------------------- may be amended, modified or supplemented, as the parties mutually agree, by a written Agreement signed by a duly appointed representative of the Buyer and a duly appointed representative of the Selling Shareholders. 10.2 Expenses. The parties hereto shall pay all of their own expenses -------- relating to the transactions contemplated by this Agreement, including the fees and expenses of their respective counsel, accountants, and financial advisers. 10.3 Governing Law. The interpretation and construction of this Agreement -------------- and all matters relating hereto shall be governed by the laws of the State of Illinois relating to contracts made and to be performed in Illinois. 10.4 Waiver of Terms. Any of the terms or conditions of this Agreement may ---------------- be waived at any time by the party or parties entitled to the benefits thereof, but only by a written notice signed by an authorized representative of the party or parties waiving such terms or conditions. 10.5 Captions. The article and section captions used herein are for -------- reference purposes only, and shall not in any way affect the meaning or interpretation of this Agreement. 10.6 Publicity. Prior to the Effective Date, none of the parties hereto --------- shall issue any press release or make any other statement to the media relating to this Agreement or the matters contained herein without obtaining the prior approval of the Buyer. 10.7 Notices. All notices, requests, demands and other communications ------- required or permitted hereunder will be in writing and will be deemed to have been duly given when delivered by hand or by air express courier. If to the Buyer: Pacific TelCom, Inc. 4270 S. Decatur Blvd., Ste. A-9 Las Vegas, NV 89103 Attention Bill J. Angelos With a copy to: Kenneth G. Mason General Counsel 33 N. LaSalle St., Ste. 2131 Chicago, IL 60602 If to the Sellers to: Richard C. Goldstein EasyTel Canada 18 King Street East, Ste. 1402 Toronto, Ontario M5C1C4 Canada With a copy to: Barry M. Polisuk Garfinkle, Biderman 1 Adelaide St. East #1401 Toronto, ON M5C2V9 10.8 Entire Agreement. This Agreement contains the entire understanding ----------------- between and among the parties and supersedes any prior understandings and agreements among them respecting the subject matter of this Agreement. 10.9 Agreement Binding. This Agreement shall be binding upon the heirs, ------------------ executors, administrators, successors and assigns of the parties hereto. 10.10Pronouns and Plurals. All pronouns and any variations thereof shall ---------------------- be deemed to refer to the masculine, feminine, neuter, singular, or plural as the identity of the person or persons may require. 10.11Presumption. This Agreement or any section thereof shall not be ----------- construed against any party due to the fact that said Agreement or any section thereof was drafted by said party. 10.12Further Action. The parties hereto shall execute and deliver all --------------- documents, provide all information and take or forbear from all such action as may be necessary or appropriate to achieve the purposes of the Agreement. 10.13Parties in Interest. Nothing herein shall be construed to be to the ----------------- benefit of any third party, nor is it intended that any provision shall be for the benefit of any third party. 10.14Savings Clause. If any provision of this Agreement, or the --------------- application of such provision to any person or circumstance, shall be held invalid, the remainder of this Agreement, or the application of such provision to persons or circumstances other than those as to which it is held invalid, shall not be affected thereby. IN WITNESS WHEREOF, this Agreement has been executed by the parties hereto on the day and year first written above. PACIFIC TELCOM, INC. EASYTEL CANADA CORPORATION an Illinois Corporation an Ontario Corporation By:__________________________ By:__________________________ Bill J. Angelos, President Richard C. Goldstein, President PACIFIC TELCOM [CANADA] INC. Selling Shareholders an Ontario Corporation By:__________________________ By:__________________________ Bill J. Angelos, President Richard C. Goldstein Sellers' Representative EX-10.16 24 0024.txt EXHIBIT "A" ----------- Section 3.3.1 - - -------------- SHAREHOLDER'S LIST OF EASYTEL CANADA NOVEMBER 6, 2000 Set forth below are the existing holders of common stock on the Effective Date.
SHARES OF SHAREHOLDER NAME EASYTEL CANADA - - ----------------------------- -------------- Richard C. Goldstein 1,500,000 53 Hetherington Crescent Thornhill, Ontario L4J 2M9 Cindy Black Goldstein 1,500,000 53 Hetherington Crescent Thornhill, Ontario L4J 2M9 Goldstein Family Trust 3,300,000 53 Hetherington Crescent Thornhill, Ontario L4J 2M9 InfoUSA 630,000 8530 Wilshire Blvd., Ste. 404 Beverly Hills, CA 90211 Sub-total 6,630,000 Richard Bogoroch 85,100 15 Caravan Dr. North York, ON M3B 1M9 Michael Bourgon 42,550 18 Hume Dr. Cambridge, ON N1T 2W1 Brian Crossley 85,100 844 Maple Ave. Milton, ON L9T 3N4 Nancy Dal Bello 85,100 35 Peru Rd. Milton, ON L9T 2V5 Bruce Davidson 166,500 430 Bell St. Milton, ON L9T 2B5 Greg Boehm & Assoc. Inc. 85,100 Investment Centre C-100 Victoria St. North Kitchener, ON N2H 6R5 Eldon Kelly 85,100 2572 Misener Ct. Mississauga, ON L5K 1N1 Keith Bundy 118,400 356 Bell St. Milton, ON L9T 2B4 David Jeffrey 92,500 1795 Solitaire Ct. Mississauga, ON L5L 2P2 Anne Lotz-Turner 85,100 7611 Appleby Line Milton, ON L9T 2Y1 Gerald McGibbon 92,500 2135 Madden Blvd. Oakville, ON L6H 3M3 Loretto Sarracini 85,100 1403-1155 Bough Beeches Blvd. Mississauga, ON L4W 4N9 Louis Solakofski 85,100 893-B Adelaide St. West Toronto, ON M6J 3T1 Frank Esposito 92,500 4040 Erindale Station Road Mississauga, ON L5C 3T8 Edward O'Rourke 85,100 29 Strathroy Crescent Waterdown, ON L0R 2H0 Betty MacDonald 185,000 714 Robertson Crescent Milton, ON L9T 4V5 Colin MacKenzie 96,200 543 Marcellus Dr. Milton, ON L9T 4E7 Charles Sammut 85,100 592 White Oak Dr. Cambridge, ON N1S 4J6 Hazel Schachner 85,100 7035 Twiss Rd. R.R. #3 Campbellville, ON L0P 1B0 Beryl Stevenson 85,100 79 Mary St. Georgetown, ON L7G 4V9 Ken Thompson 92,500 297 Oak St. Milton, ON L9T 1H6 Sub-total 1,999,850 Barry Polisuk 60,000 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Randall Skala 60,000 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Lisa MacLeod 50,000 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Andrea Hardy 40,000 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Andy Walczak 25,000 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Jeff Seaton 10,000 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Bob Coffey 10,000 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Erik Schwartz 40,000 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Markus Sauerbier 15,000 c/o EasyTel Canada 18 King St. East, Suite 1402 Toronto, ON M5C 1C4 Sub-total 310,000 Grand Total 8,939,850
EXHIBIT "B" ------------ Section 3.3.3 - - -------------- Dear (Shareholder): It is my extreme pleasure to enclose your stock Certificate(s) for _________ shares of common stock to Class A special shares of Pacific Telcom, [Canada], Inc. The Certificate(s) represents your ownership in this company, exchanged for your old certificate(s) in EasyTel Canada Corporation. I appreciate your confidence in the Pacific Telcom, Inc. company and will always work very hard to make sure you receive a proper return on your investment. As always, feel free to contact me with any comments or concerns you may have in the future. Respectfully yours, Bill J. Angelos President Pacific Telcom, Inc. Enclosure EXHIBIT "C" ----------- Section 4.4 - - ------------ EasyTel Canada Post Transaction Operation Expenses 1. Rent 2. Utilities 3. Customer Service salaries 4. Operating officer salary 5. Bookkeeper salary EXHIBIT "D" ------------ Section 5.1 - - ------------ ARTICLES OF INCORPORATION OF EASYTEL CANADA CORPORATION EXHIBIT "E" ----------- Section 5.7 - - ------------ STATEMENT OF LIENS OF CORPORATION 1. Bank of Montreal 2. Bank of Montreal Both liens represent security given pursuant to the Corporation's Small Business Loan. EXHIBIT "F" ----------- Section 5.11 - - ------------- EXCLUSIVE LICENSE AGREEMENT BETWEEN INFOTRUST TELCO AND EASYTEL CANADA CORPORATION EXHIBIT "G" ----------- Section 5.11 - - ------------- EXCLUSIVE RE-SELLERS AGREEMENT BETWEEN UNIVERSAL OFFICE CORPORATION AND EASYTEL CANADA CORPORATION EXHIBIT "H" ----------- Section 5.18 - - ------------- ADVANCES TO THE CORPORATION BY KEY EMPLOYEES The Corporation has received and has shown on its balance sheet shareholders' advances in the amount of $37,039 from Richard C. Goldstein. EXHIBIT "I" ----------- Section 5.18 - - ------------- RELATED PARTY TRANSACTIONS 1. The Corporation incurred in 1999 a consulting fee in the amount of $40,000 paid to First Republic Securities Corporation, a Shareholder of the Corporation. 2. In 1999, First Republic paid rent in the approximate amount of $15,000 for office space to the corporation, for which the corporation provided administrative services valued at approximately $5,000. EXHIBIT "J" ----------- Section 5.22 - - ------------- OUTSTANDING STOCK OPTIONS Set forth below are the existing holders of outstanding Stock Options on the Effective Date. Name of Option Holder Number of Options Expiry Date - - ------------------------ ------------------- ------------ None EXHIBIT "K" ----------- Section 8.1 - - ------------ CLASS A SPECIAL SHAREHOLDERS Set forth below are the existing shareholders of the Class A special shares on the Closing Date. Unpaid Name of Shareholder Number of Shares Cumulative Dividends - - --------------------- ------------------ --------------------- None EXHIBIT "L" ----------- Section 8.4 - - ------------ NO MATERIAL ADVERSE CHANGE SELLERS' REPRESENTATIVE CERTIFICATE ----------------------------------- RICHARD C. GOLDSTEIN, the Sellers' Representative herein represents to Buyer that prior to the Effective Date herein, there have been no material adverse change in the assets or liabilities, the business or condition, financial or otherwise, of the Corporation, its employees or customers, including, but not limited to, those changes that are a result of any legislative or regulatory change, revocation of any license or right to do business, fire, explosion, accident, casualty, labor trouble, flood, riot, condemnation or act of God or other public force or otherwise. Dated: November 6, 2000 ____________________________ Richard C. Goldstein Sellers' Representative EXHIBIT "M" ----------- Section 5.0 - - ------------ SCHEDULE OF EXCEPTIONS I, Richard C. Goldstein, President of EasyTel Canada Corporation, do hereby state that the representations and warranties of the Corporation made herein and contained in this Agreement and/or in the Exhibit delivered pursuant hereto are true and correct, to the best of my knowledge, and that any exceptions as to the representations and warranties of the Corporation as set forth in the Stock Purchase Agreement to which this Certificate is an Exhibit are as follows: None Dated: November 6, 2000 ____________________________ Richard C. Goldstein, President EasyTel Canada Corporation -----END PRIVACY-ENHANCED MESSAGE-----